INFORMATION MEMORANDUM
15th April 2016
Plateau Uranium Inc.
Plateau Uranium Inc. (‘Plateau’, ‘PLU’ or the ‘Company’) is a TSX-V-listed mineral
exploration and development company currently advancing its Macusani Uranium Project
(‘Macusani’) in the Puno province of south-eastern Peru, South America. The Company
controls all reported uranium resources in Peru, making it one of the largest undeveloped
uranium projects in the world.
Key Facts
Tickers:
Recent Price:
PLU: TSX-V
C$ 0.33
52 week Hi/Lo2:
C$ 0.69/ 0.235
Treasury1:
C$ 2.28
Debt1:
C$ 0
Burn rate3:
C$ 70 k/month
Issued1:
40.64 M
Fully Diluted:
50.08 M
Authorised1:
Unlimited
Options1:
1.70 M
Warrants1:
7.74 M
Daily volume2:
68.87 k
Market Cap:
C$ 13.41 M
Free Float2:
52.95%
Website: www.plateauuranium.com
1
Source: www.ft.com (15th April 2016)
The Macusani Project currently centres around six mineral ‘complexes’, of which five have
resource estimates. There have been several resource estimates on the complexes since
2009. As of May 2015, PLU’s combined properties have NI 43-101 compliant resources of:
M&I: 95.2 Mt @ 248 ppm U3O8 (51.9 Mlbs U3O8) & Inferred: 130 Mt @ 251 ppm U3O8
(72.1 Mlbs U3O8), at a 75 ppm cut-off. The exceptionality about the resource is its
robustness, when a 200 ppm cut-off is applied the resource is M&I: 33.5 Mt @ 445 ppm
U3O8 (32.8 Mlbs U3O8) & Inferred: 41.6 Mt @ 501 ppm U3O8 (45.9 Mlbs U3O8).
In January 2016 an updated Preliminary Economic Assessment (‘PEA’) for Macusani was
released based on new mining inventories and Cameco data which improved mine life,
throughput, average grade, processing recovery, leaching time and acid consumption.
Based on a conservative long-term uranium price of US$50 lb/U3O8, the ‘base-case’
scenario outlined a predominantly open-pit operation with a centralised heap leach facility
to return a post-tax NPV8% US$603.1 M & IRR of 40.6%, with a 1.76-year payback period.
The project is most sensitive to uranium price and recovery, and gives encouragement for
future development as the PEA also outlined a ‘low-case’ scenario at US$35 lb/U3O8 to
return a post-tax NPV8% of US$236.2 M & IRR of 22.5%.
Base-case production is anticipated to average 6.09 Mlbs U3O8 per annum, processing 109
Mt at 289 ppm U3O8 over a 10 year LOM, which would rank Macusani within the top five
largest uranium operations in the world. Cash operating costs average US$17.28 lb/U3O8
over LOM placing it in the lowest quartile of uranium producers in the world using 2015
production figures. Initial Capex is estimated at US$249.7 M (plus US$50 M contingencies)
to construct the mine and a 10.9 Mtpa heap leach process plant using standard off-the-shelf
equipment and technology. Total sustaining Capex for LOM is estimated at US$43.9 M.
Other highlights outlined in the PEA include a stripping ratio of 2.05:1 (waste to ore),
processing recovery rate of 88%, and acid consumption of 9 kg/t.
In March 2016, PLU announced a maiden lithium resource within four of its 14 uranium
deposits of: Indicated: 52.31 Mt @ 0.13% Li2O (for 67,000 t of Li2O Eq.) and Inferred:
87.68 Mt @ 0.12% Li2O (for 109,000 t of Li2O Eq.), at a 75 ppm U cut-off. The average
potassium grade is 3.71% K for Indicated and 3.73% K for Inferred. Results of initial
unoptimised metallurgical tests were released displaying positive extraction & recoveries.
The Company intend to advance the project further along the development path by initiating
further delineation, expansion and exploration drilling, and with additional pre-feasibility
metallurgical and engineering study work. In terms of environmental permitting, there is
currently no uranium production in Peru, but there are uranium-specific exploration
regulations. A working committee was recently established to advance uranium production
permitting regulations, consisting of representatives from Plateau, INGEMMET (Institute of
Geology, Mining & Metallurgy, MEM (Ministry of Mines & Energy) and IPEN (Peruvian
Nuclear Energy Institute).
PLU Annual Financial Statements and
MD&A for the year ended 30th September
2015 and 2014, 21st January 2016.
2
www.ft.com, 15th April 2016.
3
Plateau management.
Strengths





Stable jurisdiction;
Excellent Infrastructure
Large resource base;
Availability of low cost power;
Strong exploration upside
Risks




Permitting delays;
Securing strategic partners;
Securing financing;
Sensitivity to uranium market
Analysts
Martin Wood
+44 (0) 207 248 9773
[email protected]
James Smith
+44 (0) 207 248 9773
[email protected]
Plateau Uranium Inc.
15th April 2016
Contents
Aim and scope of research
2
Introduction
3
Properties
4
Country Overview: Peru
5
Market Overview: Uranium
10
Asset: Macusani
14
Metallurgy
19
Resource Estimates
20
PEA
22
Peer Comparison
26
Management, Directors & Officers
27
References
28
Aim and scope of research
The aim of this document is to provide the reader with an understanding of
PLU’s structure, assets, current development and exploration status, as well
as plans for future development. The report provides an in-depth review and
valuation of the Company’s amalgamated uranium properties, the Macusani
Project, located in south-eastern Peru, South America. An overview of the
current uranium market is also given.
The Macusani Project has not been visited by the Authors. This report is
based on publicly-available information, and information provided by PLU
management.
Units used in this report include: hectares (ha); kilometres (km); metres (m);
millimetres (mm); above sea level (asl); metric tonnes (t); grams (g); litres
(L); pounds (lbs); tonnes per year (tpa); billion (BN); million (M); thousand
(k); Canadian dollars (C$); US dollars (US$).
VCL
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4 College Hill, London, EC4R 2RB, UK
Tel + 44 (0) 207 248 9773
Web: www.vicaragecapital.com
2
Plateau Uranium Inc.
15th April 2016
Introduction
Corporate History1
Figure 1: Location of the Macusani project,
Puno, Peru.
Plateau Uranium Inc. (‘Plateau’, ‘PLU’ or the ‘Company’) is a TSX-V-listed
mineral exploration and development company currently advancing its
uranium properties in the Puno province in south-eastern Peru, South
America. The Company was formerly known as Macusani Yellowcake Inc.
and initially formed by amalgamation in 2007. A predecessor corporation,
(‘Old Macusani’) commenced operations in 2006. The other predecessor
corporation (Silver Net Equities Corp.) was classified as a Capital Pool
Company under TSX-V policies. The Company, through subsidiary
companies, Global Gold SAC (‘Global Gold’) and Minergia SAC (‘Minergia’)
holds a 99.5% interest in various mineral property claims and concessions
through its subsidiary Macusani Yellowcake S.A.C., covering an area of 910
km2 on the Macusani Plateau.
Amalgamation and Acquisitions1 (see page 17)
Source: PLU
*Minergia S.A.C.
In 2007, Cameco Corp. (and its wholly owned
subsidiary Cameco Global Exploration Ltd.)
(‘Cameco’) entered into a joint venture with Vena
Resources Inc. (‘Vena’) with the objective of jointly
exploring for uranium in Peru. Minergia S.A.C was
formed as the joint venture vehicle, with Cameco
providing the funding and Vena undertaking the
exploration management. The ownership was founded
on 50 % shareholding in favour of each party.
Azincourt Uranium Inc. (Azincourt) entered into a
definitive share-purchase agreement with joint venture
partners Cameco and Vena to acquire full ownership
of Minergia S.A.C, which completed in January 2014.
Old Macusani entered into an agreement (the ‘Agreement’) with Silver Net
Equities Corp. (‘Silver Net’) in September 2007 under which Old Macusani
and Silver Net agreed to amalgamate to form one entity (‘Amalco’). In
October 2007, pursuant to the Agreement, Old Macusani amalgamated with
Silver Net, to form Macusani Yellowcake Inc. (‘MYI’) and began trading on
the TSX-V under the symbol ‘YEL’. In April 2012 the Company concluded its
acquisition of Southern Andes Energy Inc., (‘Southern Andes’). The
transaction was effected through an amalgamation of Southern Andes with a
wholly owned special-purpose subsidiary and was renamed Peru Uranium
Inc. In December 2012 Peru Uranium Inc. was amalgamated with Macusani
Yellowcake Inc. to form a single entity.
In September 2014 MYI and Azincourt Uranium Inc. (‘Azincourt’) announced
the completion of a transaction whereby MYI acquired 100% of Minergia
S.A.C.*, a subsidiary of Azincourt, with mining concessions on the Macusani
Plateau. On 1st May 2015 the Company changed its name to Plateau
Uranium Inc. and commenced trading on the TSX-V under the symbol ‘PLU’.
The Company’s registered office is located at 141 Adelaide Street West,
Suite 1200, Toronto, Ontario M5H 3L.
Macusani Project Summary1,2
The Macusani project is located ~650 km east southeast of Lima and about
220 km by road from Juliaca in the south. The town of Macusani is some 25
km to the southeast of the project. The project currently centres around six
mineral ‘complexes’, of which five have resource estimates. These are: 1)
Corachapi; 2) Colibri; 3) Kihitian; 4) Isivilla; and 5) Corani. The sixth complex
is named Sayaña. These complexes can constitute multiple deposits within
a very close area, hence why they have been grouped into complexes. All
deposits are within a 7.5-10 km radius of one another.
There have been several resource estimates on the complexes since 2010.
As of May 2015, PLU’s combined properties have NI 43-101 compliant
resources of: M&I: 95.2 Mt @ 248ppm U3O8 (51.9 Mlbs U3O8) & Inferred:
130 Mt @ 251ppm U3O8 (72.1 Mlbs U3O8), at a 75ppm cut-off. The
exceptionality about the resource is its robustness, when a 200ppm cut-off is
applied the resource is M&I: 33.5 Mt @ 445ppm U3O8 (32.8 Mlbs U3O8) &
Inferred: 41.6 Mt @ 501ppm U3O8 (45.9 Mlbs U3O8).
Uranium mineralisation is found in acidic volcanic rocks of rhyolite
composition that cover large areas of the Macusani Plateau, and which are
preserved in the NW-SE trending graben within the Andes. These volcanic
rocks are dated between 10.0 Ma and 6.7 Ma. Uranium mineralisation
observed in these pyroclastic rocks is found concentrated along fractures and
disseminated into the surrounded host rock. Zones in which the uranium
mineralisation is concentrated are referred to locally as ‘Manto’s’ and typically
have a horizontal or sub-horizontal orientation, and can vary from several
VCL
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4 College Hill, London, EC4R 2RB, UK
Tel + 44 (0) 207 248 9773
Web: www.vicaragecapital.com
3
Plateau Uranium Inc.
15th April 2016
metres to tens of metres in thickness. Uranium mineralisation was formed by
leaching of volcanic glass, apatite, and monazite, transported as uranyl
phosphate complexes and precipitated as meta-autunite (Ca(UO2)2(PO4)2.68H2O) & subordinate weeksite (K2(UO2)(Si2O5)3 4H2O) in fractures forming
in response to tectonic uplift.
In January 2016 an updated Preliminary Economic Assessment (‘PEA’) for
Macusani was released based on new mining inventories and Cameco data
which improved mine life, throughput, average grade, processing recovery,
leaching time and acid consumption. Based on a conservative long-term
uranium price of US$50 lb/U3O8, the ‘base-case’ scenario outlined a
predominantly open-pit operation with a centralised heap leach facility to
return a post-tax NPV8% US$603.1 M & IRR of 40.6%, with a 1.76-year
payback period. The project is most sensitive to uranium price and recovery,
and gives encouragement for future development as the PEA also outlined a
‘low-case’ scenario at US$35 lb/U3O8 to return a post-tax NPV8% of
US$236.2 M & IRR of 22.5%.
Base-case production is anticipated to average 6.09 Mlbs U 3O8 per annum,
processing 109 Mt at 289 ppm U3O8 over a 10 year LOM, which would rank
Macusani within the top five largest uranium operations in the world. Cash
operating costs average US$17.28 lb/U3O8 over LOM placing it in the lowest
quartile of uranium producers in the world using 2015 production figures.
Initial Capex is estimated at US$249.7 M (plus US$50 M contingencies) to
construct the mine and a 10.9 Mtpa heap leach process plant using standard
off-the-shelf equipment and technology. Total sustaining Capex for LOM are
estimated at US$43.9 M. Other highlights outlined in the PEA include a
stripping ratio of 2.05:1 (waste to ore), processing recovery rate of 88%, and
acid consumption of 9 kg/t.
In March 2016, the Company announced a maiden lithium resource within
four of its 14 uranium deposits at Macusani of: Indicated: 52.31 Mt @ 0.13%
Li2O (for 67,000 t of Li2O Eq.) and Inferred: 87.68 Mt @ 0.12% Li2O (for
109,000 t of Li2O Eq.). The lithium resource estimate is based on a 75 ppm
U cut-off grade and are wholly contained within the uranium resources. In
addition, the results of initial unoptimised metallurgical tests were released,
yielding lithium recoveries of 69% and 73% on samples with head grades of
631 ppm Li and 518 ppm Li, using sulphuric acid heated to 250°C. Potassium
also leaches during the process and has average grades of 3.71% K for the
Indicated resource & 3.73% K for the Inferred resource. Expected products
from lithium extraction would be lithium carbonate (Li2CO3) and potassium
sulphate (K2SO4). It is understood the lithium is strongly correlated with
uranium mineralization and appears to be present in all of the uranium
deposits’ host rocks.
The Company intends to advance the project further along the development
path by initiating further delineation, expansion and exploration drilling, and
with additional pre-feasibility metallurgical and engineering study work.
Properties1, 2
Table 1: Main concessions held by Plateau.
Complex Name Concessions Hectares
1 - Corachapi
3
800
2 - Colibri
3
1,100
3 - Kihitian
3
2,000
4 - Isivilla
2
1,400
5 - Corani
4
2,000
6 - Sayaña
3
2,500
Source: PLU
VCL
Plateau presently owns 99.5% of a Peruvian company, Macusani Yellowcake
SAC. The remaining 0.5% is held by a Peruvian individual as recommended
by the Ministry of Energy and Mines (MEM). Plateau also owns 100% of
another Peruvian company, Minergia. Global Gold and Minergia hold various
mineral rights. The focus of this report is based on the mining concessions
listed in Table 1 which details the principal claims held by the Company
covering 9,800 ha. Plateau’s total concessions cover 91,000 ha.
All concessions held by Global Gold S.A.C. and Minergia SAC have been
correctly filed at the MEM for all past and present exploration, and all good
standing fees made as of July 2017. No set expiration dates have been set
on all concessions held by the subsidiaries of PLU, and access to the surface
rights will be maintained by continuation of agreements with the local
communities located on the Macusani plateau.
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Tel + 44 (0) 207 248 9773
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Plateau Uranium Inc.
15th April 2016
Country Overview: Peru
Background 2,3,4,5,6,7,8
Figure 2: Province of Carabaya,
Department of Puno and location of the
Macusani property.
The Republic of Peru is located in western South America, bounded in the
north by Columbia and Ecuador, in the east by Brazil, in the southeast by
Bolivia, in the south by Chile and in the west by the Pacific Ocean. The
country is divided into 24 ‘Departments’, each of which is subdivided into 195
provinces and 1,848 districts. Plateau’s concessions are located in southeast
of the country in the Carabaya Province, Department of Puno.
The Carabaya Province is divided into ten districts, of which the project is
within the Macusani District. Carabaya is bounded to the north by the Madre
de Dios Region, on the east by the Sandia Province, on the south by the
provinces of Azángaro, Melgar and Putina and on the west by the Cusco
Region. The capital of the province is Macusani, some 25 km to the southeast
of the project. The people in the province are mainly indigenous citizens of
Quechua descent. Quechua is the language which the majority of the
population (84.12%) learn to speak from childhood, while 15.14% use the
Spanish language and 0.62% communicate in Aymara. In 2007, the
estimated population of Carabaya was ~74,000, and in 2011 the Department
of Puno had an estimated population of ~1.36 M.
Source: Wikipedia (edited)
Figure 3: The Allin Qhapaq Mountain (‘The
Good Mighty One’) located east of the
project area.
Carabaya’s climate is generally cold and dry, though temperatures and
precipitation rates can vary hugely depending on latitude and topography.
The province is characterised by the Willkanuta and Kallawaya (Andean)
mountain ranges, with associated lakes and plateaus. Some of the highest
peaks are located near the project area, including Allin Qhapaq (5,780 m asl)
to the east, Quyllur Puñuna (5,743 m asl) to the west and Ananta (5,300 m
asl) to the north. The maximum site altitude is 4,730 m asl and depending on
local variations in altitude and temperature, the air density at site will be ~5560% of air at standard conditions at sea level. The lack of oxygen and/or lack
of air, and other factors relating to reduced air pressure will affect operations
due to the impact on personnel and machinery.
Politics 9,10
The political system of Peru is based on a constitutional republic with the
President as the head of the state as well as the head of government and of
a pluriform multi-party system. There are three branches of government,
namely the Executive, the Legislative, and the Judiciary, and each of these
branches is autonomous and independent.
Source: A. Gargate
Executive power is exercised by the government. Legislative power is vested
in both the government and the Congress. The Judiciary is independent of
the executive and the legislature. The President of Peru serves for a term of
five years and may not immediately be re-elected. The present constitutional
president of Peru is President Ollanta Humala, inaugurated in July 2011.
Congress consists of a 130-member single chamber, which can be dissolved
once during a presidential term.
Figure 4: The town of Macusani, Carabaya
Province, Puno, Peru.
Regional and local elections (four-year term) last took place in October 2014.
The next presidential and legislative elections will take place in April 2016.
Early polls point to a widening lead for Keiko Fujimori, daughter of former
president Alberto Fujimori, who is campaigning on a similar pro-business
platform to that of her father. At present, the Regional Governor of Puno is
Juan Luque and the Provincial Mayor of Carabaya is Edward Rodriguez
Mendoza.
Source: www.cycleprofix.com
VCL
In terms of international relations, Peru has a generally friendly relationship,
although there are occasional bilateral tensions with Chile (pending territorial
dispute). Peru is a member of various international organisations including:
The United Nations since 1945; Security Council between 2006 and 2007;
World Trade Organisation since 1995, Asia Pacific Economic Cooperation
(APEC) forum since 1998 and; in 2011 formed the Pacific Alliance with Chile,
Columbia and Mexico.
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Plateau Uranium Inc.
15th April 2016
Table 2: Economic overview of Peru.
Currency
Nuevo Sol (S/. or PEN)
Exchange rate
US$1.00: S/.3.51
(17th Feb. 2015)
S/.1.00: US$0.28
GDP
US$202.6 BN (2014)
GDP per capita
US$4,151.1 (2014)
External debt
US$17.2 BN (2014)
Investment
28.3% GDP (2015)
Unemployment
6.6% (Jan 2016)
rate
Pop. below
22.7% (2014)
poverty line
Canada, China, Germany,
Italy, Japan, Spain,
Export partners
Switzerland, US,
Venezuela
Gold, copper, zinc, crude
oil and by-products,
Export
coffee, potatoes,
commodities
asparagus, textiles, fish
meal
Argentina, Brazil, Chile,
Import partners
China, Ecuador, EU, US
Petroleum and byImport
products, plastics,
commodities
machinery, vehicles, iron
and steel, wheat, paper
Source: BCRP / PwC / www.ey.com
Figure 5: Exchange rate evolution: Nuevos
Soles per US$1 (yearly average).
*average rate as of 18th February 2016.
3.70
3.51*
3.50
Economy 10,11,12,13,14,15,16,17,18
Peru has a diversified economy which can be divided into three geographical
regions:

The Coast (Costa), a narrow desert strip 3,080 km long that contains
~63.2% of the population, occupying ~10.7% of Peru’s territory. The
coastal waters provide important fishing grounds. Lima is the political
and economic capital of the country;
The Highlands (Sierra), consisting of the Andean Mountain Range,
holding ~27.4% of the population and covers 31.8% of the country.
This region contains the country’s major mineral deposits;
The Amazon Jungle (Selva), the largest region accounting for 57.5%
of Peru’s territory, rich in forestry resources and petroleum


In the coming years Peru is anticipated to emerge as one of the most stable
economies in Latin America. The country has experienced continuous
economic and political stability since the early 1990’s and, according to the
IMF is currently the sixth largest economy in South America, with a GDP per
capita measured in Purchasing Power Parity (PPP) in 2014 of US$11,514.
Over the last few years Peru has achieved substantial advances in
macroeconomic performance including social and development indicators,
with dynamic GDP growth rates, a stable exchange rate, low inflation and a
reduction of external debt. This rapid expansion has resulted in the national
poverty rate reduced from 48.5% in 2004 to 22.7% of its total population in
2014.
Peru’s main industries have historically been agriculture, fishing, mining and
hydrocarbons. However, since the 1990’s there has been an increase in the
country’s manufacturing industry, principally in the textile and construction
sectors. The latter has become progressively important in the Peruvian GDP
due to infrastructure construction and a housing boom with an annual growth
rate of 11.1% in the last 10 years.
Within Puno itself, the economy is based on agriculture and cattle raising
activities for which it is well known for its herds of llamas and alpacas. The
main crops are potato, quinoa and other tubers, with low yields due to limited
access to fertilizers and seeds which only allows for subsistence farming. The
region also benefits from income brought by tourists.
Source: UKForex
Table 3: Investment grade comparison of
Latin America.
Country
S&P
Moody's
Fitch
Chile
AA-
Aa3
A+
Peru
BBB+
A3
BBB+
Mexico
BBB+
A3
BBB+
Columbia
BBB
Baa2
BBB
Bolivia
BB-
Ba3
B+
Brazil
BB
Ba2
BB+
Ecuador
B
B3
B
Argentina
CCC+
Caa2
CCC
Venezuela
CCC
Caa3
CCC
Source: Standard & Poor’s, Moody’s and Fitch
Ratings. Updated April 2016.
VCL
Figure 6: GDP annual growth rate comparison of Latin America.
11
9
7
5
3
1
-1
-3
2015
'16
2014
'14
2013
'12
2012
'10
2011
'08
2010
'06
2009
2.50
The Peruvian sol (PEN) in recent years has been in steady decline against
the US dollar as result of commodity prices at multi-year lows, and ongoing
weakness in the economy’s export sector, partly due to the poor economic
performance of China, a major importer of Peruvian exports. Trading at 3.52
PEN per US dollar on 11th February 2016, the first time in 14 years, the
general consensus amongst forecasters is that the sol will not recover in
2016, and anticipate the sol to be trading at ~3.6 PEN per USD in 2017.
2008
2.70
2007
2.90
2006
3.10
GDP Annual Growth Rate (%)
3.30
-5
-7
Peru
Ecuador
Mexico
Argentina
Columbia
Venezuela
Bolivia
Chile
Brazil
Source: WorldBank
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Plateau Uranium Inc.
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Table 4: Investment in transport and
infrastructure programmed to 2016.
Infrastructure
US$ Millions
Roads
Rail
Airports
Ports
River
Total
11,421
5,300
420
548
87
17,776
Source: MTC
*50% of income tax paid by a mine to the
Central Government is remitted as ‘Canon’,
back to the regional and local authorities of
the area where the mine is located.
Infrastructure10,11,12
Peru’s economic growth is closely linked to the progressive reduction of its
infrastructure shortcomings. The country has recently begun to take steps
towards alleviating its infrastructure ‘bottlenecks’ in order for the country to
reach its full economic potential, with a focus on transport, electricity, water
and communications, in order to promote new investments which will
contribute to the development of the productive sectors of the country. These
investments aim to modernise the country's infrastructure, reducing logistics
costs and enhancing the use of Free Trade Agreements (FTAs) signed by
the country to increase Peru's integration with world markets. The Ministry of
Transports and Communication (‘MTC’) has forecasted total investment in
transport infrastructure projects up to 2016 to be US$17.7 BN, which will
provide significant investment opportunities for both contractors and logistics
operators.
One of the major shortfalls in spending on infrastructure is the lack of
administrative capacity in the provinces which has contributed to fuelling antimining sentiment. It is believed that regional and local authorities are sitting
on billions of soles from canon*, mining royalties, and other levies collected
over the last decade lying dormant in bank accounts, which could be used to
fund new infrastructure projects. The Peruvian government have become
very proactive in recent years, providing the private sector with incentives to
develop investment projects. For example, the country’s tax system includes
provisions to grant a form of credit against income taxes to allow third-party
investors to recover capital investments made in public infrastructure. Mining
companies are responding by developing social infrastructure and involving
communities at an early stage.
Mining Industry10,11,12
Table 5: Principal minerals produced in
Peru in 2014 and 2015.
Peru has 13% of the world’s copper
reserves, 4% of gold, 22% of silver, 7.6% of
zinc, 9% of lead and 6% of tin reserves
according to recent data from the MEM.
Cu (Mt)
Au (t)
Zn (Mt)
Ag (Mt)
Pb (Mt)
Fe (Mt)
Sn (t)
Mo (t)
W (t)
2014
2015
1.38
140.10
1.32
3.77
0.28
7.19
23,105
17,018
77
1.70
145.03
1.42
4.10
0.32
7.32
19,511
20,153
139
Change
23.46%
3.52%
8.06%
8.86%
13.88%
1.78%
-15.56%
18.43%
79.93%
Source: MEM
Mining is the dominant sector of the Peruvian economy and has been one of
the key drivers of the country’s growth. It is understood that in recent years
the sector has generated on average, 58% of total exports, 16% of fiscal
revenues and 14.4% of GDP. According to a January 2016 report by the
USGS, Peru was the seventh largest mining producer in the world in 2015,
ranking third worldwide in the production of copper, silver, and zinc, and
fourth in the production of tin, lead, and molybdenum. The principal
destinations for Peruvian copper are China and Japan, gold to Switzerland
and Canada, and zinc and silver to China and South Korea. Despite the
global decline in commodity prices, investment in the sector is forecasted to
be ~US$63.9 BN for the next five to ten years. This figure includes major
projects such as Las Bambas (MMG, US$10 BN), Cerro Verde Expansion
(Freeport, US$4.6 BN), Quellaveco (Anglo, US$3.3 BN) and Constancia
(Hudbay, US$1.8 BN).
According to the MEM, there are some 200 operating mines and currently 47
projects in the country, of which 24 are in the exploration stage, 14 are EIA
approved/under construction, six are expanding current operations and three
are in evaluation. China is currently the top investor in Peru’s mining industry
(US$19.2 BN), followed by the US (US$10.1 BN) and Canada (US$8.4 BN).
Although Peru is one of the most extensively mineralised countries in the
world, with a variety of world-class ore deposits, it is estimated that in 2014
only 0.34% of the country’s total territory was being explored and 0.91% of
its territory was under exploitation.
Laws and permitting procedures10,11,12,20
The Peruvian government grant to right the explore, extract, process and/or
produce minerals in the form of mining and processing concessions. The
rights and obligations of holders of concessions are currently set forth in the
1992 General Mining Law. This law outlines the terms and conditions under
which mining activities are allowed; including the way in which mining rights
can be obtained and maintained, how they can be lost, what are the
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Plateau’s Permitting Advancements at
Macusani

Environmental Impact Study (EIA) to
MEM:
o Builds on Exploration EIS –enhanced
number of monitoring sites and
frequency
o Mine, processing infrastructure &
tailings design details and
Construction Plan
o Includes a social relations
plan/community agreement(s)
o Certification of no archaeological
remains in the area
o Draft mine closure and remediation
plan
o Water rights from the National Water
Authority

Surface lands right agreements with
surface owners
Assuming all submissions are acceptable,
approval to construct is granted within 1-4
months

obligations of the holders etc. The law also makes provision for the contracts
permitting options over mineral rights, assignments and mortgages.
Mining concessions are granted on a ‘first come, first served’ basis, with
provision for an auction if simultaneous claims are made, and may be
separately granted for metallic and non-metallic minerals. A separate
processing concession is available, granting the right to concentrate, smelt
or refine minerals already mined. Mining and/or processing concessions for
treatment of mining ores can be obtained from the MEM or through the
assignment of concessions previously granted by the MEM to independent
or related parties. Under the General Mining Law, the same mining
concession is valid for exploration and for exploitation operations; hence
there is no complicated ‘conversion’ procedure. No concession is required to
trade in minerals and exports by producers are not restricted.
The General Mining Law in Peru gives mining and metals companies the
possibility to obtain a clear and secure title for mining development. Mining
concessions have an indefinite term provided that a minimum annual level of
production or investment is met, and an annual concession fee is paid.
Processing concessions enjoy the same duration and tenure as the mining
concessions, subject to the payment of a fee based on nominal capacity for
the procession plant or level of production.
Under Peruvian law, there is a difference between the surface rights and
mineral rights (natural resources). It is often the case that the titleholders of
mining concessions (the right to explore and mine underground ore reserves
in the concession area) are not the owners of the surface land. Under the
General Mining Law, clear administrative procedures have been established
which mining concession holders must to follow to gain access to privately
owned land for mining activities, in order to avoid potential conflicts with third
parties after a mineral deposit has been discovered.
Recently, the MEM and Environmental Ministry have issued regulations
mandating environmental standards for the mining industry and reviews and
approves environmental studies for mining operations. Under these
environmental regulations, new development and production activities are
required to file and obtain approval for an Environmental Impact Study (‘EIS’),
before being authorised to commence operations. The Environmental
Evaluation and Oversight Agency (‘OEFA’) monitors environmental
compliance. The OEFA has the authority to carry out unexpected audits and
levy fines on companies if they fail to comply with prescribed environmental
standards. Furthermore, companies must prepare, submit, and execute
Closure Plans, and grant environmental guarantees to secure compliance
during the life of the concession. The guarantee must cover the estimated
amount of the Closure Plan which may be in cash, trusts or any other
guarantee contemplated in the Banking Law.
In November 2015, the government announced that mining companies are
now required to carry out prior consultation with indigenous communities in
the country’s highlands, under the terms of Law No. 29785 passed in 2011.
The new policy reverses the government previous position that that
communities meeting the definition of ‘indigenous’ were concentrated in the
Amazon Basin. The expansion of the definition ‘indigenous communities’ to
include highland communities means that companies looking to initiate
mining activities will be required to fulfil the requirements laid out in the law.
In addition, the law will be applied retrospectively with a number of projects
already in the exploration stage being required to undergo prior consultation
before proceeding further. Despite the delays that will be caused, the change
in policy is intended to ensure highland communities are consulted about
projects, reducing the risk that unaired grievances will fuel disruptive social
unrest at a later stage.
There have been a number of deadly protests in recent years in the country,
over environmental fears from local communities on mining projects, with the
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Table 6. Peru’s mining fiscal system at a
glance.
2015/ 2017/
From
16
18
2019
Income Tax
28%
27%
26%
rate1,2
Dividends
6.8%
8.0%
9.3%
Modified Mining
Royalties
(‘MMR’)
1% to 12% imposed on
operating mining income.
A minimum royalty of 1%
of sales is applicable.
Special Mining
Tax (‘SMT’)
2% to 8.4% imposed on
operating income3
Special Mining
Burden (‘SMB’)
4% to 13.12% imposed
on operating income
Good Standing
Fee
US$3.00 ha/year4
Capital
Allowances
Accelerated depreciation,
exploration write-offs
Investment
Incentives
Tax losses can be carried
forward for 4 years or
indefinitely; stabilisation
agreements; VAT
recovery
1) Mining companies with tax stabilisation
agreements are subject to a 2%
premium.
2) In addition, they must pay a workers’
participation of 8% on the net profits of
the company.
3) Is intended only for mining companies
with tax stabilisation agreements in
place prior to October 2011.
4) Deductible for corporate income tax
purposes. Reduced fees are applicable
for small mining producers (US$1
ha/year) and for artisanal mining
producers (US$0.5 ha/year).
Source: EY / MEM
last in September 2015 at MMG’s Las Bambas copper mine. It is understood
protesters were angered by the lack of consultation on MMG’s changes to
the environmental plans at Las Bambas, which resulted in four fatalities.
Currently under Peruvian law, changes in previously approved environmental
impact studies don't require additional public hearings.
Taxes and royalties10,11,12,20
After the election of President Humala in July 2011, a comprehensive mineral
fiscal system reform for Peru’s mining industry was enacted in October 2011.
Under the revised fiscal system, mining companies now pay Modified Mining
Royalties (‘MMR’) payable on a quarterly basis, based on their operating
profits, from 1% to 12%, rather than the old system where the has to pay 1%
to 3% based on sales. However, for base metals the royalties negotiated by
companies to date in practice have been between 1-3% of profits since the
new legislation was established. They also have to pay a new tax known as
the ‘Special Mining Tax’ (‘SMT’) based on a sliding scale, with progressive
marginal rates ranging from 2% to 8.40%, of a company’s operating profits.
These changes apply to all existing and future mineral resource projects
since the reform in 2011. Because the new approach is purely profit driven,
it has appeal to investors who prefer to be taxed on their ability to pay rather
than on the value of their production or sales.
However, the new legislation is not applicable to mining companies with fiscal
stabilisation agreements in place, under the General Mining Law, at the time
it became effective. Nonetheless, those companies may elect to make
‘voluntary’ payments, known as the ‘Special Mining Burden’ (‘SMB’),
according to a sliding scale with marginal rates ranging from 4% to 13.12%
also applied on operating profits. The SMB is not a tax as determined by
general legal principals given that it is not a compulsory payment imposed
under Peru’s authority to levy taxes. Accordingly, it only becomes applicable
to those companies that elect to pay it by entering into a standard-form
agreement (irrevocable) with the Peruvian government with respect to each
particular mining project. The reform was made clear by the President that
his intention was to raise additional revenues to increase social spending,
while maintaining foreign investment and encouraging more entrepreneurs to
take part of the country’s economic growth.
Stability Regime
Mining companies may enter into several types of Stabilisation Agreements
that ensure that a given set of rules, mainly about tax schemes, will remain
unchanged for a certain number of years. The two types are:
1) Foreign and Private Investment Legislation: stability contracts entered
with ‘Proinversion’, the private investment promotion agency of Peru,
available to (i) Qualified foreign and national investors and (ii) the
company that received the investment. The stability contracts
guarantee stability with respect to the corporate income tax regime and
the rate of tax on distributions of profits to the parent investor.
They also guarantee the unrestricted right to remit profits abroad, free
availability of foreign currency, stability of the labour hiring regime and
non-discrimination between foreign and national investors. The contract
is valid for 10 years. To qualify, the mining investor must invest a
minimum of US$10 M within two years of entering the stability contracts.
2) General Mining Law: mining concession holders committing to projects
of a minimum size are entitled to a broader range of stability benefits.
These agreements are for 10, 12 or 15 years and stabilise major
government taxes, duties, royalties and other payments not considered
taxes. The also guarantee to following: free marketing of mineral
products for export or domestic sale; free disposal within the country
and abroad of foreign currency generated by exports; free convertibility
into foreign exchange of local currency generated by mineral sales;
non-discrimination on exchange matters.
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Market Overview: Uranium
Background21,22
Table 7: Primary and secondary uranium
minerals and their chemical composition.
Uranium Minerals
Uranium occurs in most rocks in concentrations of 2-4 ppm, is as common
as tin, tungsten, molybdenum and zinc and some 500 times more common
than gold. It is a highly soluble, radioactive, heavy metal which can be easily
dissolved, transported and precipitated within groundwaters by subtle
changes in oxidation conditions. Furthermore, it is uncommon for uranium to
form very insoluble mineral species which is a further factor as to why,
according to the International Atomic Energy Agency (‘IAEA’), there are 15
major categories of uranium deposit types based on their geological setting.
Arranged in order of their economic significance these deposits are:
1) Unconformity-related, 2) Sandstone, 3) Quartz-pebble conglomerate,
4) Breccia complex, 5) Vein, 6) Intrusive (Alaskites), 7) Phosphorite,
8) Collapse breccia pipe, 9) Volcanic, 10) Surficial, 11) Metasomatite,
12) Metamorphic, 13) Lignite, 14) Black shale and, 15) Other types.
Primary
Chemical Formula
uraninite or
pitchblende
UO2
coffinite
U(SiO4)1–x(OH)4x
brannerite
UTi2O6
davidite
(REE)(Y,U)(Ti,Fe3+)20O38
thucholite
U-bearing pyrobitumen
Secondary
Chemical Formula
autunite
Ca(UO2)2(PO4)2 x 8-12 H2O
carnotite
K2(UO2)2(VO4)2 x 1–3 H2O
gummite
gum like amorphous mixture
of various uranium minerals
saleeite
Mg(UO2)2(PO4)2 x 10 H2O
The top five countries with the largest known recoverable resources of
uranium as of 2013 were: Australia (1.71 Mt U / 29% world); Kazakhstan
(0.68 Mt U / 12% world); Russia (0.51 Mt U / 9% world); Canada (0.49 Mt U
/ 8% world) and; Niger (0.40 Mt U / 7%).
torbernite
Cu(UO2)2(PO4)2 x 12 H2O
Mining/Processing
tyuyamunite
Ca(UO2)2(VO4)2 x 5-8 H2O
uranocircite
Ba(UO2)2(PO4)2 x 8-10 H2O
uranophane
Ca(UO2)2(HSiO4)2 x 5 H2O
zeunerite
Cu(UO2)2(AsO4)2 x 8-10 H2O
At conventional mines, the ore goes through a mill where it is first crushed.
It is then ground in water to produce a slurry of fine ore particles suspended
in the water. The slurry is leached with sulphuric acid to dissolve the uranium
oxides, leaving the remaining rock and other minerals undissolved, as mine
tailings. However, nearly half the world's mines now use a mining method
called in situ leaching (‘ISL’). This means that the mining is accomplished
without any major ground disturbance. Groundwater with a lot of oxygen
injected into it is circulated through the uranium ore, extracting the uranium.
The solution with dissolved uranium is pumped to the surface. Both mining
methods produce a liquid with uranium dissolved in it. This is filtered and the
uranium then separated by ion exchange, precipitated from the solution,
filtered and dried to produce a uranium oxide concentrate, which is then
sealed in drums.
Source: Wiki
Figure 7: Uraninite (U3O8) aka ‘Yellow
Cake’, containing at least 75% U-oxide.
Source: Nat Geo
Figure 8: Uranium dioxide in powder and
pellet form.
Source: WNA
VCL
The vast majority of all nuclear power reactors require 'enriched' uranium fuel
in which the proportion of the uranium-235 isotope has been raised from the
natural level of 0.7% to about 3.5% to 5%. The enrichment process needs to
have the uranium in gaseous form, so on the way from the mine it goes
through a conversion plant which turns the uranium oxide into uranium
hexafluoride (UF6). The enrichment plant concentrates the useful uranium235, leaving about 85% of the uranium by separating gaseous uranium
hexafluoride into two streams: One stream is enriched to the required level
of uranium-235 and then passes to the next stage of the fuel cycle. The other
stream is depleted in uranium-235 and is called 'tails' or depleted uranium. It
is mostly uranium-238 and has little immediate use.
About 27 tonnes of fresh fuel is required each year by a 1000 MWe nuclear
reactor. In contrast, a coal power station requires more than two and a half
million tonnes of coal to produce as much electricity. Enriched UF6 is
transported to a fuel fabrication plant where it is converted to uranium dioxide
powder. This powder is then pressed to form small fuel pellets, which are
then heated to make a hard ceramic material. The pellets are then inserted
into thin tubes to form fuel rods. These fuel rods are then grouped together
to form fuel assemblies, which are several meters long. The number of fuel
rods used to make each fuel assembly depends on the type of reactor. A
pressurized water reactor may use between 121-193 fuel assemblies, each
consisting of between 179-264 fuel rods. A boiling water reactor has between
91-96 fuel rods per assembly, with between 350-800 fuel assemblies per
reactor.
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Figure 9: Kansai Electric Power’s
Takahama Unit 3 and 4 reactors, Japan.
Source: BBC
Industry21,22,23,24,25
As a result of the Fukushima Daichii nuclear incident that occurred in March
2011, nuclear reactor programs around the world were impacted in varying
degrees including the shutdown of all 54 reactors in Japan, the planned
phase out of nuclear power in Germany and the pause in nuclear plant
construction in China to reassess plant and safety system designs. The
nuclear industry is showing signs of recovering, however, with the restart of
a limited number of reactors in Japan, the resumption of the Chinese nuclear
program, and the announcement of new build programs throughout the
developed (UK) and emerging markets (Saudi Arabia).
In Japan, after a two-year hiatus in nuclear power generation, Kyushu Electric
Power Company restarted its Sendai Unit 1 reactor in August 2015, followed
by its Unit 2 reactor in October. In January 2016, Kansai Electric Power
Company’s Takahama Unit 3 reactor was restarted followed by its Unit 4
reactor in February. However, three days after it was restarted, the Unit 4
reactor was shut down due to ‘technical issues’. More recently, on 9th March
Otsu District Court in Japan ordered Kansai to shut down its Unit 3 and 4
reactors despite being previously declared safe under strict post-Fukushima
safety rules. It is understood Japan’s Prime Minister, Shinzo Abe and utility
companies have been pushing to get the country’s reactors back in operation
since it was forced to turn to costly fossil fuels to fill the energy deficit as a
result of the shutdown of its nuclear reactors. On the horizon, Shikoku Electric
Power Company announced last March it expects to restart commercial
operation of its Ikata 3 reactor by August 2016.
Demand21,22,23,24,25
Figure 10: Top 12 countries with operable,
under construction, planned and proposed
reactors as of March 2016. This chart
includes only those future reactors
envisaged in specific plans and proposals
and expected to be operating by 2030.
China
USA
Russia
India
France
Japan
S. Korea
UK
Ukraine
Canada
KSA
UAE
0
100
200
Operable
Under Construction
Planned
Proposed
Source: WNA
The World Nuclear Association (‘WNA’) reports that there are 440 nuclear
reactors operable in 30 countries as of 1st March 2016. These reactors can
generate 384 gigawatts of electricity and supply 11.5% of the world's
electrical requirements. As of 1st March 2016, 65 nuclear reactors are under
construction in 14 countries with the principal drivers of this expansion being
China (24 reactors under construction), Russia (8), India (6), the United
States (5), UAE (4) and South Korea (3). Based on the most recent statistics
from the WNA, there are a total of 173 reactors that are either under
construction, or planned around the world, and an additional 337 reactors
that are proposed, with the potential to be operating by 2030. New plants
coming on line are largely balanced by old plants being retired. During 19962013, 66 reactors were retired as 71 started operation. The WNA ‘2015
Nuclear Fuel Report’ reference scenario has 132 reactors closing by 2035,
and 287 new ones coming online (Inc. 28 Japanese reactors on line by 2035).
According to the International Energy Agency's ‘World Energy Outlook 2014’
global nuclear power capacity is projected to increase by over 60%, from
377.7 gigawatts to over 620 gigawatts in 2040. China, in particular, has an
aggressive new build program underway as revealed in its new Five-Year
Plan announced in March 2016. At present, China has 30 reactors in
operation producing ~26.8 gigawatts, and expects to double capacity to 58
gigawatts by 2020 with 24 reactors currently under construction. Many nonnuclear countries are moving ahead with their plans, such as Saudi Arabia,
which plans to build up to 16 reactors, Turkey with four ordered and four more
planned and the UAE, with three reactors under construction, a contract for
another and an additional 10 proposed reactors. In its ‘Uranium Market
Outlook – Q4 2015’ (‘Q4 Outlook’), Ux Consulting Co. (‘UxCo’) estimated that
global nuclear power capacities will rise by 44%, from 376.6 gigawatts in
2015 to 540.6 gigawatts in 2030. UxCo also estimated that uranium demand
could grow from 179.3 Mlbs of U3O8 in 2015 to 266.8 Mlbs in 2030.
Primary Supply21,22,23,24,25
Uranium supply is broadly classified into two categories, primary and
secondary supply. Primary supply includes all newly mined and processed
uranium, currently supplying ~85% of current utility requirements.
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Table 8: Top 10 uranium producers by
country in 2014.
Tonnes
Rank Country
% World
U
1
Kazakhstan
23,127
41.1
2
Canada
9,134
16.2
3
Australia
5,001
8.9
4
Niger
4,057
7.2
5
Namibia
3,255
5.8
6
Russia
2,990
5.3
7
Uzbekistan
2,400
4.3
8
United States
1,919
3.4
9
China
1,500
2.7
10
Ukraine
926
1.6
World Total: 56,217t U / (66,297 t U3O8) *
*Percentage of World Total Demand: 85%
Source: WNA
According to UxCo’s Q4 Outlook, primary uranium production increased
marginally from 2014 (145.3 Mlbs U3O8) to 2015 (~152 Mlbs U3O8). However,
if the additional production associated with the ramping up at the Cigar Lake
mine is excluded (expected to increase production up to 18 Mlbs U3O8 per
year), global production actually declined by ~5.3 Mlbs U3O8 (3.6%) from
2014. In 2015, Kazakhstan was the world’s largest producer of uranium
(~40%) followed by Canada (~22%). Further to UxCo’s Q4 Outlook, it is
estimated that primary uranium supply will increase to 168.7 Mlbs U3O8 by
2025 (+11.5% compared to 2015).
The key challenges facing primary supply is the long-lead time of uranium
mine development and cost. Bringing on new production can take up to 10
years and as such the industry is unable to respond quickly to sudden
increases in demand or significant supply interruptions. Likewise, the recent
lower uranium prices are leading to delays and cancellations of new projects,
whilst operating mines in some countries have reduced output such as in the
US where uranium production dropped 32% in 2015 compared to 2014.
Secondary Supply21,22,23,24,25
Secondary uranium supply is from sources such as the reprocessing of spent
fuel, sales by uranium enrichers, inventories held by governments
(particularly the US and Russia) and commercial inventories. Secondary
supply bridges the ~15% gap between primary supply and demand from
reactors, however it is forecast that this will steadily decrease over time as
secondary supplies diminish. Cameco estimate that about 10% of total supply
required over the next decade will need to come from primary sources. In
2015, secondary supply was ~39.7 Mlbs U3O8, and according to UxCo, is
expected to decrease to ~24.6 Mlbs U3O8/year by 2025. Conversely, with the
shutdown of the German nuclear program and the continued shutdown of the
Japanese nuclear fleet, commercial inventories could become a more
significant and disruptive factor, especially when the rate and timing of this
material entering the market is uncertain.
Price21,22,23,24,25
Figure 11: Historic uranium oxide prices
(10 year).
The last uranium boom was in 2005 during the ‘commodity super cycle’,
peaking in June 2007 at ~US$136/lb. Then in 2008, the housing bubble burst
and the financial crash brought uranium prices back down, which were further
suppressed by the Fukushima incident in 2011. In the years since, uranium
has had a rough ride, slumping from ~US$60/lb before the disaster, to a nineyear low of US$28/lb in 2014. In 2015 uranium averaged ~US$37/lb,
representing an 8.9% increase compared to the 2014 average of ~US$34/lb.
140
120
100
US$ lb/U3O8
Uranium does not trade on the open market like other commodities. Instead,
prices are negotiated privately between buyers and sellers, which are then
published by independent market consultants TradeTech and UxCo.
80
60
40
20
0
Source: IndexMundi
Throughout 2015 the spot price of uranium sustained itself well above the
lows of US$28/lb in mid-2014. Starting the first quarter at ~US$40/lb, prices
softened finishing the year at ~US$34/lb. This reflects the fact that the market
is currently oversupplied as a result of a combination of factors including,
higher priced long-term contracts, secondary supply sources and the
strengthening US dollar. The strengthening of the US dollar provides several
producers with the opportunity to sell into the spot market at significantly
higher prices in their local currency. In Canada, the spot price in Canadian
dollars has increased by over 65% to roughly C$50/lb from a low of C$30/lb
noted in mid- 2014.
Despite the performance of uranium in 2015, the price outlook predicted for
the year missed the mark. Average uranium spot prices of US$40/lb and longterm prices of ~US$58/lb were forecast, but the reality was ~US$37/lb and
~US$47/lb respectively. Several drivers contributed to the ambitious mark at
the beginning of 2015 including the Russia/Ukraine fallout and supply
disruptions at two of the world’s biggest uranium mines; Rössing and Olympic
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Dam which accounted for 8% of global supply in 2014. The re-start of Japan’s
reactors also played a role in addition to the Chinese resurgence. It is worthy
to note that Japan’s idling reactors have caused Japanese utilities to
accumulate about 120 Mlbs of uranium as they honoured their existing supply
contracts. This is enough fuel to last the country about 10 years, and as such
Japanese utilities are unlikely to purchase much uranium for a few years, but
they shouldn’t be sellers holding back the spot price either.
Figure 12: Uranium uncovered demand.
Utilities contract 2-4 years ahead.
Source: UxCo, WNA
While long-term demand is steadily growing, short-term procurement is
affected in large part by utilities' uncovered requirements. Utilities purchase
the majority of their fuel requirements under long-term contracts, to the extent
that they have unmet demand in the near term, they usually purchase on the
spot market, which in turn affects the spot price. Recently, there has been
little unmet demand, so utility buying has primarily been discretionary in
nature and price sensitive. However, as unfilled utility requirements are
increasing in the near term, the market has begun to see a resumption of
spot, medium and long term contracting, particularly from US utilities.
Many analysts believe that the supressed price experience last year was
down to the lack of buying from US utilities, who refrained from buying due to
excessive inventories, despite an estimated 15-20% of uncovered
requirements. Nonetheless, in the short-term US utilities are expected to sign
new contracts which should give a boost to uranium prices. Furthermore, the
considerable growth in emerging economies appears to be the defining
feature of uranium markets.
Although the uranium market is currently oversupplied, the long term growth
projections for the nuclear industry (currently 65 reactors under construction,
more than 170 planned, and 337 proposed) combined with the expected
depletion of uranium resources in operation today, continue to suggest that
a significant long term supply shortage could emerge, even with new
production sources expected to come online. For output to increase to meet
rising future demand, uranium prices have to rise in order to justify the
construction of new mines. Cantor Fitzgerald’s uranium spot price outlook for
the next three years is US$50/lb in 2016, US$60/lb in 2017 and US$70/lb in
2018. Dundee Capital Markets have a slightly higher outlook for the spot price
in 2016 at US$55/lb, and expects the price to flatline at US$65/lb for 2017
and 2018.
Figure 13: Global projected uranium supply (reference case) and demand.
Source: WNA
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Asset: Macusani 1,2
Figure 14: Topographic map of the Andes
over Peru.
Location and Access
The Macusani project is located ~650 km east southeast of Lima and ~220
km by road from Juliaca in the south. The town of Macusani is some 25 km
to the southeast of the project area. The Interoceanica Highway (IH) is a
system of tarred/sealed roads and passes within 10-15 km east of the project.
Two unpaved roads connect the project to the IH. The closest airport is
located at Juliaca with daily flights from Lima and Cusco. There are currently
no electricity supplies to the project, however there is a 138KV transmission
line located ~20km to the east of the project. It is understood the area has
access to sufficient water resources for the purposes of mining operations.
The project is situated at 4,100-4,800 m asl, comparable to Antamina,
Collahuasi, Chinalco-Toromocho and Minsur-San Rafael mines.
Geology
Source: NASA
Figure 15: Regional geology of Peru.
Source: PLU
Figure 16: Local geology at Macusani, and
the six uranium complexes.
Source: PLU
VCL
Regional
The Macusani project is located within the Andes Mountains, formed by the
westerly movement of the South American tectonic plate overriding and
subducting the Pacific (Nazca) tectonic plate on the western margin of the
Americas over the last +/-150 Ma (‘Andean orogeny’). The Puno region of
Peru is predominantly composed of Palaeozoic sediments (520-250 Ma) that
were formed on the western Brazilian Craton. These have been highly
deformed by thrusting and folding as a result of the Andean orogeny, an
ongoing process, that begun in the Early Jurassic since the break-up of the
supercontinent Rodinia in the Neoproterozoic.
The main geological units are shown in Figure 15 with the Oceanic Trench
forming the western margin of the South American plate. As a result of the
tectonic history, older sediments are bounded by westward dipping thrusts,
intense folding and intrusions of dykes, batholiths and being affected by
volcanic activity at various times. The Andes represents a large anticlinorium,
a large anticline on which minor folds are superimposed, convoluted by a
series of faults and intrusions, with the flanks of this superstructure made up
of the coastal Mesozoic and eastern Palaeozoic belts. In the Late Tertiary
and Quaternary, the Andes were rejuvenated by block faulting of the eroded
early Tertiary mountain range, occupying the axis of Palaeozoic and
Mesozoic synclines. Topographically, the Andes comprise a central
dissected plateau, the Intermontane Depressions and Altiplano (bounded by
narrow ranges), the Western and the Eastern Cordillera.
Local
The Macusani project area primarily overlies a series of late Tertiary tuffs,
ignimbrites and associated sediments are preserved in a NW-SE trending
graben. Overlying Early Tertiary and Mesozoic sediments were mostly
eroded before deposition of the pyroclastics which cover the Palaeozoic
rocks and Late Palaeozoic intrusives (Hercynian granites) and extrusives
(Mitu volcanics). These late Tertiary units are understood to be from the
Neogene Period and belong to the Quenamari Formation (22.5 Ma to 1.8
Ma). Miocene (23 Ma to 5.3 Ma) units comprise the Sapanuta and
Chacacuniza Members and overlying these are younger units from the
Pliocene (5.3 Ma to 2.6 Ma) belonging to the Yapamayo Member, which
outcrop over most of the area. The Quenamari Formation is comprised of
acidic tuffs, ignimbrites and interbedded sediments. The tuffs are flat dipping,
varying in composition from rhyolite to dacite to latite, principally composed
of quartz, orthoclase and plagioclase in a groundmass of amorphous glass.
In terms of the structural geology there are four main regional fault strike
orientations, in order of dominance these are: An E-W trending (102.5˚)
fabric; a NNW-SSE (157.5˚) fabric; an E-W (072.5˚) fabric; and a lesser NNESSW (012.5˚) fabric. These are noted from regional plans and dip to the
northeast (048˚) by an average of 6˚.
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Figure 17: Rose diagram depicting the
main regional fault orientations.
Mineralisation
The known uranium occurrences in the Macusani area are associated with the
Quenamari Formation acidic pyroclastics volcanic rocks of rhyolite to latite
composition, that cover large areas of the Macusani Plateau, and which are
preserved in the NW-SE trending graben within the Andes. Uranium is found
concentrated along fractures and disseminated into the surrounded host rock.
Zones in which the uranium mineralisation is more concentrated are referred
to locally as ‘Manto’s’ and typically have a horizontal or sub-horizontal
orientation, and can vary from several metres to tens of metres in thickness.
Source: PLU
Figure 18: The visible uranium
mineralisation present is meta-autunite, the
bright yellow mineral pictured below.
Uranium mineralisation was formed by leaching of volcanic glass, apatite, and
monazite (in rhyolites), transported as uranyl phosphate complexes (via
meteoric waters) and precipitated as meta-autunite and subordinate weeksite
in fractures forming in response to tectonic uplift, see Figure 18. No other
forms of uranium mineralisation have been identified. Other uranium
mineralisation appears to be hosted in the acidic volcanic rocks that cover
large areas of the Macusani Plateau, in horizontally bedded formations from
surface to a depth of about 100 m, but these appeared to be lenticular or
confined to fracture zones. U-Pb ages of the autunite indicate initiation of this
mineralisation at ~1 Ma, long after the cooling of the last volcanic eruptions.
Structurally, uranium mineralisation is hosted within three main fracture
orientations:
 A near vertical orientation (85° towards the southwest) striking 158°;
 A steeply dipping orientation (67° towards the south) striking 096°; and
 A flat dipping orientation (10° towards the southwest) striking 150°
There are a further three subsidiary mineralised fracture orientations and
several un-mineralised fracture orientations.
To date, a total of 14 mineralised deposits have been identified in the
Macusani property area. These can occur within a close distance to oneanother and as such are grouped into ‘complexes’. Plateau have focussed
on the following six complexes: Kihitian, Isivilla, Corani, Colibri, Corachapi,
and Sayaña, see Figure 19.
Source: PLU
Exploration
Historical
Figure 19: Plateau’s mineral rights plan
(yellow outline) with complexes (purple
outline) and associated uranium deposits.
Uranium exploration activities in Peru were initiated on the back of the work
of the Instituto Peruano de Energia Nuclear (‘IPEN’) between 1976 and 1981
with the aim of identifying and developing resources in the country. The
Macusani East area was the most studied area in southern Peru by IPEN.
After IPEN discovered the first 60 uranium showings in 1978, radiometric
prospecting and trenching were carried out over an area of ~600 km2,
culminating in the discovery of numerous additional uranium showings.
In 1977, a UN Development Programme/International Atomic Energy Agency
(UNDP/IAEA) project was initiated consisting of regional reconnaissance
over selected areas. Car-borne radiometric surveys were conducted in the
Puno Basin where a significant discovery was made near Macusani in the
southern Cordillera Oriental, north of Lake Titicaca. Uranium anomalies were
found in the Upper Tertiary volcanics and the Permian Mitu Group by the
UNDP/International Atomic Energy Agency (‘UNDP/IAEA’) project. Additional
anomalies were also identified during this same period near Santa Rosa.
Source: PEA (edited)
VCL
These discoveries resulted in further exploration in the area which included
a heli-borne spectrometric survey of selected areas, as an IAEA/IPEN
Project, and a fixed wing survey in an adjacent area by IPEN which were
completed in 1980, identifying numerous uranium anomalies. In 1984, the
OECD’s Nuclear Energy Agency and the IAEA sponsored an International
Uranium Resources Evaluation Project Mission (‘IUREP’) to Peru which
estimated that the uranium resources in the country were 6,000-11,000 t.
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Plateau Uranium Inc.
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Figure 20: Drilling on the Macusani
property.
Source: PLU
Figure 21: Schematic of multiple drilling
methodology from platforms.
Source: PLU
Modern
During the collapse of prices in the 1980’s and in the wake of the Three Mile
Island accident, there was little interest to explore for uranium. Then between
2001 and 2008, the uranium prices experienced a huge resurgence resulting
in junior mining companies to mobilise, staking properties over prospective
ground. Amongst these early explorers was Vena Resources Inc. (‘Vena’)
who acquired seven concessions in the Macusani Plateau as well as
additional concessions elsewhere in Peru. In 2006, Vena commenced
scintillometer prospecting, radon and surface outcrop mapping over various
IPEN uranium showings.
At around the same time, Global Gold acquired several concessions,
completing ground-based radiometric surveys over most of its properties (inc.
Colibri II & III and Kihitian; and supported by the previously drilled data from
Triunfador I by Frontier Pacific) as a guide for its drilling programmes.
During 2006, Minergia collected radiometric readings at 1,785 individual
stations as well as 564 Alpha cup readings of radon gas. In addition, 44
surface samples were collected from various IPEN showings for target
identification and 169 petrographic samples were prepared and examined. In
2007, Minergia collected 10,301 additional radiometric readings at various
concessions in the Macusani area for target identification. In addition, 14
petrographic samples were prepared and examined. From 2009 to 2010
Minergia completed 65 DDH’s (12,316.8 m), with 155 petrographic samples
prepared and examined. In 2011, a further 62 DDH’s for a total of 11,107 m
were drilled on Minergia’s properties. Since 2006, a total of 232 DDH’s
totalling 37,958 m have been completed on the Minergia properties.
Corachapi Complex
Figure 22: Drill core enriched in
meta-autunite.
Initial exploration consisted of 77 trenches cut across the strike of
mineralisation at 50 m to 100 m intervals. Contact Uranium undertook a
drilling campaign beginning in 2007 which comprised 193 diamond drillholes
(‘DDH’). Global Gold subsequently drilled a further 26 DDH’s. All holes were
drilled to a depth of ~50 m, bringing the current status of drilling to 11,818 m
from 219 drillholes. Contact Uranium drilled on 80 m or 160 m spaced E-W
lines. The spacing of the holes on the lines was 40 m with generally, two
holes drilled from each location, one dipping 50° east and the other 50° west.
Core recovery was reported to be generally over 85 - 90 %.
Colibri Complex
Source: PLU
Figure 23: Once logged and photographed,
the entire core is sampled.
Global Gold initially completed a ground radiometric survey in 2007, followed
by structural mapping. A diamond drilling programme began later that year
over radiometric anomalies, focussing on Colibri II & III, and subsequently
extended onto Tupurumani. To date 149 DDH’s (12,673 m) have been drilled.
Drillholes were typically drilled from platforms 125 m to 250 m apart. From
each platform, a series of drillholes were drilled; one vertical hole and up to
four inclined holes. The inclined holes were drilled at an angle of 55° from the
horizontal and at right angles to each other. Core recovery was ~100%.
Kihitian Complex
During the IUREP project, trenching and underground adits were developed
at the Chilcuno Chico Project and the nearby Pinochio Project. Global Gold
drilled 94 DDH’s radially from 32 platforms and 42 DDH’s radially from 14
platforms for the Chilcuno Chico and Quebrada Blanca deposits respectively.
Minergia drilled 128 DDH’s in lines spaced 100 m apart, angled at 45° E. 11
exploratory holes were drilled at Tuturumani from drill lines and platforms.
The drillhole spacing for the Chilcuno Chico and Quebrada Blanca deposits
resulted in mineralised zone intersection separation distances of up to 175
m. The Tantamaco deposit was drilled more linearly, in a series of drill lines
100 m apart with collar spacing on each drill line 100 m in the north and 200
m in the south of the deposit. The Tuturumani deposit was drilled sparsely.
To date, 275 DDH’s (50,108 m) have been drilled. Core recovery was >95%.
Source: PLU
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Plateau Uranium Inc.
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Table 9: Summary of total drilling
completed at each Complex / deposit.
Complex
Deposit
Holes
Total (m)
Corachapi Corachapi
219
11,818
Colibri
Colibri II & III
127
8,417
Tupuramani
22
4,256
Chilcuno Chico
94
19,060
Quebrada
Blanca
42
5,285
Tantamaco
128
23,286
Tuturumani
11
2,477
Calvario I
58
3,857
Puncopata
34
2,261
Calvario Real
9
1,628
Isivilla
27
3,597
Calvario II
32
2,433
Calvario III
85
5,425
Nueva Corani
57
6,770
Agaton
52
2,301
Sayaña Central
94
8,464
Sayaña West
34
2,244
Kihitian
Isivilla
Corani
Sayaña
1,125
113,579
Source: PEA
Isivilla
The Calvario I and Puncopata deposits were explored extensively by Solex,
from 2000 to 2012. During Solex’s exploration campaign, they undertook an
airborne radiometric survey and various drilling campaigns which comprised
92 DDH’s. A total of 36 core boreholes were drilled at Isivilla and Calvario
Real. This drilling all post-2006 drilling was run as a joint venture between
Minergia and Vena. Core recovery was >95%. As with other complexes, the
drilling takes place from a series of platforms resulting in separation distance
between intersections of the mineralised zones between 100 m and 250 m.
Corani
Initial exploration work for Calvario II and Calvario III were undertaken by
Solex; 32 DDH’s totalling 2,433 m from 8 platforms were drilled at Calvario II
and 85 DDH’s totalling 5,425 m from 23 platforms were drilled at Calvario III.
In 2006, Vena drilled 8 DDH’s at Nueva Corani (679 m). From 2007 to 2010,
Minergia drilled 48 DDH’s at Nueva Corani (6,282 m). To date, 174 DDH’s
have been drilled over the Complex for 14,628 m. Core recovery was >95%.
Sayaña
Solex previously undertook diamond drilling on Agaton, Sayaña West and
Sayaña Central. On Agaton, a total of 52 DDH’s from 12 platforms were
drilled. Sayaña West comprised 34 DDH’s from 9 platforms. At Sayaña
Central a total of 94 DDH’s from 26 platforms were drilled. To date, 180
DDH’s have been completed for 13,009 m. Core recovery is unknown.
The current areas explored via drilling and sampling that have allowed
delineation of Mineral Resources are relatively small compared to the total
Plateau Uranium mining concession footprint that is underlain by the
Quenamari Formation rocks.
Figure 24: A summary of the transactions which form the history to Plateau Uranium.
Source: PLU
VCL
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Plateau Uranium Inc.
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Figure 25: Corachapi Complex with radiometrics and drillholes.
Figure 26: Isivilla Complex with radiometrics and drillholes.
Source: PEA (edited)
Source: PEA (edited)
Figure 27: Colibri II & III and Tupuramani radiometrics with drillholes.
Source: PEA (edited)
Figure 28: Kihitian Complex radiometrics with drillholes.
Source: PEA (edited)
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Plateau Uranium Inc.
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Metallurgy2
Table 10: Column leach test summary,
based on site in Isivilla.
Column
Acid
Grade (g/t) Extraction Consumption
(kg/t)
1
82
91.0%
10.2
2
383
92.2%
10.5
3
287
96.1%
9.6
4
98
93.1%
10.3
Source: PEA (edited)
Figure 29: Acid consumption per pound of
yellowcake by grade.
The overall proposed method of recovery for uranium as per the PEA
includes crushing and stacking ore onto a 7 m high heap leach pad which is
irrigated with an acidic solution to dissolve the uranium. The leach solution
would then pass through ion exchange (‘IX’) columns to recover the dissolved
uranium and solvent extraction (‘SX’) to recover uranium from the IX eluate
to reduce acid consumption. The SX product solution then passes through
precipitation to yield a yellowcake precipitate (with no deleterious elements),
which is thickened, filtered, dried and packaged for dispatch. Interpretation of
metallurgical testwork results determined a processing recovery rate of 88 %
resulting in an average annual production of 6.08 Mlbs U₃O₈. The nominated
process method utilises industry standard equipment and extraction
technologies that are used in practice around the world. For a feed grade of
288 ppm U₃O₈ (244 ppm U) the estimated acid consumption is 14.1 kg/lb
U₃O₈ or, 9.0 kg/t.
It is understood that the majority of material tested has been from the Colibri
Complex. Bottle roll testwork indicate samples from the Kihitian and
Corachapi Complexes are very similar to Colibri Complex. Fewer tests have
been conducted on material from the Isivilla Complex, but it has been
assumed that it is also similar to Colibri. Consequently, column leach test
results on samples from Colibri have been assumed applicable to material
from the Kihitian, Corachapi, and Isivilla Complexes (PEA-Level). It is
understood that further testwork will need to be carried out on representative
samples from each Complex and its individual deposits to validate this
assumption and to meet the requirements of a Feasibility Study.
Since 2007, the testwork that has been completed for the project to date is
as follows:
Source: PEA (edited)
Figure 30: Mining and processing.










Bottle roll leach tests;
Column leach tests;
Ion exchange;
Solvent extraction and precipitation;
Grade confirmation;
Size by size assay;
Mineralogy;
Residue neutralisation;
Site water quality; and
Rock compression tests.
The metallurgical processing testwork that has been conducted to date can
be grouped into six phases:
1)
2)
3)
4)
5)
6)
Initial bottle roll tests (December 2007 to April 2008);
Initial column leach, SX and IX tests (May 2009 to 2010);
Ion exchange screening tests (September 2010);
Leach extraction mapping tests (October to December 2010);
Large column leach tests (January 2011 to June 2013); and
Minergia / Cameco testwork (September 2011 to May 2015)
Other Tests
Source: PEA (edited)
VCL
Water quality tests were performed during early 2011 on the site water and
indicated the site water to be of generally good quality with low hardness and
low alkalinity. Rock compression tests were also performed and simple
compressive strengths of 3.6 to 19.0MPa were reported along with
compressive stress in the range of 2.0 to 32.5MPa. In situ density in the range
1.936 to 2.071 g/cm3 was also reported. Friction angle of 35.6 to 41.0 degrees
was measured. Cohesion results of 0.120 to 0.075MPa were returned.
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Plateau Uranium Inc.
15th April 2016
Resource Estimates2
Figure 31: Plateau’s resource growth.
120
Mlbs of U3O8
100
80
The first resource estimate in the Macusani project area was for the
Corachapi Project, by Contact Uranium. In April 2009, the resource was
updated by SRK Consulting and was based on gamma down-the-hole
estimates. The latest resource estimate was completed in 2010 by The
Mineral Corporation (‘TMC’) and is based on chemical analytical data.
Previous resource estimates over the Colibri Complex for the Colibri II and III
concessions were compiled in 2008 by TMC, who subsequently updated and
expanded the resources in 2010. In 2013, TMC updated the resources further
which included results from drilling at Tupuramani and remain unchanged.
In the Kihitian Complex, previous estimates were released in 2012 for the
Chilcuno Chico and Quebrada Blanca deposits by TMC. When Plateau
acquired Minergia, MII resources were reported for the Tuturumani deposit.
In May 2015, the resources were updated further and included the
Tantamaco deposit. The first resource estimates for the Isivilla Complex were
in 2013 by TMC for the Puncopata and Calvario I deposits. In 2014, (Minergia
Acquisition) MII resources were reported for the Isivilla deposit, and Inferred
resources for the Calvario Real deposit. In May 2015 the resources were
updated further. For the Corani Complex, Indicated and Inferred resources
were reported for the Nueva Corani deposit in 2014 when Minergia was
acquired. In May 2015, the resources were updated further and included the
Calvario II & III deposits.
60
40
20
0
Current NI 43-101 compliant resources for the Macusani Project and its
Complexes, as reported in May 2015, are detailed in Table 11 and 12 below:
Measured & Indicated
Inferred
Source: PLU
Table 11: NI 43-101 compliant Measured and Indicated resources for the Complexes and
their associated deposits at Macusani, using a 75 ppm U cut-off grade.
Complex
Corachapi
Deposit
Resource
Category
Tonnes
(Mt)
Grade
(ppm U)
Contained lbs
(Mlbs U3O8)
0.32
Corachapi*
Measured
1.03
120
Corachapi*
Indicated
10.56
171
4.70
Chilcuno Chico
Indicated
34.84
218
19.78
Quebrada Blanca
Indicated
5.51
279
4.00
Tantamaco
Indicated
7.39
191
3.66
Isivilla
Isivilla
Indicated
4.57
296
3.52
Corani
Nueva Corani
Indicated
3.40
141
1.25
Colibri
Colibri II & III**
Indicated
27.89
203
14.72
95.19
210
51.95
Kihitian
Total Measured and Indicated
Source: PLU
Table 12: NI 43-101 compliant Measured and Indicated resources for the Complexes and
their associated deposits at Macusani, using a 75 ppm U cut-off grade.
Complex
Deposit
Resource
Category
Tonnes
(Mt)
Grade
(ppm U)
Contained lbs
(Mlbs U3O8)
Corachapi
Corachapi*
Inferred
3.75
195
1.90
Kihitian
Chilcuno Chico
Inferred
31.00
294
23.70
Quebrada Blanca
Inferred
13.44
269
9.40
Tuturumani
Inferred
3.30
146
1.25
Tantamaco
Inferred
35.85
172
15.98
Isivilla
Inferred
7.40
295
5.67
Puncopata
Inferred
5.92
216
3.32
Calvario I
Inferred
1.68
268
1.17
Calvario Real
Inferred
1.15
90
0.27
Corani
Nueva Corani
Inferred
6.11
111
1.76
Colibri
Colibri II & III**
Inferred
9.45
167
4.10
Tupuramani**
Inferred
10.98
125
3.57
130.02
213
Isivilla
Total Inferred
72.09
Source: PLU
* Figures based on October 2010 Mineral Resource Estimates by The Mineral Corporation.
** Figures based on September 2013 Mineral Resource Estimates by The Mineral Corporation.
Minor discrepancies due to rounding may occur. Density 1.98 t/m3
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Plateau Uranium Inc.
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Lithium Resource
In addition to the uranium resources, as at 22nd March 2016, Plateau has also
defined NI 43-101 compliant resources of lithium from only four of the
Company’s 14 uranium deposits on the Macusani property. The lithium
resource estimates have been calculated only from within the defined
uranium resources footprint using a 75 ppm U cut-off, see Table 13. The
lithium resource has not been included in the updated January 2016 PEA.
Table 13: NI 43-101 compliant Indicated and Inferred lithium resources.
Complex
Kihitian
Isivilla
Resource
Category
Indicated
Chilcuno Chico
Inferred
Indicated
Quebrada Blanca
Inferred
Indicated
Tantamaco
Inferred
Indicated
Isivilla
Inferred
Total Indicated
Total Inferred
Deposit
Tonnes
(Mt)
34.84
31.00
5.51
13.44
7.39
35.85
4.57
7.40
52.31
87.68
Grade
(% Li2O)
0.13
0.13
0.12
0.11
0.13
0.12
0.13
0.14
0.13
0.12
Contained
Li2O (kt)
44.93
39.10
6.42
14.78
9.79
44.77
5.90
10.16
67.04
108.81
K Grade
(%)
3.71
3.76
3.68
3.67
3.73
3.69
3.67
3.81
3.71
3.73
Source: PLU
Minor discrepancies due to rounding may occur. Density 1.98 t/m3
The lithium resource estimate is based on 296 DDH’s. Throughout all four
deposits, the lithium mineralisation occurs in a 40-60 m thick zone, which is
interpreted to be a discreet lithological unit within the acidic volcanic rocks of
the Macusani Plateau. It has been identified that this is the same unit that
hosts the previously reported uranium mineralisation. The geological and
grade continuity with respect to lithium is at least as good as that for uranium.
As a result, TMC elected to retain the original mineral resource categorisation
of these estimates, which was based on the data quality, data spacing and
geostatistical confidence associated with the uranium mineralisation.
Plateau have completed various lithium leach tests using warm sulphuric acid
and achieved recoveries of up to 86%. Two samples were sent for external
confirmation studies which yielded recoveries of 69% and 73% on samples
with head grades of 631 ppm Li and 518 ppm Li using sulphuric acid heated
to 250°C. The work was completed by K-UTEC and were un-optimised. In
addition to the lithium, potassium also leaches during the process.
No precipitation work has been completed, however, K-UTEC considers that
the leach solutions produced have similar chemistries and characteristics to
current lithium producers and should be capable of lithium carbonate (Li2CO3)
precipitation and production. Additional precipitation of potassium sulphate
(K2SO4), a desired fertilizer product is also expected. Future additional lithium
leach test work is being planned and considered to refine the potential
processing route and enhance lithium recoveries with the ultimate goal being
to establish potential quantities and quality of a saleable lithium carbonate
product, as well as to define acid consumption figures and production cost
estimates for this potentially important by-product.
Despite the lack of lithium data for the entire set of uranium deposits, the
Company believes that the lithium mineralisation appears relatively
consistent. The lithium is strongly correlated with uranium mineralisation and
appears to be present in all of the uranium deposits’ host rocks.
Cautionary Note
Exploration results that include geophysics, sampling, and drill results on wide spacings may not be indicative of the occurrence of a mineral deposit.
Such results do not provide assurance that further work will establish sufficient grade, continuity, metallurgical characteristics and economic potential
to be classed as a category of mineral resource. A mineral resource that is classified as "inferred" or "indicated" has a great amount of uncertainty as
to its existence and economic and legal feasibility. It cannot be assumed that any or part of an "indicated mineral resource" or "inferred mineral resource"
will ever be upgraded to a higher category of resource. Investors are cautioned not to assume that all or any part of mineral deposits in these categories
will ever be converted into proven and probable reserves. The project’s Inferred Mineral Resources were used in the LOM plan together with the
project’s defined Indicated Mineral Resources. In addition, the mineral resource estimates could be materially affected by environmental, geotechnical,
permitting, legal, title, taxation, socio-political, marketing or other relevant factors.
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Plateau Uranium Inc.
15th April 2016
PEA2
Figure 32: Project Area by Complex, 1 km
Grid Squares.
Source: PLU
Figure 33: Colibri Complex – Isometric view
and cross section.
Plateau’s updated January 2016 Preliminary Economic Assessment (‘PEA’)
for the Macusani Plateau uranium project was completed in collaboration with
Wardell Armstrong International (‘WAI’), The Mineral Corp. (‘TMC’) and GBM
Minerals Engineering Consultants (‘GBM’). The report contains a detailed
base case and as well as four alternative development scenarios using higher
grade feed material.
Only three of the five uranium deposit Complexes (Colibri, Kihitian and
Isivilla) with identified mineral resources included in the mineral resource
estimates have been used as potential mine feed in the PEA, leaving
significant future upside to provide additional feed to an existing operation.
All three complexes will be mined via conventional open pit methods. Due to
the orientation and topography of the Kihitian Complex, significant mineral
resources are uneconomic to mine via the open pit method due to the
excessive stripping costs and, as such, an underground operation is also
planned for mineralised material above cut-off.
Base Case
Mine Plan and Processing
The complexes are located over a 17 km x 13 km area and the bulk of the
deposits (Colibri, Kihitian and Isivilla Complexes) are located to the east over
a smaller area. Based on a central processing model, the Colibri, Kihitian and
Isivilla Complexes have only been considered due to the central processing
area which can’t be located >5 km from the extents of the Complexes.
Source: PLU
Figure 34: Kihitian Complex – Isometric
view and cross section.
With respect to the open pits, they are located in three separate geological
complexes and consist of ten projected pits. The underground design is on a
continuing mineralised horizon from an open pit. The PEA has considered
three of five identified resource areas, the three areas selected are based on
uranium metal content and proximity to the proposed central processing area
to reduce project CAPEX. Open pit Mineral Resources contribute 92% of the
life of mine (‘LOM’) projected 30,000 tpd mill feed. Table 14 summarises the
Mineral Resources to be mined.
Table 14: In-Situ Complex Mineral Resources to be Extracted (Base Case).
U3O8
Grade U3O8
Waste
Strip Ratio
Complex
Tonnage (Mt)
Content
(ppm)
(Mt)
(w:o)
(Mlbs)
Colibri
40.10
232
9.90
0.25
17.10
Kihitian
45.70
309
170.00
3.72
26.00
Kihitian (UG)
8.23
475
0.00
7.58
Isivilla
15.00
373
48.80
3.25
10.30
Total
109.03
372
228.70
2.05
60.98
Source: PLU
Source: PLU
Figure 35: Isivilla Complex – Isometric view
and cross section.
Source: PLU
VCL
As per the updated PEA, conventional open pit operations with a centralised
processing facility will operate over a 10 year LOM. Processing is planned to
be via heap leach to extract uranium into a weakly acidic aqueous leach
solution with uranium recovery through IX and SX acid recovery circuit. Total
LOM production is anticipated to be 109 Mt of process feed material, 224 Mt
of waste rock, diluted U3O8 mill head grade of 289 ppm and stripping ratio of
2.05 (waste:ore). The mining inventory currently contains 56% Inferred
Mineral Resources (61.2 Mt @ 293 ppm U3O8 for 39.5 Mlbs U3O8). Mining
designs have been based on preliminary geotechnical designs. Dilution and
loss have been estimated at approximately 5% respectively.
In terms of mine sequencing, NPVS software was employed to determine the
pushback selection and production scheduling. The pushback phases were
based on higher-grade material being mined first where possible. During
active mining and processing of the material, the waste would be placed into
a waste rock facility adjacent to the final shell limits. All mineralised material
would be hauled to a central process facility. The mining fleet was assumed
to be contractor operated.
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Plateau Uranium Inc.
15th April 2016
Figure 36: Isometric view of mineable stope
shapes shown by resource category.
Indicated (Red), Inferred (Grey).
Source: PEA
The bulk of underground Mineral Resources are held within the Chilanco
Chico deposit (Kihitian Complex). Mineralisation is generally 6 m to 24 m
thick, averaging 10 m. The strong continuity and thickness of the
mineralisation zones combined with weak rock strength at Chilanco Chico
are amenable to horizontal room and pillar mining by continuous miner. This
method was selected to benefit from the productivity and low mining costs
associated with the method. The method allows for multiple working areas
and a fast mining cycle to extract 2,700 tpd of material over nine years.
Material handling from the underground workings to the surface is based on
conveyor haulage through the workings, with material being hauled directly
from the underground to the ROM stockpile through the underground access.
Dilution and loss have been estimated at approximately 5% respectively.
Processing of the uranium mineralisation includes crushing and stacking
mineralised material onto a heap leach pad, which is irrigated with an acidic
solution to dissolve the uranium. The leach solution would then pass through
IX columns to recover the dissolved uranium and SX to recover uranium from
the IX eluate to reduce acid consumption. The SX product solution then
passes through precipitation to yield a yellowcake precipitate, which is
thickened, filtered, dried and packaged for dispatch. Interpretation of
metallurgical testwork results estimate sulphuric acid consumption at 9 kg/t
and an estimated 88% processing recovery rate, resulting in an average
estimated annual production of 6.09 Mlbs U₃O₈.
Figure 37: LOM production profile for the
Colibri, Kihitian and Isivilla Complexes.
Figure 38: Plateau’s consolidated land package (>910 km2) showing location of the
centralised processing facility. 85% of Plateaus land package is undrilled.
9
U3O8 Mlbs Recovered
8
7
6
5
4
3
2
1
0
1 2
3
4 5
6
7 8
9 10
Year
Kihitian
Kihitian UG
Isivilla
Colibri
Source: PEA
Source: PEA
Infrastructure and Transport
It is understood that a reliable supply of good quality raw water will be sourced
from a valley adjacent to the project area. The San Gaban power line (138
kV) runs near the proposed power plant location. In order for a grid
connection to be made an extension of the power line will be required to reach
the project site, subject to negotiation with the supply authority.
In terms of access, route surveys from port(s) to site will be undertaken to
determine the best road transit route. It is likely to include access via the
Interoceanica Highway. The connecting roads from the highway to the site
will need upgrades and potentially rerouting in order to handle the traffic
generated from site. It is possible that two roads would be constructed to give
flexibility such as a one-way system; heavy / light vehicle separation or
primary road with back up road in case of a road blockage.
VCL
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23
Plateau Uranium Inc.
15th April 2016
Table 15: PEA outcomes.
Pre-tax NPV8%
US$852.7 M
Pre-tax IRR
47.6%
Life of Mine
10 years
Strip ratio (LOM)
2.05
Average annual
production
6.09 Mlbs U3O8
It is proposed that the tailings management facility will be located to the west
of the site in an adjacent valley and is estimated to be able to accommodate
a heaped pile of 99 Mm³. The tailings management facility will link with the
reclaim operation via an overland conveyor, receiving waste material at the
edge of the heap leach pad turnaround area. The tails will be discharged at
the edge of the tailings area where the material would be stacked into the
shallow wide valley, forward advancing using grasshopper link conveyors as
the valley fills up.
Processing recovery
rate
88%
PEA Financial Results
Acid consumption
9 kg/t
Average LOM
operating cost
US$17.28 lb/U3O8
All-In production
costs*
US$22.91 lb/U3O8
Initial CAPEX**
US$249.7 M
Sustaining CAPEX
US$43.9 M
Total CAPEX (LOM)
US$358.5 M
Pre-tax payback
period
1.69 years
Key outcome
BFS result
Sensitivity
** Based on Average LOM Cash Operating Cost +
LOM Capital Cost per lb of production.
* plus US$50.1 M contingencies.
Source: PLU
Table 16: Uranium price sensitivity.
Pre-Tax
NPV8%
IRR
(US$)
852.7 M
47.6%
Base
U3O8 Price
(US$)
50/lb
Low
35/lb
334.2 M
26.2%
High
65/lb
1371.3 M
65.1%
Base
U3O8 Price
(US$)
50/lb
Low
35/lb
236.2 M
High
65/lb
967.4 M
Post-Tax
NPV8%
IRR
(US$)
603.1 M
40.6%
22.5%
55.3%
Source: PEA
Table 17: Capital and operating estimates.
Initial Capital
LOM Capital
US$299.9 M
US$358.5 M
US$247.5 M
US$279.4 M
Case 2
US$247.5 M
US$291.4 M
Case 3
US$267.4 M
US$299.3 M
Case 4
US$267.4 M
US$311.3 M
US$/t ROM
US$/lb U3O8
Base
Case
Case 1
Base
Case
Case 1
9.6
17.28
14.6
17.39
Case 2
13.6
15.95
Case 3
17.6
19.73
Case 4
17
18.81
Source: PEA
VCL
According to the 2016 updated PEA, the Macusani Project is expected to
have a pre-tax NPV8% of US$852.7 M and IRR 47.6% with payback after
1.69 years, based on a US$50/lb U3O8 price and 3% royalty (NSR on sales).
Post-tax, these are NPV8% US$603.1 M and IRR 40.6%. Initial CAPEX is
estimated at US$249.7 M plus US$50.1 M contingencies. Total sustaining
capital costs for LOM are estimated at US$43.9 M with average operating
cost of US$17.28 lb/U3O8. Over a 10-year LOM, the project is anticipated to
produce an average of 6.09 Mlbs U3O8 per annum, processing 109.0 Mt @
289 ppm U3O8, which would rank within the top five largest uranium
operations in the world. Further economic outcomes are detailed in Table 15.
According to the 2016 PEA, the Macusani Project is most sensitive to both
uranium price and recovery. The next most influential factor is the mining
operating cost. It is understood that to increase confidence in the rate used,
further work is required in understanding the mining methodology and factors
used. It should be noted that the open pit mining contract rate used in the
mine optimisation and potentially economic pit-shells was $2.40/t (ore and
waste), but for the financial model (US$1.85/t (ore and waste)) has been
calculated in-house from first principles based on historical projects and a
quote from the market is recommended for future PFS work. Major Peruvian
mining contractors were contacted and have substantiated the US$1.85/t
(ore & waste) mining cost figures used in the financial analysis. There is
opportunity to reduce the capital and process operating expenditures,
however the impact on project financials is limited. Similarly, the effect of
capital cost estimate over-runs and higher operating costs is also limited.
High Grade Option
As part of the 10.9 Mtpa heap leach design GBM were requested to evaluate
four additional scenarios based on a high-grade resource which used a 200
ppm U₃O₈ cut-off grade. The 200 ppm U₃O₈ cut-off was determined after a
series of cut-off grades in 100 ppm U₃O₈ increments and the relative
estimated NPV’s were modelled. Limited testwork has shown that ore
material at a higher grade will consume a reduced amount of acid per tonne,
therefore acid consumption for all four cases was reduced to 8.5 kg/t.
At a 75 ppm U3O8 cut-off, the mineral resources are:
 Indicated: 95.19 Mt @ 248 ppm U3O8 (containing 51.9 Mlbs U3O8);
 Inferred: 130.02 Mt @ 251 ppm U3O8 (containing 72.1 Mlbs U3O8)
At a 200 ppm U3O8 cut-off, the mineral resources are:
 Indicated: 33.47 Mt @ 445 ppm U3O8 (containing 32.8 Mlbs U3O8);
 Inferred: 41.62 Mt @ 501 ppm U3O8 (containing 45.9 Mlbs U3O8)
The following four cases were investigated:
 Case 1: Heap leach, open pit mining only;
 Case 2: Heap leach, open pit and underground mining;
 Case 3: Tank leach, open pit mining only; and
 Case 4: Tank leach, open pit and underground mining
The tank leach option was investigated due to the decreased plant footprint
and the potential for increased uranium recoveries, with 93% process
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24
Plateau Uranium Inc.
15th April 2016
Table 18: Financial model estimate results.
Pre-Tax
Base
Case
Case 1
Recovered
U3O8
NPV8%
(US$)
IRR
6.08
852.7
47.6%
4.26
544.4
41.2%
Case 2
5.01
733.5
49.4%
Case 3
4.5
510.2
36.8%
Case 4
5.3
679.90
43.2%
Recovered
U3O8
Base
Case
Case 1
Post-Tax
NPV8%
IRR
(US$)
6.08
603.1
40.6%
4.26
417.4
37.3%
Case 2
5.01
550.9
43.7%
Case 3
4.5
397.2
33.9%
Case 4
5.3
516.1
28.9%
Source: PEA
recovery used in the tank leach option cases. The same optimisation
parameters used in the base case were used for the high grade cases for the
three complexes included in the PEA.
The open pit only high grade scenarios (Cases 1 & 3) have a higher strip ratio
than the base case and would produce 25% less uranium over the planned
10 year LOM, however the mineral resource tonnage to be extracted, moved
and processed represents only 50% of the base case and only 62% of the
total ore and waste tonnes, yet yields a 50% increase in grade.
The addition of the proposed underground mineral resources to the high
grade open pit scenarios (Cases 2 & 4) increases the average grade
marginally, but increases the potential LOM average uranium production to
over 5 Mlbs U3O8 per year. Both high grade potential development scenarios
above were considered as options within the current PEA update as feed for
both the heap leach and tank leach processing options.
With respect to the financial analysis and similar to the base case, heap leach
processing is a more favourable option over tank leach processing, however,
more work will be completed to adequately prove this.
Licence to extract uranium
As a uranium operation, the project is classified as Category 1 under the
Radiation Safety Regulations. Therefore, a licence to extract uranium is
required where the uranium has a specific activity greater than or equal to 1
BQ/g. NATO must be advised of various stages of the operation for approval
under these regulations, including but not limited to notification of:





Means of product transport;
EIA and proposed closure plans;
Emergency Action Plans;
Production; and
Sales (NATO authorised parties)
Additionally, for operations some personnel may require NATO licences to
perform their specific tasks
Figure 39: Local community event in Puno.
Current Activities
The Company intends to continue along the development path by enhancing
the present environmental monitoring program, completing further
metallurgical testwork and returning to active exploration/development work
on the project with initial plans to restart drilling activities aimed at in-fill drilling
on and between known deposits. This drilling would serve to further increase
resource confidence and would also include initial drilling on several of the
untested, shallow, high grade uranium showings on the extensive 910 km 2
land position at the Macusani Plateau uranium project.
Source: PLU
The Company has an excellent long-standing relationship with the local
communities near the project, with existing community agreements and
environmental permits to allow the restart of exploration activity when
needed. Over the last few years the Company have undertaken various
community programs including:







Twice yearly medical campaign;
Employment of local community members from Isivilla, Tantamaco
and Corani);
Hygiene programs (water sanitation);
Monthly madre leche (milk) program contribution;
Sponsorship of local and regional festivals;
Loan road building equipment for local community use; and
Schools programs sponsorship
Progress is also being made navigating Peru’s mine permitting regime and
the path towards future uranium production.
VCL
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25
Plateau Uranium Inc.
15th April 2016
Peer Comparison
Figure 40: Comparison of Plateau Uranium against developed peers.
Source: PLU
Table 19: Comparison of Plateau Uranium against developed peers.
Fission Uranium
Corp.
C$333.9 M
Plateau Uranium
Inc.
C$13.4 M
Salamanca
PLS
Macusani
Spain
Canada
Peru
PFS
Nov-15
PFS
Nov-15
PEA
Sep-15
US$65/lb
US$65/lb
US$65/lb
PEA
Jan-16
US$50/lb
NPV8% - $65/lb*
US$431 M
US$871 M
US$1,041 M
IRR (%) - $65/lb
25.1%
93.3%
34.2%
US$967 M
55.3%
Processing Type
Acid Leach
Heap Leach
Acid Leach
Heap Leach
Throughput (tpd)
7,300
14,250
1,000
30,000
Mine Life (Years)
17
18
14
10
Market Cap
Project
Location
Study Type
Release Date
Base Case U3O8 Price
Vimy Resources
Ltd.
C$77.3 M
Berkeley Energia
Ltd.
C$85.6 M
Mulga Rock
Australia
Annual Production (Mlbs)
3.0
3.0
7.2
6.1
LOM Production (Mlbs)
50.4
51.6
100.8
60.9
US$31.65 M
US$19.80 M
US$14.02 M
US$17.28 M
US$254 M
US$81 M
US$1,100 M
US$300 M
US$367 M
US$38.93/lb
US$297 M
US$25.56/lb
US$1,339 M
US$27.30/lb
US$344 M
US$22.91/lb
LOM Cash Cost
Initial CAPEX
LOM CAPEX
All-In Costs (LOM Production)**
Source: PLU / Company Reports and Technical Reports.
* After-Tax NPV8% except Vimy (Pre-Tax NPV10%)
** All-In Production Costs calculated based on Average LOM Cash Operating Cost + LOM Capital Cost per lb of production
VCL
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26
Plateau Uranium Inc.
15th April 2016
Management, Directors and Officers:
Chairman: Ian Stalker
CEO & Director: Ted O’Connor
Mr Stalker has over 40 years’ experience in mining
development and operations in Europe, Africa, and
Australia. Former CEO of UraMin Inc. until its acquisition
by Areva in 2007 for US$2.5 billion. Former VP
Exploration of Gold Fields Ltd., the fourth largest gold
producer in the world at that time.
Mr O’Connor has over 22 years of experience in the
exploration industry, most recent as Director of
Corporate Development at Cameco. In that role, he was
responsible for evaluating, directing and exploring for
uranium deposits worldwide. He has successfully led
new project generation from early exploration through
to discovery on multiple unconformity uranium projects.
Former CEO & President of Azincourt Uranium,
remains Director.
President & COO: Laurence Stefan
Director: Alan Ferry
Dr Stefan is the founder of Plateau Uranium (formerly
Macusani Yellowcake), serving as Managing Director in
Peru since October 2007. Dr. Stefan previously worked
at Gold Fields of South Africa and JCI (Pty) Ltd. with
recent years spent mainly on South American projects.
Over 25 years of experience in the investment industry
following a career as a geologist, mainly in uranium
exploration. Significant experience in mining analysis,
mineral economics and corporate finance. Current Lead
Director of Guyana Goldfields Inc. and Director of
Avalon Rare Metals Inc. and GPM Metals Inc.
Director: Engin Ozberk
Currently Executive Director amp; Senior Technical
Advisor and Mitacs Industry Executive in Residence –
Minerals, with the International Minerals Innovation
Institute. Prior to his current role, Engin spent 16 years
with Cameco Corporation, most recently as Vice
President, Technology and Innovation.
Plateau Uranium Inc.
141 Adelaide St. W., Suite 1200 Toronto, ON M5H 3L5 Canada
Phone: +1-416-628-9600
[email protected]
VCL
Vicarage Capital Limited
4 College Hill, London, EC4R 2RB, UK
Tel + 44 (0) 207 248 9773
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27
Plateau Uranium Inc.
15th April 2016
References
1.
www.plateauuranium.com
2.
NI 43-101 Report – Preliminary Economic Assessment (PEA) on the Macusani Project, Peru. 12th January 2016
3.
https://en.wikipedia.org/wiki/Puno_Region
4.
https://en.wikipedia.org/wiki/Carabaya_Province
5.
https://www.inei.gob.pe/
6.
https://www.instagram.com/antoniogargate/
7.
http://www.citypopulation.de/php/peru-admin.php?adm2id=2103
8.
http://mapio.net/o/1582263/
9.
http://www.123independenceday.com/peru/political-system.html
10. http://www.ey.com/Publication/vwLUAssets/Peru-Business-and-Investment-guide-201415/$FILE/Peru%C2%B4s%20Business%20and%20investment%20guide%202014-2015-2.pdf
11. http://www.ey.com/Publication/vwLUAssets/Gu%C3%ADa_Minera_2015-2016/$FILE/EY-Peru-mining-and-metals-investment-guide2015-2016.pdf
12. https://www.pwc.com/pe/es/doing-business-and-investing-in-peru/assets/2015-doing-business-and-investing-in-peru.pdf
13. http://www.bcrp.gob.pe/
14. https://www.pwc.com/pe/es/doing-business-and-investing-in-peru/assets/2015-doing-business-and-investing-in-peru.pdf
15. http://www.ukforex.co.uk/forex-tools/historical-rate-tools/yearly-average-rates
16. http://www.tradingeconomics.com/peru/rating
17. http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG/countries/PE-BO-BR-EC-AR-VE-MX?display=graph
18. http://minerals.usgs.gov/minerals/pubs/mcs/2016/mcs2016.pdf
19. http://www.minem.gob.pe/
20. http://www.iclg.co.uk/practice-areas/mining-law/mining-law-2016/peru
21. http://www.world-nuclear.org/ (WNA)
22. http://www.mining.com/
23. http://investingnews.com/
24. http://www.uraniumparticipation.com/ (UPC)
25. http://www.japantimes.co.jp/
VCL
Vicarage Capital Limited
4 College Hill, London, EC4R 2RB, UK
Tel + 44 (0) 207 248 9773
Web: www.vicaragecapital.com
28
Plateau Uranium Inc.
15th April 2016
Copyright and Risk Warnings
Plateau Uranium Inc. is a corporate client of Vicarage Capital Ltd.
Plateau Uranium Inc. is a corporate client of Vicarage Capital Ltd. (“Vicarage Capital”). Vicarage Capital will receive compensation for providing
fundraising and other services to the Company including the publication and dissemination of Marketing Material. This note should NOT, therefore,
be treated as independent or impartial research.
Not an offer to buy or sell
This is a note and under no circumstances is to be construed as an offer to buy or sell or deal in any security and/or derivative instruments based on
such securities. It is not an initiation or an inducement to engage in investment activity under S21 of the financial services and Markets Act 2000.
Note prepared in good faith
Comments made in this research note represent the current opinions of Vicarage Capital as of the date of this document and have been arrived at in
good faith. No representation or warranty either actual or implied is made as to the accuracy, precision, completeness or correctness of the statements,
opinions and judgements contained in this document.
Vicarage Capital’s and related interests
The analysts who produced this research note, Martin Wood and James Smith are employees of Vicarage Capital. The Macusani Project has not
been visited by the Authors. Vicarage Capital and/or its employees and/or directors and associates may or may not hold shares and warrants in
Arianne Phosphate Inc. and reserve the right to acquire or dispose of such positions in the future.
Information purposes only
This document is purely intended for background information purposes only and this report is furnished on the basis and understanding that Vicarage
Capital is to be under no responsibility of liability whatsoever in respect thereof.
Investment Risk Warning
The value of any potential investment made in relation to companies mentioned in this document may rise or fall and sums realised may be less than
those originally invested. Any reference to past performance should not be construed as being a guide to future performance.
Investment in small companies, and especially mineral exploration companies, carries a high degree of risk and investment in the companies or
minerals mentioned in this document may be affected by related currency variations. Changes in the pricing of related currencies and or commodities
mentioned in this document may have an adverse effect on the value, price or income of the investment.
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VCL
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