Proposed legislation that would end Virginia's 31-year moratorium on uranium mining permits is set to be finalized this week. The Virginia General Assembly will take up the issue in its 2013 session in what is expected to be a tight vote. If passed, the legislation will be a monumental step toward production at the Coles Hill uranium project, which is wholly owned by Virginia Energy Resources (TSXV:VUI,OTCQX:VEGYF).
Last week, Virginia's Coal and Energy Commission voted 11 to 2 to recommend lifting the ban, with Senator John Watkins (R-Powhatan) and Delegate Jackson Miller (R-Manassas) announcing that they will introduce legislation to establish regulatory and licensing requirements. Watkins has also proposed legislation that would impose a 3-percent tax on companies mining uranium in the state. Senate Democratic Leader Richard Saslaw of Fairfax also announced his support for ending the ban at a news conference in Richmond that was attended by Watkins, Miller and Southside Virginia residents. Coles Hill largest known uranium deposit in the United States The proposed legislation to lift the ban would limit uranium mining to the Coles Hill deposit, the largest known uranium deposit in the United States and one of the top 15 largest in the world. The 3,500-acre property holds an indicated resource of an estimated 119.6 million tons with an average grade of 0.056 percent eU3O8 containing 133 million pounds of eU3O8, according to a company press release. The geology of the deposit is similar to Athabasca unconformity-style deposits and holds potential for resource expansion along strike and at depth. An updated preliminary economic assessment (PEA) completed in June 2012 shows that the project has a capex of $147 million (including a 25-percent contingency) prior to production, alongside operating costs of $31/lb in the first 10 years and $36/lb over the expected 35-year mine life. The PEA estimates that 64.2 million pounds can be recovered at an average grade of 0.1 percent U3O8 if mill processing capacity operates at 3,000 tons per day; those conditions will result in an initial average production rate of 2 million pounds per year. Average annual revenue is projected at $140 million at a $64/lb uranium contract price. At that price, and at a discount rate of 7 percent, the net present value of the project sits at $427 million, with an internal rate of return of 36.3 percent at $64/lb uranium.