Positive PEA Recommends Laguna Salada Project Advance To Pre-Feasibility

TORONTO, ON – U3O8 Corp. has filed a National Instrument 43-101 (NI 43-101) Preliminary Economic Assessment (PEA) on its Laguna Salada Deposit in Argentina. The PEA was undertaken by internationally recognized engineering firm, Tenova Mining & Minerals. The economic model shows that uranium at Laguna Salada would be produced at an average life-of-mine (LOM) cash cost of $21.62 per pound (lb) of U3O8, net of a vanadium credit, and the total capital cost of $136 million would be paid back in 2.5 years.

"The PEA confirms that Laguna Salada would be among the uranium industry’s lowest cash cost producers – in the same league as in-situ recovery and Athabasca Basin projects," said Dr. Richard Spencer, President and CEO. "In addition, the economic model shows that a larger resource at Laguna Salada would significantly improve the project’s economics. Hence, the PEA recommends resource expansion onto the adjacent La Susana area that has a footprint larger than the current deposit, and also onto the La Rosada target, where exploration returned average grades 30 times higher than at Laguna Salada. The estimated exploration budget to establish resources on these new areas is $1.8 million. The study also recommends that the project be advanced to pre-feasibility study with associated on-site pilot plant work."

The PEA estimates a LOM cash cost of $21.62/lb of uranium, net of a vanadium by-product credit, and including a 3% NSR to the Chubut Province. Vanadium contributes 14% of revenues, on average. This would put the Laguna Salada Deposit well within the lower quartile in terms of production cash costs in the uranium industry and competitive with operating costs of uranium mines in the Athabasca Basin and low-cost in-situ recovery (ISR) operations.

Since the Laguna Salada mineralization lies in an unconsolidated, flat lying sheet just below surface, mining could start in the richest part of the deposit where revenue would be maximized so that the capital cost of the project could be paid back in 2.5 years. By taking this approach, initial uranium cash cost averages at $16.14/lb during the payback period or $11.66 in year 1 and $14.05 in year 2, gradually rising as uranium grades decrease over the 10-year mine life for an average cash cost of $21.62.

The PEA demonstrates that the project should generate healthy operating margins relative to analysts’ uranium price forecasts. The economic model was based on a $60/lb uranium (U3O8) price and $5.50/lb for vanadium (V2O5) to yield a NPV of $55 million at a 7.5% discount with a pre-tax IRR of 24% (18% post-tax IRR). At the consensus uranium price forecast of $70/lb, estimated to commence in 2019, the project’s NPV (at a 7.5% discount rate) would increase to $98 million, the IRR would increase to 35% and the payback period would shorten to 1.9 years.

U3O8 Corp. undertook this PEA before the full extent of the deposit is known in order to have independent verification that Laguna Salada’s production cost would be comparable with the uranium industry’s lowest-cost producers. As both the IRR and NPV are sensitive to deposit size, our next step aims to increase the resource, which would significantly improve both of these economic measures. For example, doubling the size of the Laguna Salada resource (and assuming a similar grade profile to the current resource), and doubling the production rate, would result in the NPV (at a 7.5% discount) increasing to $180 million and the IRR to 44%. The capital cost of a plant that has double the capacity would be approximately $25 million more than the current plant design (or a total of $138 million including contingency and sustaining capital) and would produce an average of 1.2 million pounds ("Mlb") of uranium and approximately 2Mlb of vanadium per year over a 10-year mine life.

The immediate goal is further exploration on the La Susana area that appears to be an extension of the Laguna Salada Deposit, and on the La Rosada target, which show potential to increase the current resource to 20-25Mlb(3) of uranium.