Greg Cochran, Managing Director, Deep Yellow Ltd.

MACIG Connect Series

“We will hopefully be producing our first uranium before the end of 2019. It is a tight timeline, but it is not impossible.”

When GBR last met with Reptile Uranium, Deep Yellow’s wholly owned Namibian subsidiary, its main objective was completing pre-feasibility and bankable feasibility studies for the Omahola Project. Have these goals come to fruition?

Greg Cochran (GC): When we slowed down our rate of expenditure to suit market conditions, we re-assessed our projects and decided that the Tubas Sands Project, being a much smaller project, had the potential to be progressed more quickly into production, both cost effectively (from a feasibility study perspective) and with low capital expenditure. The Tubas Sands Project had the potential to produce an intermediate product instead of yellowcake, which could possibly be sold to or toll treated by one of Namibia’s existing producers – Langer Heinrich, Rössing Uranium, or even Husab once it was up and running. We completed a scoping study on the project, which concluded that we were on the right path. However, logistics costs and some technical issues made the project marginal and, in the absence of a committed offtaker, we placed it on hold.

By that time we had also been monitoring the progress of another company that was developing a new method of physically beneficiating lower grade calcrete ores. While the Tubas Sands deposit is relatively low-grade, Reptile also had palaeochannel calcrete mineralization (the Tumas Deposit) with significantly higher grades that may suit the (as yet unproven) new processing methodology, which was delivering very impressive results.

Now Reptile had previously conducted quite extensive drilling programs on the Tumas Palaeochannel but then decided to focus on its Omahola Project – so it was time for us to come full circle and reassess these calcretes once again.

We started with a small, successful in-fill drill program followed by some sophisticated geophysical analysis that delivered great results, giving us confidence in the potential extent of this resource. For the next step, we need to send a small bulk sample from the Tumas Deposit to Perth for metallurgical testwork. That sample was excavated towards the end of November and should be in Perth early in January. While previous testwork (on other deposits) has been impressive and our earlier mineral characterization analysis was also encouraging, we cannot claim that this will work, but what we have seen to date is very encouraging. Naturally we continue to be cautious in terms of expenditure levels, but in four months or so when we have the results we will be looking to take concrete steps to move forward.

What would be the definitive next step towards extraction?

GC: Overcoming our main obstacle, which is funding. We need to correctly pitch the message about the great opportunity we now have, assuming testwork success of course. We understand the local production environment and how difficult it is to invest at this point in time; however, we think we will have an attractive product, and we believe that the opportunity for satellite supply to existing operations in Namibia is changing and moving in our favor; there is available capacity. If the testwork is successful, we will have done all of the preparatory work to then commence with feasibilities studies, resource definition and then ultimately project finance and development. The design of the operation is likely to be simpler and therefore quicker to implement, as there are fewer steps in the process and no on-site leach circuit, precipitation and drying and packaging. Assuming that funding is in place, we would aim to complete feasibility studies by the end of 2017.

What message would you like foreign investors to know about Deep Yellow and its Reptile Uranium-held projects in Namibian?

GC: Assuming that the physical beneficiation process works, the Tumas Project is likely to be a low capital-expenditure and operational-expenditure entry into production that could generate the cash flow required to sustain the business. While we have three projects, it is worthwhile noting that we have plenty of optionality in how these may one day be developed. For example, if the Tumas Project is successful, the technology could conceivably also be applied to the Tubas Sand Deposit and if Omahola proceeds, it could take supplemental feed from these two deposits. That said, the Tubas Deposit and its related palaeochannel system is extensive, although further exploration work needs to confirm that; but based on the work that we have done to date with independent consultants, there is significant potential.

There are not many attractive investment opportunities in the uranium space. Whilst we are not as advanced as some other companies, this project concept is relatively simple and we expect capital costs well south of $100 million. This figure is manageable, which can allow us to move very quickly towards producing a product and sending it to an existing producer for the final processing steps. As the testwork progresses, we will be reaching out to these potential offtakers, as competition is a good thing and their interest to process our higher-grade, cost-effective and easily transportable product will only increase over time.

Do you see an increase in global demand for uranium?

GC: Yes, that is unquestionable. Yet demand will grow relatively slowly, with China, India, Russia, and South Korea being the key drivers. Japan is also critical from a market-sentiment perspective and the more reactors they turn back on the better it will be for the market. Europe and North America are faced with a slightly declining demand, which continues to surprise me, because the operating experience and safety of nuclear power is so sound. I cannot understand, when considering the situation scientifically and rationally, why Germany would turn off perfectly good operating nuclear reactors and build brown, coal-fired power stations instead. Of course politically, to supplement the huge power deficit left when renewables so frequently cannot deliver, one may argue that makes sense.

Previously, we thought demand would grow at a much faster rate, but Fukushima certainly had a severe impact on that thesis. Of interest though are the new entrants to the nuclear space – countries with vision such as the UAE that is building four plants, the first of which should be commissioned by 2017 with the rest to follow shortly thereafter.

For multiple reasons, Namibia is known for being the top investment destination in Africa. With the new mining act that will potentially come into play, what changes do you hope to see?

GC: There can always be improvements, but the existing mining act is perfectly workable. One may argue that it is less sophisticated than compared to mining acts say in South Africa or Australia, but that is not necessarily bad. International companies operate based on international standards anyway, so we are abiding by those safety and environmental practices, and Namibia’s act is fit for purpose.

However, there are some gaps in the act that can work either for or against the interests of both investors and Namibia. For example, the minister has the power to renew certain licenses at his or her discretion, which is not unusual. But, the basis on which that renewal can be granted is very simply defined, being as long as the minister deems it desirable in the interests of the development of the mineral resources of Namibia. Make no mistake, we have been wonderfully treated by Namibia; it is a great place to do business and accordingly we have invested around $60 million into the country over the last nine years or so. But a clearer definition of that particular aspect may make it easier for new investors to understand and commit.

More recently, there have been unacceptably long delays in the renewal and licensing process that which directly impact our ability to raise capital to progress projects, which is clearly a priority for both investors and Namibia alike. With the reshuffling of the cabinet some nine months ago, which came with the election of the new president, the transition led to these recent delays. To some extent one can understand a reasonable period for a new minister (like any senior role) to get up to speed.

Nine months, however, seems to most of us to be an unconscionably long transition period. Any company awaiting renewal and seeking funding faces a serious problem – investors want confirmation that companies have title. For sure, the minister has the right to impose additional conditions on license holders and the ministry has an excellent track record of consultation with the industry through the Namibian Chamber of Mines, but on this occasion that has not occurred.

What goals does Reptile Uranium have for the next couple of years?

GC: We, like our peers in Namibia, expect to get our renewals around the end of the year, which will alleviate some pressure. With funding and positive testwork results we will move forward rapidly, aiming to commit to a feasibility study by the end of 2016. In parallel, we will be doing serious resource work on the palaeochannels, while during the feasibility study we will also finalize the environmental impact assessment and mining license application. We will hopefully be producing our first uranium before the end of 2019. It is a tight timeline, but it is not impossible.

This interview was conducted as part of research by GBR for its upcoming Mining in Africa Country Investment Guide (MACIG) 2016. A pre-release report on the Central African Copperbelt was released in October 2015 and can be accessed here. To participate in this report, please contact Molly Concannon at mconcannon@gbreports.com or +27 63 629 1968.

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