First Uranium will generate some of its own electricity and construct a sulphuric acid plant in order to reduce costs and secure supplies at its Ezulwini underground uranium and gold mine and at its Mine Waste Solutions (MWS) tailings recovery project in South Africa.
The Ezulwini complex
(Image: First Uranium)
The plans follow an February announcement which said it had concluded a preliminary review of the feasibility of generating its own power due to ongoing power shortages in South Africa.
First Uranium said that although generating additional power to supplement that supplied by South African utility Eskom will increase the projected capital and operating costs of the two projects, the investment is justified by securing supply of electricity. First Uranium said the investment will have been more than offset by the increased realized price for gold and the decline in the value of the rand against the US dollar.
At both Ezulwini and MWS, the company plans to initially lease diesel generators for up to five years. In addition, First Uranium plans to purchase and install 30 MWe of generating capacity at a cost of some $20 million. The company expects to power its generators using a combination of diesel fuel and heavy fuel oil for about five years and to recover some 50% of its investment by selling the power generators when they are no longer needed.
First Uranium said that generating some of its own electricity would increase operating costs by some $3.59, or 12%, per pound of uranium and by some $35.50, or 8%, per ounce for gold at its Ezulwini mine over the five years. At MWS, the impact on operating costs would be an extra $2.49, or 10%, per pound for uranium and some $44.70, or 13%, per ounce for gold.
In addition to secure electricity supplies, First Uranium also announced that it would spend some $124 million on purchasing and installing an "off the shelf" plant to produce sulphuric acid for the two projects. The company said that reduced availability of electrical power in South Africa had also caused cutbacks in the operation of smelters and other facilities that produce sulphuric acid as a by-product, and that new uranium mining activity in the region had increased local demand for sulphuric acid.
First Uranium expects to take 19 months to procure and commission the acid plant, with production expected to start in January 2010. A standard plant with a sulphuric acid capacity of 600 tonnes per day could be built at the MWS project, which First Uranium said would be more than sufficient to meet its planned requirements. It could sell any excess acid production.
Gordon Miller, president and CEO of First Uranium, said: "First Uranium is determined to start up its uranium recovery plants at its Ezulwini mine and MWS on schedule." He added, "We have adjusted our uses and sources of electrical power to enable us to fulfil our production commitments to our investors. We do not intend to let the power situation nor the ongoing increase in the cost of sulphur and sulphuric acid threaten our business or use them as an excuse to miss our project milestones."
Ezulwini was sunk in the 1960s but production was suspended in 2001, primarily because of weak gold and uranium markets, and was mothballed. Ezulwini Mining, a subsidiary of First Uranium, signed an agreement in 2006 to buy the project from Randfontein Estates, and work towards a restart commenced in earnest in February 2007. The first module of the uranium processing plant at Ezulwini remains on schedule for commissioning in June 2008.