Peninsula Energy (PEN) - Producing Uranium in 2023

Morgan Leighton
December 17, 2021

Matthew Gordon caught up with Wayne Heili, Managing Director and CEO of Peninsula Energy, an Australian junior uranium development company. Peninsula has been on a journey to production process at its Lance projects in Wyoming. The CEO shared with us some of the recent details, particularly the successful completion of a field demonstration of its intended recovery process at Lance. 

Company Overview 

Peninsula Energy, Ltd., is an ASX-listed company that owns the Lance uranium projects in Wyoming, USA. Although the company is headquartered in Australia, it only has US operations, which are operated out of its US subsidiary, Strata Energy, Inc. Peninsula Energy shares are listed in the ASX and the OTC.

Management at Peninsula Energy

In addition to Heili, company management includes Ron Chamberlain, CFO and Joint Company Secretary; and Jonathan Whyte, Joint Company Secretary. An additional management team within the Strata subsidiary operates on the ground in Wyoming. 

Peninsula Energy (PEN) - Producing Uranium in 2023

Peninsula’s Uranium Assets

Peninsula Energy is in the process of transforming the Lance assets (JORC-compliant uranium mineral resource of 53.6 M pounds U3O8) into a low-pH, in-situ recovery operation, with the aim of achieving the operating performance and a cost profile on par with industry-leading uranium projects. The Lance projects are the sole US-based uranium projects authorized to use this industry-leading, in-situ process. 

At Lance, alkaline in-situ recovery operations commenced in December 2015 and ceased in July 2019, primarily because of lower than expected recoveries. The transition to in-situ recovery was initiated in 2018. The company commenced the low-pH field demonstration in August 2020. Peninsula has just wrapped up the demonstration stage. 

Peninsula Energy (PEN) - Producing Uranium in 2023

Synopsis of Recent Activity

Recent activity has focused squarely on the field demonstration. It was originally supposed to last longer, but the company was able to finish it up successfully, as was discussed in its most-recent press release.   

The purpose of the demonstration project was two-fold: The company wanted to show that the low-pH process really works and demonstrate that the pattern configurations that it had in mind would be effective. 

Peninsula Energy (PEN) - Producing Uranium in 2023

Heili indicated that the company is very cautious when it provides guidance to the market. It originally guided that the field demonstration was going to take longer, based on the initial larger-scale patterns under which it was operating the field demonstration. The team recognized along the way though, that if it utilized smaller patterns, it could get the same data that it was looking for in a much shorter time frame. Therefore, it set about doing just that. 

By changing the pattern size rather than staying on the original path, the company was able to deliver the results that were needed much more quickly. Consequently, Peninsula has come to the market and reported that it has concluded the field demonstration early. The company also wanted to address how it was going to manage solids that are generated in the low-pH process as well as how it was going to deal with the limitations of ion exchange in the recovery plant. 

Peninsula Energy (PEN) - Producing Uranium in 2023

Upcoming Updated Feasibility Study

The data collected during the field demonstration will be integrated into an updated feasibility study, which will be ready in early 2022.  Specifically, the company looked at the following economic drivers, which will be incorporated into the economic analysis: 

·         These actual field consumption rates for acid, which is one of the cost drivers for the low pH.

·         The pattern configurations and how that impacts acid consumption, and

·         The pattern configuration sizes and how it impacts the rate of recovery from the field.   

Heili provided some detail on the technical process. The distance between the injection well and the recovery well in-situ recovery is really important. It determines the rate at which a pour volume can be recovered, also referred to as the effective amount of solution in the pattern. The distance between an injection well and a recovery well determines how much volume you need. Generally speaking, a model is constructed that considers the volume used at a constant rate, say 20-25 gallons per minute. If it's a large volume, it takes a long time, at 25 gallons a minute, to recover the whole volume. By shrinking the pattern size down to a smaller required volume while processing it at the same rate, the company was able to achieve more pour volumes in a shorter period of time. That's really what the company achieved with the small pattern sizes. 

It's also important to keep in mind that when establishing patterns, it's easier to go from large patterns to small patterns by shrinking the size. When Peninsula activated the small pattern, the subsurface had already been acidified and been infiltrated by production solution, so it responded very quickly and well. Peninsula was able to see the entire recovery curve. It matched nicely to original assumptions from the laboratory. That is what a field demonstration is all about: showing that the technical ideas that you have are good ones. 

Keep in mind that using a small pattern to achieve the test objective doesn't mean that it will be the size of pattern used in the future. Consider the field demonstration as a pilot-scale test. Every pilot scale is a much smaller scale test than what's actually commercialized. What is important is that the smaller pilot size has yielded the field data that are required to make the technical demonstrations that were necessary.  

Peninsula Energy: Providing Uranium to the US Market

Peninsula wants to be able to market more uranium to the US market as quickly as it can. The field demonstration shows the market Peninsula's intention to aggressively move in that direction. 

Peninsula anticipates that 2022 is going to be a very good year in the uranium space. It needs to be prepared to be a producer. It needs to put its project back online, and advance the feasibility study and the final economic piece as quickly and aggressively as possible in 2022. That will enable it to meet the market demands that it foresees in 2022 and 2023. 

Moving Through the Economic Assessment Stage

The CEO indicated that learned from the field demonstration that it will have to reassess its capital needs and operating costs. The reassessed numbers are going to result in an economic projection and a feasibility study in the near term. But first these capital costs must be scoped out, in order to produce a quality economic study.  

To that end, Peninsula hired Mr. Brian Pile, who came onboard in November 2021. He is an expert at preparing feasibility study economics and engineering works. He's a very experienced industry veteran who has a portfolio of feasibility study analysis under his belt. Pile has done this multiple times as a consultant in the industry in Nebraska, Wyoming and Kazakhstan in in-situ recovery facilities. He will be taking that data from the demonstration study and going out to procure the cost information that the company needs. From that, high-quality informed decisions will be made. 

Balance Sheet Information

Peninsula Energy today is well funded and its balance sheet is strong. The company announced a capital raise earlier in May of 2021, amounting to some A $15 M. This money was used to procure 300,000 lbs. of U3O8. About a year and a half ago, the company wiped out its debt. 

The company closed the last quarter with about US $8 M in its coffers. It had some inflows from some sales subsequent to that, which improved its cash position. The company’s 300,000-lbs. uranium inventory is presently valued at US $13-14M. All of this provides a lot of flexibility in moving forward. 

Peninsula will need some funds to bring the project back into production, to build some new well fields, and to accomplish the transition from the alkali process into the low-pH process. All of that will be done very quickly according to Heili. The company has been guiding that within a six-month timeframe it could go from an investment decision to having the Lance project starting back into production and ramping up. 

Investors need to keep in mind that the company’s commercial deliveries of uranium that are scheduled for 2022 are already covered with its existing purchases. Under the present contract portfolio, there is no need to produce in 2022. However, Heili believes that the company should be making the final investment decision and putting the project into a state of readiness in 2022, so that it can feed pounds into the market in 2023. 

Peninsula Energy (PEN) - Producing Uranium in 2023

Does Peninsula Need to Take On Debt or Raise Additional Equity?

Heili reiterated that the company has a lot of flexibility right now. It’s sitting on a reasonable amount of cash and inventory, which could be liquidated. The contracts that it has in place would be adequate if it decided to follow a debt model. Alternatively, Peninsula can raise capital to put the project into production if it decides to use that route. The CEO also believes that he doesn’t need to make any decision about additional funding right now. He anticipates a much higher uranium price going forward and that will buoy up his ability to raise additional cash. 

Details on the Company’s Uranium Contracts

Peninsula has contracts that it continues to serve and that generate cash revenue for the company. These contracts have fixed prices that are going to be above US $50/lb., and they extend out to the year 2030, which should give a great deal of confidence to any lender. 

The company would like to secure additional contracts so that it can ramp up its project to higher production rates over time. It's a balance between watching a rising market and pulling the trigger, and making sure that the company has the economic and revenue base needed to secure the funding that is required. 

Peninsula Energy (PEN) - Producing Uranium in 2023

CEO Thoughts on Production

As mentioned, Heili wants to establish commercial production as quickly as possible. His view is that the utilities want to contract with established producers. They will contract when they must with companies that wish to go into production, or hope to be in production, but the bottom line is that the utilities are looking for the established producers to contract with. So, if one wants to be in that camp and wants to be an established producer, the first step is to produce. 

Therefore, Heili wants early production that ramps up quickly. He wants to do it systematically and sensibly. He doesn’t think it's possible to contract an entire mine's production into this market without first being in production.  

Peninsula Energy (PEN) - Producing Uranium in 2023

Closing Thoughts

Peninsula has successfully completed its demonstration phase. It has “checked the box” on the technical risk. It is “leaps and bounds” ahead of the companies that have a permitted project but haven't built or operated anything. 

Heili thinks that if you're a uranium investor, 2021 was a good year, but it was just building the foundation, just like Peninsula has been building its foundations. He also believes that in 2022, the uranium market looks to be well set for a good run. Peninsula has been positioning itself to run forward with the market.

To find out more, go to the Peninsula Energy Website