Canada-based uranium exploration and development company Plateau Uranium has signed a letter of intent (LoI) with Curzon Resources, indicating the potential sale of a portion of future production from Macusani Plateau Uranium Project in south-eastern Peru.
The deal involves the sale of up to two million pounds of uranium concentrates (U3O8) over a five-year period (400,000lb per annum), beginning in the first year of commercial production from the Macusani Project, which is expected to start production in late-2020.
Additional provisions have been incorporated in the LoI, which provides options for an increase in the annual volumes and a two-year extension.
Plateau Uranium CEO Ted O’Connor said: "We are extremely pleased to have entered into this LoI with Curzon as another step to ensuring the economic success of the Macusani project. We have projected cash costs for uranium only, excluding any lithium co-production value, of $17.28 per pound U3O8 produced.
"At $40 uranium price, our uranium project has excellent potential economic returns with a post-tax NPV8 of $360m and an IRR of 29.2% with a payback period of 2.5 years. The uranium prices under discussion average higher than this, which is extremely positive for the future development of the project."
Under the LoI, Platinum Uranium can sell reserves at an average price above $42 per pound compared with the current spot price of around $23 per pound. A pricing model that includes a combination of fixed and market-related hybrid pricing is under consideration to ensure positive margins in the initial phase of production.
Volumes enlisted in the LoI constitute less than 7% of proposed uranium production rates from the Macusani Project. This arrangement ensures Plateau Uranium maintains exposure to higher uranium price increases in the future.
Negotiations for future uranium offtake agreement will be carried out over the next 12 months.
The LoI is non-binding and non-exclusive in nature, with Plateau Uranium able to pursue other offtake agreements.
However, Curzon reserves a right of first refusal to be able to match any additional offers received from interested parties during this time period.
Curzon Resources is a privately funded commodity trading company specialising in the purchase, sale and distribution of commodities.