Economic crisis impacts North American mines

26 November 2008

The partners in the Midwest joint venture in Saskatchewan, Canada, have announced their decision to postpone the uranium mine project due to current economic conditions. Denison has also suspended operations at the Tony M mine in Utah, USA.

Midwest (Denison) 
The Midwest deposit (Image: OURD)
The partners in the Midwest project - Areva Resources Canada (69.16%), Denison Mines Corp (25.17%) and OURD Canada Co (5.67%) - announced in December 2007 the formal decision to proceed with development of the project.

However, Denison announced that the partners have now decided the postponement the project due to the "current economic climate, delays and uncertainties associated with the regulatory approval process, the increasing capital and operating costs and the current market for uranium." The company said that, based on current estimates, capital costs have increased by some 50% from the previous estimate of C$435 million ($355 million).

Areva stated that "the decision not to go ahead with work at Midwest, initially scheduled for 2010, is a strategic choice that Areva and its partners have made due to the recent drop in the price of uranium, as well as the major increase in operating costs in the region due to the regulatory calendar." It added, "If it were launched today, the project's profitability would be uncertain."

The Midwest partners will complete the environmental assessment for the project, which has been ongoing since December 2005, and will complete the engineering of the Midwest site. Denison said that this will "enable the project to be advanced to the stage that it is ready to be developed quickly when the economic conditions improve."

Subject to regulatory approvals, site construction could begin in mid-2009. Under previous plans, stripping of the rock over the ore would have started in early 2010, with ore removal between mid-2011 and 2013.

The Midwest project is some 15 km west of the McClean Lake operation. The deposit was discovered in 1978 following ten years of exploration activity and is to be exploited by draining part of the Mink Arm of South McMahon Lake to construct an open pit mine. The open pit is anticipated to cover an area of some 45 hectares and to be up to about 215 metres deep. The mine is expected to produce some 16,300 tonnes U3O8 (13,850 tU). The ore will be transported by a dedicated road to the McClean Lake mill, some 15 km away, for processing.

Tony M suspended

Meanwhile, Denison has also decided to temporarily close its Tony M mine in the US state of Utah. Again, the company attributed the move on the "current economic situation, including the current uranium market."

The mine will be put on care and maintenance. The company said that "it will be maintained in a state to resume mining operations quickly when uranium prices improve or Denison is able to obtain favourable uranium contracts for the Tony M production."

Operating permits for Denison's Tony M mine were granted in September 2007 by the US Bureau of Land Management and the State of Utah, enabling mining to begin. Rehabilitation work at Tony M began in May 2007. Tony M has historical indicated resources of 1.16 million tonnes of ore, graded at 0.21% U3O8, equivalent to 2400 tonnes of U3O8. Full production of 16,000 tonnes of ore per month was due to be reached by mid-2008, with the ore being processed at Denison's White Mesa mill.

Denison's expected US uranium production will fall by some 200,000 pounds U3O8 (90 tonnes U3O8), to between 1.2 and 1.6 million pounds U3O8 (544 to 725 tonnes U3O8), as a result of the suspension of operations at Tony M.

Denison said that it is also significantly reducing its expected exploration and capital expenditures in 2009. It expects exploration expenditures to total $4.2 million in Canada and $1.6 million in the USA. In Mongolia, Denison expects to spend $5 million to advance its projects, and in Zambia $3 million is expected to be spent to complete the detailed feasibility study and secure the mining licence. The company stated, "The impact on Denison's uranium production beyond 2010 is uncertain."