Local uranium operators spoken to by Business News still hold out hope that WA will repeal the state’s mining ban.
On November 19 last year, Subiaco-based Aurora Energy made a series of strategic decisions about the future of its uranium project located on the Oregon-Nevada border in the US.
Peter Lester-chaired Aurora, with a market capitalisation of around $7.1 million, filed documents with US-based Eagle Energy Metals to sell the project for a total share consideration package of up to $US26 million, along with additional option payments up to $US1 million.
The option agreement, which is conditional upon Eagle listing on a US-based exchange and tapping investors for a minimum of $US6.8 million, would result in Aurora shareholders securing a 38 to 40 per cent stake in Eagle.
On the same day, Aurora told the market it would pursue an option to acquire a small private company named Metalbelt Holdings, along with a series of its exploration tenements based in Western Australia, in a bid to achieve greater balance across its portfolio.
An experienced mining engineer and senior executive with vast knowledge of uranium mining, Mr Lester told Business News there were many benefits to being a junior, with the nature of these decisions a testament to this.
“The biggest one is leverage I think,” he said.
“As a junior, your share price is down there, and you are always chasing money.
“[But] when you get a decent project, as we have in the US, the ability to leverage value to shareholders is far higher than a Rio Tinto, for example.
“The second one is being able to be nimble.
“Juniors can move. Our [Aurora] corporate structure is tiny. Our overheads are tiny. We can do stuff faster than most other people and I think the two option agreements we’ve got are an example of how fast we can do things when people approach us with things.”
Mr Lester said a junior miner’s share price also had the potential to rise significantly, particularly during the exploration phase.
“When you are in exploration and you find something, your share price is likely to react a lot faster than if you are a big guy building something,” he said.
“As the junior, we are the little guy with the big project, so people will want that project.
“And because we can make decisions quickly and are a junior, they probably feel they can get a better deal with us than partnering with the big guys.”
Appreciative of the positives that come with the territory of being a junior in the uranium sector, Mr Lester is nevertheless acutely aware of the challenges.
“I think the biggest challenge within the sector is raising money,” he said.
“The worst thing a lot of people think can happen to a junior is that you are a junior with a big project.
“We’ve got a big project in the US.
“The biggest challenge is making sure people know we are going to go somewhere, that we are going to create a lot of value for them in the long term.
“But raising money today to do the boring stuff, which is drill, do resources, reserves and that sort of stuff.
“The other [challenge] is permitting.
“We’re in Oregon, although we’re on the Nevada border, which is a good thing. So, you need an on-ground team to do that sort of work.
“Doing that sort of stuff with a small team can get hard. We’re in Churchill Avenue, Subiaco, trying to manage something pretty much on the other side of the world.
“You need to make sure people are aware of who you are.”
Mr Lester said juniors could also be more susceptible to market conditions. Initially, in 2010, ASX-listed Energy Ventures, acquired the Aurora uranium project for $US2 million from Uranium One.
Five years later, the project was spun-out to form Aurora, by way of an in-specie distribution to Energy Ventures shareholders.
In 2022, after its ASX listing, Aurora raised $8 million to further develop and accelerate exploration at the project.
Aside from the importance of executing at the right time, Mr Lester believes a suitable and stable jurisdiction conducive to uranium mining is also critical for a junior such as Aurora.
“If you’re going to have a uranium project, where do you want to have it on this planet?” he said.
“Now, I might offend my Bannerman [Energy] mates, but that’s the US, because that’s where the largest number of new reactors and refurbishing of reactors is occurring on the planet.”
Following bipartisan support in the US Senate, former US president Joe Biden signed into law the Prohibiting Russian Uranium Imports Act, which banned the importation of low-enriched uranium from Russia.
A few weeks later, Aurora released its project scoping study, which resulted in its share price closing trade up 7 per cent.
Aside from an 11-year mine life, which offers the potential to capitalise on US domestic demand for uranium, the project is expected to produce an average of 1.15 million pounds of uranium oxide per year for total overall production of 12 million pounds.
Aurora is hopeful the project will be production ready in 2028, around the same time when the US’s need for the commodity will likely rise.
From the outset, Mr Lester made it clear Aurora would ensure the project had US-based personnel on the ground. Last June, it appointed Troy Blackledge as project manager.
Mr Lester said Mr Blackledge understood the importance of ensuring all US-based requirements were met in order to accelerate the project’s development.
This mindset also led to Aurora’s eventual negotiations with Eagle, in a bid to further derisk the project’s long-term development.
“We’ve always said, almost from the beginning, this thing needs to be managed in the US,” Mr Lester said.
“And that was back under the Biden administration. Although all of the rules were bipartisan; both sides very strongly in favour of nuclear energy in the US and even more so now.
“Eagle, in the discussions, will provide North American management. We’ll get a board seat, so we’ll have a say.
“We will end up – and it depends on when and how well Eagle’s IPO will go – with around thirty-eight to forty per cent on the numbers Eagle think they might raise.
“So, it’ll be plus or minus that sort of figure. In anyone’s language, that’s material and a big shareholding.
“Aurora shareholders will own thirty-eight to forty per cent of a US-listed entity, which as I keep saying is the best jurisdiction for a uranium project which is already under study on the planet.”
Market forces
In the first two months of 2024, several factors resulted in something of a perfect storm for those in WA’s uranium sector.
Aside from the uranium spot price breaking the $US100 a pound barrier, a major update from Kazatomprom – the world’s largest uranium producer – resulted in higher share prices for WA-based juniors.
In February 2024, Kazatomprom told the market that, due to a sulphuric acid shortage in its home country of Kazakhstan, annual production guidance for the 2024 financial year would be revised from 25,300 tonnes of uranium to between 21,000 and 22,500t.
In order to produce yellowcake, uranium ore is crushed and soaked in sulphuric acid, which acts as a leaching agent.
Once each piece is dried and purified, it turns yellow, containing up to 90 per cent of the commodity.
Typically, market updates from Kazatomprom or Canadian giant Cameco confirming increased production results in a hit to the price of WA-based companies, while revised or downgraded production guidances result in share prices rising.
Discussion around WA’s uranium mining ban – implemented after WA Labor’s 2017 election win –began to gain greater traction in the marketplace throughout the year.
In the lead-up to the March 8 state election, Premier Roger Cook reiterated his party would not overturn the ban, which is expected to remain given Labor’s comprehensive win.
Presently, WA has around 226,000t of known uranium deposits, about 13 per cent of Australia’s reserves.
The Barnett government had approved four uranium projects before the 2017 election.
One of these projects was Toro Energy’s Wiluna project.
In 2021, however, state approval for the junior’s project lapsed due to a lack of progress.
Last October, Toro executive chair Richard Homsany said investment in uranium and nuclear power by companies such as Amazon, Google and Microsoft offered WA-based uranium plays a great opportunity, should the state’s ban ever be overturned.
These sentiments were echoed by Mr Lester.
“We have an option [with Metalbelt] and we are doing our due diligence on those assets right now, as Eagle is on the Aurora uranium project,” Mr Lester told Business News.
“People say it is in WA and if the current government [policy remains] you will never be able to mine it while they are in power.
“But it’s an option on an option.
“The idea is that if the uranium market in Australia finally moves forward and we do something with nuclear power in this country … we are almost going to be forced in a period of time ... to have uranium deposits in Australia over and above those ones we already know.
“The projects in WA are generally all hard rock, and I was associated with one many years ago.
“South Australia is pretty much the same, although they’ve got some paleochannels.
“If we can get paleochannels working in WA and then just sit on them until you are allowed to do something with them … I think it’s a good option to have. Ultimately, we are going to have to rethink nuclear power in this country.”
