Who is Sibanye-Stillwater’s new uranium partner?

The uranium market has been transformed in less than four years. Spot prices, at about $85/lb, are more than double the price in 2020. This is partly because the market has come to view uranium differently, as a green metal. It’s long been seen as a strategic metal, but Russia’s increased militarisation and the rise of new nuclear threats from Iran and North Korea has also influenced the price.

The advent of the Trump administration has also led to investors anticipating a more strident response to global multipolarity. Supply shocks such as import bans on Russian production are expected. Already there’s evidence of this on the uranium price. When limits were imposed on Russia by the US a year ago, the uranium spot price increased to $106/lb.

Brewer is hoping Neo Energy can tap into this thriving market, especially while the metal’s price is running hot. It has a good chance of doing so.

From Beatrix 4, mined by Sibanye-Stillwater for its gold, Neo Energy will have access to Beisa, a major uranium resource once explored and pre-developed by Gencor in the early 1980s. Brewer says 2.5t of the Beisa reef is ‘stopeable’, or ready to mine, containing 400,000 ounces of gold and 5-million pounds of uranium.

Prospective lenders have rushed to help finance Beisa, says Brewer. “One group, a listed uranium fund, is just purchasing physical [uranium], so they are trying to get in early,” he says. About $50m has been offered in a royalty stream or a prepayment of cash. In return for $25m the lender gets 25,000 oz of gold, which is a fraction of the 5.4-million ounce resource base at Beisa. The balance is for the uranium.

Aside from political pressures, the fundamental supply/demand drivers in uranium make for a fickle market.

Brewer acknowledges it’s a crazy market. This is partly due to stockpiles held by US utilities. “Flow from stockpiles is a feature of this market; no other commodity trade’s total supply is so dependent on its inventories,” Tom Price at Panmure Liberum told the Financial Times in November.

Brewer says, however, that while Neo Energy has a degree of protection from the spot price market owing to gold accessible from the Beisa/Beatrix reef, “from a pure uranium point of view, when you take the gold credits from an indicative, high-level cash flow analysis, operating costs net of gold byproducts is a negative $15/lb”.

Upside

It raises the question as to why Sibanye-Stillwater CEO Neal Froneman didn’t just do the project himself. “If he hadn’t had challenges, I think he would have,” says Brewer. “He is using us as a vehicle to get these things moving.”

For R500m, Sibanye-Stillwater will own up to 40% of Neo Energy. The group also has a pre-emptive right over future equity calls and two board members on Neo Energy’s board. “Down the track, they have that option, don’t they?” says Brewer. “So let’s see.”

Based on its previous assessment, Beisa has sufficient resources to support a 17-year life of mine.

Neo Energy is also developing another uranium prospect called Henkries, in the Northern Cape. Formerly explored by Anglo American in the 1970s, the prospect is still held under a prospecting right.

The path to production is therefore much longer, though Brewer says Henkries is “not really like mining” when the company turns its hand to its extraction. Uranium is at surface in a sand-hosted deposit.

For now, Neo Energy is waiting on the department of mineral resources & energy for regulatory approvals. A waiver is also required from the UK Takeover Panel as Neo Energy is a London-listed company.

It is hoped construction of a uranium circuit and a refit of the Beatrix gold plant will start once those boxes have been ticked. Brewer is hopeful that will be in the next six to nine months.

A version of this article was previously published in the Financial Mail.