NPV after Tax
Free Cash Flow
Property Description and Location
The Company’s flagship project is Norasa which includes the wholly owned Valencia project (ML 149) which has a 25 year mining licence and a 100% interest in the Namibplaas project (EPL 3638), which is located 7.5 km north east of Valencia. Both projects have NI 43-101 compliant uranium resources and reserves. The properties are located in the Republic of Namibia, located approximately 75 km south-west of the town of Usakos in central-west Namibia and together are known as the Norasa Uranium Project.
Definitive Feasibility Study
The Company released a Definitive Feasibility Study in March 2015 (“DFS”). A summary of the outcomes of the study are as follows:
- Mineral Reserves increased from 79.0 Mlbs U3O8 as of October, 2013 to 90.7 Mlbs U3O8 as of February, 2015 (up by 14.8%), due to a 16.4% increase in tonnage and only a slight decrease in the average grade
- The operating costs per pound are estimated to average $32.96/lb U3O8 over the first 5 years of production and $34.72/lb U3O8 over the life of the mine
- The economic analysis results in an estimated pre-tax net present value (NPV) at a discount rate of 8% to Forsys of $622.6 million. Using the initial investment and operating cash flows from inception, the pre-tax internal rate of return (IRR) is estimated to be 32%
- The Norasa plant throughput is 11.2 M/T per annum to produce an average of 5.2m/lbs U3O8 per year
Mineral Resource Estimate
Key Financial Model Parameters and Outputs
Norasa has received NamWater’s (Namibia’s national bulk water utility) assurance of a supply of water during the construction phase of the project. This will require a 31km temporary pipeline extending from the Rössing reservoir to the construction site. Norasa will design and construct this temporary pipeline with a 300 m3/day capacity required to service the construction camp and for construction activities. This pipeline is to be installed adjacent to the completed access road. Production from Norasa will require construction of a permanent 31km main pipeline (replacing the temporary line used during mine construction) linking Norasa to the Rössing reservoir. The Company is working with NamWater, who is responsible for the tendering and construction of this water pipeline.
Most of the water supply infrastructure will require an upgrade to cater for Norasa and the expansion plans of other operations. Norasa has requested a water allocation of 3 Mm³ annually for its operating requirements.
The nearest power off-take point that can supply Norasa is the Khan substation, located at Ebony, 26km north of the project site. However, the direct route is very rugged through the Khan Valley and tributaries and an alternate indirect transmission route of nearly 30km has been laid out by NamPower. The Khan substation has recently been upgraded and expanded. NamPower met the cost of the new substation although a new bay for Norasa will be at the mine’s expense, as will be the cost of the transmission line to the mine. Power distribution to the mine is planned to be a 220kV transmission line as part of a regional expansion and strengthening of the coastal power supply using the Norasa line as stage one of a ring feed. At an installed capacity of approximately 35MW and a mine draw of about 31MW, two 40 MVA transformers would be installed, one of which would be maintained as a backup unit. It is assumed that the Company would have to carry the cost of establishing the substation.
Standby power generators are being considered by the Company, but a decision on the capacity will be taken at a future date. The generators will be connected to a synchronization and load control panel to operate the generator sets. This control panel will consist of a switchboard arranged for automatic synchronizing of the generator sets, which would include motorized circuit breakers to synchronize the generator sets to a common bus bar. A bus coupler would be included to split or combine the common bus bar to give flexibility to synchronizing or power sharing.
The preferred route to access the mine was determined to be across the Khan River, using tributary valleys. This route links the mine to the B2 highway, 12km northeast of Rössing. The total length of this new road is approximately 26km. Construction of the industrial grade gravel road was completed in mid-2010. Some of the internal service roads were also constructed.
Norasa is one of the very few uranium projects in the world that is construction ready with a Mining Licence, The completion of the DFS confirmed the robustness of Norasa’s economics. The DFS delivered a number of outstanding results including increases in tonnage, annual and life of mine production whilst lowering operating costs. The Company believes the outlook is enhanced by the achievement of this milestone and that the study results will attract strategic partners and investors, and provide Forsys with alternatives for the next phase of Norasa’s development.