Gordon Miller, CEO, Simmer & Jack Mines and First Uranium Corporation.
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First Uranium to build additional plants
Julie Bain
Posted: Mon, 21 Apr 2008

[miningmx.com] -- FIRST Uranium hopes to beat rising sulphuric acid and electricity prices as well as power shortages in South Africa with plans to build a $124m sulphuric acid plant and a $20m power plant at its Mine Waste Solutions (MWS) recovery plant.

CEO and president Gordon Miller "We do not intend to let the power situation nor the ongoing increases in the cost of sulphur and sulphuric acid threaten our business or use them as an excuse to miss our project milestones.

"Given that we are mining uranium and gold at both projects we are confident that the project economics are robust enough, assuming our forecast metal prices, to allow us to overcome the electrical power shortages and rapidly increasing acid prices that are prevalent in South Africa," he added.

Sulphuric acid is used to process ore. Prices have been climbing as a result of strong demand while less acid has been produced as a result of the power short falls in the country.

"Future price projections in South Africa, which indicate sulphuric acid costs ranging between US$330 and US$600 per tonne, have not taken into consideration acid demand at new mining projects, such as MWS, which will come on stream in the near term and approximately represent an additional 15% of current market acid supply," Miller said.

Even assuming more conservative increases in acid costs, the company expects that its investment of $124 million in an acid plant, on its own, will have an internal rate of return ("IRR") of 6%, an NPV of $28 million and a payback of 11 years," he added.

Any acid produced surplus to First Uranium's requirements will be sold on the open market and the company can source the sulphur from its own operations and plans to use the pyrite in the tailings dams at MWS.

The plant is expected to start producing in 2010.

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In addition, the company also said it would build a power generation plant in order to prevent any delay in its production lead times that may result from the shortage of electricity.

"While these arrangements to generate additional power to supplement that supplied by South Africa's national power utility, Eskom, will increase the projected capital and operating costs of the company's two operations, this investment in power is justified by securing supply of electrical power and it will have been more than offset by the increased realised price for gold and the decline in the value of the South African rand against the US dollar," said First Uranium in a SENS statement.

Miller said at a conference call today that First Uranium would not issue new shares to pay for the power and acid plants.

At both Ezulwini and MWS, First Uranium will initially lease diesel generators for up to five years.

The generators will be powered by a combination of diesel fuel and heavy fuel oil for approximately five years. About 50% of ithe investment will be recovered by selling the power generators when they are no longer needed.

"First Uranium is determined to start up its uranium recovery plants at its Ezulwini Mine and MWS on schedule," said Miller.

The first 50,000 tonne per month module of the gold plant remains on schedule for commissioning in April and the uranium expansion and gold plant at MWS is on track to start up in December, one month later than originally scheduled.

Miller said he continued to see significant opportunities in the South African uranium sector despite the challenges of power and increasing acid costs.