Peninsula Energy flagship project set to take advantage of positive US uranium market outlook

Peninsula Energy Ltd (ASX:PEN) sees a clear pathway to restart uranium production at its flagship Lance Project in Wyoming, USA, which is the only US-based uranium project authorised to use the industry-leading, low-cost, low pH In-Situ Recovery (ISR) process. Lance is a modern, large-scale and long-life asset with 53.6 million pounds uranium JORC 2012-compliant resource base and a licence to produce up to 3 million pounds per annum. The current (Stage-1) plant capacity is 1.15 million pounds uranium per annum, however, production is paused while awaiting a transition to low pH ISR. Peninsula estimates a six-month lead time to return to production (post-restart decision) which depends on sustained improvement in market conditions and a satisfactory progression of current low pH optimisation activities. Low-cost process Low pH ISR is the leading method of uranium production globally with 57% of global uranium produced in 2019 via low pH ISR. All of the lowest quartile cash cost uranium mines are all low pH ISR and Lance is the only US-based uranium project authorised to use the industry-leading method. Lance Feasibility Study showed a capex of US$6 million for a Low pH ISR transition and restart, with working capital for the stage one ramp-up at around US$15 million (including mine unit 3) and an AISC of $41/per pound. The stage two expansion to capacity of 2.3 million pounds per annum is at a capex of US$43 million and AISC of $31/per pound. Field demonstration underway The company is continuing the MU1A field demonstration (12-18 months) with ongoing optimisation testing of: Uranium grade curves; Hard acidification uranium recovery curve; Performance of test oxidant; Acid consumption and wellfield flow rates; and Results from use of ponds for fines management; Upcoming workflow also includes the testing of low pH ion exchange resin, optimisation of uranium recovery processes and permitting of wellfield oxidant addition. The project has a well-defined pathway to production.  Strong sales contract book Notably, the company has an established uranium sales contract book and is the only junior uranium producer with long-term sales contracts extending to 2030 representing around 15% of the projected Lance FS LOM production. Current contracts are in place for up to 5.5 million pounds at US$51-$53/pound uranium with major utilities in both the US and Europe and the company has secured uranium sales net cash margin of US$6-8 million in 2021. In the December quarter, 75,000 pounds of deliveries have been met generating a net cash margin of $US1.4 million with 450,000 pounds to be delivered in each of 2021 and 2022. The company is confident that its strong existing relationships with preferred customers will serve as a base for future business opportunities. Nuclear fuel market drivers Peninsula notes several key US uranium market opportunities in the near-term including bipartisan support for a long-term buying program from US uranium mines, a US Budget proposal for appropriation of US$150 million to purchase US produced uranium and legislation introduced in US Senate to support Advanced Nuclear Energy Initiatives including the strategic uranium reserve purchases. Additionally, there is the extended and amended Russian Suspension Agreement (RSA) – signed October 5, 2020 – which limits Russian origin uranium and opens market opportunities for US Uranium producers. This makes Peninsula the only ASX-listed uranium company that has the immediate ability to take advantage of these US government programs that support US uranium mines.