WYOMING, USA – LANCE ISR URANIUM PROJECTS

(Peninsula Energy 100%)

BACKGROUND

The Lance Projects are located on the North-East flank of the Powder River Basin in Wyoming, USA. The original NuBeth Joint Venture between Nuclear Dynamics Inc, Bethlehem Steel Corporation and later Pacific Power and Hydro (NuBeth JV), discovered thirteen substantial zones of uranium mineralisation associated with an extensive system of roll fronts confirmed by drilling between 1970 and 1979. As part of this exploration program, the NuBeth JV drilled more than 5,000 exploration and development holes, totalling in excess of 912,000 metres. A proprietary database of the historic drilling and pilot plant data was acquired by Peninsula in 2007, defining a then relatively unknown uranium district of which Peninsula is now the dominant mineral rights holder.

The Company has explored only part of this area since 2007 and has already delineated over 53.7mlbs of U3O8 JORC Code (2012) compliant resource.

The Lance Projects have 305 line kilometres of identified roll fronts and an exploration target of 104-163mlbs U3O8, which is in addition to the JORC Code (2012) compliant resource. These roll fronts stretch over 50 kilometres north-south and are open to the north, south and west.

Unlike most in-situ recovery (ISR) projects, Peninsula’s mineral resources are located on contiguous landholdings that we control. This allows Peninsula to develop the Lance Projects in a cost-effective manner, without having to incur infrastructure and facility development costs that would otherwise be required if our landholdings were not contiguous.

Figure 1: Lance Projects Location, Wyoming, USA

Figure 1: Lance Projects Location, Wyoming, USA

 COMMENCEMENT OF PRODUCTION

In December 2015 Peninsula received the United States Nuclear Regulatory Commission’s (NRC) authorisation to begin in-situ uranium recovery operations from the Ross Permit Area at the Lance Projects in Wyoming, USA (Lance Projects).

The NRC preoperational inspections were held during November 2015, and confirmed that the constructed plant and associated site systems up to the ion exchange columns, including wellfields, indicated that the plant is physically capable of conducting in-situ uranium recovery operations. The NRC also confirmed that written operating procedures and approved radiation safety and environmental monitoring programs were in place, and verified that preoperational testing was complete.

CURRENT OPERATIONS 

Lance Project Updated December 2015

Figure 2: Lance Projects Location, Wyoming, USA

Since the initial injection of O2 and CO2 at the first header house unit on 2 December 2015, production well flow-rates are meeting expectations and substantially confirming the permeability of the ore body, a key risk factor in ISR operations. Average flow rates from extraction wells at header houses 1 to 4 remain consistent with the planned rate of 20gpm.

To date the Central Processing Plant (CPP) and well field systems are operating as expected and production rates are increasing steadily.

54,000lbs U3O8 were extracted from the Lance Projects in the September 2016 quarter, an increase of 25,000lbs U3O8 over the June 2016 quarter in which 29,000lbs U3O8 was extracted.

Production to date has been primarily from header houses 1,2 and 3. Each header house experiences slightly different rates of ramp-up and Peninsula is currently seeing header houses 3 and 4 taking longer to ramp-up than originally projected. Production for the 2016 calendar year is expected to be between 135,000 and 160,000lbs U3O8 and is now aligned to delivery commitments under existing term contracts rather than the currently weak spot market. The CY 2017 production profile has also been tailored around existing term contracts of 100,000 lbs for delivery in 2016 and 400,000 lbs to be delivered in 2017 at approximately $55/lb.

Stage 1 full production will see up to seven header houses in simultaneous operation.

Construction on the the 5th header house was recently completed and this header house came online on 2 November 2016. Well installation is complete on header house 6 and well advanced on header house 7, which are forecast to come online in November and December 2016 respectively.

Deliveries of drummed uranium product commenced during the June 2016 quarter, with the first delivery of Lance Projects drummed uranium 12,000lbs U3O8 received by a North American conversion facility in May 2016. A further 40,000lbs of Lance Projects uranium was delivered to a North American conversion facility on 15 September 2016.

At present the spot market remains weak and the Company is operating on an alternate operating plan tailored to existing term contracts. At full capacity the Lance Projects development plan comprises a three stage ramp up:

  • Stage 1 – production rate of between 500,000 and 700,000 lbs U3O8 per annum;
  • Stage 2 – production rate of up to 1,200,000 lbs U3O8 per annum; and
  • Stage 3 – production rate of up to 2,300,000 lbs U3O8 per annum.

 

Figure 2: Drummed Lance Projects U3O8Figure 2: Drummed Lance Projects U3O8

URANIUM SALE AGREEMENTS

Peninsula currently has 8.1 million pounds of U3O8 under contract for delivery to major utilities located in the United States and Europe. Projected revenue under these existing long term contracts is approximately US$440 million. These contracts provide a substantial earnings stream to the Company whilst allowing it to retain significant quantities of planned U3O8 production for future contracting during periods of anticipated improved uranium prices.

The weighted average delivery price for these five contracts over the next 10 years is US$55/lb U3O8. The progressive expansion to Stage 2 will generate increased operating margins, (both in aggregate and on a per pound basis), and is projected to move the Company to significant profitability.

Peninsula continues to negotiate additional product sales contracts with various counterparties and plans to enter into term contracts for an additional 1.0 to 2.0 million pounds of uranium concentrate for delivery over the next five years.

Peninsula has established a dedicated sales and marketing function in order to market and sell the uranium that we expect to produce from the Lance Projects directly to nuclear power generating utilities under long-term uranium concentrate sale and purchase agreements.

By having its own internal sales and marketing team, Peninsula is able to deal directly with the procurement functions within nuclear power generating utilities without the need for intermediaries. Not only does this reduce overall sales and marketing costs, it also enables Peninsula’s executive management to meet face to face with their counterparts from the utilities. Over the past four years, the Company’s marketing efforts have focused on building market knowledge of Peninsula and its plans with North American and European utilities, and positioning Peninsula to participate in the nuclear fuel procurement processes of these utilities prior to production commencing at our projects.

permitting status - fully permitted

The Company has in place all material licenses and permits required to construct and operate the Lance Projects and to sell the U3O8 extracted therefrom.

The following key permits and licenses have been granted:

 

  • ´╗┐the Underground Injection Control Permit (Class I) issued by the Wyoming Department of Environmental Quality on April 13, 2011;
  • the Air Quality Permit issued by the Wyoming Department of Environmental Quality on September 13, 2011;
  • the Permit to Mine issued by the Wyoming Department of Environmental Quality on November 16, 2012;
  • the Safety Evaluation Report issued by the NRC on February 28, 2013;
  • the Aquifer Exemption issued by the United States Environmental Protection Agency on May 15, 2013;
  • the final Supplemental Environmental Impact Statement issued by the NRC on February 28, 2014; 
  • the Source Material and By-product License issued by the NRC on April 24, 2014, allowing the Lance Projects to process up to 3.0 million pounds per annum of U3O8; and
  • the Pre-Operational Inspection approval issued by the NRC on November 30, 2015 authorising the commencement of production operations.

 

jorc code - compliant resource

On 24 January 2013 Peninsula announced a further upgrade to the JORC-compliant Resource Estimate for the Lance Projects. This upgrade was achieved by the completion of an additional 676 rotary mud drill holes completed in the seven months subsequent to the March 2012 resource estimate.

The resource, now totalling 53.7Mlbs, has been calculated by applying a combined constraint of a GT of 0.2 contour and 200ppm eU3O8. These cut offs are considered to be appropriate for both calculating and reporting of ISR resources at the Lance Projects.

The measured, indicated and inferred resources are located in host sandstones that have demonstrated positive uranium recovery from test-work. Geological modelling of the extensive down-hole geophysical data has accurately defined the impermeable shale and mudstone horizons that form the confining horizons to the mineralised sandstones.

 

Table 1: Lance Projects, Wyoming USA - Classified Resource Summary (U3O8

TotalTonnes Ore
(M)
U3O8 kg
(M)
U3O8 lbs
(M)
Grade
(ppm U3O8)
Measured4.12.14.5495
Indicated11.65.712.7497
Inferred35.516.636.5467
Total51.224.453.7476
(The JORC resource is reported above a lower grade cut-off of 200ppm and a GT of 0.2).


At Ross there is a combined measured, indicated and inferred resource of 11.2Mlbs U3O8 with an average grade of 518ppm and an average GT of 0.47.

At Kendrick the combined measured and indicated resource totals 4.82Mlbs U3O8 at an average grade of 497ppm and an average GT of 0.47.

At Barber the combined measured and indicated resource totals 2.41Mlbs U3O8 at an average grade of 421ppm and an average GT of 0.42.

 

Table 2:  Lance Projects Classified Resource by Resource Unit (U3O8)

RossTonnesGrade
(ppm U3O8 )
U3O8 lbsAverage Thickness
(ft)
Average GT
Measured2,824,5715003,112,02910.00.50
Indicated5,823,1435316,818,8228.40.45
Inferred1,145,3774971,253,76210.50.52
Total9,793,09151811,184,6129.00.47
      
KendrickTonnesGrade
(ppm U3O8 )
U3O8 lbsAverage Thickness (ft)Average GT
Measured682,078506761,0869.30.47
Indicated
3,706,8084964,056,8669.40.47
Inferred23,834,08247224,799,06810.00.47
Total28,222,96847629,617,0209.90.47
      
BarberTonnesGrade
(ppm U3O8 )
U3O8 lbsAverage Thickness (ft)Average GT
Measured636,302461647,0459.50.44
Indicated
2,002,1844001,765,2639.80.39
Inferred10,498,57445210,460,2849.70.44
Total13,137,06044412,872,5929.50.42
      
TotalTonnesGrade
(ppm U3O8 )
U3O8 lbsAverage Thickness (ft)Average GT
Measured4,142,9514954,520,1599.80.49
Indicated11,532,13549712,640,9519.00.45
Inferred35,478,03346736,513,1149.790.46
Total51,153,11947653,674,2249.70.46

exploration target

The Lance Projects covers an area of over 120km² within which there is a combined total of 305 line kilometres (190 miles) of known stacked roll fronts. Of this total, only a small percentage has been explored, with over 90% of the drilling concentrated within the more advanced Ross, Kendrick and Barber areas. Based on the historic conversion rate from roll front length to a drill-defined resource, the exploration target of the Lance Project, which is in addition to the JORC-compliant resource, is assessed at between 104 and 163 Mlbs U3O8. The exploration target is based on an anticipated grade range of 426ppm to 530ppm U3O8. This grade range approximates the minimum and maximum modelled grades respectively.

 

Table 3: Lance Projects Exploration Target

Exploration AreasTonnes
(M)
Grade
(ppm U3O8)
eU3O8
(Mlbs)
RangeFromToFromToFromTo
Total168.9185.9426530157.7217
(Totals include existing JORC Resource)

 

Please note that in accordance with Clause 17 of the JORC (2012) Code, the potential quantity and grade of the ”Exploration Target” must be considered conceptual in nature as there has been insufficient exploration to define a Mineral Resource and it is uncertain if further exploration will result in the determination of a Mineral Resource.