Uranium miner Deep Yellow Ltd (ASX: DYL) says there is potential to extend the life of its Tumas Project in Namibia beyond the current 30 year mine plan following further positive drilling results.
The company's shares hit a new 12-month high on the news on Tuesday morning, trading 5.8% higher at $2.19. The shares have almost tripled over the past year from lows of 74.5 cents.
The company said it had completed a 3361m drilling program at the S-Bend prospect, which was adjacent to the flagship Tumas Project, located in Namibia.
The drilling identified uranium mineralisation at thicknesses of up to 8m from the surface, with high-grade mineralisation located in four main clusters.
Further drilling will be needed to prove up a resource at the S-Bend prospect, but it was a positive development for the project overall, the company said.
The potential to add to the current resource base at Tumas and extend beyond the presently stated 30-year life of mine of this project is further enhanced with discoveries such as identified at the S-Bend prospect.
Image source: Getty Images
Waiting for uranium market to improve
Deep Yellow has not yet made a final investment decision (FID) regarding the Tumas project, saying in a statement to the ASX in April that it was delaying that decision until the uranium market improved.
As the company said at the time:
The additional detailed engineering carried out in the past three months has confirmed Tumas as a robust, long-life project. However, as previously stated, the key element to delivering FID was always going to be the prevailing uranium market conditions that would justify development of a greenfield uranium project. Therefore FID has been deferred in order to fully capitalise on the project's upside and thereby protect shareholder value.
The company said it was pushing ahead with early infrastructure development and detailed engineering for the project, but full-scale development would be deferred until "the inevitable improvements" in uranium prices eventuated.
Deep Yellow Managing Director John Borshoff said at the time that the long-term uranium market was "essentially broken''.
This is due to more than a decade of sector inactivity, persistently depressed uranium prices, and utility offtake contracting practices which are yet to support the development of greenfields uranium production. Although the Tumas project is economic at current long-term uranium prices, these prices do not reflect or support the enormous amount of production that needs to be brought online to meet expected demand. Also, we can expect from experience that supply shortages will only be exacerbated by likely delays and underperformance of the sector generally.
The company's current estimate of the pre-production capital cost to bring Tumas into production is US$474 million ($727.3 million).
