Financial Analysis

The base case uses forward prices of US$68/lb U 3O 8 and US$15/lb Mo respectively.

Initial capital costs are US$225 million (including owner’s costs and a contingency of US$31 million). During the life of mine there will be sustaining capital requirements of about US$71 million.

Total operating costs are estimated to be US$22.98 per pound of U 3O 8 over the mine life. During the first 4 years of production, total operating costs are estimated at US$16.68 per pound of U 3O 8. These costs are net of a byproduct credit for molybdenum of about US$1.27 per pound of U 3O 8.

In addition to adding value to the Kuriskova project, molybdenum has been defined as a Class 2 strategic metal by the European Union. Royalties payable to the government in this base case will add about US$2.89 per pound of U 3O 8.

The base case internal rate of return is estimated at 30.8% on a pre-tax basis with a 1.9 year payback after the start of production on an estimated initial capital cost of US$225 million including owner’s costs and a contingency of US$31 million.

At an 8% discount rate, the pre-tax NPV is estimated at US$277 million. The project is financially sensitive to U 3O 8 price and amount of uranium produced per year. This is directly related to the tonnage and grade mined and processed annually as well as to plant recovery.

The following tables illustrate the sensitivity of the project to changes in U 3O 8 price and discount rate used in the NPV calculation:
 
Uranium (U3O8) Price Sensitivity
Economic Parameter   -10%   Base Case   +10%
  ($61.2)   ($68.0)   ($74.80)
NPV   $201.2   $276.8   $352.4
IRR   25.7%   30.8%   35.4%
 
Discount Rate Sensitivity
NPV 0%   NPV 5%   NPV 8% Base Case   NPV 10%
$618.3   $374.2     $276.8   $225.7
All dollar values are in US$ millions.

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