Boss Energy (BOE) - 47% IRR Australian Uranium Producer

Boss Energy is a uranium mining and production company founded in 2005, headquartered in Australia. The company is listed on the Australian Stock Exchange (ASX: BOE). The company's flagship site is the Honeymoon Project in Australia, capable of producing up to 3.3M lbs on an annual basis. 

We met with Duncab Craib, CEO and Managing Director, Boss Energy. He is the owner of the Honeymoon Uranium Mine in South Australia. Duncab is a Chartered Accountant who has held executive roles in Australia, the UK, Namibia, and China. He has over 12 years of experience in the uranium mining industry.

Company Overview

Boss Energy is a uranium mining and production company ready to participate in the new uranium bull market. The company's flagship site is the Honeymoon Uranium Site, a fully permitted uranium mine with an existing $170M infrastructure. The company has produced and exported uranium from this site in South Australia. The company also holds the approval of the Heritage and Native Title mining agreement. 

The Honeymoon Uranium Mine

This asset is a uranium mine featuring a brownfield restart asset. This site is known historically for the production and export of uranium in the global markets. The site was placed in the care and maintenance phase following the dip in uranium prices in 2014.

Over the years, the company has been able to carry out substantial technical advancements on the site along with increasing the JORC resource. The company has acquired the permits for the property and has recently concluded the enhanced feasibility study on the site. The current growth in the uranium markets places the company in a strong business position.

The Honeymoon project is fully permitted with an export permit of 3.3Mlbs. The company also has additional permits along with native title agreements in the region. The site has a strong JORC Resource that stands at 72Mlbs. The site has a strong infrastructure in place as the initial mine development was carried out in 2012-2013 through a capital investment of AUD$170M. 

The company released a Feasibility Study in January 2020 which concluded that choosing ion exchange over the existing solvent extraction process would offer an increased production profile and significantly cut down costs. This migration is planned over two stages, the first stage involves the refurbishing of the existing solvent extraction process, and stage two consists of replacing it with an ion exchange plant. 

Capital Raised

Boss Energy raised AUD$60M in March through local and international institutional firms. The company has also observed a growing interest from retail investors. This fund was targeted towards the purchase of physical Uranium for the market. This purchase is a way to de-risk the Honeymoon site and safeguard the company's contractual obligations to ensure a sustainable supply. Since the Honeymoon mine is entering the developmental stage, it places the company in a strong position amidst the growing spot and stockpile prices. This move has seen growing support from the industry. 

The company currently has up to 9 utilities in its portfolio and is going through an inducement pricing phase where the pressure from the market is towards lowering costs and optimizing the production process.

Although the industry trend has moved towards the purchase of a physical supply of uranium. There has been an ongoing interest in the spot market, in the mid-term and the long-term utilities market. The company projects that the price of uranium from a production perspective will grow in Q3 2021. 

Boss Energy currently has liquidity of AUD$20M excluding the 100% backed bond with the State Government. This fund provides the company with sufficient resources to carry out its exploration targets.

The company has secured a syndicated agreement of USD$1.64Bn and an additional USD$400M from a local South African bank. They have appointed an independent debt advisor to work alongside the project and the market.

The company plans to release a financial model based on the Enhanced feasibility study while also working towards initial offtake agreements.

Market Trends

The uranium market has seen a drop in overall supply due to the covid restrictions which lead to production constraints and shutdown of several mining operations. The natural recovery of uranium's spot price has been slow compared to other commodities. 

The North American market has seen the lowest inventory levels in uranium in the past few years and it's expected that a price move is on the horizon. The incentive price for uranium is preferred at USD$60/lb and the average spot price is currently hovering near the $32 mark. This trend is projected to further intensify with the recent inventory transactions made by groups including Sprott, and UPC. These transactions provide an opportunity to increase liquidity in the near-term spot markets.

Boss Energy has observed a growing interest in its Honeymoon Project over the past 6 months where buyers are trying to grasp the details on the next production wave to gauge potential price changes. The company has been looking to gain a pole position in the market as the new production cycle starts, to seize an opportunity at higher commodity prices.

The company is in talks with utility buyers for prospective contracts. The fuel buyers are in a close working relationship with Boss Energy. The company plans to initiate raising funds for the CapEx (Capital Expenditure), which will be utilized towards the purchase of NIMCIX columns and refurbishing the existing plant.

Boss Energy recently purchased a physical supply through Sashi Davies, a technical expert and one of the world's top uranium traders. The company was able to lock a price agreement and the deal was carried out under a 24-hour time frame. The purchase was made at a spot price of $30.15/lb. 

As the world moves towards cleaner energy sources, the Australian political parties have also shown their support towards a potential nuclear power plant. South Australia is known to be one of the premier jurisdictions in the country. Boss Energy has been successful in garnering support from the state and the federal government. The South Australian government is also contributing towards a part of the geophysical exploration activities currently being carried out.

EFS (Enhanced Feasibility Study) Results

Boss Energy carried out detailed studies with their technical team to optimize the existing extraction process, a move that has garnered substantial interest from the market. They carried out a 6-month leach trial with ANSTO (Australian Nuclear Science Technology Organization) in 2017 leading to the major breakthrough at the Honeymoon mine. The company took a conservative approach towards the pricing strategy as they were able to average a 53mg/liter uranium initially and were able to ramp it up to 80-90 mg/liter in the final leach trial. 

Additionally, the company is testing out new resins that would cope up with the high chloride operating environment. The recovery of this resin through ion exchange stands at 95%, regardless of the uranium's grade. This was made possible due to the extensive research and technological advancements carried out by the company. 

Boss Energy has an assumed cost study price at $60/lb over the life of the mine. The company has set a pre-tax NPV (Net Present Value) at USD$309M. This indicates a 35% increase in the NPV compared to the previous study with an IRR (Internal Rate of Return) at 47% and a margin of 62%. The company was also able to increase the production from 2M to 2.4M, while simultaneously lowering the operating costs by 11%. The sustenance costs have dropped by 16%, standing at USD$25.6/lb. The switch to the ion exchange process and the installation of additional ion exchange columns has led the CapEx to reach USD$80M. 

Resource Expansion

Currently, the company has a resource permit of 3.3Mlbs. The permit was renewed 18 months ago. The company has already discussed the possibility of resource expansion with the local administration. Based on the feasibility study, the current resource stands at 36Mlbs at the Honeymoon Restart Area and an additional 36Mlbs at Jason's satellite domain, which is a different license.

The company has set an exploration target of 190Mlbs and recently finished the passive seismic survey. The next step is to carry out an active seismic survey to determine the resources for drilling, which is planned for Q4 2021. The company aims to grow the resource while simultaneously working towards expanding the life of the mine. The move towards ion exchange has also significantly de-risked the operational aspects of the project. 

M&A Considerations

Boss Energy looks for potential M&A once their Honeymoon project is in the advanced stage. The company is currently in discussion with multiple entities, however, the final decision will be made favoring the shareholder's interests.

The company plans to commence production within the next 12 months, working towards a profitable and sustainable mine. The company is looking for contracts from a 100,000 lbs yearly supply seeking a market price in the high 30s. Boss Energy stipulates that the prices of uranium will pick up in Q3 2021, a trend that will continue in 2022.

To find out more, go to the Boss Energy Website