Energy Fuels' Sheep Mountain Project and Strathmore's Contiguous Claims and Gas Hills Project
Energy Fuels' Sheep Mountain uranium project ("Sheep Mountain") is a large conventional uranium project in Wyoming which Energy Fuels is developing as a stand-alone production center. An April 13, 2012 technical report prepared in accordance with NI 43-101 entitled "Sheep Mountain Uranium Project, Fremont County, Wyoming, U.S.A., Updated Preliminary Feasibility Study" (the "Sheep Mountain PFS") outlined improved economics for the project. Energy Fuels continues its permitting efforts on Sheep Mountain. Strathmore currently owns various mining claims that are contiguous (the "Contiguous Claims") with Sheep Mountain. By combining the claims, it is expected that the design of Sheep Mountain can be modified to take advantage of the additional area provided by the Contiguous Claims, thereby simplifying permitting and design and lowering Sheep Mountain's development capital expenditures and ongoing operating expenses. The Sheep Mountain PFS estimates that the project has 12.9 million tons of Indicated Resource containing 30.2 million lbs. eU3O8 with an average grade of 0.12% eU3O8. Included in the above Sheep Mountain Indicated Resources are 7.4 million tons of Probable Mineral Reserves containing 18.4 million lbs. eU3O8 with an average grade of 0.123% eU3O8. The Sheep Mountain PFS also describes attractive project economics under three separate production scenarios, with Energy Fuels' preferred scenario having a Net Present Value of $201 million (using a 7% discount rate and $65/lb. uranium price), $32.31/lb. operating cost, initial capital expenditures of $109 million, and a production rate of up to 1.5 million lbs. per year for 15 years.
Strathmore's Gas Hills, Wyoming uranium project ("Gas Hills") is located only 28 miles from Sheep Mountain. Gas Hills is currently being developed by Strathmore pursuant to a phased joint venture agreement with Korea Electric Power Company ("KEPCO"). According to a March 22, 2013 technical report prepared in accordance with NI 43-101entitled "Update of Gas Hills Uranium Project, Fremont and Natrona Counties, Wyoming, USA", Strathmore showed a substantial increase in uranium resource estimates from the previous July 2012 report, including 2,300,000 tons of Indicated Resources containing 5,400,000 lbs. of eU3O8 with an average grade of 0.13% eU3O8. In addition, the technical report estimates that Gas Hills contains 3,900,000 tons of Inferred Resources containing 5,500,000 lbs. of eU3O8 with an average grade of 0.07% eU3O8. Under its joint venture agreement with Strathmore, KEPCO has the option to earn-in up to a 40% interest in Gas Hills by spending US$32 million over three years beginning in 2013. Energy Fuels and Strathmore believe that significant synergies exist between Sheep Mountain and Gas Hills which can be realized through combining the two projects including:
-- Evaluating opportunities that could result in significant savings on co- development capital expenditures by utilizing a common precipitation, filtering, drying and packaging plant circuit for uranium recovery from each project's heap leach process solutions;-- Targeting a larger combined annual production profile in excess of the 1.5 million pounds U3O8 currently outlined in the Sheep Mountain PFS;-- Applying the Sheep Mountain permitting and design work to accelerate the Gas Hills development timeline;-- Evaluating general and administrative expense savings in areas including payroll, purchasing, environmental compliance, engineering, surveying and geologists, land management and safety; and-- Considering capital cost savings by utilizing common equipment fleets.