GTR ISR uranium scoping study shows potential for US uranium project

Note:This article is based on GTR’s Scoping Study published 8:30AM on Thursday 5th June.

Later that day GTR updated the Scoping Study correcting the NPV breakeven price over the economic evaluation period to ~ US$60/lb rather than ~US$65/lb.

After market on Thursday 5th June GTR retracted the Scoping Study as it contains forward looking statements in the form of production targets and forecast financial information.

In consultation with the ASX, GTR did not have a reasonable basis for those forward looking statements due to the proportion of inferred mineral resources in the production target.

Due to the absence of reasonable basis for the statements, investors should not rely on the Scoping Study announcements as a basis for investment decisions.

Energy is a hot button issue in the US right now with Trump doing everything he can to bring online more domestic energy.

With that backdrop in mind, our US uranium Investment GTi Energy (ASX: GTR) just gave us a first look at the economics behind its project in Wyoming.

GTR’s Lo Herma sits ~16km away from Cameco’s Smith Ranch-Highland plant (the USA’s biggest ISR uranium production facility).

Here are the highlights from the Scoping Study published today:

• GTR modelled a Life of Mine production target of ~6M pounds of uranium, extracting roughly 800,000/lb of uranium each year for 7 years.
• The project would have a CAPEX between US$57M and US$67M depending if GTR decides to go down the path of buildings its own Central Processing Plant OR a Satellite Operation where it toll mills its uranium through someone else’s plant.
• The project NPV is US$167M as a Satellite Operation and at a uranium price of US$90 per pound, with a pre-tax IRR of 52%.

So, what is our take?

The project has a breakeven price of US$65/lb uranium, with a last traded price of $70/lb it wouldn’t make sense to build out GTR’s project right now.

However, if the company is able to bring a larger resource online (and hopefully with a higher uranium price) in the future, then the project could become a reality.

At a price of US$95/lb the NPV is around US$191M for its Satellite Operation, which is decent for a CAPEX of US$67M.

GTR is currently capped at just ~A$7M.

The main reason we like GTR’s project is its location.

This part of Wyoming has been the centre of a wave of uranium M&A with $3.6BN Uranium Energy Corp going on an acquisition spree over the last few years.

The project is also just ~16km away from Cameco’s Smith Ranch-Highland plant, the largest ISR uranium production facility in the USA:

The US Department Of Energy (DOE) has also been active in the region, signing purchase orders with uranium suppliers.

Uranium Energy Corp for example received a US$17.5M purchase order to sell its uranium to the government.

GTR’s project benefits from proximity to these large and active players - we think that this will be the heart of the US uranium industry going forward.

Sensitivity analysis for GTR’s project

When evaluating a scoping study we always like to look at the “sensitivity analysis” on the price of the underlying commodity.

For GTR, that is uranium.

GTR’s project has a breakeven price of $65/lb uranium, right now uranium is trading at US$70, so it will need to move more favourably for GTR in order to ensure the project’s viability.

If the uranium price moves past US$95 then GTR’s project economics look quite favourable:

Interestingly, the sensitivity analysis also shows that if GTR is able to have better recoveries, it will make a meaningful impact on the project economics:

Next, GTR will undertake Metallurgical Testwork and Groundwater Testwork to better understand and optimise the flow sheet for recoveries.

What’s coming up next for GTR?

In the scoping study GTR published its milestones needed to get through to production:

The next key milestone for GTR will be resource drilling and exploration.

GTR has an exploration target of between 5.6 to 7.1 million tonnes of uranium.

Any new uranium discovered by GTR will add to the economics of the project in a favourable way.

We see this Scoping Study as a nice baseline for GTR to launch its US-based uranium project from.