Mineral Resource Estimate – Vanadium
(1)(2)(3)(4)(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Measured Mineral Resources
|
|
Indicated Mineral Resources
|
|
Inferred Mineral Resources
|
|
Tons (000)
|
|
Grade % V
2
O
5
|
Pounds V
2
O
5
(000)
|
|
Tons (000)
|
Grade % V
2
O
5
|
|
Pounds V
2
O
5
(000)
|
|
Tons (000)
|
Grade % V
2
O
5
|
Pounds V
2
O
5
(000)
|
|
|
Las Sal
(6)
|
1,009
|
|
0.97%
|
19,596
|
|
132
|
0.73%
|
|
1,930
|
|
185
|
0.51%
|
1,902
|
|
Other Properties
(7)
|
240
|
|
1.32%
|
6,350
|
201
|
0.94
|
%
|
3,797
|
447
|
0.74%
|
6,660
|
|
Total Mineral Resources (V
2
O
5
)
|
|
|
25,946
|
|
|
|
5,727
|
|
|
|
8,562
|
Notes:
(1) The Mineral Resource estimates in this table comply with the requirements of NI 43-101 and the classifications comply with CIM definition standards and do not represent reserves under SEC Industry Guide 7. Mineral resources that are not reserves do not have demonstrated economic viability. See “
Cautionary Note to U.S. Investors Concerning Disclosure of Mineral Resources
,” above.
(2) Mineral Resources were estimated at various %U
3
O
8
or G.T. cut-off grades. Details regarding cut-off grade calculations for each project are given in the project’s respective section below.
(3) Mineral Resources were estimated at various long-term uranium prices. The specific long-term uranium price for each project is given in the project’s respective section below.
(4) Various vanadium to uranium ratios were used to calculate the vanadium grades and pounds given in the table. The specific ratio used for each project is given in the project’s respective section below.
(5) Numbers may not add due to rounding.
(6) The La Sal Project includes the Energy Queen, Redd Block, Beaver, and Pandora properties.
(7) Other Properties includes Whirlwind and the retained portion of Sage Plain.
Mineral Resource Estimate – Copper
(1)(2)(3)(4)(5)(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Measured Mineral Resources
|
|
Indicated Mineral Resources
|
|
Inferred Mineral Resources
|
|
Tons (000)
|
Grade % Cu
|
Pounds Cu (000)
|
|
Tons (000)
|
Grade % Cu
|
Pounds Cu (000)
|
|
Tons (000)
|
Grade % Cu
|
Pounds Cu (000)
|
|
|
Canyon
|
6
|
9.29%
|
1,203
|
|
94
|
5.70%
|
10,736
|
|
5
|
5.90%
|
570
|
|
Total Mineral Resources (Cu)
|
|
|
1,203
|
|
|
|
10,736
|
|
|
|
570
|
Notes:
(1) The Mineral Resource estimate in this table complies with the requirements of NI 43-101 and the classifications comply with CIM definition standards and do not represent reserves under SEC Industry Guide 7. Mineral resources that are not reserves do not have demonstrated economic viability. See “
Cautionary Note to U.S. Investors Concerning Disclosure of Mineral Resources
,” above.
(2) For the Main and Main-Lower zones of the Canyon Mine, a 0.36% uranium equivalent cut-off grade (% U
3
O
8
Eq) was applied to account for both the copper and uranium mineralization. In all other zones only uranium was reported and a 0.29% U
3
O
8
cut-off grade was applied. (The %U
3
O
8
Eq grade term is not the same as the eU
3
O
8
% grade term with indicates probe rather than assay data listed elsewhere in this report. For details see the Canyon Technical Report).
(3) Mineral Resources are estimated using a long-term uranium price of US$60 per pound and a Copper price of US$3.50 per lb.
(4) A copper to U
3
O
8
conversion factor of 18.19 was used for converting copper grades to equivalent U
3
O
8
grades (U
3
O
8
Eq) for cut-off grade evaluation and reporting.
(5) Numbers may not add due to rounding.
(6) For Canyon, Mineral Resource tonnages of uranium and copper cannot be added as they overlap in the Main and Main-Lower Zones.
The Nichols Ranch Project
Unless stated otherwise, the following description of the Nichols Ranch Project is derived from a technical report titled “
Nichols Ranch Uranium Project, 43-101 Technical Report, Preliminary Economic Assessment
” dated February 28, 2015, prepared by Douglas L. Beahm, P.E., P.G. of BRS Inc. and Paul Goranson, P.E. of the Company, in accordance with NI 43-101 (the “
Nichols Ranch Technical Report
”). The Nichols Ranch Technical Report includes an updated NI 43-101 mineral resource estimate and the results of a Preliminary Economic Assessment (“
PEA
”) for the uranium resources identified to date at the Nichols Ranch Project. Each of the authors is a “qualified person” within the meaning of NI 43-101, and Mr. Beahm is “independent” of the Company within the meaning of NI 43-101. Because the independent author of the Nichols Ranch Technical Report assumed overall responsibility for all items of the technical report, the report is therefore an independent technical report under NI 43-101. The Nichols Ranch Technical Report is available on SEDAR at www.sedar.com. The Nichols Ranch Project does not have known reserves, and is therefore considered under SEC Industry Guide 7 definitions to be exploratory in nature, despite currently ongoing uranium recovery activities.
Property Description and Location
The Nichols Ranch Project is the Company’s currently active ISR uranium recovery project, which it acquired in June 2015 through the acquisition of Uranerz. It is located in the Powder River Basin of northeast Wyoming. The Nichols Ranch Project includes: (i) the Nichols Ranch Plant; (ii) the Nichols Ranch Wellfield; (iii) the Jane Dough Property; and (iv) the Hank Project, which includes the planned Hank Satellite Plant and the Hank Property. The Nichols Ranch Project is an ISR project; it is not an underground or open pit project.
A map of the Nichols Ranch Project, including the Nichols Ranch Plant, the Nichols Ranch Wellfield, the Jane Dough Property and the Hank Property is shown below:
The Nichols Ranch Project is an operating ISR facility that recovers uranium through a series of injection and recovery wells. Using groundwater fortified with oxygen and sodium bicarbonate, uranium is dissolved within a deposit. The groundwater is then collected in a series of recovery wells and pumped to the Nichols Ranch Plant. The Nichols Ranch Plant creates a yellowcake slurry that is transported by truck to the White Mesa Mill where it is dried and packaged into drums that are later shipped to a conversion facility.
The original plan for the Nichols Ranch Project included the construction of an ISR processing facility and a second uranium recovery and extraction facility at the Hank Project. Our current extraction plan for the Nichols Ranch Project is now divided into three separate areas, being (i) the Nichols Ranch Wellfield, (ii) the Jane Dough Property, and (iii) the Hank Property. The Nichols Ranch Wellfield is, and the Jane Dough Property is expected to be, directly connected to the Nichols Ranch Plant via pipeline. The Hank Project is expected to consist of a uranium extraction and recovery facility that will create a loaded resin that will be trucked to the Nichols Ranch Plant for elution. The Nichols Ranch Wellfield consists of our two initial production areas, being Production Area #1 and Production Area #2. The Nichols Ranch Wellfield also includes the two deep disposal wells that are permitted and constructed for the Nichols Ranch Project. The Jane Dough Property is adjacent to the Nichols Ranch Wellfield to the south and contains certain properties that are 100% owned by Energy Fuels and other properties that are held in the Arkose Mining Venture, in which we own an 81% interest. The Jane Dough Property contains two fully licensed and permitted extraction areas. The Hank Project is 100% owned by Energy Fuels and is located approximately six miles east of the Nichols Ranch Wellfield. The Hank Satellite Plant is fully licensed and permitted to be constructed and operate as a satellite to the Nichols Ranch Plant, and the Hank Property contains two targeted extraction areas.
Construction of the Nichols Ranch Plant was substantially completed in 2013, and extraction commenced in the second quarter of 2014 after final NRC inspections were completed. The Jane Dough Property described above has two fully licensed and permitted extraction areas. The Company completed construction of an elution and precipitation circuit at the Nichols Ranch Plant in early-February 2016. Yellowcake slurry is now transported from the Nichols Ranch Plant to the White Mesa Mill for drying and packaging. However, the
Nichols Ranch Plant is currently licensed to allow for the construction and operation of a drying and packaging circuit should conditions warrant.
The Nichols Ranch Project does not have known reserves under SEC Industry Guide 7, and is therefore considered under SEC Industry Guide 7 definitions to be “exploratory” in nature. During 2017, a total of approximately 259,000 pounds of U
3
O
8
were recovered from the Nichols Ranch Project and nil pounds of mineralized material were added through drilling.
Accessibility, Local Resources, Physiography and Infrastructure
The Nichols Ranch Project site is located approximately 50 road miles southwest of Gillette, Wyoming and 76 road miles northeast of Casper, Wyoming in portions of Campbell and Johnson Counties, Wyoming in the Townships 41 to 45 North and Ranges 73 to 77 West. It is accessed from State Highway 50 from the east or State Highway 387 from the south, and various internal gravel-surface county and private roads. Casper is on Interstate 25, approximately one hour by air from either Denver, Colorado or Salt Lake City, Utah. The Nichols Ranch Project is accessible via two-wheel drive vehicle on existing county and/or private gravel and dirt roads.
The Nichols Ranch Project is located within the Wyoming Basin physiographic province in the central portion of the Powder River Basin, within the Pumpkin Buttes Mining District. The Pumpkin Buttes are a series of small buttes rising several hundred feet above the surrounding plains. Portions of the Powder River Basin properties are located east, west and south of these buttes. The cap rocks on top of the buttes are erosional remnants of the Tertiary White River Formation that is believed to have overlain the majority of the Powder River Basin. The volcanic tuffs in the White River Formation have been cited as a source of uranium in this basin.
The area in which the Powder River Basin properties is located is a low lying plain, and elevations range from approximately 4,390 feet (1,440 meters) in the northwest to approximately 5,450 feet (1,790 meters) in the southeast. Historically and currently, the land is used for livestock and wildlife grazing. Vegetation is characteristically sagebrush grassland with some pines on elevated terrain and some deciduous trees within drainages.
The climate is semi-arid and receives an annual precipitation of approximately 9.4 inches, the most falling in the form of late autumnal to early spring snows. The summer months are usually hot, dry and clear except for infrequent heavy rains. Cold, wind and snow/blizzards can make winter exploration work in this area difficult but not impossible. The weather may limit the time periods for capital construction but should not have any significant adverse impacts on the operation of an ISR facility.
Infrastructure at the site of the Nichols Ranch Project is dominantly related to local oil, gas, and coal bed methane exploration and development. Mineralized locations could affect future siting of wellfields and processing facilities. Generally, the proximity of the Nichols Ranch Project to paved roads is beneficial with respect to transportation of equipment, supplies, personnel and product to and from the property. Power transmission lines are located on or near parts of the property. We have secured power from the local electrical service provider to accommodate our needs. Water is available from wells developed at planned facility locations, and water for ISR operations comes from the operation itself, i.e. the extracted groundwater. Therefore, the basic infrastructure (power, water and transportation) that is required to support an ISR mining operation is located within reasonable proximity to the Nichols Ranch Project.
Ownership
Our property interests vary widely, and include unpatented mining claims, private and state leasehold interests and surface use rights. Some agreements renew annually, some renew automatically when mineral extraction has commenced, and some are agreements for fixed terms. For the property agreements that expire in 2018, the Company may negotiate new agreements for only those acres that are within permit boundaries or critical project areas. Leases outside of such desired project areas may be allowed to expire, although the Company may seek to negotiate new agreements for those dropped properties in the future should market conditions warrant. We do not expect that the expiry of any property interests in 2018 and beyond, nor the forfeiture of any unpatented mining claims in 2018, will have a material effect on our ability to continue exploration and extraction activities on our properties.
Our unpatented lode mining claims are located on minerals owned by the federal government and open to location, with the surface being owned by either the federal government or private individuals. In addition, the unpatented lode mining claims are recorded in the appropriate county and filed with the state office of the BLM. The unpatented lode claims do not have an expiration date. However, affidavits must be filed annually with the BLM and respective county recorder’s offices in order to maintain the claims’ validity. All of the unpatented lode mining claims have annual filing requirements ($155 per claim) with the BLM, to be paid on or before September 1 of each year. Most of the above-mentioned unpatented lode mining claims are located on Stock Raising Homestead land where the United States government has issued a patent for the surface to an individual and reserved the minerals to the United States government subject to the location rights by claimants as set forth in the federal Mining Act of 1872.
Our leasehold interests are subject to the various terms as set forth in the applicable leases. The state leases and leases on fee mineral lands usually have annual payments, royalty obligations, and the terms of the leases vary, but for the most part can be extended by
production (as defined in the leases). The fee surface and mineral leases apply only to uranium and other fissionable minerals and typically have a 10-year term with the right to extend the leases with production (as defined in the leases). Commingling of extraction from adjacent lands is allowable under the fee mineral leases.
Surface rights under applicable laws allow for exploration disturbance, road construction and facility siting. The claimant must first notify the surface owner of its intention to locate unpatented lode mining claims on the owner’s surface and then reach an agreement with the surface owner to pay for damages caused by the claimant’s operations. If an agreement cannot be reached, the claimant may post a bond with the BLM to cover the amount of the damages caused by the claimant’s operations. We have negotiated surface use agreements with various surface owners that provide us with all required surface access for the Nichols Ranch Project. The surface use agreements typically provide for reimbursement to the surface owner of actual damages resulting from our operations.
Nichols Ranch Plant – 100% Energy Fuels
The Nichols Ranch Plant is located on the Nichols Ranch Project property pursuant to the surface use agreements described below.
Nichols Ranch Wellfield – 100% Energy Fuels
The Nichols Ranch Project, which includes the Nichols Ranch Plant and the Nichols Ranch Wellfield mining permit area, consists of 36 unpatented lode mining claims, two fee surface and mineral leases, and one surface use agreement encompassing approximately 920 acres. The Nichols Ranch Wellfield permit boundary encompasses approximately 1,120 acres. There is an overriding royalty interest in favor of Excalibur Industries on all federal unpatented lode mining claims that were acquired from Excalibur Industries, defined as a gross royalty of six percent when the spot price of uranium is less than $45.00 per pound and of eight percent if the uranium spot price is $45.00 per pound or higher. In addition, there is a portion of the Nichols Ranch Wellfield that includes private (fee) mineral that is subject to the above Excalibur Industries royalty, plus an additional royalty payable to the fee mineral owner under the fee leases. Cumulatively, the combined royalties range from 12 percent to 16 percent, depending upon the price of uranium). The Company has entered into an agreement to acquire these Excalibur Industries royalties, which it intends to cancel upon acquisition. See
General Development of the Business: 2017 Corporate Developments
. The primary term of the leases would have expired in 2017; however, they are held by production (as defined in the leases). The primary term of the surface use agreement would have expired in 2016, however the term has been held by production.
Hank Property – 100% Energy Fuels
At the Hank Project, for which the Company has received a license to construct and operate a satellite plant to the Nichols Ranch Plant (known as the Hank Satellite Plant), we have 66 unpatented lode mining claims, two fee surface and mineral leases, which are not significant, and one surface use agreement encompassing approximately 1,393 acres. The Hank Project permit boundary encompasses approximately 2,250 acres. Of the 66 unpatented lode mining claims comprising the Hank Project, 56 of the claims have a royalty interest burden, payable to Excalibur Industries, of 6 or 8 percent depending on the price of uranium. This royalty interest is based on uranium produced from these claims. As mentioned above, the Company has entered into an agreement to acquire these Excalibur Industries royalties, which it intends to cancel upon acquisition. See
General Development of the Business: 2017 Corporate Developments
. The primary term of the leases would have expired in 2016, however they have been held beyond the primary term by production (as defined in the leases). In 2017, the Company renewed all of these leases through 2026.
Jane Dough Property (Jane Dough/Doughstick – 100% Energy Fuels; North Jane and S. Doughstick – 100% Arkose Mining Venture, held 81% by Energy Fuels)
In 2017, the Company received its license amendment from the NRC, which includes the Jane Dough Property in the Nichols Ranch Project permit area, and combines the Jane Dough/Doughstick, North Jane and S. Doughstick properties consisting of 115 unpatented lode mining claims, 16 mineral leases, and three surface use agreements encompassing approximately 3,121 acres. Our operating interest in the Jane Dough Property includes Energy Fuels’ 100% owned property and 81% from the two properties held by the Arkose Mining Venture. The Jane Dough Property permit amendment encompasses approximately 3,680 acres. The fee land in the project is covered by mineral leases some of which have annual payments and some of which are five year paid up leases. The mineral leases have primary terms of ten years and can be held by ongoing uranium extraction (as defined in the leases). Some of the leases expire in 2018, and 2019. The fee surface is covered by three separate surface use agreements, which include damage payments paid on an annual basis. The mining leases have a variety of royalty payments based on a fixed rate, a two tier system, or a sliding scale system.
One of the leases has a fixed royalty rate of 4% of the gross proceeds. Two of the leases have a two-tier royalty based on the price of U
3
O
8
at the time of the sale, and they are 6% for a U
3
O
8
price less than $75 per pound, and 8% for a U
3
O
8
price equal to or greater than $75 per pound. Five of the leases have a sliding scale royalty that runs from a low of 2% at a U
3
O
8
price of $25 per pound up to a high of 10% for a U
3
O
8
price of equal to or greater than $100 per pound. Four leases have a sliding scale royalty that runs from a low of 4.0% at a U
3
O
8
price of $40 per pound up to a high of 10% for a U
3
O
8
price of equal to or greater than $100 per pound. Four of the leases have a sliding scale royalty that runs from a low of 4.5% at a U
3
O
8
price of $49.99 up to a high of 10% for a U
3
O
8
price of equal to or greater than $100 per pound. There is an overriding royalty interest held by Excalibur Industries that covers some of the unpatented claims located in Sections 20, 21, 28 and 29, Township 43 North, Range 76 West, which is a two-tiered royalty based on quarterly
production of U
3
O
8
and adjusted annually by the actual amount of U
3
O
8
sold during the previous year. The Excalibur royalty amounts are based on the average quarterly spot price for U
3
O
8
, and they are 6% for a U
3
O
8
price equal to or less than $45 per pound and 8% for a U
3
O
8
price greater than $45 per pound. As mentioned above, the Company has entered into an agreement to acquire these Excalibur Industries royalties, which it intends to cancel upon acquisition. See
General Development of the Business: 2017 Corporate Developments
. There are twenty (20) unpatented mining claims located in Section 32, Township 43 North, Range 76 West that have an overriding royalty interest of 0.25%. This overriding royalty interest is based on production of uranium on said claims. Two of the surface use agreements have a two tiered royalty based on the sales price of the U
3
O
8
received by Uranerz, and they are 1% for a sales price of less than $50 per pound; and 2% for a sales price of equal to or greater than $50 per pound.
Uranium Severance Tax
We are required to pay a standard uranium industry severance tax of approximately 4% of sales and an ad valorem tax (annual property tax based on assessed values) to the State of Wyoming, in addition to various maintenance, land impact and access fees and other consideration to surface owners.
Permitting and Licensing
Energy Fuels has received all regulatory approvals necessary to conduct extraction and uranium processing activities at the Nichols Ranch Plant and Nichols Ranch Wellfield. In December 2010, Uranerz received its Permit to Mine for the Nichols Ranch Project from the Wyoming Department of Environmental Quality (“
WDEQ
”) - Land Quality Division (“
WDEQ-LQD
”). In July 2011, Uranerz received a Source Material License from the NRC for the Nichols Ranch Plant and Nichols Ranch Wellfield, and construction of the Nichols Ranch Plant immediately began.
Both the state and federal agencies analyzed all environmental aspects of the Nichols Ranch Project including reclamation of the land surface following extraction operations and restoration of impacted ground water. Workplace safety and the safety of the public are also closely monitored by regulatory agencies. We have posted a reclamation bond with the regulatory agencies in an amount of $6.8 million to cover the total estimated cost of reclamation by a third party as a requirement of the licenses.
The various state and federal permits and licenses that were required and have been obtained for the Nichols Ranch Project, exclusive of the expansion to the Jane Dough Property, are summarized below:
Primary Permits and Licenses for the Nichols Ranch Project (Nichols Ranch and Hank Units Only)
|
|
|
|
Permit, License, or Approval Name
|
Agency
|
Status
|
Source Material License
|
NRC
|
Obtained
|
Permit to Mine (UIC Permit)
|
WDEQ-LQD
|
Obtained
|
Aquifer Exemption
|
WDEQ-LQD; EPA
|
Obtained
|
Permit to Appropriate Groundwater
|
SEO
|
Obtained
|
Wellfield Authorization
|
WDEQ-LQD
|
Obtained
|
Deep Disposal Well Permits
|
WDEQ-WQD
|
Obtained
|
WYPDES
|
WDEQ- WQD
|
Obtained
|
Plan of Operations (Hank Unit only)
|
BLM
|
Obtained
|
Air Quality Permit
|
WDEQ-AQD
|
Obtained
|
Notes:
NRC - Nuclear Regulatory Commission
EPA – Environmental Protection Agency
WDEQ-LQD - Wyoming Department of Environmental Quality Land Quality Division
WDEQ-WQD - Wyoming Department of Environmental Quality Water Quality Division
WDEQ-AQD - Wyoming Department of Environmental Quality Air Quality Division
WYPDES – Wyoming Pollutant Discharge Elimination System
SEO - State Engineer's Office
Under the licensed plan, the Nichols Ranch Plant has been built, and a satellite processing facility is licensed for the Hank Project. In 2017, the NRC approved a source material license amendment to add the Jane Dough Property to the existing license for the Nichols Ranch Project, and the Wyoming Department of Environmental Quality approved an amendment to our Permit to Mine to incorporate the Jane Dough Property. The Jane Dough Property is now fully licensed and permitted as part of the Nichols Ranch Project. The Jane Dough Property is adjacent to the Nichols Ranch Wellfield and is expected to share its infrastructure. We are now able to bring the Jane Dough Property into extraction operations before the Hank Project. Due to its close proximity, extracted solutions from the Jane Dough Property may be delivered directly to our Nichols Ranch Plant by pipeline, thus eliminating the need for a larger capital outlay to construct a satellite plant as is planned for the Hank Project. Our Jane Dough Property includes the Doughstick, South Doughstick and North Jane properties. Additional wellfields may be added to the extraction operations plan as we continue to assess geological data.
Geology
The Nichols Ranch Project is located in the Powder River Basin. The mineralized trends within the Nichols Ranch Project are alteration-reduction trends hosted in the Eocene age channel sands that lie at depths of approximately 300 to 1,100 feet from the surface. Roll front deposits of uranium bearing material are anticipated to occur within these properties. An alteration-reduction trend is a natural chemical boundary trend line in a sandstone aquifer where reduced (non-oxidized) sand is in contact with altered (oxidized) sand. Uranium mineralization may be found along the trend line.
The properties in the Nichols Ranch Project contain alteration-reduction trends hosted in Eocene age channel sands. Alteration-reduction trends in the Pumpkin Buttes Mining District are typically composed of multiple, stacked roll front deposits that often contain associated uranium mineralization. A stacked roll front is a type of uranium occurrence found in thick sandstone where a number of mineralization trends are stacked on top of each other. Uranium mineralization within and adjacent to the Nichols Ranch Project are found in the Eocene Wasatch Formation (“
Wasatch
”). The Wasatch is a fluvial deposit composed of arkosic sandstones that are typically 25% or more feldspar grains and indicates a source rock where chemical weathering was not extreme and the sediments have not been transported far. A fluvial deposit is a deposit of uranium mineralization found in sandstones that originated from sediments laid down by streams and rivers. The arkosic sandstone is a type of sandstone that contains a high percentage of feldspar grains. The medium grain size and relatively good sorting of this sediment implies water transportation, probably in a meandering river/stream system. The Wasatch Formation is interlaid with sandstones, claystones, siltstones, carbonaceous shale, and thin coal seams that overlie the Paleocene Fort Union Formation, another fluvial sedimentary unit.
History
The Nichols Ranch Project is located within the Pumpkin Buttes Mining District, which was the first commercial uranium extraction district in Wyoming. Uranium was first discovered in the Pumpkin Buttes in 1951. Intermittent uranium extraction from about 55 small mines occurred through 1967 producing 36,737 tons of material containing 208,143 pounds of uranium. This early mining activity focused on shallow oxidized deposits exploited by small open pit mines. The material was generally transported to the Atomic Energy Commission (“
AEC
”) buying station in Edgemont, South Dakota. Modern mining in the district has focused on deeper reduced deposits, including facilities operated by Cameco Corporation and Uranium One Inc.
The properties included in the Nichols Ranch Project were originally part of a large exploration area encompassing Townships 33 through 50 North of Ranges 69 through 79 West, on the 6th principal meridian. In 1966, Mountain West Mines Inc. (“MWM
,
” now known as Excalibur Industries) began a successful drilling exploration program in a portion of this area. In 1967, MWM entered into an agreement with Cleveland-Cliffs Iron Company (“
CCI
”) for further exploration and an option if suitable resources were found. CCI exercised its option in 1976 with plans to begin underground mining operations in the vicinity of North Butte. Changing economic conditions and the introduction of ISR mining technology reportedly ended much of CCI’s interest in the area. By the late 1980’s, CCI began selling select properties or allowing them to revert to the federal government.
Between 1968 and 1980, CCI drilled 117 holes and installed 3 water wells on the Nichols Ranch Project area. Texas Eastern Nuclear Inc. in 1985 completed limited drilling and exploration on the property (approximately 28 borings) and in early 1990s Kerr McGee Corporation and Rio Algom Mining Corporation also completed limited drilling in the area.
Mineralization
The targeted mineralized zones for the Nichols Ranch Wellfield in the A Sand unit are 300 to 700 feet below the surface and occur in two long narrow trends meeting at the nose. The nose is in the northwest corner of the deposit where the two narrow trends meet to form the tip of the geochemical front. The Hank Project’s two targeted mineralized zones in the F Sand unit range from 200 to 600 feet below the ground surface depending on the topography and changes in the formation elevation and stratigraphic horizon. The targeted
mineralization zone for the Jane Dough Property is the A Sand unit, the same as Nichols Ranch, at depths of 300 to 750 feet below the surface.
Mineral Resource Estimates
BRS prepared an updated NI 43-101 compliant Mineral Resource estimate for the Nichols Ranch Project in the Nichols Ranch Technical Report. The updated Mineral Resource estimate is effective as at January 1, 2015 and is summarized in the table below. Mineral Resources were estimated using the GT Contour method. The primary data used in evaluation are equivalent uranium values as quantified by downhole geophysical logging reported as %e U
3
O
8
. Radiometric equilibrium was evaluated and a disequilibrium factor ("
DEF
") of 1 was used. The minimum uranium grade included in the estimate was 0.02% eU
3
O
8
. A minimum grade of 0.02% U
3
O
8
and GT (grade x thickness) of 0.20 were used in these resource calculations. Mineral resources are reported at a cutoff of 0.20 GT, which is the cutoff applied at the Nichols Ranch Project. The table below provides a summary of Mineral Resources by classification following CIM guidelines. There are no Mineral Reserves on the property at this time. BRS noted that it is not aware of any known environmental, permitting, legal, title, taxation, socioeconomic, marketing, political, or other relevant factors that could materially affect the current resource estimate.
Nichols Ranch Remaining Mineral Resources – Uranium
(1)(2)(3)(4)(5)
|
|
|
|
|
|
|
|
|
Classification
|
Property
|
Tons (000)
|
Grade % eU
3
O
8
|
Pounds eU
3
O
8
(000)
|
Energy Fuels Pounds (000)
(6)
|
|
|
Nichols Ranch Measured Resources (M)
|
Nichols Ranch
|
357
|
0.140%
|
1,000
|
1,000
|
|
Nichols Ranch Indicated Resources (I)
|
Nichols Ranch
|
428
|
0.126%
|
1,079
|
1,079
|
|
Hank
|
450
|
0.095%
|
855
|
855
|
|
Jane Dough
|
1,892
|
0.112%
|
4,237
|
3,567
|
|
Nichols Ranch Total (M & I)
|
|
3,127
|
0.115%
|
7,171
|
6,501
|
|
Nichols Ranch Inferred Resources
|
Nichols Ranch
|
---
|
---
|
---
|
---
|
|
Hank
|
423
|
0.095
|
803
|
803
|
|
Jane Dough
|
170
|
0.112
|
381
|
309
|
|
Nichols Ranch Inferred Total
|
|
593
|
0.100%
|
1,184
|
1,112
|
Notes:
(1) The Mineral Resource estimate in this table complies with the requirements of NI 43-101 and the classifications comply with CIM definition standards and do not represent reserves under SEC Industry Guide 7. Mineral resources that are not reserves do not have demonstrated economic viability. See “
Cautionary Note to U.S. Investors Concerning Disclosure of Mineral Resources
,” above.
(2) Remaining Mineral Resource includes reduction for production of 857,041 pounds from January 1, 2015 through January 1, 2018, and an increase of approximately 162,500 pounds due to additional drilling.
(3) Mineral Resources are estimated at a uranium grade x thickness (G.T.) cut-off grade of 0.20 G.T. (minimum 0.02% eU
3
O
8
).
(4) Mineral Resources are estimated using a long-term uranium price of US$65 per pound.
(5) Numbers may not add due to rounding.
(6) “
Energy Fuels Pounds
” represent 100% of Nichols Ranch and Hank, and 81% of the Company's share of the portion of Jane Dough held by the Arkose Mining Venture.
Information shown in the table above differs from the disclosure requirements of the SEC. See “
Cautionary Note to U.S. Investors Concerning Disclosure of Mineral Resources
,” above.
Activities Subsequent to Nichols Ranch Technical Report
Subsequent to the completion of the Nichols Ranch Technical Report, the Company has continued to operate and advance the Nichols Ranch Project, as described below. The information contained in this subsection entitled “
Activities Subsequent to Nichols Ranch
Technical Report
”, was prepared by the Company and has not been reviewed or confirmed by the authors of the Nichols Ranch Technical Report.
Wellfield Development and Exploration Completed by Energy Fuels
Prior to its acquisition by Energy Fuels in June 2015, Uranerz drilled 257 exploration holes, including three core holes and three water wells at the Nichols Ranch Project during 2006 and 2007 and 25 exploration holes and seven wells in 2009. In addition, Uranerz drilled 61 exploratory holes and seven wells within the Hank Property during 2006 and 2007 and eight additional wells in 2009. There has been no new drilling activity at the Hank Project since 2009. Uranerz drilled 691 exploration holes and 29 wells for baseline monitoring at the Jane Dough Property. There has been no new drilling at the Jane Dough Property since 2010.
Uranerz drilled a total of 78 rotary drill holes on the Hank Property, Nichols Ranch Wellfield, and Jane Dough Property during 2006, with 46 holes demonstrating uranium mineralization. During 2006, environmental permitting activities also continued at the Hank Property and Nichols Ranch Wellfields with the completion of a total of five hydrogeologic test wells, and the drilling of six core holes. The core was submitted for laboratory testing to support permitting requirements as well as to define resource disequilibrium attributes.
From February 19 to December 20, 2007, Uranerz drilled a total of 486 uranium trend delineation holes and eight hydrologic sampling wells on the Nichols Ranch Project, utilizing as many as three drill rigs and one electric log probing unit. This represents a total of approximately 300,000 feet of drilling with an average depth of 617 feet per hole. A total of 214 delineation holes were drilled on Nichols Ranch in 2007. In the final months of the 2007 drilling program, exploration efforts focused on the Hank Property and Nichols Ranch Wellfield to facilitate sub-surface geologic mapping with cross sections and to refine previous geologic models delineating known trends of uranium mineralization.
During 2008, no new exploration work was undertaken at the Nichols Ranch Wellfield.
During 2009, 51 delineation holes were drilled at the Nichols Ranch Wellfield, including the Doughstick and North Nichols Ranch properties. The purpose of this drilling was primarily to prepare for the installation of baseline monitor wells for the planned Nichols Ranch Plant. Additional drilling was carried out on the Doughstick properties.
During 2011, 38 delineation holes were drilled in 2011 on the Nichols Ranch Wellfield. The purpose of this drilling was for final delineation drilling prior to beginning the monitor well and extraction well installation in Production Area #1 of the Nichols Ranch Wellfield.
During 2012, Uranerz engaged in drilling exploration efforts and wellfield installation at Production Area #1 at the Nichols Ranch Wellfield. At Production Area #1, 263 extraction wells were cased and cemented. The extraction wells were connected to header houses with buried feeder lines. It was planned that initial extraction should begin with four header houses. Three header houses were set on their foundations in 2012 and connected to individual extraction wells.
The Uranerz 2013 and 2014 drilling programs at the Nichols Ranch Wellfield were restricted to adding extraction and monitor wells. No new exploration drilling was conducted.
During 2015, Uranerz engaged in drilling delineation efforts and wellfield installation at Production Area #1 of the Nichols Ranch Wellfield, where 283 extraction wells were cased and cemented. At Production Area #2 of the Nichols Ranch Wellfield, 51 monitor wells were cased and cemented. The extraction wells were connected to header houses with buried feeder lines. Initial extraction at the Nichols Ranch Wellfield began with four header houses. In 2015, two additional header houses (#5 and #6) were set on their foundations and connected to the individual extraction wells.
In 2016, the Company completed drilling 12 delineation holes and drilling and casing of 86 extraction wells in Header Houses #7 and #8 in Production Area #1. Header House #7 was turned on in March of 2016 and Header House #8 was turned on in June of 2016. In Production Area #2, 133 extraction and injection wells were drilled and cased.
Header House #9 was completed and turned on in March of 2017. No drilling or other development activities were performed in 2017 or to date in 2018.
Current Status of Wellfields
All the currently planned and permitted wellfields are in Production Areas #1 and #2 of the Nichols Ranch Wellfield. The Nichols Ranch Wellfield is expected to have a total of 13 header-houses, with Production Area #1 comprising header-houses 1 through 8, and Production Area #2 comprising header-houses 9 through 13. Each of the two planned Nichols Ranch Wellfield Production Areas will
include a number of injection wells, recovery wells, monitoring wells, header houses and associated piping and power supply. Header houses will be located within the Production Areas and will distribute recovered fluids from recovery wells to trunk lines, and injection fluids from the processing facility through the trunk lines to injection wells. See the map below illustrating Production Areas #1 & #2, and the plant.
We are currently engaged in uranium recovery activities in Production Area #1 and, as the productivity or solution grade (uranium concentration in the recovered ground water) of some installed patterns decreases below the economic limit, replacement patterns will be placed into operation in order to maintain the desired flow rate and solution grade at the processing plant. As patterns reach their economic limit and extraction flows cease, restoration activities will commence in these areas.
The first five header houses and their respective wellfields in Production Area #1 at the Nichols Ranch Wellfield were installed and extracting uranium at the time we acquired Uranerz in June 2015. Header house #6 was turned on in November 2015. We placed our 7th and 8th header-houses on-line in March and July 2016, respectively, thereby completing development of Production Area #1. In February, 2017 we completed construction on our 9th header-house, marking the beginning of development in Production Area #2. Uranium recovery operations from Production Area #2 commenced in March of 2017.
Nichols Ranch Plant
In 2014, construction of the Nichols Ranch Plant was completed. The Nichols Ranch Plant is licensed to produce up to two million pounds of uranium per year through three major processing solution circuits: (i) a recovery and extraction circuit; (ii) an elution circuit; and (iii) a yellowcake production circuit. The Nichols Ranch Plant is currently constructed and operated with the recovery and extraction circuit and the elution circuit installed. We retain the ability to construct and operate a yellowcake drying and packaging circuit at the Nichols Ranch Plant at a later date if desired.
The Nichols Ranch Plant is currently engaged in uranium recovery operations and is processing uranium-bearing wellfield solutions from Production Areas #1 and #2 of the Nichols Ranch Wellfield. At the current time, yellowcake production is occurring at the White Mesa Mill, whereby yellowcake slurry is shipped by truck from the Nichols Ranch Project to the Mill where it is dried and packaged in drums as uranium concentrate product. Prior to the completion of the elution circuit in February 2016, loaded resin was transported by truck to a third party facility for elution, drying and packaging, under a toll processing arrangement.
The Nichols Ranch Plant was acquired by the Company on June 18, 2015, through the acquisition of Uranerz. As of December 31, 2017, the total cost attributable to the Nichols Ranch Plant on the Company’s financial statements was $29.21 million.
The Company’s Planned Work
Header House #9 was completed and uranium extraction began in March 2017. The addition of this header house brought another 123 extraction and injection wells online.
As a result of our recent NRC and WEQ license and permit amendment approvals, we are now able to expand extraction operations to the Jane Dough Property before expanding to the Hank Project.
The Hank Project, including the permitted but not constructed Hank Satellite Plant and planned Hank wellfield, is currently licensed as a satellite uranium extraction and recovery facility, with loaded resin from the satellite facility, when constructed, expected to be transported by truck to the Nichols Ranch Plant for elution. Construction activities at the Hank Project will not commence until market conditions warrant. In the future, we will consider whether to amend our current license for the Hank Project to include a pipeline to our Nichols Ranch Plant, which would replace or eliminate the currently permitted satellite ion exchange recovery facility. If market conditions warrant construction activities at the Hank Project, our extraction plan for the Hank Property will likewise target two planned extraction areas. Should market conditions warrant, the Jane Dough and Hank Properties would be expected to follow a similar construction, extraction, and restoration schedule as outlined above for the Nichols Ranch Wellfield extraction areas.
The Alta Mesa Project
Unless stated otherwise, the following description of the Alta Mesa Project is derived from a technical report titled, “
Alta Mesa Uranium Project, Alta Mesa and Mesteña Grande Mineral Resources and Exploration Target, Technical Report National Instrument 43-101
” dated July 19, 2016, prepared by Mr. Douglas Beahm, P.E., P.G. of BRS Inc. in accordance with NI 43-101 (the “
Alta Mesa Technical Report
”). The author is a “qualified person” within the meaning of NI 43-101, and because the sole author is “independent” of the Company within the meaning of NI 43-101 the report is therefore considered an independent technical report under NI 43-101. The Alta Mesa Technical Report is available on SEDAR at www.sedar.com. The Alta Mesa Project does not have any known reserves, and is therefore considered under SEC Industry Guide 7 definitions to be exploratory in nature, despite its history of uranium recovery activities. No current preliminary economic assessment, pre-feasibility study or feasibility study has been completed.
Property Description and Location
The Alta Mesa Project is a fully-licensed ISR uranium recovery facility that the Company acquired in June 2016 through the acquisition of EFR Alta Mesa LLC (previously named Mesteña Uranium LLC). It is located in South Texas and is currently on standby. The Alta Mesa Project is not an underground or open pit project.
The Alta Mesa central processing facility and mine office is located at 755 CR 315, Encino, Texas 78353, in Brooks County, Texas, at approximately 26° 54’ 08” North Longitude and 98° 18’ 54” West Latitude. The site is located approximately 11 miles west of the intersection of US 281 and Ranch Road 755, which is 22 miles south of Falfurrias, Texas.
The Project is located within a portion of the private land holdings of the Jones Ranch, founded in 1897. The ranch comprises approximately 380,000 acres. The ranch holdings include surface and mineral rights including oil and gas and other minerals including uranium. Active uses of the lands in addition to uranium exploration and production activities include agricultural use (cattle), oil and gas development, and private hunting.
The Project consists of Uranium Mining Leases for uranium ISR mining (4,598 acres) and Mineral Options (195,501 acres) comprising some 200,100 total acres. The Project is defined as constituting two distinct project areas with sufficient drilling to define resources. These two areas are subdivided, as listed below and illustrated on the map on the following page:
|
|
•
|
The Alta Mesa project area, Brooks County, Texas, comprising 16,010 acres, including,
|
|
|
◦
|
The Alta Mesa mine area and central processing facility
|
|
|
•
|
The Mesteña Grande project area, Jim Hogg County, Texas, comprising 47,088 acres, including,
|
|
|
◦
|
Mesteña Grande Alta Vista
|
The remaining 137,002 acres lack sufficient exploration drilling to define any resources at this time.
Accessibility, Local Resources, Physiography and Infrastructure
The Project is located primarily in Brooks and Jim Hogg counties, Texas, with the central processing facility in Brooks County. Brooks County is generally rural and according to the 2010 United States Census, there were 7,223 people living in the county. The population density was 8 people per square mile. Most of the workers for the operation are from the local area and nearby communities such as Kingsville, Texas approximately 40 miles from the site. Some staff members commute from Corpus Christi, Texas approximately 90 miles from the site.
The Project is located in the coastal plain of the Gulf of Mexico. Topography of the lower Gulf Coast is relatively flat, whereas the upper Gulf Coast, including most of the current and past mining operations of the South Texas Uranium Province, generally has low relief, rolling plains, except where it is locally dissected by rivers and streams. Elevations range from sea level to about 800 ft. in the southwest. Three major rivers from south to north are: the Nueces River, which flows into Corpus Christi Bay, and the San Antonio and Guadalupe Rivers, which flow into San Antonio Bay southeast of the city of Victoria.
The Project is accessible year round. The site is located approximately 11 miles west of the intersection of US Highway 281 (paved) and Ranch Road 755 (paved), 22 miles south of Falfurrias, Texas. Commercial airlines serve both San Antonio and Corpus Christi. Many of the local communities have small airfields and there are numerous private airfields in the region.
Overall the climate is warm and dry, with hot summers and relatively mild winters. However, the region is strongly influenced by its proximity to the Gulf of Mexico and, as a result, has a much more marine-type climate than the rest of Texas, which is more typically continental. Monthly mean temperatures in the region range from 55
o
F in January to 96
o
F in August. The area rarely experiences freezing conditions and, as a result, the majority of the processing facility and infrastructure is located outdoors. Wellfield piping and distribution lines do not require burial for frost protection. Annual precipitation ranges from 20 to 35 inches regionally. Primary risk for severe weather is related to heavy thunderstorms and potentially effects of hurricanes in the Gulf Coast.
Local infrastructure includes electricity service, which is adequate for mine and mineral processing activities. The Alta Mesa facility also has telephone and internet service in the form of a T-1 fiber optics line. The plant has an automated control and monitoring system, which allows remote monitoring of the facility, and includes fail safe systems, which can shut down portions of the system in the event of an upset condition. The facility is fully secured with on-site and remote monitoring. Water supply for the Project is from established and permitted local wells. Liquid waste from the processing facility is disposed of via deep well injection through two permitted Underground Injection Control (UIC) Class I disposal wells. Solid waste from the processing facilities is disposed of off-site at licensed disposal facilities. No tailings or other related waste disposal facilities are needed.
The Project is located on an operating cattle ranch. In addition, there is significant local oil and gas development and production. The Alta Mesa area was first developed as an oilfield in the 1930s with production ongoing, primarily for natural gas. Other land uses include farming and recreational uses such as hunting.
The area is regionally classified as a coastal sand plain. Brooks County comprises 942 square miles of brushy mesquite land. The nearly level to undulating soils are poorly drained, dark and loamy or sandy; isolated dunes are found. In the northeast corner of the county the soils are light-colored and loamy at the surface and clayey beneath.
The mineral leases and options described below include provisions for reasonable use of the land surface for the purposes of ISR mining and mineral processing. Alta Mesa is a fully licensed, operable facility with sufficient sources of power, water, and waste disposal facilities for operations and aquifer restoration. While the current staff level has been reduced, sufficient local personnel are available for mine operations.
Ownership
Mineral ownership in Texas is a private estate. Private title to all land in Texas emanates from a grant by the sovereign of the soil (successively, Spain, Mexico, the Republic of Texas, and the state of Texas). By a provision of the Texas Constitution the state released to the owner of the soil all mines and mineral substances therein. Under the Relinquishment Act of 1919, as subsequently amended, the surface owner is made the agent of the state for the leasing of such lands, and both the surface owner and the state receive a fractional interest in the proceeds of the leasing and production of minerals.
The Project consists of a private Uranium Solution Mining Lease (4,598 acres) and Options (195,501 acres) for uranium comprising some 200,100 total acres consisting of acreage associated with currently approved mining permits issued by the Texas Commission on Environmental Quality and 9 prospect areas.
The Uranium Solution Mining Lease, originally dated June 1, 2004, covers 4,575 acres, more or less, out of the “La Mesteñas” Ysidro Garcia Survey, A-218, Brooks County, Texas and “Las Mesteñas Y Gonzalena” Rafael Garcia Salinas Survey, A-480, Brooks County, Texas (description corrected in a later amendment). This original Uranium Solution Mining Lease has been superseded by the Amended and Restated Uranium Solution Mining Lease dated June 16, 2016, as part of the share purchase agreement between the Company and the various former holders of the Alta Mesa Project. The Lease now covers uranium, thorium, vanadium, molybdenum, other fissionable minerals, and associated minerals and materials under 4,597.67 acres. The term of the amended lease is fifteen (15) years commencing on June 16, 2016 or so long as the lessee is continuously engaged in any mining, development, production, processing, treating, restoration or reclamation operations on the leased premises. The amended lease can be extended by the Lessee for an additional 15 years upon payment of a stipulated cash payment. The lease includes provisions for royalty payments on the net proceeds (less allowable deductions) received by the Lessee. The royalty payment is 7.5% of Market Value of Product sold at a uranium price greater than $95.00 per pound, 6.25% of Market Value of Product sold at a uranium price greater than $65.00 and up to and including $95.00 per pound, and 3.125% of the Market Value of Product sold at a uranium price of $65.00 or less per pound.
The Uranium Testing Permit and Lease Option Agreement, originally dated August 1, 2006, covers all of the land containing mineral potential as identified through exploration efforts and covers uranium, thorium, vanadium, molybdenum, and all other fissionable materials, compounds, solutions, mixtures, and source materials, has been superseded by the Amended and Restated Uranium Testing and Lease Option Agreement dated June 16, 2016, as part of the share purchase agreement between the Company and the various holders of the Alta Mesa Project. It now covers some 195,501.03 acres. The term of the amended lease and option agreement is for eight years commencing June 16, 2016. The amended lease and option agreement can be extended by the grantee for an additional seven years. Certain payments by the Grantee to the Grantor are required prior to year three of the initial eight year lease. The amended Lease Option Agreement provides for designating acreage to be leased for production by making certain payments to the Grantor (cash or stock). If acreage designation occurs within the first three years of the initial eight year lease, the payments will be deducted from the certain payments required by year three in the lease option agreement. The grantor then has sixty business days to execute and return the lease.
Amended surface use agreements have been entered into with all of the surface owners on the various prospect areas as part of the Membership Interest purchase agreement between the Company and the various former holders of the Alta Mesa Project. These amended agreements, unchanged from those originally entered into on June 1, 2004, provide, among other things, for stipulated damages to be paid for certain activities related to the exploration and production of Uranium. Specifically, the agreements call for Consumer Price Index adjusted payments for the following disturbances: exploratory test holes, development test holes, monitor wells, new roads, and related surface disturbances. The lease also outlines an annual payment schedule for land taken out of agricultural use around the area of a deep disposal well, land otherwise taken out of agricultural use, and pipelines constructed outside of the production area.
Surface rights are expressly stated in the lease and in general provide the lessee with the right to ingress and egress, and the right to use so much of the surface and subsurface of the leased premises as reasonably necessary for ISR mining. Open pit and/or strip mining is prohibited by the lease.
Ad valorem tax rates per $100 of taxable value applicable to tangible property for 2016 were as follows:
Brooks County 0.743829
Brooks County Rd and Bridge 0.150000
Brooks County ISD 1.572555
Brooks County FM FC 0.098837
Brush Country Groundwater 0.026020
Permitting and Licensing
The Alta Mesa Project area is fully permitted for ISR mining and recovery of uranium. The table below summarizes the current permits held by EFR Alta Mesa. Similar permits would be required for the Mesteña Grande project area depending upon the nature of operations and their integration with the Alta Mesa facility.
Primary Permits and Licenses for the Alta Mesa Project
|
|
|
|
Permit, License or Approval Name
|
Agency
|
Status
|
Radioactive Material License
|
TCEQ
|
Obtained
|
Class III UIC Mine Area Permit
|
TCEQ
|
Obtained
|
Aquifer Exemption
|
TCEQ
|
Obtained
|
Production Area Authorization
|
TCEQ
|
Obtained
|
Class I UIC Deep Disposal Well Permits
|
TCEQ
|
Obtained
|
* TCEQ= Texas Commission on Environmental Quality
The ISR processing facility at Alta Mesa has an operating capacity of 1.5 million pounds of uranium per year. Primary regulatory authority resides with the State of Texas. Financial assurance instruments are held by the state for completed wells, ISR mining, and uranium processing to ensure reclamation and restoration of the affected lands and aquifers in accordance with state regulations and permit requirements.
History
Alta Mesa was first discovered in the mid 1970’s by Chevron Resources as a result of researching oil and gas logs for natural gamma geophysical signatures. Chevron controlled the Alta Mesa portion of the project through June of 1985 when they returned the mineral lease due to Chevron exiting the uranium business. Chevron reportedly drilled a total of 360 holes inclusive of exploration drilling, coring, and well completion during a four-year period from 1981 through 1984. In July of 1988 Total Minerals Incorporated (“
Total
”) executed a lease agreement for the Alta Mesa portion of the project. Total also engaged Uranium Resources Incorporated (“
URI
”) to complete a feasibility study for the project. The Total mineral lease was terminated as a result of the French Government requiring Total to sell all of their uranium assets to Cogema.
Subsequently, the Project was evaluated by Cogema in 1994 and later by URI. URI held the mineral lease and obtained the Radioactive Material License during the period of 1996 through 1998. EFR Alta Mesa (previously named "
Mesteña Uranium LLC
") was formed in 1999 and continued permitting activities in April of 2000 and completed licensing in 2003. Plant construction at Alta Mesa began in 2004 with initial production in the 4th quarter of 2005. The Project produced approximately 4.6 million pounds of uranium oxide between 2005 and 2013 via ISR mining. The facility was in production from 2005 until primary production ceased in February 2013. The Project operated in a groundwater clean-up mode until February 2015; therefore, any uranium mined since 2013 remains as in-circuit inventory.
Geology
The Alta Mesa Project is located within the Texas Gulf Coast along a belt of Tertiary and Quaternary sedimentary formations. The Project is located within the South Texas Uranium Province, which is known to contain more than 100 uranium deposits that were developed in the second half of the 20th century.
Regionally, uranium deposits are hosted by four formations:
|
|
•
|
Miocene/Pliocene Goliad Formation, consisting of fluvial deposits, mostly unconsolidated sands.
|
|
|
•
|
Miocene Oakville Formation, consisting of fluvial deposits (sands, some clay).
|
|
|
•
|
Oligocene/Miocene Catahoula Formation, consisting of fluvial deposits, mostly sands, clay, and clastic volcanic rich sediments.
|
|
|
•
|
The Jackson Group consisting of fluvial deposits sands, silt, clay, and lignite.
|
At the Alta Mesa Project, in order of importance, uranium is hosted by the Goliad, Oakville, and Catahoula formations.
South Texas uranium deposits are sandstone roll-front uranium deposits. The key components in the formation of roll-front type mineralization include:
|
|
•
|
A permeable host formation:
|
|
|
◦
|
Sandstone units of the Goliad, Oakville, and Catahoula formations.
|
|
|
•
|
A source of soluble uranium:
|
|
|
◦
|
Volcanic ash-fall tuffs coincidental with Catahoula deposition containing elevated concentration of uranium is the probable source of uranium deposits for the South Texas Uranium Province.
|
|
|
•
|
Oxidizing ground waters to leach and transport the uranium:
|
|
|
◦
|
Ground waters regionally tend to be oxidizing and slightly alkaline.
|
|
|
•
|
Adequate reductant within the host formation:
|
|
|
◦
|
Conditions resulting from periodic H2S gas migrating along faults and subsequent iron sulfide (pyrite) precipitation created local reducing conditions.
|
|
|
•
|
Time sufficient to concentrate the uranium at the oxidation/reduction interface.
|
|
|
◦
|
Uranium precipitates from solution at the oxidation/reduction boundary (REDOX) as uraninite which is dominant (UO
2
, uranium oxide) or coffinite (USiO
4
, uranium silicate).
|
|
|
◦
|
The geohydrologic regime of the region has been stable over millions of years with ground water movement controlled primarily by high-permeability channels within the predominantly sandstone formations of the Tertiary.
|
The structural map of the Gulf Coast area is dominated by an abundance of growth faults that trend with, or are slightly oblique to, stratigraphic strike, which is more or less parallel to the Gulf of Mexico. In addition, local structural features such as salt domes influence the distribution and deposition of uranium mineralization potentially through various mechanisms including effects on ground water flow and the introduction of additional reductant via the migration of H
2
S gas along the faulting related to the salt dome intrusion. This mechanism is thought to be of importance at Alta Mesa.
Mineralization
The Alta Mesa Project is located in the South Texas Uranium Province. Mineralization within the South Texas Uranium Province is interpreted to be dominantly roll-front type mineralization and primarily of epigenetic origin. Roll-fronts are formed along an interface between oxidizing ground water solutions, which encounter reducing conditions within the host sandstone unit. This boundary between oxidizing and reducing conditions is often referred to as the REDOX interface or front. Mineralization tends to be very continuous.
Within the Alta Mesa portion of the Project, Quaternary formations are exposed at the surface. These are conformably underlain by the Goliad Formation, the primary uranium host. Alta Mesa ISR mine units have exploited uranium mineralization in the Goliad C sands within wellfields PAA-1, PAA-2, PAA-3, PAA-4, and PAA-6. The B sand was targeted in wellfield PAA-5. Mineral resources have been estimated for the A, B, C, and D sands. Exploration targets in the South Alta Mesa area lie within successively deeper D, E, F, G, and H sands of the Goliad.
Within the Mesteña Grande portion of the project, mineralization is also present in the Goliad Formation but is dominantly found in the Oakville Formation. In the western portion of Mesteña Grande mineralization is found in the Catahoula Formation. Mineral resources have been estimated for all areas within the Mesteña Grande portion of the project.
Present Condition of the Property and Work Completed to Date
The Alta Mesa Project produced approximately 4.6 million pounds of uranium oxide between 2005 and 2013 via In Situ Recovery mining. The facility was in production from 2005 until primary production ceased in February 2013. The Project operated in a groundwater clean-up mode until February 2015; therefore, any uranium mined since 2013 remains as in-circuit inventory. The first wellfield (PAA-1) has undergone restoration and is currently being monitored for restoration stability. All other wellfields are being maintained by a small bleed (less than 100 gpm) for permit compliance. The bleed solutions are disposed of in the deep disposal wells.
Drill data is available for a total of 10,744 drill holes of which approximately 3,000 are within existing wellfields. The primary assay data for the Project is downhole geophysical log data. EFR Alta Mesa relied entirely on prompt-fission-neutron ("
PFN
") logging for
uranium grade assay and used natural gamma logging to screen intervals for PFN logging. Of the 10,744 drill holes in the Alta Mesa database, PFN logging was not available for only 7.2% of the drill holes. For the Mesteña Grande portion of the Project, all 460 drill holes were completed by EFR Alta Mesa and all gamma intercepts greater than 0.02 % eU
3
O
8
were logged by PFN.
For determination of uranium grade, EFR Alta Mesa LLC relied on PFN log data for 92.8% of the data, which is a direct measurement of uranium content and not an equivalent radiometric assay. As a result, assessment of disequilibrium factor ("
DEF
") is not applicable.
As of December 31, 2017, the total cost attributable to the Alta Mesa Project on the Company's financial statements was $13.63 million.
The Company’s Planned Work
During 2018, the Company expects to maintain the Alta Mesa Project on standby. However, Alta Mesa is capable of ramping up to commercial production levels within approximately six months of a positive production decision by the Company, with only minimal capital requirements.
Mineral Resource Estimates
Mineral resources have been estimated for both the Alta Mesa and Mesteña Grande areas by Douglas Beahm of BRS Inc. in accordance with CIM standards and definitions, and are summarized in the respective tables below. Mineral Resources for the Alta Mesa Project are estimated by classifications, meeting CIM standards and definitions as measured, indicated, and inferred mineral resources, at a 0.30 GT cutoff.
There are no Mineral Reserves on the property at this time. Mr. Beahm of BRS Inc. noted that he is not aware of any known environmental, permitting, legal, title, taxation, socioeconomic, marketing, political, or other relevant factors that could materially affect the current resource estimate.
Alta Mesa and Mesteña Grande Resource Summary
Alta Mesa and Mesteña Grande Mineral Resources – Uranium
(1)(2)(3)(4)
|
|
|
|
|
|
|
|
Classification
|
Tons (000)
|
Grade % eU
3
O
8
|
Pounds eU
3
O
8
(000)
|
|
|
|
Total Measured Resources (M)
(5)
|
123
|
0.151%
|
371
|
|
|
Alta Mesa Indicated Resources (I)
|
1,393
|
0.106%
|
2,959
|
|
|
Mesteña Grande Indicated Resources (I)
|
119
|
0.120%
|
287
|
|
|
Total (M & I)
|
1,635
|
0.111%
|
3,617
|
|
|
Alta Mesa Inferred Resources
|
1,230
|
0.128%
|
3,192
|
|
|
Mesteña Grande Inferred Resources
|
5733
|
0.119%
|
13,601
|
|
|
Total Inferred Resources
|
6,963
|
0.121%
|
16,793
|
|
Notes:
(1) The Mineral Resource estimate in this table complies with the requirements of NI 43-101 and the classifications comply with CIM definition standards and do not represent reserves under SEC Industry Guide 7. Mineral resources that are not reserves do not have demonstrated economic viability. See “
Cautionary Note to U.S. Investors Concerning Disclosure of Mineral Resources
,” above.
(2) Mineral Resources are estimated at a uranium grade x thickness (G.T.) cut-off grade of 0.30 G.T. (minimum 0.02% eU
3
O
8
).
(3) Mineral Resources are estimated using a long-term uranium price of US$65 per pound.
(4) Numbers may not add due to rounding.
(5) The Total Measured Mineral Resource is that portion of the in-place mineral resource that is estimated to be recoverable within existing wellfields. Wellfield recovery factors have not been applied to indicated and inferred mineral resources.
The White Mesa Mill
General
The White Mesa Mill is a fully licensed uranium and vanadium processing facility located in southeastern Utah, approximately six miles south of the city of Blanding, Utah. It is within trucking distance of our conventional properties in Utah, Colorado, Arizona and New Mexico, including the Canyon Project, the Roca Honda Project, the Henry Mountains Complex, the La Sal Project and the Daneros Project. The Mill is the only fully operational and licensed conventional uranium mill in the U.S. It is capable of functioning independently of off-site support except for commercial power from Rocky Mountain Power and as-needed supplemental water supply from the City of Blanding, Utah, and the San Juan Water Conservancy District. The White Mesa Mill is a uranium processing and recovery facility. It is not an underground or open pit project.
The Mill is licensed to process an average of 2,000 tons of ore per day and to extract over 8.0 million pounds of U
3
O8 per year. In addition to the conventional circuit, the Mill has a separate vanadium by-product recovery circuit.
In addition to the Mill processing equipment, which includes the grinding and leaching circuits, CCD (liquid–solid separation), solvent extraction, and precipitation and drying circuits, the Mill has several days of reagent storage for sulfuric acid, ammonia, salt, soda ash, caustic soda, ammonium sulfate, flocculants, kerosene, amines, and liquefied natural gas.
The on-site infrastructure also includes a stockpile area capable of storing up to 450,000 tons of mineralized material, and existing tailings capacity of approximately 3.5 million tons of solids. In addition, the Mill has approximately 90 acres of evaporation capacity.
Synthetic lined cells are used to contain tailings and solutions for evaporation. We operate two tailings cells and one or more evaporation ponds during normal operations. As each tailings cell is filled, the water is drawn off and pumped to an evaporation pond and the
tailings solids are allowed to dry. As each tailings cell reaches final capacity, reclamation begins with the placement of interim cover over the tailings. Additional cells are excavated, and the overburden is used to reclaim previous cells. In this way, there is an ongoing reclamation process.
In full operation, the Mill employs approximately 150 people. If no Vanadium ores are being processed, the Mill employs approximately 110 people.
Alternate Feed Materials
The Mill License (defined below) also gives the Company the right to process other uranium-bearing materials known as “
alternate feed materials
” pursuant to an Alternate Feed Guidance published by the NRC. Alternate feed materials are uranium-bearing materials, usually classified as waste products by the generators of the materials, which can be recycled by the Mill for the recovery of U
3
O
8
. The Mill License does not permit the processing of uranium-bearing materials that have undergone enrichment. Requiring a routine amendment to the Mill License for each different alternate feed material, the Company can process these uranium-bearing materials and recover uranium, in some cases, at a fraction of the cost of processing conventionally mined material. In other cases, the generators of the alternate feed materials are willing to pay a recycling fee to the Company to process these materials to recover uranium and then dispose of the remaining by-product in the Mill’s licensed tailings cells, rather than directly disposing of the materials at a disposal site. By working with the Company and taking the recycling approach, the suppliers of alternate feed materials can significantly reduce their remediation costs, as there are only a limited number of disposal sites for such materials in the United States. Alternate feed materials are particularly attractive to Energy Fuels because they carry no associated mining costs.
Throughout its history, the Mill has received 17 license amendments, authorizing it to process 20 different alternate feed materials. Of these amendments, eleven have involved the processing of feeds provided by nuclear fuel cycle facilities and private industry, and one has involved the processing of material from the United States Department of Energy (“
DOE
”). These twelve feed materials have been relatively high in uranium content and relatively low in volume. The remaining five amendments have allowed the Mill to process uranium-bearing soils from former defense sites, known as FUSRAP sites, which were being remediated by the U.S. Army Corps of Engineers. These materials are typically relatively low in uranium content but relatively high in volume.
The Mill has a separate circuit for processing certain types of alternate feed materials, which was built in 2009. This circuit enables the Mill to process both conventionally mined material and alternate feed materials simultaneously.
Accessibility, Local Resources, Physiography and Infrastructure
The Mill is located in central San Juan County, Utah, approximately six miles (9.5 km) south of the city of Blanding. It can be reached by taking a private road for approximately 0.5 miles west of U.S. Highway 191.
The climate of southeastern Utah is classified as dry to arid continental. Although varying somewhat with elevation and terrain, the climate in the vicinity of the Mill can be considered as semi-arid with normal annual precipitation of about 13.4 inches. The weather in the Blanding area is typified by warm summers and cold winters. The mean annual temperature in Blanding is about 50° (F). Winds are usually light to moderate in the area during all seasons, although occasional stronger winds may occur in the late winter and spring.
The Mill site is located on a gently sloping mesa that, from the air, appears similar to a peninsula, as it is surrounded by steep canyons and washes and is connected to the Abajo Mountains to the north by a narrow neck of land. On the mesa, the topography is relatively flat, sloping at less than one (1) percent to the south and nearly horizontal from east to west.
The natural vegetation presently occurring within a 25-mile (40-km) radius of the Mill site is very similar to that of the region, characterized by pinyon-juniper woodland integrating with big sagebrush (Artemisia tridentata) communities.
Off-site infrastructure includes paved highway access from U.S. Highway 191, and rights-of-way for commercial power and a water supply pipeline from Recapture Reservoir, which brings up to 1,000 acre-feet of water per year to the Mill site. The Mill also has four deep (2,000+ foot) water supply wells, which are available to supply process water during normal operations.
Ownership
The White Mesa Mill is located on 4,816 acres of private land owned in fee by Energy Fuels. This land is located in Township 37S and 38S Range 22E Salt Lake Principal Meridian. Energy Fuels also holds 253 acres of mill site claims and a 320 acre Utah state lease. No facilities are planned on the mill site claims or leased land, which are used as a buffer to the operations.
All operations authorized by the Mill’s License are conducted within the confines of the existing site boundary. The milling facility currently occupies approximately 50 acres and the current tailings disposal cells encompass another 250 acres.
Permitting and Licensing
The White Mesa Mill holds a Radioactive Materials License through the State of Utah (the “
Mill License
”). Uranium milling in the U.S. is primarily regulated by the NRC pursuant to the Atomic Energy Act of 1954, as amended. The NRC’s primary function is to ensure the protection of employees, the public and the environment from radioactive materials, and it also regulates most aspects of the uranium recovery process. The NRC regulations pertaining to uranium recovery facilities are codified in Title 10 of the Code of Federal Regulations. These regulations also apply to our ISR facilities in Wyoming and Texas.
On August 16, 2004, the State of Utah became an Agreement State for the regulation of uranium mills. This means that the primary regulator for the White Mesa Mill is UDEQ rather than the NRC. At that time, the Source Material License, which was previously issued and regulated by the NRC, was transferred to the State and became a Radioactive Materials License. The State of Utah incorporates, through its own regulations or by reference, all aspects of Title 10 pertaining to uranium recovery facilities. The Mill License was due for renewal on March 31, 2007. Energy Fuels’ predecessor timely submitted its application for renewal of the license on February 28, 2007. The renewed license was issued by UDEQ on January 19, 2018 for a period of ten years, after which another application for renewal will need to be submitted. During the review period for each application for renewal, the Mill can continue to operate under its then existing license until such time as the renewed license is issued. The Mill’s license was initially issued in 1980 and was also renewed in 1987 and 1997.
When the State of Utah became an Agreement State, it required that a Groundwater Discharge Permit (“
GWDP
”) be put in place for the White Mesa Mill. The GWDP is required for all similar facilities in the State of Utah, and implements the State groundwater regulations to the Mill site. The State of Utah requires that every operating uranium mill have a GWDP, regardless of whether or not the facility discharges to groundwater. The GWDP for the Mill was finalized and implemented in March 2005. The GWDP required that the Mill add over 40 additional monitoring parameters and 15 additional monitoring wells at the site. The GWDP came up for renewal in 2010, at which time an application for renewal was timely submitted. The renewed GWDP was issued by UDEQ on January 19, 2018 for a period of five years, after which another application for renewal will need to be submitted. During the review period for each application for renewal, the Mill can continue to operate under its then existing GWDP until such time as the renewed GWDP is issued. The White Mesa Mill also maintains a permit for air emissions with the UDEQ, Division of Air Quality.
The White Mesa Mill is subject to decommissioning liabilities. Energy Fuels, as part of the Mill License, is required to annually review its estimate for the decommissioning of the White Mesa Mill site and submit it to UDEQ for approval. The estimate of closure costs for the Mill is $20.8 million as of December 31, 2017, and financial assurances are in place for the total amount. However, there can be no assurance that the ultimate cost of such reclamation obligations will not exceed the estimated liability contained in the Company’s financial statements.
History
The Mill was originally constructed and owned by Energy Fuels Nuclear, Inc. (“
EFN
”) and its affiliates (no relation to the Company). It was licensed by the NRC and commenced operations in June 1980. In 1984, EFN transferred a 70% interest in the Mill to UMETCO Minerals Corp., a subsidiary of Union Carbide Corporation (“
UMETCO
”). UMETCO became the operator of the Mill in 1984 and continued to be the operator until 1994, at which time it transferred its interest in the Mill back to EFN and its affiliates. The Mill was acquired by Denison Mines Corp. (“
Denison
”), then named International Uranium Corporation (“IUC”) and its affiliates in 1997, and was operated by Denison until it was acquired by the Company in June 2012. From the original commissioning in 1980 through December 31, 2017, the Mill has recovered a total of approximately 38 million pounds of U
3
O
8
and 46 million pounds of vanadium.
In late 2006, Denison began a program to refurbish the Mill. The refurbishment program included the purchase of mobile equipment, restoration of the vanadium roasting, fusion and packaging circuits, replacement of major pumps and component drives, modernization of the Mill’s instrumentation and process control systems, and completion of relining tailings Cell 4A. The total cost of the refurbishment program was approximately $31.0 million and was completed in 2008.
The White Mesa Mill has historically operated on a campaign basis. In 2008, the Mill began processing uranium/vanadium conventional mined material, extracting uranium concentrate in the form of U
3
O
8
, and vanadium in the form of V
2
O
5
. Mineral processing continued through the end of March 2009, at which time maintenance activities were performed at the Mill. Mineral processing recommenced near the end of April 2009, but was discontinued due to a decline in uranium prices at the time. The Mill began mineral processing again in March 2010 and continued through June 2011. Conventional processing recommenced in November 2011 and continued until early March 2012, at which time it ceased for routine maintenance. Conventional mineral processing recommenced at the Mill in August 2012 and continued until early June 2013. Mineral processing began again in May 2014 and continued through August 2014.
The alternate feed circuit processed materials from January through December 2014, and continued processing alternate feed materials through December 2015. In 2016, the Company continued processing several alternate feed materials and processed 45,057 tons of mineralized material from its Pinenut mine. In 2017 the Mill continued processing alternate feed materials as well as the recovery of uranium from pond solutions at the site.
Energy Fuels acquired the Mill from Denison Mines Corp. on June 29, 2012. All mineral processing after that date has been for the account of Energy Fuels. Mineral processing at the Mill over the past five years is shown below. Note, only mineral processing since June 30, 2012 has been for the account of Energy Fuels.
(1)
|
|
|
|
|
|
|
Project or Source
|
2017
|
2016
|
2015
|
2014
|
2013
|
Alternate Feed Materials
(2)
|
Tons (000)
|
NA
(2)
|
NA
(2)
|
NA
(2)
|
NA
(2)
|
NA
(2)
|
Ave. % U
3
O
8
|
18.86%
|
27.98
|
9.21
|
16.94%
|
5.03%
|
Recovered Pounds U
3
O
8
(000)
|
1,004
(3)(4)
|
172
(3)(4)
|
229
(3)
|
391
(3)
|
351
(3)
|
Tailing Solution Recycle & In-Circuit Material
(5)
|
Recovered Pounds U
3
O
8
(000)
|
308
|
78
|
67
|
---
|
---
|
Conventional Feed Materials
|
Tons (000)
|
---
|
45
|
---
|
49
|
126
|
Contained Grade % U
3
O
8
|
---
|
0.50%
|
---
|
0.56%
|
0.26%
|
Recovered Pounds U
3
O
8
(000)
|
---
|
431
|
---
|
552
|
655
|
Total Pounds of U
3
O
8
Recovered (000)
|
1,312
|
681
|
296
|
943
|
1,006
|
Total Pounds of V
2
O
5
Recovered (000)
|
|
|
|
|
1,303
|
Notes:
(1) Mineralized material is shown as being processed and pounds recovered during the year in which the materials were processed at the White Mesa Mill, which is not necessarily the year in which the materials were extracted from the project facilities.
(2) All alternate feed materials were processed at the White Mesa Mill. A number of different alternate feed materials were processed during the period 2013 - 2017. The table shows the average uranium grades and the total pounds recovered from all alternate feed materials processed at the Mill during each of the years in that period. Because of the variability in uranium grades, pounds recovered is considered to be the relevant metric and tons fed is not considered to be relevant.
(3) The 1,004,000 pounds recovered in 2017 include 952,000 pounds recovered for the accounts of third parties; the 172,000 pounds recovered in 2016 includes nil pounds recovered for the accounts of third parties; the 229,000 pounds recovered in 2015 includes 72,000 pounds recovered for the accounts of third parties; the 391,000 pounds recovered in 2014 includes 85,000 pounds recovered for the accounts of third parties; and the 351,000 pounds recovered in 2013 includes nil pounds recovered for the accounts of third parties.
(4) Material recovered originated from several different sources that were fed to process at various times in 2015 and 2016. Therefore, the recovered amount is independent of the reported feed amount for any given period.
(5) Pounds contained in tailings solutions containing previously unrecovered uranium, together with in-circuit mineralized material from previous conventional mine material processing, were recovered by processing alternate feed materials at the White Mesa Mill, though tons and grade are not available because it cannot be tied to any specific source.
Present Condition of the Property
Planned Operations and Maintenance
The White Mesa Mill processed conventional material from June to mid-August 2014. The alternate feed circuit was operating throughout 2014 and 2015, and stopped processing materials in July of 2016. The White Mesa Mill processed conventional mineralized material in the second and third quarter of 2016 and processed alternate feed materials during the remainder of the year. In 2017, the Mill
processed only alternate feed materials and recovered uranium from pond solutions at the site. The Mill operations registered zero lost time accidents in 2017.
Environmental Matters
Prior to Energy Fuels’ acquisition of the Mill from Denison, chloroform in the shallow aquifer at the White Mesa Mill site was discovered. The chloroform appears to have resulted from the operation of a temporary laboratory facility that was located at the site prior to and during the construction of the Mill, and from septic drain fields that were used for laboratory and sanitary wastes prior to construction of the Mill’s tailings cells. In April 2003, Denison commenced an interim remedial program of pumping the chloroform affected water from the groundwater to the Mill’s tailings system. This action enabled Energy Fuels to begin cleanup of the affected areas and to take a further step towards resolution of this outstanding issue. Pumping from the wells continued in 2015. On September 14, 2015, the State of Utah approved a long-term Corrective Action Plan (“
CAP
”) for cleanup of the chloroform, which involves continued pumping of the affected water to the Mill’s tailings system. While the investigations to date indicate that this chloroform appears to be contained in a manageable area, the scope and costs of final remediation have not yet been determined and could be significant.
Prior to Energy Fuels’ acquisition of the Mill from Denison, elevated concentrations of nitrate and chloride were observed in some of the monitoring wells at the White Mesa Mill site in 2008, a number of which are upgradient of the Mill’s tailings cells. Pursuant to a Stipulated Consent Agreement with UDEQ, Denison retained INTERA, Inc., an independent professional engineering firm, to investigate these elevated concentrations and to prepare a Contamination Investigation Report for submittal to UDEQ. The investigation was completed in 2009, and the Contamination Investigation Report was submitted to UDEQ in January 2010. INTERA concluded in the Report that: (1) the nitrate and chloride are co-extensive and appear to originally come from the same source; and (2) the source is upgradient of the Mill property and is not the result of Mill activities. UDEQ reviewed the Report, and concluded that further investigations were required before it could determine the source of the contamination and the responsibility for cleanup. Such investigations were performed in 2010 and 2011, but were considered to be inconclusive by UDEQ. As a result, after the investigations, it was determined that there are site conditions that make it difficult to ascertain the source(s) of contamination at the site, and that it was not possible at that time to determine the source(s), causes(s), attribution, magnitude(s) of contribution, and proportion(s) of the local nitrate and chloride in groundwater. For those reasons, UDEQ decided that it could not eliminate Mill activities as a potential cause, either in full or in part, of the contamination. The Company and UDEQ have therefore agreed that resources are better spent in developing a CAP, rather than continuing with further investigations as to the source(s) and attribution of the groundwater contamination. Pursuant to a revised Stipulated Consent Agreement, Denison submitted a draft CAP for remediation of the contamination to UDEQ in November 2011. The CAP proposed a program of pumping the nitrate contaminated groundwater to the Mill’s tailings cells, similar to the chloroform remedial program. UDEQ approved the CAP on December 12, 2012. In accordance with the CAP, in 2013 the Company commenced pumping nitrate/chloride contaminated water from four monitoring wells for use in Mill processing or discharge into the Mill’s process or tailings cells. Although the contamination appears to be contained in a manageable area, the scope and costs of final remediation have not yet been determined and could be significant.
During 2011, 2012, and 2013, the White Mesa Mill reported consecutive exceedances of groundwater compliance limits (“
GWCLs
”) under the Mill’s GWDP for several constituents in several wells, and there are decreasing trends in pH in a number of wells across the site that have caused the pH in a number of compliance monitoring wells to have dropped below their GWCLs. These exceedances and pH trends include wells that are up-gradient of the Mill facilities, far down-gradient of the Mill site and at the site itself. These consecutive exceedances of GWCLs have resulted in violations of the GWDP. Source Assessment Reports were submitted in 2012 and 2013 addressing each exceedance and the decreasing trends in pH at the site. UDEQ has accepted the Source Assessment Reports, and has concluded that such exceedances and decreasing trends in pH are due to natural background influences at the site. The renewed GWDP, issued on January 19, 2018, has revised GWCLs which are intended to account for these background influences and put those constituents, including pH at the site, back into compliance.
Total Cost of Project
The White Mesa Mill was acquired by the Company in June 2012, through the acquisition of the US Mining Division from Denison. The cost of the White Mesa Mill has been fully impaired, and as of December 31, 2017, the total cost attributable to the White Mesa Mill and its associated equipment on the financial statements of the Company was nil.
The Company’s Planned Work
The Company continues to process alternate feed material at the White Mesa Mill. During 2018 the Mill is expected to continue alternate feed processing and the recovery of uranium from uranium dissolved in the Mill's ponds, as well as to pursue additional alternate feed materials and other sources of feed for the Mill, as well as evaluate the possibility of recovering vanadium from existing pond solutions at the Mill.
The Canyon Mine
Except as noted, the following technical and scientific description of the Canyon Project is based on a technical report titled “
Technical Report on the Canyon Mine, Coconino County, Arizona, U.S.A.
”, dated October 6, 2017 prepared by Mark B. Mathisen, C.P.G., Valerie Wilson, M.Sc., P.Geo, and Jeffrey L. Woods, QP MMSA, SME of RPA in accordance with NI 43-101 (the “
Canyon Technical Report
”). Each of the authors of the Canyon Technical Report is a “qualified person” and is “independent” of the Company within the meaning of NI 43-101. The Canyon Technical Report is available on SEDAR at www.sedar.com. The Canyon Project does not have known reserves, and is therefore considered under SEC Industry Guide 7 definitions to be exploratory in nature, despite currently ongoing development activities.
Property Description and Location
The Canyon Project is a fully constructed and partially developed underground uranium project with: a head frame, a hoist, a compressor and a completed shaft. The site is located south of Grand Canyon National Park, in Sections 19 and 20, T29N, R03E, GSRM, Coconino County, Arizona, 153 miles north of Phoenix, 86 miles northwest of Flagstaff and seven miles south of Tusayan, Arizona in the Kaibab National Forest. The Canyon Project was acquired by Energy Fuels in its June 2012 acquisition of Denison’s US Mining Division.
The Canyon Project is located in the Arizona Strip mining district. The Arizona Strip is an area largely bounded on the north by the Arizona/Utah state line; on the east by the Colorado River and Marble Canyon; on the west by the Grand Wash Cliffs; and on the south by a midpoint between the city of Flagstaff and the Grand Canyon. The area encompasses approximately 13,000 square miles. Uranium-bearing material from the Arizona Strip mines is hauled by truck to the White Mesa Mill where it is processed. The Company’s Arizona 1, Pinenut (now in reclamation) and EZ Projects are located north of the Grand Canyon. The Canyon Project and Wate Project are located south of the Grand Canyon. The Canyon Project is 325 road miles from the Mill.
Accessibility, Climate, Local Resources, Infrastructure and Physiography
Access to the Canyon Mine site is via State Highway 64 and Federal Highway 180 to within five miles of the mine site, then over unsurfaced public Forest Service roads. The Atchison, Topeka and Santa Fe railway line passes east-west 50 mi. south of the site at Williams, and a spur of the railway, which passes 10 mi. west of the Canyon Mine site, services the Grand Canyon National Park. Airports at Flagstaff, Phoenix, and Tusayan provide air access to the area.
Climate in northern Arizona is semi-arid, with cold winters and hot summers. January temperatures range from about 7° F to 57° F and July temperatures range from 52° F to 97° F. Annual precipitation, mostly in the form of rain but some snow, is about 12 inches. Vegetation on the plateaus is primarily open piñon juniper woodland and shrubs. Mining operations can be conducted on a year-round basis.
The community of Tusayan, seven miles northwest of the Canyon Mine, provides much of the housing and other facilities for people who work within Grand Canyon National Park. Seasonal population is from 500 to 1,000. A clinic run by a Phoenix hospital is operated at Grand Canyon Village inside the national park, as well as a K-12 grade school with a capacity of 250 students. Williams, a rural community, 44 miles south of the site at Interstate 40, has a population of approximately 2,500. Williams relies heavily on tourism to maintain its economy, but many people are also involved in agriculture and forestry. The town offers an elementary, middle and high school, an emergency medical center, shopping and a variety of community services. Although housing is available, lack of adequate water supplies has limited housing construction. Flagstaff, 56 miles southeast of the Canyon Mine, is a full-service city with a population of 70,000 and is the regional trade center for northern Arizona.
Arizona, and particularly Coconino County, is among the fastest growing areas in the United States, due to the climate, landscape diversity, and economic and recreational opportunities. Resources and services are often stretched to meet the needs of the growing population.
Personnel for future mining operations are expected to be sourced from the nearby towns of Williams and Flagstaff, as well as other underground mining districts in the western United States.
In addition to the mine shaft, existing mine infrastructure includes surface maintenance shops, employee offices and change rooms, a water well, an evaporation pond, explosives magazines, water tank, fuel tank, and rock stockpile pads. Electrical power is available through an existing power line that terminates at the site.
Northern Arizona is part of the Colorado Plateau, a region of the western United States characterized by semi-arid, high-altitude, gently sloping plateaus dissected by steep walled canyons, volcanic mountain peaks, and extensive erosional escarpments. The Canyon Mine is located on the Coconino Plateau within the Colorado Plateau, at an elevation of approximately 6,500 ft.
Ownership
The Canyon Project is held by Energy Fuels on nine unpatented claims (Canyon 64-66, 74-76, and 84-86) located on land managed by the USFS. A uranium royalty has been retained by the successors to Gulf Oil Company on the Property, however, the current validity of the royalty is under investigation by Energy Fuels. If valid, the royalty rate is a 3.5% weighted average price tied to the Atomic Energy Commission Circular 5.
Holding costs for the Canyon Project are minimal and consist entirely of annual fees for unpatented mining claims ($155 per claim per year) and county filing fees (approximately $10 per claim per year). Unpatented mining claims expire annually, but are subject to indefinite annual renewal by filing appropriate documents and paying the fees described above. In addition, holders of unpatented mining claims on USFS lands are generally granted surface access by the USFS to conduct mineral exploration and mining activities.
Permitting and Licensing
The Canyon Project is located on public lands managed by the USFS and has an approved PO with the USFS. In September 2009, the groundwater General Aquifer Protection Permit was received for the water storage ponds. This permit was renewed in 2014. An Air Quality Permit was issued by the Arizona Department of Environmental Quality in March 2011, renewed in 2016 and amended in 2017. The Company received EPA’s approval under the Clean Air Act National Emissions Standard for Hazardous Air Pollutants for the Canyon Project in September of 2015.
Development of uranium-bearing breccia pipes of the Arizona Strip requires minimal surface disturbance, typically less than 20 acres. The overall environmental impact is small. Nevertheless, the areas in the vicinity of the Grand Canyon can be environmentally sensitive in many ways, and the permitting, development, and operation of a uranium extraction facility in this area has been a contentious issue. In 2009, as described below, over one million acres of federal land were withdrawn from mineral location, subject to valid existing rights. Reclamation at the Canyon Project is bonded at its total expected cost.
Geological Setting
Parts of two distinct physiographic provinces are found within Arizona: the Basin and Range province in the southern and western edge of the state, and the Colorado Plateau province in most of northern and central Arizona. The Arizona Strip lies within the Colorado Plateau province.
Surface exposures within the Arizona Strip reveal sedimentary and volcanic rocks ranging in age from upper Paleozoic to Quaternary; the area is largely underlain by Mississippian through Triassic sedimentary rocks. However, exposed within the Grand Canyon are older rocks reaching Precambrian in age.
Paleozoic sedimentary rocks of northern Arizona are host to thousands of breccia pipes. These deposits are known to extend from the Mississippian Redwall Limestone to the Triassic Chinle Formation, which makes about 4,000 feet of section. However, because of erosion and other factors, no single deposit has been observed cutting through the entire section. No deposit is known to occur above the Chinle Formation or below the Redwall Limestone.
Breccia pipes within the Arizona Strip are vertical or near vertical, circular to elliptical bodies of broken rock. Broken rock is comprised of slabs and rotated angular blocks and fragments of surrounding and stratigraphically higher formations. Surrounding the blocks and
slabs making up the breccia is a matrix of fine material comprised of surrounding and overlying rock from various formations. The matrix has been cemented by silicification and calcification for the most part.
Breccia pipes are typically comprised of three interrelated features: a basinal or structurally shallow depression at surface (designated by some as a collapse cone); a breccia pipe that underlies the structural depression; and annular fracture rings, which occur outside of, but at the margin of the pipes. Annular fracture rings are commonly, but not always, mineralized. The structural depression may be up to 0.5 miles or more in diameter, whereas the breccia pipe diameters range up to about 600 feet; the normal range is 200 feet to 300 feet.
Mineralized breccia pipes found to date appear to occur in clusters or trends. Spacing between breccia pipes ranges from hundreds of feet within a cluster to several miles within a trend. Pipe location may have been controlled by deep seated faults, but karstification of the Redwall Limestone in Mississippian and Permian times is considered to have initiated formation of the numerous and widespread breccia pipes in the region.
At the Canyon deposit, the surface expression of the pipe is a broad shallow depression in the Permian Kaibab Formation. The pipe is essentially vertical with an average diameter of less than 200 feet, but it is considerably narrower through the Coconino and Hermit horizons (80 feet). The cross sectional area is probably between 20,000 and 25,000 square feet. The pipe extends for at least 2,300 feet from the Toroweap limestone to the upper Redwall horizons. The ultimate depth of the deposit is unknown.
Mineralization extends over about 1,500 vertical feet, with higher-grade mineralization found mainly in the Coconino, Hermit, and Esplanade horizons and at the margins of the pipe in fracture zones. Sulfide zones are found scattered throughout the pipe but are especially concentrated (sulfide cap) near the Toroweap Coconino contact, where the cap averages 20 feet thick and consists of pyrite and bravoite, an iron-nickel sulfide. The mineralized assemblage consists of uranium-pyrite-hematite with massive copper sulfide mineralization common in and near the higher-grade zone. The strongest mineralization appears to occur in the lower Hermit-upper Esplanade horizons in an annular fracture zone.
History
Uranium exploration and mining of breccia pipe uranium deposits started in 1951 when a geologist employed by the U.S. Geological Survey noted uranium ore on the dump of an old copper prospect on the South Rim of the Grand Canyon of Northern Arizona. The prospect was inside the Grand Canyon National Park, but on fee land that predated the park. A mining firm acquired the prospect and mined this significant high-grade uranium deposit, called the Orphan Mine. By the time mining ended in the early 1960s, 4.26 million pounds of U
3
O
8
and some minor amounts of copper and silver had been produced.
After the discovery of the first deposit in the 1950s, an extensive search for other deposits was made by the government and industry, but only a few low-grade prospects were found. Exploration started again in the early 1970s. In the mid-1970s, Western Nuclear Inc. (“
Western Nuclear
”) acquired the Hack Canyon prospect located about 25 miles north of the Grand Canyon and found high grade uranium mineralization offsetting an old shallow copper/uranium site. In the next few years, a second deposit was found approximately one mile away. EFN acquired the Hack Canyon property from Western Nuclear in December 1980. Construction started promptly, and the Hack Canyon mine was in production by the end of 1981.
The Canyon deposit is located on mining claims that EFN acquired from Gulf Mineral Resources Company (“
Gulf
”) in 1982. Gulf drilled eight exploration holes at the site from 1978 through May 1982, but found only low-grade uranium in this pipe. Additional drilling completed by EFN in 1983 identified a major deposit. EFN drilled a further 30 holes from May 1983 through April 1985 to delineate the uranium mineralization and to determine placement of the shaft and water supply well. Additional drilling of six holes was completed in 1994. Construction at the site was discontinued as a result of low uranium prices at that time.
EFN identified and investigated more than 4,000 circular features in northern Arizona. About 110 of the most prospective features were explored by deep drilling, and approximately 50% of those drilled were shown to contain some uranium mineralization. Ultimately, nine deposits were deemed worthy of development. Total mine production from the EFN breccia pipes from 1980 through 1991 was approximately 19.1million pounds U
3
O
8
at an average grade of just over 0.60% U
3
O
8
.
Most of the EFN assets were acquired by Denison (then named IUC) in 1997 and by the Company in June 2012 upon acquisition of the US Mining Division. Since that time, Denison and later Energy Fuels has maintained ownership of the Canyon Project.
Denison did not carry out any surface exploration on the Canyon Project since its acquisition of the project in 1997, nor has the Company to date. Exploration for breccia pipes in northern Arizona typically begins with a search for surface expressions of circular features. This search was aided by geologic mapping, Landsat aerial photography, thermal infrared imagery, geochemical testing, and certain geophysical methods such as resistivity, Very Low Frequency ("
VLF
"), and time domain electromagnetics. Other techniques tested
included: geobotany, microbiology, and biogeochemistry. All of these methods were utilized to identify surface expressions of breccia pipes. The key element of the process was to zero in on the throat of the pipe as a locus for drilling from the surface since the throat is usually associated directly with the center of the collapse.
Mineralization
Mineralization extends vertically both inside and outside the pipe over about 1,500 vertical feet, but high-grade mineralization has been found mainly in the collapsed portions of the Coconino, Hermit, and Esplanade horizons and at the margins of the pipe in fracture zones. Sulfide zones are found scattered throughout the pipe but are especially concentrated (within a sulfide cap) near the Toroweap-Coconino contact, where the cap averages 20 feet thick and consists of pyrite and bravoite, and iron-nickel sulfide. The mineralization assemblage consists of uranium-pyrite-hematite with massive copper sulfide mineralization common in and near high-grade zones. The strongest mineralization appears to occur in the lower Hermit-upper Esplanade horizons in an annular fracture zone.
The two metals of interest within the Canyon breccia pipe are uranium and copper. Since the rocks making up the breccia within the pipe are all sedimentary rocks, mineralization typically occurs within the matrix material (primarily sand) surrounding the larger clasts.
Uranium mineralization at Canyon is concentrated in six stratigraphic levels or zones (Cap, Upper, Main, Main-Lower, Juniper I, and Juniper II) within a collapse structure ranging from 80 ft. to 230 ft. wide with a vertical extension from a depth of 650 ft. to over 2,100 ft., resulting in approximately 1,450 feet of mineralization. Intercepts range widely up to several tens of feet with grades in excess of 1.0% U
3
O
8
.
Consistent with other breccia pipe deposits, uranium at Canyon Mine occurs largely as blebs, streaks, small veins, and fine disseminations of uraninite/pitchblende (UO
2
). Mineralization is mainly confined to matrix material, but may extend into clasts and larger breccia fragments, particularly where these fragments are composed of Coconino sandstone. Uranium mineralization occurs primarily as uraninite and various uranium phase minerals with lesser amounts of brannerite and uranospinite.
Copper mineralization occurs in concentrations within the Main and Main-Lower zones that have a reasonable prospect for eventual economic extraction. It is also present in the Juniper zones, but at much lower concentrations than the Main zone.
Mineralization can be disseminated throughout the matrix material (commonly replacing calcite cement) with higher-grade mineralization typically occurring as vug fills, blebs, or streaks within the matrix and sometimes zoning the breccia clasts. The highest grade copper mineralization either completely replaces the matrix cement or replaces the matrix material all together. Copper mineralization occurs primarily as tennantite, chalcocite and bornite with lesser amounts of covellite. Pyrite and sphalerite are also found throughout the pipe. Silver is commonly associated with the copper mineralization in the main zone. Assay values of silver in excess of one ounce per ton are common where copper grades are high. Arsenic is present where tennantite mineralization occurs. Additionally, lower quantities of Zn, Pb, Mo, Co, Ni, and V are present and scattered throughout the pipe.
Mineral Resource Estimate
Mineral Resource estimates were prepared for the Canyon deposit using both historical surface drill hole gamma and assay data and gamma and assay data collected during underground drilling in 2016 and 2017. A model of the breccia pipe host was constructed based on drill logs and constrains the Mineral Resource. Mineralization wireframes for U
3
O
8
were based on assays and gamma data at a nominal cut-off grade of 0.15%. Low and high-grade copper wireframes were based on nominal cutoff grades of 1% and 8% respectively. Values for U
3
O
8
and copper were interpolated into blocks using inverse distance squared or ordinary kriging. Resources are presented a 0.36% U
3
O
8
Eq equivalent cut-off grade for zones that contain both uranium and copper mineralization (Main and Main-Lower) and at a 0.29% U
3
O
8
Eq cut-off grade for zones that contain only uranium mineralization (Cap, Upper, Juniper I, and Juniper II).
There are no Mineral Reserves estimated at the Canyon deposit at this time. Additional underground drilling conducted by the Company in 2016 and 2017 allowed for the classification of measured and indicated mineral resources, and the inclusion of a copper Mineral Resource. In October 2017, RPA estimated the Mineral Resources for both uranium and copper, shown in the following tables.
Canyon Mine Mineral Resources – Uranium
(1)(2)(3)(4)(5)(6)(7)
|
|
|
|
|
|
|
|
|
|
|
|
Classification
|
Zone
|
Cut-off Grade % U
3
O
8
Eq
(8)
|
Tons (000)
|
|
Grade % U
3
O
8
|
|
Pounds U
3
O
8
(000)
|
|
|
|
Canyon Measured Resources (M)
|
Main
|
0.36
|
6
|
|
0.43
|
%
|
56
|
|
|
Canyon Indicated Resources (I)
|
Main
|
0.36
|
94
|
|
0.89
|
%
|
1,669
|
|
|
Juniper I
|
0.29
|
38
|
|
0.94
|
%
|
709
|
|
|
Total (M & I)
|
139
|
|
0.88%
|
|
2,434
|
|
|
Canyon Inferred Resources
|
Cap
|
0.29
|
---
|
|
---
|
|
---
|
|
|
Upper
|
0.29
|
9
|
|
0.43
|
%
|
78
|
|
|
Main-Lower
|
0.36
|
5
|
|
0.20
|
%
|
20
|
|
|
Juniper I
|
0.29
|
2
|
|
0.57
|
%
|
25
|
|
|
Juniper II
|
0.26
|
1
|
|
0.35
|
%
|
9
|
|
|
Total Inferred Resources
|
18
|
|
0.38%
|
|
134
|
|
Notes:
(1) The Mineral Resource estimate in this table complies with the requirements of NI 43-101 and the classifications comply with CIM definition standards and do not represent reserves under SEC Industry Guide 7. Mineral resources that are not reserves do not have demonstrated economic viability. See “
Cautionary Note to U.S. Investors Concerning Disclosure of Mineral Resources
,” above.
(2) For the Main and Main-Lower zones, a 0.36% uranium equivalent cut-off grade (% U
3
O
8
Eq) was applied to account for both the copper and uranium mineralization. In all other zones only uranium was reported and a 0.29% U
3
O
8
cut-off grade was applied. (The %U
3
O
8
Eq grade term is not the same as the eU
3
O
8
% grade term with indicates probe rather than assay data listed elsewhere in this report. For details see the Canyon Technical Report).
(3) Mineral Resources are estimated using a long-term uranium price of US$60 per pound and a copper price of US$3.50 per pound.
(4) A copper to U
3
O
8
conversion factor of 18.19 was used for converting copper grades to equivalent U
3
O
8
grades (U
3
O
8
Eq) for cut-off grade evaluation and reporting for the Main and Main-Lower zones.
(5) Process recoveries used were 96% for U
3
O
8
and 90% for Cu, based on preliminary metallurgical test work.
(6) Numbers may not add due to rounding.
(7) Tonnages of uranium and copper cannot be added as they overlap in the Main and Main-Lower zones.
(8) Note that the Tonnages of uranium and copper cannot be added as they overlap in the Main and Main-Lower zones.
Canyon Mine Mineral Resources – Copper
(1)(2)(3)(4)(5)(6)(7)
|
|
|
|
|
|
|
|
|
Classification
|
Zone
|
Cut-off Grade % U
3
O
8
Eq
|
Tons (000)
|
Grade % Cu
|
Pounds Cu (000)
|
|
|
Canyon Measured Resources (M)
|
Main
|
0.36
|
6
|
9.29%
|
1203
|
|
Canyon Indicated Resources (I)
|
Main
|
0.36
|
94
|
5.70%
|
10,736
|
|
Total (M & I)
|
Main
|
0.36
|
101
|
5.93%
|
11,939
|
|
Canyon Inferred Resources
|
Main-Lower
|
0.36
|
5
|
5.90%
|
570
|
Notes:
(1) The Mineral Resource estimate in this table complies with the requirements of NI 43-101 and the classifications comply with CIM definition standards and do not represent reserves under SEC Industry Guide 7. Mineral resources that are not reserves do not have demonstrated economic viability. See “
Cautionary Note to U.S. Investors Concerning Disclosure of Mineral Resources
,” above.
(2) Mineral Resources are estimated at a uranium equivalent (%U
3
O
8
Eq) cut-off grade of 0.36% U
3
O
8
Eq.
(3) Mineral Resources are estimated using a long-term uranium price of US$60 per pound and a copper price of US$3.50 per lb.
(4) A copper to U
3
O
8
conversion factor of 18.19 was used for converting copper grades to equivalent U
3
O
8
grades (U
3
O
8
Eq) for cut-off grade evaluation and reporting.
(5) Process recoveries used were 96% for U
3
O
8
and 90% for Cu, based on preliminary metallurgical test work.
(6) Numbers may not add due to rounding.
(7) Tonnages of uranium and copper cannot be added as they overlap in the Main and Main-Lower Zones.
Two cut-off grades were used for the resource estimate. For the uranium and copper bearing zones, a 0.36% uranium equivalent (%U
3
O
8
Eq) cut-off grade was used. For the uranium-only zones, a 0.29% eU
3
O
8
cut-off grade was used. The two cut-off grades account for separate process campaigns with different unit costs.
Present Condition of the Property and Work Completed to Date
At the Canyon Project, all surface facilities are in place. During 2017, an underground drilling program was completed, shaft sinking continued, and a large water tank was installed. As of March 8, 2018 shaft sinking had been completed. The final depth of the shaft is approximately 1,470 feet below ground surface. Shaft stations are developed at depths of 1,000 feet (elevation 5,506 feet above sea level), 1,220 feet (elevation 5,286) and 1,400 feet (elevation 5,106). Construction of the main mine sump is underway.
During 2017, laboratory and bench scale metallurgical test work was carried out at the White Mesa Mill and at the Australian Nuclear Science and Technology Organization ("
ANSTO
"), an independent testing firm in Australia. The copper is expected to be processed using acid leach followed by solvent extraction (the same method used for uranium). Following solvent extraction, a saleable copper product is expected to be produced by either electro-winning or copper sulfate crystallization. To recover copper from the Canyon mineralized material, some modifications to White Mesa Mill process circuits are expected to be required. The copper modifications are expected to include using the existing vanadium solvent extraction circuit for copper extraction, the addition of a roaster to improve copper recovery, and the addition of either an electro-winning circuit or copper sulfate crystallization circuit. Preliminary bench test work indicates that acid leaching after roasting pre-treatment is expected to result in average copper and uranium recoveries of approximately 92% and 91% respectively. Using optimum roasting and leaching conditions, it is expected that for a continuous operation, recoveries will improve and uranium recoveries will match the nominal 96% currently experienced at the White Mesa Mill. Production copper recoveries are expected to be in the 90% range.
The Canyon Project was acquired by the Company in June 2012, through the acquisition of the US Mining Division from Denison. The cost of the Canyon Project has been fully impaired, and as of December 31, 2017, the total cost attributable to the Canyon Project and its associated equipment on the financial statements of the Company was nil.
The Company’s Planned Work
During 2018, the Company plans to complete the construction of the main mine sump at the Canyon Project before mid-year 2018, after which time field activities will have been completed. The Company plans to continue to carry out engineering, procurement and construction management activities in 2018, including additional bench and pilot plant scale metallurgical test work of the uranium/copper mineralization, as well as pursue any additional permitting actions that may be required to recover copper at the White Mesa Mill. The timing of our plans to extract and process mineralized materials from this project will be based on the results of this additional evaluation work, along with market conditions, available financing and sales requirements.
The Roca Honda Project
Except as noted concerning land tenure and permitting efforts, the following technical and scientific description of the Roca Honda Project is based on a technical report titled "
Technical Report on the Roca Honda Project, McKinley County, State of New Mexico, U.S.A.
" dated October 27, 2016, prepared by Robert Michaud, P.Eng., Stuart E. Collins, P.E., and Mark B. Mathisen, C.P.G., all of Roscoe Postle Associates (“
RPA
”) and Harold Roberts, then Executive Vice President of the Company, in accordance with NI 43-101 (the “
Roca Honda Technical Report
”). The purpose of the Roca Honda Technical Report was to update the Preliminary Economic Assessment ("
PEA
") of the Project in light of changes in the Project ownership interest and the acquisition of additional mineral property. Each of the authors of the Roca Honda Technical Report is a “qualified person” and all but one is “independent” of the Company within the meaning of NI 43-101. Harold R. Roberts, P.E., was Executive Vice President, Conventional Operations of the Company at the time he co-authored the PEA; however, the independent authors of the Report have assumed overall responsibility for all items of the technical report, and the Report is therefore an independent technical report under NI 43-101. The Roca Honda Technical Report is available on SEDAR at www.sedar.com and on EDGAR at www.sec.gov. The Roca Honda Project does not have known reserves, and is therefore considered under SEC Industry Guide 7 definitions to be exploratory in nature, despite currently ongoing permitting activities.
We acquired most of the Roca Honda Project on August 29, 2013 as a result of our acquisition of Strathmore. Certain adjacent properties (the "
Adjacent Properties
") (which now form part of the Roca Honda Project) were acquired from Uranium Resources, Inc. ("
URI
") in June 2015.
Property Description and Location
The Roca Honda Project is an underground uranium project that is being permitted by the Company’s wholly-owned subsidiary, Strathmore Resources, U.S. Ltd. as operator of Roca Honda Resources, LLC (“
RHR
”). RHR was established on July 26, 2007, when Strathmore formed a limited liability company with Sumitomo and transferred the property to RHR. Strathmore purchased Sumitomo's 40% interest in RHR on May 27, 2016. The Roca Honda Project is located approximately three miles northwest of the community of San Mateo, New Mexico, near the southern boundary of McKinley County and north of the Cibola County boundary, and approximately 22 miles by road northeast of Grants, New Mexico. The property is located in the east part of the Ambrosia Lake subdistrict of the Grants Mineral Belt in northwest New Mexico and comprises nearly all of Sections 5, 6, 8, 9, 10, and a narrow strip of Section 11, the New Mexico State Lease, consisting of Section 16, and the fee mineral interest in Section 17, all in Township 13 North – Range 8 West (T13N-R8W), New Mexico Principal Meridian. Mineralized material from the Roca Honda Project will be shipped by highway truck to the White Mesa Mill, where it will be processed for the recovery of uranium. The Roca Honda Project does not have known reserves, and is therefore considered under SEC Industry Guide 7 definitions to be exploratory in nature.
Accessibility, Climate, Local Resources, Infrastructure and Physiography
The Roca Honda property is located approximately 17 miles (22 miles by road) northeast of Grants, New Mexico. The southern part of the property, which are on Sections 16 and 17, can be reached by traveling north from Milan, New Mexico on State Highway 605 toward the town of San Mateo to mile marker 18 and then north on a private gravel road. Access rights from Highway 605 onto Section 16 have been subject to temporary agreements with the surface owner, Fernandez Company, the latest of which expired on December 31, 2015. When the Company acquired the mineral rights to Section 17 in the URI transaction, it acquired surface access rights to Section 17 and Section 16, which the Company believes provides all necessary access. The Company is in discussions with the surface owner to determine whether any further access rights may be required.
The north part of the project can be reached by traveling 23.5 miles from Milan, New Mexico, on paved public Highway 605, and then west on US Forest Service roads to the southeast corner of Section 10. There are numerous drill roads that provide access to different portions of Sections 9 and 10, many of which will require maintenance. Old drill roads were previously established across the property, and an electrical line transects the northern half of Section 16 in the project area. The line continues on the west side of the project area into Section 17, where it terminates, and on the east side of Section 16 through the northwest quarter of Section 15 and along the southern section boundary of Section 10. There is a concrete lined, 14-foot diameter, 1,478-foot deep shaft, which was sunk by Kerr-McGee on Section 17 (the "
Existing Shaft
"). The Existing Shaft would need to be completed to a final depth of approximately 1,600 feet for use in future mine activities. No milling operations are expected to occur on the site.
The climate in the Roca Honda Project area may be classified as arid to semi-arid continental, characterized by cool, dry winters, and warm, dry summers. On average, the Roca Honda property receives approximately 11 inches of precipitation annually, most of which occurs during thunderstorms in July and August. Grants, New Mexico has an annual average temperature of 50°F, with an average summer high of 87°F and low of 52°F, and average winter high of 47°F and low of 18°F. Year-round operations are expected.
The community of Grants, New Mexico, located in Cibola County, is the largest community near the Roca Honda Project. As of the 2010 census, there are 8,772 people residing in Grants, where supplies can be obtained, and personnel experienced in underground mining, construction and mineral processing are available.
The Roca Honda Project area is sparsely populated, rural and largely undeveloped. The predominant land uses include low density grazing and cultivation, and recreational activities such as hiking, sightseeing, and seasonal hunting. The Roca Honda property has moderately rough topography in Sections 9 and 10 and consists of shaley slopes below ledge-forming sandstone beds, as mesas, that dip 7° to 11° northeast. Elevations range from 7,100 feet to 7,800 feet. Section 9 consists mostly of steep slopes in the west and south, with a large sandstone mesa in the north central part. Section 10 consists mostly of the dip-slope of a sandstone bed that dips from 8° to 11° east. Sections 16 and 17 have less topographic relief, with elevations ranging from 7,100 to 7,300 feet and easterly dipping slopes. Vegetation in the Roca Honda Project area consists of grasses, piñon pine and juniper trees.
Ownership
Prior to May 27, 2016, the Roca Honda Project (excluding the Adjacent Properties) was held by RHR, a joint venture owned by Energy Fuels’ wholly-owned subsidiary Strathmore Resources, (US) Ltd. (60%) and Sumitomo’s subsidiaries SC Clean Energy and Summit New Energy Holding, LLC (together, 40%). On May 27, 2016 the Company acquired Sumitomo's 40% interest in RHR, and the Roca Honda Project is now held entirely by our wholly-owned subsidiary, Strathmore Resources, (US) Ltd. As consideration for the 40% interest, the Company issued to Sumitomo 1,212,173 common shares of the Company and agreed to pay $4.5 million of cash upon the first commercial production of uranium from the Roca Honda Project. The Adjacent Properties were acquired from URI in June 2015.
The Roca Honda property covers an area of 4,440 acres, and includes 63 unpatented lode mining claims in Sections 9 and 10, 64 unpatented claims in Sections 5 and 6, 36 unpatented claims in Section 8, one adjoining New Mexico State General Mining Lease in Section 16, and the fee minerals interest in all of Section 17. The mining claims also extend onto a 9.4 acre narrow strip of Section 11. The New Mexico State Lease was acquired by David Miller (the former Strathmore CEO) on November 30, 2004, and subsequently transferred to Strathmore. Strathmore then relinquished the Lease and acquired it again in December 2015 (State Mining Lease No. HG-0133) for a new 15-year term expiring on December 14, 2030. The "Roca Honda" Claims in Sections 5 and 6 were staked by Miller and Associates in September 2004 and assigned to RHR on August 28, 2013. Strathmore acquired the Adjacent Properties, comprised of the "Roca Honda" claims in Section 8 and the fee mineral interest in Section 17 on June 26, 2015 from URI.
The State Mining Lease (No. HG-0133) issued by the New Mexico State Land Office for Section 16 covers an area of 638 acres. The surface of Section 16 is leased to Fernandez as rangeland for grazing. The area covered by the Fernandez lease is also referred to as “Lee Ranch”. The Mining Lease has a primary, secondary, tertiary, and quaternary term, each with rentals to be paid in advance, and will not expire until December 14, 2030. It can be held for the next two years (primary term) by paying only $1.00 per acre annually.
The State lease stipulates a 5% gross returns royalty to the State of New Mexico "less actual and reasonable transportation and smelting or reduction costs, up to 50% of the gross returns" for production of uranium, which is designated a "special mineral" in the lease. New Mexico mining and private royalties on value of minerals extracted are shown below:
|
|
•
|
Section 9 Gross Royalty (1%); and
|
|
|
•
|
Section 16 New Mexico State Lease Royalty (5%).
|
Under the rights acquired in the URI transaction, a gross royalty of 1% is payable to the surface owner.
Permitting and Licensing
The Roca Honda Project is at an advanced stage of permitting. A Draft EIS was completed by the USFS in February 2013. In March 2015 the USFS initiated the scoping process for a new mine dewatering alternative to be addressed in a Supplement to the EIS. In September 2016, an additional scoping process to incorporate Section 17 (the "
Adjacent Properties
") and development drilling into the mine plan was initiated by the USFS. The Supplement to the EIS is expected to be completed in 2018 with a Final EIS and Record of Decision (ROD) scheduled to be completed in 2019.
Other major permits required for the Roca Honda Project include a Permit to Mine to be issued by the New Mexico Mining and Minerals Division, a Discharge Permit issued by the New Mexico Environment Department, and a Mine Dewatering Permit issued by the New Mexico State Engineer’s Office. The Mine Dewatering Permit was approved in December 2013 but appealed by the Acoma Pueblo in January 2014. RHR subsequently proposed a new alternative for discharging treated mine water that would benefit a number of downstream users including the Acoma Pueblo. As a result, the Acoma Pueblo agreed to withdraw the dewatering permit appeal in March 2015. The dewatering permit will need to be revised to reflect a higher dewatering rate with the addition of Section 17 to the mine plan.
The two other major permits that are in the agency review stage are the draft Discharge Permit expected in late 2018, and the Permit to Mine expected in 2019 following approval of the Final EIS by the USFS. Permit approvals from the U.S. Army Corps of Engineers and the U.S. Environmental Protection Agency are also required for discharge of treated mine water associated with mine activities. Applications for these two permits are also presently undergoing agency review.
As the project has not yet been developed or operated, we are not aware of any environmental liabilities of any significance.
No permitting is required to start milling the Roca Honda Project material at the White Mesa Mill. The White Mesa Mill is fully permitted with the State of Utah, and has all the necessary operating licenses for a conventional uranium mill. As additional tailings storage capacity will eventually be required at the Mill over the life of the mine, an Amendment to the White Mesa Mill’s Radioactive Materials License issued by the Utah Division of Waste Management and Radiation Control will be required in due course to construct the next tailing cells.
Geological Setting
The Roca Honda Project area is located in the southeast part of the Ambrosia Lake sub-district of the Grants uranium district and is near the boundary between the Chaco slope and the Acoma sag tectonic features. This sub-district is in the southeastern part of the Colorado Plateau physiographic province and is mostly on the south flank (referred to as the Chaco slope) of the San Juan Basin.
Rocks exposed in the Ambrosia Lake sub-district of the Grants Mineral Belt, which includes the Roca Honda Project area, comprise marine and non-marine sediments of Late Cretaceous age, unconformably overlying the uranium-bearing Upper Jurassic Morrison Formation. The uppermost sequence of conformable strata consists of the Mesaverde Group, Mancos Shale, and Dakota Sandstone. All rocks that outcrop at the Roca Honda Project area are of Late Cretaceous age.
The uranium found in the Roca Honda Project area is contained within five sandstone units of the Westwater Canyon Member. Zones of mineralization vary from approximately one foot to 30 ft. thick, 100 ft. to 600 ft. wide, and 200 ft. to 3,000 ft. in length. Uranium mineralization in the Project area trends west-northwest, consistent with trends of the fluvial sedimentary structures of the Westwater Canyon Member, and the general trend of mineralization across the Ambrosia Lake sub-district.
Core recovery from the 2007 drilling program indicates that uranium occurs in sandstones with large amounts of organic/high carbon material. Non-mineralized host rock is much lighter (light brown to light grey) and has background to slightly elevated radiometric readings.
History
Kerr-McGee Oil Industries, Inc. (“
Kerr-McGee
”) staked the Roca Honda Project unpatented mining claims in Sections 9 and 10 in June 1965. Kerr-McGee, its subsidiaries, and successor in interest Rio Algom had held the claims until the property was acquired by Strathmore on March 12, 2004. Energy Fuels acquired a 100% interest in Strathmore in September 2013, assuming Strathmore’s 60% ownership interest in RHR and becoming the project operator. Strathmore purchased Sumitomo's 40% interest in RHR on May 27, 2016.
Drilling on the property began in 1966. Kerr-McGee performed a number of rotary drill hole exploration programs from 1966 to 1985. In Section 9, the first drill hole was completed in July 1966. Discovery was made in drill hole number 7 completed on August 2, 1970,
which encountered mineralization at a depth of 1,900 ft. From 1966 to 1982, a total of 187 drill holes were completed for a total of 388,374 ft.
In Section 10, the first hole was drilled in October 1967. Discovery was made in drill hole number 6 completed on March 19, 1974, which encountered mineralization at a depth of 2,318 ft. From 1967 to 1985, a total of 175 drill holes were completed for a total of 459,535 ft.
In Section 16, the first drilling was in the 1950’s by Rare Metals, which drilled 13 holes, including two that intercepted high-grade uranium mineralization at depths of 1,531 ft. and 1,566 ft. No records of the total drilled footage were located. Subsequently, Western Nuclear acquired a mining lease for Section 16 from the State and began drilling in 1968, with the first drill hole completed on August 17, 1968. The second drill hole intercepted high-grade uranium mineralization at a depth of 1,587 ft. From 1968 through September 1970, Western Nuclear drilled 63 holes totaling 121,164 feet, not including six abandoned holes totaling 7,835 ft. Two of the drill holes reported cored intervals, but the cores and analyses were not available. From the late 1960’s to the early 1980’s, a total of 725 drill holes totaling over 1,425,000 feet were completed on the six Sections (5, 6, 8, 9, 10 and 16) of the Roca Honda property. More than 500 holes totaling over 841,900 feet were also drilled in Section 17 by Kerr-McGee and Western Nuclear. In June 2015, Energy Fuels acquired a 100% interest in the mineral properties controlled by URI (Sections 8 and 17).
RHR drilled four pilot holes on Section 16, of which three were completed as monitor wells totaling 8,050 feet for environmental baseline and monitoring purposes in Section 16 from June through November 2007. One drill hole was located outside of known mineralization, and three holes were located within mineralized areas. The entire thickness of the Westwater Sandstone, except for zones with no recovery, was cored in the pilot holes for these wells. The cores are PQ diameter (3.345 in.) and were taken principally for laboratory testing of hydraulic conductivity, effective porosity, density, and chemical analysis.
In November 2011, a core hole was drilled at the Section 16 shaft location. The hole was drilled to a depth of 2,053 ft. Core was tested for numerous geotechnical properties.
No historic mineral extraction has occurred on the property.
Mineralization
Uranium mineralization consists of unidentifiable organic-uranium oxide complexes. The uranium in the project area is dark grey to black in color, and is found between depths of approximately 1,450 feet and 2,600 feet below the surface.
Primary mineralization pre-dates, and is not related to, present structural features. There is a possibility of some redistribution and stack mineralization along faults; however, it appears that most of the Roca Honda Project mineralization is primary.
Paleochannels that contain quartz-rich, arkosic, fluvial sandstones are the primary mineralization control associated with this trend. Previous mining operations within the immediate area suggest that faults in the Roca Honda Project area associated with the San Mateo fault zone post-date the emplacement of uranium. Therefore, it may be expected that mineralized zones in the Roca Honda Project area are offset by faults.
The mineralization is typically confined to sandstones in the Westwater Canyon Member, although there is some overlap into the shales that divide the sandstones, and also some minor extension (less than 10 feet) into the underlying Recapture Member. The mineralization is contained in the Westwater Canyon Member sandstones across the Project area, but in Sections 9 and 16, the mineralization is typically found in the upper sandstones (A, B1, and B2), as it is in Section 17, also. In Section 10, the A and B1 sandstones pinch out in some areas due to thickening of the overlying Brushy Basin Member. Mineralization is in the middle and western portions of Section 10, and is typically in the lower sandstones (sands C and D).
Sedimentary features may exhibit control on a small scale. At the nearby Johnny M mine, a sandstone scour feature truncates underlying black mineralization, indicating nearly syngenetic deposition of uranium mineralization with the sandstone beds.
Mineral Resource Estimates
RPA prepared an updated PEA in 2016 and an NI 43-101 compliant Mineral Resource estimate for the Roca Honda Project is set out in the Roca Honda Technical Report. The Mineral Resource estimate, which has remained unchanged from the 2015 PEA effective as at February 4, 2015, is summarized in the following table. Mineral Resources are constrained by wireframes generated around individual mineralized zones within five sand horizons designated as A, B1, B2, C, and D sands.
Roca Honda Mineral Resources – Uranium
(1)(2)(3)(4)
|
|
|
|
|
|
|
Classification
|
Tons (000)
|
Grade % eU
3
O
8
|
Pounds eU
3
O
8
(000)
|
|
|
Roca Honda Measured Resources (M)
|
208
|
0.477%
|
1,984
|
|
Roca Honda Indicated Resources (I)
|
1,303
|
0.483%
|
12,580
|
|
Roca Honda Total (M & I)
|
1,511
|
0.482%
|
14,564
|
|
Roca Honda Inferred Resources
|
1,198
|
0.468%
|
11,206
|
Notes:
(1) The Mineral Resource estimate in this table complies with the requirements of NI 43-101, and the classifications comply with CIM definition standards and do not represent reserves under SEC Industry Guide 7. Mineral resources that are not reserves do not have demonstrated economic viability. See “
Cautionary Note to U.S. Investors Concerning Disclosure of Mineral Resources
,” above.
(2) Mineral Resources are estimated at a uranium cut-off grade of 0.19% eU
3
O
8
.
(3) Mineral Resources are estimated using a long-term uranium price of US$65 per pound U
3
O
8
.
(4) Numbers may not add due to rounding.
Energy Fuels acquired the mineral rights to the Section 17 property adjacent to its main Roca Honda project in 2015. An historical estimate for the Section 17 property was completed by Uranium Resources Inc. (“URI”) in 2007. URI estimated that the Section 17 property contained approximately 510,000 tons at a grade of 0.37% U
3
O
8
for 3.8 million pounds of uranium. This historical estimate is based on over 500 surface drill holes and was calculated using the circle tangent method. A density of 15 cu ft./ton was used.
RPA and the Company do not consider this historical estimate to be current mineral resources or reserves as defined under NI 43-101. While Energy Fuels has reviewed all the drill hole data associated with this estimate, a qualified person has not done sufficient work to classify this historical resource as current mineral resources or mineral reserves in accordance with NI 43-101. This historical estimate was unclassified. The Company believes this historical estimate is relevant, as the methodology was well documented and utilized industry standard practice. However, the methodologies used do not reflect current best industry practices. The Company does not consider these historical estimates to be equivalent to current mineral resources or mineral reserves as defined in NI 43-101, nor has the Company completed sufficient work to confirm a NI 43-101 compliant resource. Therefore, the historical estimates cannot, and should not, be relied upon as NI 43-101 resources or reserves.
Present Condition of the Property and Work Completed to Date
Old drill roads were previously established across the property, and an electrical line transects the northern half of Section 16 in the project area. The line continues on the west side of the project area into Section 17, where it terminates, and on the east side of Section 16 through the northwest quarter of Section 15 and along the southern section boundary of Section 10. Three monitor water wells were drilled by RHR in 2007, and are located on Section 16. Other items installed by RHR include a permanent electrical weather station and a high volume TSP and PM10 air samplers. Three, dry man-made impoundments are also located on Section 16. More than 400 historic drill exploration holes were completed on the property from the late 1960’s to the early 1980’s. Except for the existing shaft on Section 17, there are no mine workings, existing tailings ponds, waste deposits or other improvements or facilities at the site.
No additional exploration work has been conducted on the Roca Honda Project since November 2011, when a core drill hole was completed at the proposed shaft location in Section 16 for geotechnical studies.
The Roca Honda Project was acquired by the Company in August 2013, through the Company’s acquisition of Strathmore. As of December 31, 2017, the total cost attributable to the Roca Honda Project on the financial statements of the Company was $22.8 million.
The Company’s Planned Work
The Company intends to continue its permitting and related activities at the Roca Honda Project during 2018. Approximately $0.8 million is budgeted for permitting efforts in 2018. The Company plans to integrate the Adjacent Roca Honda Properties into the permitting efforts underway for the Roca Honda Project properties.
The Sheep Mountain Project
Unless otherwise stated (concerning land tenure and permitting efforts), the following technical and scientific description of the Sheep Mountain Project is derived from a technical report titled “
Sheep Mountain Uranium Project, Fremont County, Wyoming, USA, Updated Preliminary Feasibility Study, National Instrument 43-101 Technical Report
”, dated April 13, 2012 and, prepared by Douglas L. Beahm, P.E., P.G., Principal Engineer of BRS Inc. in accordance with NI 43-101 (the “
Sheep Mountain Technical Report
”). The author of the Sheep Mountain Technical Report is a “qualified person” and is “independent” of the Company within the meaning of NI 43-101. The Sheep Mountain Technical Report is available on SEDAR at www.sedar.com. The Sheep Mountain Project does not have known reserves, and is therefore considered under SEC Industry Guide 7 definitions to be exploratory in nature.
Project Description and Location
The Sheep Mountain Project is an underground and open pit uranium project. The Sheep Mountain Project was acquired on February 29, 2012, as a result of the Company’s acquisition of Titan. The Sheep Mountain Project is located eight miles south of Jeffrey City, Wyoming within the Wyoming Basin physiographic province at the northern edge of the Great Divide Basin in central Wyoming. The project is located in portions of Sections 8, 9, 15, 16, 17, 20, 21, 22, 27, 28, 29, 30, 31, 32, and 33, Township 28 North, Range 92 West.
The Sheep Mountain Project includes the Congo Pit, a proposed open pit uranium extraction facility, and the reopening of the existing Sheep Underground facility. Although alternatives were considered, the recommended recovery method in the Sheep Mountain Technical Report includes the processing of extracted materials via an on-site heap leach facility. Material from the underground and open pit operations are expected to be commingled at the stockpile site located near the underground portal and in close proximity to the pit. At the stockpile, the mineralized material will be sized if needed, blended, and then conveyed via a covered overland conveyor system to the heap leach pad where it will be stacked on a double lined pad for leaching. The primary lixiviant will be sulfuric acid. Concentrated leach solution will be collected by gravity in a double lined collection pond and then transferred to the mineral processing facility for extraction and drying. The final product produced will be uranium concentrate (U
3
O
8
, also known as “
yellowcake
”). Since the Sheep Mountain Technical Report was completed, Energy Fuels has acquired the White Mesa Mill and the Nichols Ranch Plant, which creates the option to transport loaded resin to either of those facilities for stripping, and to the White Mesa Mill for drying, and packaging of yellowcake.
The preferred alternative for the development of the Sheep Mountain Project begins the operation with the open pit and heap leach facility and brings the underground component of the project into operation about five years later such that the forecasted end of extraction for both the open pit and underground components coincide. This approach defers a substantial amount of initial capital, minimizes risk, and allows for a gradual startup of site activities while maximizing resource recovery. Having the end of extraction coincide for both operations also optimizes the fixed costs of personnel and facilities. A preliminary feasibility study (“
PFS
”) for the project has been completed in accordance with NI 43-101, which includes the preliminary design and sequencing of the open pit and underground operations and the heap leach mineral processing facility. Designs and sequencing are inclusive of pre-production, production, and decommissioning and reclamation.
The current design for the Congo Pit includes typical highwall heights in the range of 100 to 400 feet, and reaches a maximum depth of 600 feet in localized areas in the southeast pit corner. The open pit design employs similar design parameters and mining equipment configurations to those used successfully in past Wyoming conventional operations. Highwall design is based upon the performance of past projects in the Sheep Mountain and Gas Hills districts, and includes an average highwall slope of 0.7:1, which reflects the average of a 10-foot bench width and 50-foot wall at a 0.5:1 slope.
The underground method proposed is also a conventional method using a modified room and pillar method, but utilizing modern equipment such as jumbo drills and 7 cubic-yard scooptrams for haulage. A new double entry decline will be constructed starting at the Paydirt Pit and ending below the deposit. Haulage from the facility will be accomplished via a 36-inch conveyor within one of the double declines. The existing shafts will be used for ventilation purposes only, with exhaust fans mounted at both locations. If the existing borehole ventilation shafts can be rehabilitated, they will be used as intake shafts.
In 2013, we submitted a revised PO to the BLM, which included redesign of the heap leach processing area and the option to potentially transport the mineralized material to an off-site processing facility. The revision to the PO is expected to give us more flexibility in processing the resources extracted from the Sheep Mountain Project. A Record of Decision giving BLM's final approval of the revised PO was issued on January 6, 2017.
Accessibility, Climate, Local Resources, Infrastructure and Physiography
The Sheep Mountain Project is located at approximate Latitude 42°24’ North and Longitude 107° 49’ West, within the Wyoming Basin physiographic province in the Great Divide Basin at the northern edge of the Great Divide Basin. The project is approximately eight miles south of Jeffrey City, Wyoming. The nearest commercial airport is located in Riverton, Wyoming approximately 56 miles from Jeffrey City on a paved two-lane state highway. The project is accessible via 2-wheel drive on existing county and two-track roads.
The Sheep Mountain Project falls within the intermountain semi-desert weather province, with average maximum temperatures ranging from 31.1 °F (January and December) to 84.9 °F (July), average minimum temperatures ranging from 9.1 °F (January) to 49.2 °F (July), and average total monthly precipitation ranging from 0.36 -inches (January) to 2.04 -inches (May). The topography consists of rounded hills with moderate to steep slopes. Elevations range from 6,600 feet to 8,000 feet above sea level. The ground is sparsely vegetated with sage and grasses and occasional small to medium sized pine trees at higher elevations. Year-round operations are contemplated for the Sheep Mountain Project.
Telephone, electric and natural gas service adequate for the planned extraction and mineral processing operations have been established at the Sheep Mountain Project. Electric service and a waterline have been extended via right-of-way issued by the BLM in 2011 to the existing Sheep 1 and 2 shafts. Adequate water rights are held by the Company for planned extraction and mineral processing operations but need to be updated with the Wyoming State Engineer with respect to type of industrial use, points of diversion, and points of use.
We believe that sufficient surface rights are in place for all contemplated operations, including tailings storage areas, waste disposal, heap leach pads, and potential processing sites.
Ownership
The mineral properties at the Sheep Mountain Project are comprised of 192 unpatented mining claims (the Company added 13 claims to the 179 reported in the Sheep Mountain Technical Report) on land administered by the BLM; approximately 640 acres of State of Wyoming leases; and approximately 630 acres of private leases on fee lands. In February 2012, Energy Fuels purchased 320 acres of private surface overlaying some of the federal minerals covered by 18 of the claims. The purchased parcel includes the SW¼ SW¼ Section 28 and SE¼, E½ SW¼, and NW¼ SW¼ Section 29, T28N, R92W. A final payment of $5,000 was made in January 2016 for the purchased parcel. The combination of land holdings (including the 13 new claims) comprises approximately 4,675 acres and gives Energy Fuels mineral rights to resources as defined in the Congo Pit and the Sheep Underground areas. After the 2012 Technical Report, the Company increased the Sheep Mountain property size by 26 unpatented mining claims (approximately 520 acres) through the
acquisition of Strathmore. These contiguous claims form a larger buffer, with potential for additional uranium resources, along the west side of the Project.
To maintain these mineral rights, the Company must comply with the lease provisions, including annual payments with respect to the State of Wyoming leases; private leases; BLM and Fremont County, as well as Wyoming filing and/or annual payment requirements to maintain the validity of the unpatented mining lode claims as follows. Mining claims are subject to annual filing requirements and payment of a fee of $155 per claim. Unpatented mining claims expire annually, but are subject to indefinite annual renewal by filing appropriate documents and paying the fees described above. ML 0-15536 will expire on 1/1/2024. Annual Payments to maintain ML 0-15536 are $2,560 per year. The original private lease dated November 20, 2975 between McIntosh Cattle Company and Western Nuclear Inc. (the “Private Lease”) expired 11/20/2015. Properties covered by the Private Lease include: Township 28 North, Range 92 West, 6th PM; Section 20: S½SW¼; Section 29: NW¼, SW¼SW¼; Section 30: SE¼NE¼, E½SE¼; Section 31: E½NE¼; Section 32: E½NE¼; Section 33: S½NW¼. Since the date of the Sheep Mountain Technical Report, the Company no longer holds the Private Lease, however a Surface Owner’s Agreement (originally dated January 27, 1970, as amended on April 14, 1981 and ratified by assignees on April 16, 2007) covering the same parcels and a few select claims in the Sun-Mc area is still in effect. It carries a 2% mine value royalty for any material extracted from the subject lands, but no other payment obligations.
The Sheep Mountain Project is subject to an overall sliding scale royalty of 1% to 4% due to Western Nuclear, based on the Nuclear Exchange Corporation Exchange (“
NUEXCO
”) Value. This royalty is currently at its maximum rate of 4%. Under Wyoming State Lease ML 0-15536, there is a royalty of 5% of the quantity or gross realization value of the U
3
O
8
, based on the total arms-length consideration received for uranium products sold.
Uranium mining in Wyoming is subject to both a gross products (county) and mineral severance tax (state). At the federal level: aggregate corporate profit from mining ventures is taxable at corporate income tax rates, i.e. individual mining projects are not assessed federal income tax but rather the corporate entity is assessed as a whole. For mineral properties: depletion tax credits are available on a cost or percentage basis whichever is greater. The percentage depletion tax credit for uranium is 22%, among the highest for mineral commodities, IRS Pub. 535.
Permitting and Licensing
In June 2010, Titan commenced baseline environmental studies to support an application to the NRC for a Source Material and By-product Material License (the “
License
”) for operation of a heap leach facility. Work was also initiated on a revision to the existing WDEQ Mine Permit, as well as a PO for the BLM. Baseline studies included wildlife and vegetation surveys, air quality and meteorological monitoring, ground and surface water monitoring, radiological monitoring, and cultural resource surveys.
Submission of the PO to the BLM was made in June 2011. The PO was accepted as complete by the BLM, and an EIS was initiated in August 2011. Energy Fuels revised the PO in July 2012, consistent with the modified plan presented in the Sheep Mountain Technical Report. In July 2013, the PO was again revised to reflect a new waste rock disposal layout for the open pit mine and an improved and more economical heap leach and processing facility. The revised PO also included the option of transporting mineralized material off-site for processing. The Final EIS was completed in August of 2016. On January 6, 2017, the BLM issued its RoD and approved the PO.
In October 2011, Titan submitted a draft revision to its existing Mine Permit 381C to WDEQ. WDEQ then provided Titan with review comments as part of its “courtesy review.” The permit revision was revised and resubmitted in January 2014. In July 2015, the revision was approved by WDEQ. The revision includes expansion of surface and underground mining operations and an updated reclamation plan consistent with current reclamation practices.
Development of an application to the NRC for a license to construct and operate the uranium recovery facility has been taken to an advanced stage of preparation. This license would allow Energy Fuels to process the mineralized material into yellowcake at the Sheep Mountain Project site. The draft application to NRC for a Source Material License was reviewed in detail by the NRC in October 2011. The NRC audit report identified areas where additional information should be provided. The review and approval process for this license by the NRC is anticipated to take approximately four years from the date submitted to the NRC. Submittal of the license application to the NRC is on hold pending the Company’s evaluation of off-site processing options for this project, and if a decision is made to proceed with an on-site uranium recovery facility, pending improvements in uranium market conditions.
The heap leach facility has been permitted through the State of Wyoming and BLM, yet still requires NRC licensing. The permitted capacity is 4 million tons of mineralized material which is 53% of the NI 43-101 Mineral Reserves declared. An expansion to the heap leach facility (including permitting) will be required in the future to process the remaining 47% of the 43-101 Mineral Reserves.
Geological Setting
A primary component of the geology for the Sheep Mountain Project is the Battle Spring Formation. Battle Spring is Eocene in age. Prior to deposition of the Battle Spring Formation and subsequent younger Tertiary formations, underlying Paleocene, Cretaceous, and older formations were deformed during the Laramide Orogeny. During the Laramide Orogeny, faults, including the Emigrant Thrust Fault at the northern end of the project area, were active and displaced sediments by over 20,000 feet. Coincident with this mountain building event, Paleocene and older formations were folded in a series of echelon anticlines and synclines, generally trending from southeast to northwest. The Battle Spring Formation was deposited unconformably on an erosional landscape influenced by these pre-depositional features. Initial stream channels transporting clastic sediments from the Granite Mountains formed in the synclinal valleys.
The geologic setting of the Sheep Mountain Project is important in that it controlled uranium mineralization by focusing movement of the groundwaters, which emplaced the uranium into the stream channels, which had developed on the pre-tertiary landscape. The Battle Spring Formation and associated mineralization at the Sheep Mountain Project is bounded to the east by the western flank of the Sheep Mountain Syncline and to the west by the Spring Creek Anticline. To the north the system is cut off by erosion. To the south the Battle Spring continues into the northern portions of the Great Divide Basin.
Mineralization occurs throughout the lower A Member of the Battle Spring Formation and is locally up to 1,500 feet thick. The upper B Member is present only in portions of the project and may be up to 500 feet thick. Although arkosic sandstone is the preferred host, uranium has been extracted from all lithologies. Grade and thickness are extremely variable depending on whether the samples are taken from the nose or the tails of a roll front. Typically the deposits range from 50 feet to 200 feet along a strike, five feet to eight feet in height, and 20 feet to 100 feet in width. Deposits in the Sheep Mountain Project area occur in stacked horizons from 7,127 feet in elevation down to 6,050 feet in elevation.
History
The Sheep Mountain Project was acquired by Energy Fuels on February 29, 2012, as a result of the Company’s acquisition of Titan, which is now a wholly owned subsidiary of Energy Fuels. Titan acquired the Sheep Mountain Project in two transactions in 2009. A 50% working interest was acquired when Titan completed a business combination with Uranium Power Corp. (“
UPC
”) on July 31, 2009. UPC is now a wholly-owned subsidiary of Energy Fuels. At that time, UPC and UPC’s US subsidiary (then called UPC Uranium (USA) Inc. and now called Energy Fuels Wyoming Inc.) became wholly-owned subsidiaries of Titan. The remaining 50% of the Sheep Mountain Project was owned by Uranium One Inc. (“
U1
”) which was UPC’s joint venture partner for the project. On October 1, 2009, Titan acquired U1’s 50% interest, giving Titan a 100% interest in the Sheep Mountain Project. On February 29, 2012, Energy Fuels acquired Titan (and its subsidiaries) at which point the Sheep Mountain Project became 100% owned by the Company.
The Sheep Mountain Project was operated as an underground and open pit mine at various times in the 1970’s and 1980’s. 5,063,813 tons of mineralized material were mined and milled, yielding 17,385,116 pounds of uranium at an average grade of 0.17% U
3
O
8
. Mining was suspended in 1988 and the project has been on care and maintenance since that time.
Uranium was first discovered in the Crooks Gap District, which includes the Sheep Mountain Project, in 1953. While the original discoveries were aided by aerial and ground radiometric surveys, exploration activities were primarily related to drilling and exploratory trenching. Three companies dominated the district by the mid-1950s: Western Nuclear Inc. (“
Western Nuclear
”), Phelps Dodge Corporation (“
Phelps Dodge
”), and Continental Uranium Corporation (“
Continental
”). Western Nuclear built the Split Rock mill at Jeffrey City in 1957 and initiated production from the Paydirt pit in 1961, Golden Goose 1 in 1966, and Golden Goose 2 in 1970. Phelps Dodge was the principal shareholder and operator of the Green Mountain Uranium Corporation’s Ravine Mine, which began production in 1956. Continental developed the Seismic Pit in 1956, the Seismic Mine in 1957, the Reserve Mine in 1961, and the Congo Decline in 1968. In 1967, Continental acquired the Phelps Dodge properties and in 1972, Western Nuclear acquired all of Continental’s Crooks Gap holdings. During the mid-1970’s Phelps Dodge acquired an interest in Western Nuclear, which began work on the Sheep Mountain I in 1974, the McIntosh Pit in 1975, and Sheep Mountain II in 1976. Western Nuclear ceased production from the area in 1982. Western Nuclear production from the Sheep Mountain I is reported to have been 312,701 tons at 0.107% U
3
O
8
. Subsequent to the closure of the Sheep Mountain I by Western Nuclear, during April to September 1987, Pathfinder Mines Corporation (“
Pathfinder
”) mined a reported 12,959 tons, containing 39,898 pounds of uranium at an average grade of 0.154% U
3
O
8
from Sheep Mountain I. U.S. Energy-Crested Corp. (“
USECC
”) acquired the properties from Western Nuclear in 1988, and during May to October 1988, USECC mined 23,000 tons from Sheep Mountain I, recovering 100,000 pounds of uranium for a mill head grade of 0.216% U
3
O
8
. The material was treated at Pathfinder’s Shirley Basin mill, 130 miles east of the Project. The Sheep Mountain I mine was allowed to flood in April 2007. UPC (then known as Bell Coast Capital) acquired a 50% interest in the property from USECC in late 2007. USECC later sold all of its uranium assets to U1. Titan acquired UPC’s 50% interest in the property when it acquired UPC by a plan of arrangement in July 2009. Titan acquired U1’s interest in the Sheep Mountain Project in September 2009.
During the National Uranium Resource Evaluation (“
NURE
”) program conducted by the DOE in the late 1970’s and early 1980’s, the project area and vicinity were evaluated. This evaluation included aerial gamma, magnetic, and gravimetric surveys, soil and surface water geochemical surveys and sampling, and geologic studies and classification of environments favorable for uranium mineralization.
Approximately 4,000 holes were drilled in the project area historically (prior to 1988), most of which were open-hole rotary drilling, reliant upon down-hole geophysical logging to determine equivalent uranium grade % eU
3
O
8
.
However, some core drilling for chemical analysis was also completed. The drill maps show hole locations at the surface and downhole drift, the thickness and radiometric grade of uranium measured in weight percent U
3
O
8
, elevation to the bottom of the mineralized intercept, collar elevation, and elevation of the bottom of the hole.
In 2006, UPC completed a drilling program consisting of 19 holes totaling 12,072 feet. Two of the 19 holes were located in Section 28 with the purpose of confirming the mineralization within the Sheep Underground mine area. The remaining 17 holes were completed in the planned Congo Pit to test both shallow mineralization and to explore a deeper mineralized horizon. This 2006 drilling has confirmed the presence of mineralization in the shallow horizons of the Congo Pit area and has identified and extended roll front mineralization in the 58 sand along strike.
Following the acquisition of UPC by Titan, five holes were drilled in the Congo Pit area in 2009 for a total of 1,700 feet. In situ mineral grades for 2009 drilling were determined by geophysical logging including both conventional gamma logging and state of the art Uranium Spectrum Analysis Tool. Titan also drilled in the Congo Pit area in 2010 62 exploratory drill holes and 5 monitor wells and 2011 73 exploratory drill holes and 5 monitor wells. There were a total of 140 exploration holes drilled between 2009 and 2011, which total about 44,000 feet.
No relevant exploration work other than this drilling has been conducted on the property in recent years. The project is located within a brownfield site, which has experienced past mine production and extensive exploration and development drilling. The initial discovery was based on aerial and ground radiometric surveys in the 1950s, but since that time exploratory work on the site has been primarily drilling.
Mineralization
Most of the mineralization in the Crooks Gap District occurs in roll-front deposits. Roll fronts have an erratic linear distribution but are usually concordant with the bedding. Deposits have been discovered from the surface down to a depth of 1,500 feet. The two major uranium minerals are uranophane and autunite. Exploration drilling indicated that the deeper roll-type deposits are concentrated in synclinal troughs in the lower Battle Spring Formation. Three possible sources for uranium have been suggested: post-Eocene tuffaceous sediments, leached Battle Spring arkoses, and Precambrian granites. Structural controls of uranium occurrences along roll fronts include carbonaceous siltstone beds that provide a local reducing environment for precipitation of uranium-bearing minerals, and abrupt changes in permeability along faults, where impermeable gouge is in contact with permeable sandstones. Uranium has also been localized along the edges of stream channels and at contacts with carbonaceous shales.
Mineral Resource and Mineral Reserve Estimates
Mineral Resources
The Mineral Resource estimates for the Sheep Mountain Project are summarized in the following table. The Mineral Resource estimates presented herein have been completed in accordance with CIM Standards and NI 43-101. Based on the drill density, the apparent continuity of the mineralization along trends, geologic correlation and modeling of the deposit, a review of historic mining with respect to current resource projections, and verification drilling, the Mineral Resource estimate herein meets CIM criteria as an Indicated Mineral Resource. These Indicated Mineral Resources are not reserves within the meaning of SEC Industry Guide 7. See Cautionary Note to U.S. Investors Concerning Disclosure of Mineral Resources, above. Below is a summary of the total Indicated Mineral Resources
(1)
estimated for the Sheep Mountain Project:
Sheep Mountain Mineral Resources – Uranium
(1)(2)(3)
|
|
|
|
|
|
|
|
|
Classification
|
Zone
|
G.T. Cut-off
|
Tons (000)
|
Grade % eU
3
O
8
|
Pounds eU
3
O
8
(000)
|
|
|
Sheep Mountain Measured Resources (M)
|
---
|
---
|
---
|
---
|
---
|
|
Sheep Mountain Indicated Resources (I)
|
Sheep Underground
|
0.30
|
5,640
|
0.117%
|
13,245
|
|
Congo Pit Area
|
0.10
|
6,176
|
0.122%
|
15,040
|
|
Sun-Mc
|
0.10
|
1,080
|
0.093%
|
2,000
|
|
Total (M & I)
|
12,895
|
0.117%
|
30,285
|
|
Sheep Mountain Inferred Resources
|
---
|
---
|
---
|
---
|
---
|
Notes:
(1) The Mineral Resource estimate in this table complies with the requirements of NI 43-101 and the classifications comply with CIM definition standards and do not represent reserves under SEC Industry Guide 7. Mineral resources that are not reserves do not have demonstrated economic viability. See “
Cautionary Note to U.S. Investors Concerning Disclosure of Mineral Resources
,” above.
(2) Mineral Resources are estimated at a uranium grade x thickness (G.T.) cut-off grade of 0.10 G.T. (2 ft. of 0.05% eU
3
O
8
for the Congo Pit and Sun-Mc areas and 0.30 G.T. (6 ft. of 0.05% eU
3
O
8
) for the Sheep Underground.
(3) Numbers may not add due to rounding.
This estimate includes deletion of the portions of the mineral resource model which falls within the historic limits in the Congo Pit estimated to have removed some 25% of the initial resource estimate and the total reported mined tonnage from the historic Sheep I underground mine. From review of the Sheep I and II as-built mine plans, it was apparent that little or no mineralized material was mined at the historic Sheep II and that only development work was completed. Historic underground mining in the Sun Mc area is estimated to have removed some 10% of the total resource. Although in many cases the mine maps showed remnant pillars, none of these areas were included in the mineral resource estimate. Thus, the estimate of current mineral resources is conservative with respect to the exclusion of areas affected by historic mining. Estimated mineral resources for potential open pit areas were diluted to a minimum mining thickness of two feet and a cutoff grade of 0.05% U
3
O
8
, which equates to a 0.10 GT cutoff. The cutoff of 0.10 GT used for estimating the Mineral Resources for the open pit areas is the same cutoff value as that used for estimating the Mineral Reserves at a $65/Lb uranium price. The cutoff of 0.30 GT used for estimating the Mineral Resources for Sheep Underground is lower than the 0.45 GT cutoff used for estimating the Mineral Reserves at a $65/Lb uranium price. Some of the Mineral Resources fall outside of the mine plan, whereas all of the Mineral Reserves fall within the mine plan.
Mineral Reserves
The estimate of mineral reserves for the Sheep underground extraction area is set out in the Sheep Mountain Technical Report. With respect to the open pit mineral reserves, mineral resources for the Congo, North Gap, and South Congo areas were combined into a single comprehensive mineral resource model. Open pit mine designs and sequencing was completed for all areas, and the resultant mineral reserve estimate reflects the current open pit mine designs and economic evaluations. These reserves have been calculated in accordance with NI 43-101 and should not be considered to meet the definition of reserves within the meaning of SEC Industry Guide 7. Resources that are not reserves do not have demonstrated economic viability. See Cautionary Note to U.S. Investors Concerning Disclosure of Mineral Resources, above.
Below is a summary of the total Probable Mineral Reserve estimate for the Sheep Mountain Project as calculated in accordance with NI 43-101:
Sheep Mountain Mineral Reserves – Uranium
(1)(2)(3)(4)
|
|
|
|
|
|
|
|
|
Classification
|
Zone
|
G.T. Cut-off
|
Tons (000)
|
Grade % eU
3
O
8
|
Pounds eU
3
O
8
(000)
|
|
|
Sheep Mountain Proven Reserves
|
---
|
---
|
---
|
---
|
---
|
|
Sheep Mountain Probable Reserves
|
Open Pit
|
0.10
|
3,955
|
0.115%
|
9,117
|
|
Underground
|
0.45
|
3,498
|
0.132%
|
9,248
|
|
Total Proven and Probable Reserves
|
7,453
|
0.123%
|
18,365
|
Notes:
(1) The Mineral Reserve estimate in this table complies with the requirements of NI 43-101 and the classifications comply with CIM definition standards and do not represent reserves under SEC Industry Guide 7.
(2) Mineral Reserves are estimated at a uranium grade x thickness (G.T.) cut-off grade of 0.10 G.T. (2 ft. of 0.05% eU
3
O
8
) for the Congo Pit and 0.45 G.T. (6 ft. of 0.075% eU
3
O
8
) for Sheep Underground.
(3) Mineral Reserves are estimated using a long-term uranium price of US$65 per pound U
3
O
8
.
(4) Numbers may not add due to rounding.
The Probable Mineral Reserves are fully included in the total Indicated Mineral Resources for the Congo Pit and are not additive to that total. The Probable Mineral Reserve is that portion of the Indicated Mineral Resource that is economic under estimated costs and assumed pricing conditions. The cutoff grade of 0.075% eU
3
O
8
at a minimum mining height of 2 foot equates to a 0.10 GT cutoff for the Congo Pit. The cutoff grade of 0.075% eU
3
O
8
at a minimum mining height of 6 feet equals a 0.45 GT cutoff used for the Sheep underground extraction area. The cutoff grade was determined based on an assumed uranium price of $65 per pound U
3
O
8
.
Present Condition of the Property and Work Completed to Date
The Sheep Mountain Project includes the Congo Pit, a proposed open pit uranium extraction facility, and the reopening of the existing Sheep Underground mining facility. Mineral Extraction at the Sheep Underground mining facility was suspended in 1988 and the project has been on care and maintenance since that time.
The Sheep Mountain Project does not currently have a processing facility. Transportation of mineralized materials to the White Mesa Mill is not economic at current or foreseeable uranium price levels. As a result, it will be necessary to permit and construct a heap leach or other processing facility at the site, or make arrangements to process Sheep Mountain mineralized materials at a third party processing facility.
The Company is subject to liabilities for mine reclamation at the Sheep Mountain project. The Company maintains a bond in the amount of $950,000 with the State of Wyoming as security for these liabilities. The Company files an annual report with the State of Wyoming, and the amount of the bond may be adjusted annually to ensure sufficient surety is in place to cover the full cost of reclamation. The Company’s reclamation of the exploration drilling performed by Titan was deemed complete in October 2014; the drilling permit was terminated and that bond was fully released.
The Sheep Mountain Project was acquired by the Company in February 2012, through the Company’s acquisition of Titan. As of December 31, 2017, the total cost attributable to the Sheep Mountain Project on the financial statements of the Company was $34.18 million.
The Company’s Planned Work
The Company will continue to evaluate its options for processing Sheep Mountain mineralized material, including continuing to pursue permitting for a heap leach facility at the site, evaluating other types of processing facilities at the site, or determining whether arrangements can be made to process Sheep Mountain mineralized materials at a third party processing facility. Submittal of the license application to the NRC for a heap leach processing facility at the site is on hold pending the Company’s evaluation of off-site processing options for this project. The project is currently on standby, pending completion of the evaluation of the processing options for the Project and improvement in market conditions.
The Henry Mountains Complex
Except as noted below concerning the land and permitting efforts, the following technical and scientific description of the Henry Mountains Complex is based on the technical report dated June 27, 2012 titled “
Technical Report on the Henry Mountains Complex Uranium Property, Utah, U.S.A.
”, prepared by William E. Roscoe, Ph.D., P.Eng., Douglas H. Underhill, Ph.D., C.P.G. and Thomas C. Pool, P.E. of Roscoe Postle Associates Inc. (“
RPA
”) in accordance with NI 43-101 (the “
Henry Mountains Technical Report
”). Each of the authors of the Henry Mountains Technical Report is “independent” of Energy Fuels and a “qualified person” for purposes of NI 43-101. The report contains mineral resource estimates for the Indian Bench, Copper Bench, Southwest and Tony M deposits. The Henry Mountains Technical Report is available on SEDAR at www.sedar.com and on EDGAR at www.sec.gov. The Henry Mountains Complex does not have known reserves, and is therefore considered under SEC Industry Guide 7 definitions to be exploratory in nature, despite uranium extraction activities occurring at the Tony M deposits as recently as 2008.
Property Description and Location
The Henry Mountains Complex is an underground project comprised of the Bullfrog Property, hosting the Indian Bench and the Copper Bench deposits, and the Tony M Property, hosting the Southwest deposit and the Tony M deposit and associated mineral extraction facilities. The Henry Mountains Complex is located in eastern Garfield County, Utah.
Accessibility, Climate, Local Resources, Infrastructure and Physiography
Road access to the Henry Mountains Complex is by paved Highway 276, running between Hanksville and Bullfrog Basin Marina, Utah. An unimproved gravel road maintained by Garfield County extends west from Highway 276, passes by the portal of the Tony M Property, and extends northerly across the property, the northern end of which is crossed by another county road. The property is located in a relatively remote area of Utah, and the infrastructure is limited. The town site of Ticaboo, Utah, is located approximately five miles south of the property. Ticaboo has been used to provide housing and municipal services for Tony M Property staff. The next closest community is Hanksville, Utah, a small town of a few hundred people, located about 40 miles north of the property. During operation of the Tony M Property, electricity was generated locally. Materials and supplies are transported to the site by truck about 275 miles from Salt Lake City, and about 190 miles from Grand Junction, Colorado. The distance to the White Mesa Mill is about 117 miles.
The climate is distinctly arid, with an average annual precipitation of approximately eight inches, including about 12 inches of snow. The vegetation consists primarily of small plants including some of the major varieties of blackbrush, sagebrush, and rabbit brush. A few small junipers are also present. Relief over the combined Henry Mountains Complex is approximately 2,250 feet (the technical report erroneously reported 800 feet). The elevation on the property ranges from 4,550 ft. above sea level at the portal of the Tony M Property, near the southern end of the property, to 6,800 ft. above sea level over the northern end of the property. The terrain is typical canyon lands topography, with some areas deeply dissected by gullies and headwalls of canyons and the rest consisting of gently undulating gravel benches covering the northern part of the project area. The terrain in several parts of the property is particularly rugged and inaccessible and is the primary reason for the irregular pattern of surface drill holes in parts of the property.
Ownership
The Henry Mountains Complex is 100% owned by Energy Fuels, and was acquired from Denison Mines Corp. and its affiliates in June 2012. The project consists of one Utah State Mineral Lease for Section 16, Township 35 South, Range 11 East (T35S R11E), Salt Lake Meridian (SLM), and 202 unpatented federal lode mining claims. The latter consist of 137 B.F., 19 Bull, 19 Star, two Frog claims (comprising the Bullfrog Property), and 17 TIC and eight Ticaboo claims, including fractions (comprising the Tony M property). The claims and state lease comprise one contiguous property located in T34S, R11E and T35S, R11E, SLM. The Utah State Section 16 includes 638.54 acres, and the 202 unpatented lode mining claims consist of about 3,667.18 acres (not specified in the technical report), for a total land holding of 4,305.72 acres. The surface rights are owned by the federal government, administered by the BLM, with the exception of the State lease, which has associated state surface rights.
There is no royalty burden for the 185 claims that comprise the Bullfrog Property, as well as for the Ticaboo claims. All unpatented mining claims are subject to an annual federal mining claim maintenance fee of $155 per claim plus approximately $10 per claim for county filing fees. The 17 TIC claims are held by Energy Fuels, subject to an annual advance minimum royalty. The uranium production royalty burden is 4% yellowcake gross value less taxes and certain other deductions. The vanadium production royalty burden is 2% gross value less certain deductions. The Utah State Lease carries an annual rental of $640, plus an escalating annual advance minimum royalty based on the uranium spot price. Since the technical report was written, the State lease was renewed in 2015 for an additional 10-year term, which can be extended. Other changes in the renewed lease include reducing annual advanced royalty payments and crediting the advanced royalty against the production royalty for the year in which it is paid plus any amount paid in the five prior years. The uranium royalty on the State lease is 8% of gross value less certain deductions. The vanadium royalty on the State lease is 4% of gross value less certain deductions.
Permitting
Tony M Property:
The original Tony M Property mine permit was allowed to lapse. Subsequently the previous operator, Denison, filed for exploration permits with the Utah Division of Oil, Gas and Mining (“
UDOGM
”) and the BLM. These permits were granted by UDOGM and the BLM on December 2, 2005 and March 6, 2006, respectively, which enabled Denison to regain access, inspect and begin rehabilitation of the Tony M underground workings. Denison also began the permitting process for the Tony M Property. The permit application was submitted in November 2006 and a RoD and approved PO were received in September 2007.
The PO was challenged by the Center for Water Advocacy and the Utah Chapter of the Sierra Club, which requested a Utah State BLM Director Review and a stay of the decision approving the Final PO for the Tony M Property. On November 21, 2007, the BLM State Director issued a decision vacating the previously issued permit and remanded the case to the Field Office in order that the EA for the Tony M Mine PO could be amended and a new RoD issued. As a result of this decision to vacate and renew, the request for stay was considered moot. The new decision was issued by the BLM on November 23, 2007 approving the PO for the project. The new decision was once again appealed by the Center for Water Advocacy and the Utah Chapter of the Sierra Club. The Utah State Director issued a decision denying the appeal and upholding the PO on February 19, 2008. In addition to the PO and FONSI from the BLM, major permits for the Tony M property include an approved Large Mine permit with UDOGM, and an approved ground water discharge permit with the Utah Division of Water Quality (“
DWQ
”). A reclamation bond of $708,537 is in place.
Permit applications for a Phase 2 expansion were submitted to the BLM and UDOGM in 2008, but Denison subsequently requested that BLM and UDOGM review of the applications be deferred given the market conditions at that time.
Bullfrog Property:
The Company is currently completing environmental baseline studies and preparing mine plans for permitting purposes at the Bullfrog Property. An Exploration Notice of Intent was submitted to UDOGM and BLM in late 2016 to allow for drilling of 23 holes planned as offset/confirmation data and a few to be core holes to gather geotechnical and metallurgical information. The NOI has not been approved by DOGM and approval by BLM is pending additional information.
Geologic Setting
Exposed rocks in the project area are Jurassic and Cretaceous in age. Host rocks for the Copper Bench-Indian Bench and Tony M-Southwest uranium-vanadium deposits are Upper Jurassic sandstones of the Salt Wash Member of the Morrison Formation. This formation is located within the Colorado Plateau. Early Tertiary fluvial and lacustrine sedimentation within the deeper parts of local basins was followed in mid-Tertiary time by laccolithic intrusion and extensive volcanism. Intrusions of diorite and monazite porphyry penetrated the sediments at several sites to form the laccolithic mountains of the central Colorado Plateau.
The Morrison Formation is a complex fluvial deposit of Late Jurassic age. In outcrop, the Salt Wash is exposed as one or more massive, ledge-forming sandstones, generally interbedded with laterally persistent siltstones or mudstones. The lower Salt Wash is approximately 150 ft. thick in the Project area, thinning and becoming less sandy northward from the project area. Sandstones comprise 80% of the sequence, with siltstones and mudstones making up the remainder. Significant uranium mineralization occurs only in this lower unit.
History
In 1970 and 1971, Rioamex Corporation conducted a 40-hole drilling program in an east-west zone extending across the southerly end of the Bullfrog Property and the northerly end of the Tony M and adjacent Frank M properties. Some of these holes intercepted significant uranium mineralization. The Bullfrog deposit was initially explored by Exxon Minerals Company (“
Exxon
”), while the Tony M deposit was explored and advanced by Plateau Resources Ltd. (“
Plateau
”), a subsidiary of Consumers Power Company (“
Consumers
”) of Michigan.
In February 1977, drilling commenced in what was to become the Tony M deposit. Subsequently, Plateau drilled more than 2,000 rotary drill holes totaling about 1,000,000 feet. Over 1,200 holes were drilled in the Tony M area. Following the discovery of the Tony M deposit in 1977, Plateau developed the Tony M Property from September 1, 1977, to about May 1984, at which time mining activities were suspended. By January 31, 1983, over 18 miles of underground workings were developed at the Tony M Property, and a total of approximately 237,000 tons of mineralized material was extracted with an average grade of 0.121% U
3
O
8
containing about 573,500 pounds U
3
O
8
. The underground workings at the Tony M Property are accessed via two parallel declines extending about 10,200 ft. into the deposit. The underground workings were allowed to flood after mining activities were suspended in 1984. The southern one-half of the underground workings remained dry, as they are located above the static water table.
Exxon commenced drilling on the Bullfrog Property in 1977. Before it sold the property to Atlas in July 1982, Exxon had drilled 1,782 holes. From July 1982 to July 1983, Atlas completed 112 drill holes delineating the Southwest and Copper Bench deposits on approximately 100 ft. centers. After July 1983, Atlas completed an additional 49 core hole drilling program throughout the Bullfrog Property, as well as a 133 rotary drill hole program to delineate the Indian Bench deposit on approximately 200 ft. centers. 2,232 drill holes were completed on the Bullfrog Property.
The Southwest and Copper Bench deposits are delineated by drilling on approximately 125-foot centers. The Indian Bench deposit is delineated by drilling on approximately 200 ft. centers. In some areas, the rugged terrain made access difficult, resulting in an irregular drill pattern. Records indicate that 81 core holes were drilled in the Southwest, Copper Bench, and Indian Bench deposits, while 25 core holes were drilled in the vicinity of the Tony M deposit. The core holes provided samples of the mineralized zone for chemical and amenability testing.
Denison acquired the Bullfrog Property when it purchased most of the assets of EFN in 1997. In February 2005, Denison acquired the Tony M Property bringing it under common ownership with the Bullfrog Property. Following rehabilitation work at the Tony M Property and re-establishment of surface facilities in 2006, Denison received operational permits, reopened the Tony M underground workings and commenced mining activities in September 2007. This work included a long-hole drilling program to discover and delineate mineralization within about 100 feet of underground workings. In November 2008, Denison announced that mining activities at the Tony M Property would be suspended due to uranium and economic market conditions. During its September 2007 to December 2008 reactivation, cleanup and mining activities, Denison extracted 162,384 tons of mineralized material at radiometric grade of 0.131% containing 429,112 pounds U
3
O
8
from within existing workings and from the previously stockpiled material. This material was trucked to the White Mesa Mill for processing. In June 2012, Energy Fuels acquired all of Denison’s uranium properties in the United States, including the Henry Mountains Complex.
No mine development has been conducted on the Southwest portion of the Tony M-Southwest deposit or on the Copper Bench-Indian Bench deposit located further north.
Energy Fuels has carried out no exploration work on the Henry Mountains Complex.
Mineralization
Uranium mineralization in the Henry Mountains Complex is hosted by favorable sandstone horizons containing detrital organic debris. Mineralization primarily consists of coffinite, with minor uraninite, which usually occurs in close association with vanadium mineralization. Mineralization occurs as intergranular disseminations, as well as coatings and/or cement on and between sand grains and organic debris. Vanadium occurs as montroseite (hydrous vanadium oxide) and vanadium chlorite in primary mineralized zones located below the water table (i.e., the northern portion of the Tony M deposit). Historic production records from the AEC for the South
Henry Mountains district suggest that the vanadium content of the district is relatively low. Based on the review of the available analyses, RPA is of the opinion that the V
2
O
5
:U
3
O
8
ratio ranges from about 1.3:1 to about 2.0:1 in the Henry Mountains Complex deposits.
The Henry Mountains Complex vanadium-uranium deposits consist of two extensive elongate, tabular zones containing a large concentration of mineralization. The Tony M–Southwest deposit extends for a distance of approximately 2.5 miles along a north-south trend and has a maximum width of about 3,000 ft. The larger Copper Bench-Indian Bench deposit extends approximately 3.5 miles along a northwesterly trend to the northeast of the Tony M–Southwest deposit.
Mineral Resource Estimates
Mineral Resources of the Tony M-Southwest deposit were estimated by Denison in 2009 using the GT contour method, and Mineral Resources of the Copper Bench-Indian Bench deposit were estimated in 1993 by EFN using the polygonal block method. These Mineral Resources are not reserves within the meaning of SEC Industry Guide 7.
Henry Mountains Complex Mineral Resources – Uranium
(1)(2)(3)(4)
|
|
|
|
|
|
|
|
|
|
Classification
|
Zone
|
Tons (000)
|
|
Grade % eU
3
O
8
|
Pounds eU
3
O
8
(000)
|
|
|
|
Henry Mountains Measured Resources (M)
|
---
|
---
|
|
---
|
---
|
|
|
Henry Mountains Indicated Resources (I)
|
Tony M
(2)
|
1,030
|
|
0.24%
|
4,830
|
|
|
Southwest
(2)
|
660
|
|
0.25%
|
3,300
|
|
|
Indian Bench
(3)
|
220
|
|
0.40%
|
1,740
|
|
|
Copper Bench
(3)
|
500
|
|
0.29%
|
2,930
|
|
|
Total (M & I)
|
2,410
|
|
0.27%
|
12,800
|
|
|
Henry Mountains Inferred Resources
|
Tony M
(2)
|
650
|
|
0.17%
|
2,170
|
|
|
Southwest
(2)
|
210
|
|
0.14%
|
580
|
|
|
Indian Bench
(3)
|
250
|
|
0.42%
|
2,090
|
|
|
Copper Bench
(3)
|
500
|
|
0.32%
|
3,240
|
|
|
Total Inferred Resources
|
1,610
|
|
0.25%
|
8,080
|
|
Notes:
(1) The Mineral Resource estimate in this table complies with the requirements of NI 43-101 and the classifications comply with CIM definition standards and do not represent reserves under SEC Industry Guide 7. Mineral resources that are not reserves do not have demonstrated economic viability. See “
Cautionary Note to U.S. Investors Concerning Disclosure of Mineral Resources
,” above.
(2) Mineral Resources for Tony M and Southwest are estimated at a uranium grade x thickness (G.T.) cut-off of 0.20 G.T. (2 ft. of 0.10% eU
3
O
8
). This cut-off is estimated using a long-term uranium price of US$60 per pound U
3
O
8
.
(3) Mineral Resources for Indian Bench and Copper Bench are estimated at a uranium grade x thickness (G.T.) cut-off grade 0.80 G.T. (4 ft. of 0.20% eU
3
O
8
). This cut-off is estimated using a long-term uranium price of US$40 per pound U
3
O
8
.
(4) Numbers may not add due to rounding.
The EFN resource estimate was audited by RPA and accepted as a current Mineral Resource estimate for Energy Fuels under NI 43-101.
Present Condition of the Property and Work Completed to Date
The following section has been prepared by the Company and is not based exclusively on the Henry Mountains Technical Report.
The Tony M Property was developed from 1977 to 1983 with a double entry system including two parallel declines spaced 50 ft. apart. The declines measure 9 feet by 12 feet in cross- section, have crosscuts on 50-foot centers, have a minus 3% grade, serve as the primary fresh air intake, and are 10,200 feet in length. By January 31, 1983, over 18 miles of underground workings had been developed at the
Tony M Property. The underground workings were allowed to flood after mining activities were suspended in 1984. The southern one-half of the underground workings remained dry, as they are located above the static water table.
The underground workings were planned as a random room and pillar approach with pillar extraction by a retreat system. Mining equipment consisted of slushers and rubber-tired, five- to ten-ton capacity load-haul-dump units. Exhaust ventilation was provided by five bored ventilation shafts, six feet in diameter, each with a 75-HP exhaust fan mounted at the shaft collar.
By early 2007, work on reactivating the Tony M Property was carried out by Denison, and surface and underground rehabilitation and repairs were conducted. Surface facilities to support mining activities were constructed, including administration and maintenance facilities, site power and communications, and an evaporation pond for evaporation of water from the underground workings. Worker housing was established in the town of Ticaboo, Utah. As rehabilitation work advanced, ventilation was re-established. The water level in the underground workings rose to historic pre-mining activity levels, and upon reaching the flooded workings, dewatering activities were also initiated. During the rehabilitation work, limited amounts of “cleanup mineralized material” were removed. As areas of the underground workings were made ready for mining activities, extraction of mineralized materials increased steadily. Dewatering continued at an average rate of 125 gallons per minute during these activities. Denison placed the Tony M Property on temporary closure status at the end of November 2008, and dewatering activities have ceased. The project is being maintained in a state ready to resume operations as market conditions warrant. All of the Company housing and property in Ticaboo has been sold by Energy Fuels.
There is no existing infrastructure on the Bullfrog Property.
The Henry Mountains Complex was acquired by the Company in June 2012, through the acquisition of the US Mining Division from Denison. The cost of the Henry Mountains Complex has been fully impaired, and as of December 31, 2017, the total cost attributable to the Henry Mountains Complex and its associated equipment on the financial statements of the Company was nil.
The Company’s Planned Work
The Company intends to continue its evaluation activities at the Bullfrog Property during 2018. The Company is also conducting care and maintenance activities on the Tony M Property, in order to maintain it on standby, pending improvements in uranium prices. The planned drilling in the permitting stage will be postponed until the uranium price improves sufficiently.
The La Sal Project
Unless stated otherwise concerning land tenure and permitting efforts, the following technical and scientific description of the La Sal Project is derived from a technical report titled "
Technical Report on La Sal District Project (Including the Pandora, Beaver, and Energy Queen Projects), San Juan County, Utah, U.S.A.
", dated March 25, 2014, prepared by Douglas C. Peters, CPG, of Peters Geosciences, in accordance with NI 43-101 (the “
La Sal Technical Report
”). The La Sal Technical Report includes an updated NI 43-101 compliant Mineral Resource estimate. The author of the La Sal Technical Report is a “qualified person” and “independent” of the Company within the meaning of NI 43-101. A copy of the La Sal Technical Report is available on SEDAR at www.sedar.com and on EDGAR at www.sec.gov. The La Sal Project does not have known reserves, and is therefore considered under SEC Industry Guide 7 definitions to be exploratory in nature, despite uranium extraction activities occurring as recently as 2012.
Project Description & Location
The La Sal Project is an underground project that consists of four mineral properties within close proximity of one another, including (from east-to-west) the Pandora (Snowball) Property, the Beaver (La Sal) Property, the Redd Block Property, and the Energy Queen Property. The La Sal Project is located in San Juan County, Utah near the town of La Sal. Other properties within the La Sal Project (but not described in the La Sal Technical Report) include the Pine Ridge property, east of the Pandora property, and unpatented mining claims west of the Energy Queen Property.
The La Sal trend, which includes the La Sal Project, has a long history of uranium and vanadium production. Deposits from this district have been successfully milled at several historic mills in the region including Union Carbide’s (Umetco's) mill at Uravan, Colorado, the Climax Uranium mill in Grand Junction, Colorado, the Atlas mill at Moab, Utah and Energy Fuels’ White Mesa Mill near Blanding, Utah.
Operations at the La Sal Project are currently on standby. The extraction of all resources at the La Sal Project has been by conventional underground methods for over 40 years and, once mining activity resumes, will continue by such methods. These methods have been used very successfully in the region for over 70 years. The nature of the Salt Wash uranium-vanadium deposits require a random room and pillar mining configuration. The deposits are accessed from the surface via declines depending on the depth to mineralization and geologically suitable sites for portals, as is the case for the La Sal and Pandora/Snowball Properties. Deposits may also be accessed through vertical shafts, such as the shafts located at the Beaver and Energy Queen Properties. The Salt Wash uranium deposits are usually thinner than the underground height needed for personnel and equipment access. Therefore, the mineralized material is often extracted by employing a split-shooting method, which serves to separate mineralized material and waste as it is broken.
Accessibility, Climate, Local Resources, Infrastructure and Physiography
The La Sal Project is easily accessed from the all-weather Utah State Highway 46. Utah 46 enters the project land near the southwest corner of ML-49313 (Section 36, T28S, R24E) about three miles east of the intersection of Utah 46 with U.S. Highway 191 at La Sal Junction. Utah 46 stays within or very near the project land for the next 9 miles to the east. All State and U.S. highways in this area are paved roads.
The area is semi-arid. Temperatures range between an average low of 41°F to an average high of 72°F. Less than ten inches of precipitation falls per year. Winters are not severe, although there are numerous snow storms, the temperature drops below 0°F at times, and snow can accumulate to over a foot in the lower areas and more than two feet at times on Pine Ridge. The region of the La Sal Project central area is characterized by a broad shallow valley of hay fields and pasture lands at an elevation between 6,400 and 7,000 feet. Hills cut by small canyons occur at the west end and even higher elevations of about 7,800 feet are reached at Pine Ridge on the east end. All elevations within four miles of the center and west end of the property support moderate growths of sage and rabbitbrush along with
other brush, forbs, cactus, yucca, and grasses. Higher elevations contain juniper and piñon pine in the rocky soils along with scrub oak, aspen, and ponderosa pine on Pine Ridge to the east.
La Sal, Utah is a small town, currently home to about 200 people. It has been a hub to area ranchers, uranium and copper miners, and oil and gas workers for many years. Larger population centers of Moab and Monticello, Utah are 22 miles north and 34 miles south, respectively, from La Sal Junction on Highway 191. Before the cessation of mining activities at the Beaver and Pandora Properties in late 2012, many of the workers also came from the Nucla-Naturita and the Dove Creek areas of Colorado, each about 55 miles away to the east and south, respectively. Larger cities with industrial supply houses include Cortez, Colorado about 100 miles to the south and Grand Junction, Colorado about 140 miles to the north.
Electric transmission and distribution lines exist throughout the project area, of sufficient size to supply the load the projects demanded in the past. Several substations exist, and the electricity supply is adequate for additional demand. Natural gas is also available for any future production needs.
Ownership
The La Sal Project is held by Energy Fuels’ subsidiary, EFR Colorado Plateau LLC under private surface use and access leases, private mineral leases, Utah State Mineral Leases, San Juan County surface use, access, and mineral leases, and, after the Company reduced the property position by dropping claims without affecting the Mineral Resource, 210 unpatented mining claims on land managed by the BLM or USFS, that are either owned by Energy Fuels (81 claims) or leased by Energy Fuels (129 claims). After the claim drop, the total land package now consists of approximately 9,080 acres. The unpatented claims cover about 3,350 acres, the seven Utah State leases total approximately 2,220 acres, the San Juan County leased land contains just over 263 acres, and the six separate surface access and nine private parcel mineral leases apply to a total of 3,170 acres. The property covers all, or parts of the following Sections: Sections 31, 32, and 33, T28S, R25E; Sections 4, 5, 6, and 7, T29S, R25E; Sections 25, 26, 31, 32, 33, 34, 35, and 36, T28S, R24E; Sections 1, 2, 3, 4, 5, 6, 7, 11, and 12, T29S, R24E; Section 36, T28S, R23E; and Sections 1, and 12, T29S, R23E, SLBM, San Juan County, Utah.
Annual holding costs consist of rental fees to the BLM at $155 per year per claim, due on or before September 1st each year. An affidavit of the payment to the BLM must be filed with the appropriate County each year for a nominal fee of about $10 per claim. This applies to all unpatented claims whether owned or leased by Energy Fuels. Annual holding costs for State leases and private leases vary, ranging between $500 and $13,500 for State Leases and $480 and $20,340 for private leases. The Company is also required to pay production royalties at varying rates for unpatented mining claims and private leases. The Utah State production royalties are fixed at 8% on uranium and 4% on vanadium.
The Company generally has entered into surface access agreements sufficient to allow access for its mining activities.
Permitting
Mineral extraction facilities on private and public lands in Utah require an approved Notice of Intent (“
NOI
”) with the Utah Division of Oil, Gas and Mining (“
UDOGM
”). If the facility generates water, a ground water discharge permit is required for the treatment plant and ponds, and a surface water discharge permit is required for discharge of treated water. Both permits are issued through the State of Utah Division of Water Quality ("
DWQ
"). Air permits for air emissions including radon are issued by the Utah Division of Air Quality (“
DAQ
”); however, smaller mines are typically exempt. Water well permits, water rights, and stream alteration permits are also issued through the DWQ. On federal land, all the state permits listed above are required, as well as a Plan of Operations approved through a NEPA review by the responsible federal land managing agency.
The Company’s mineral facilities at the La Sal Project are all existing facilities in historic mining areas, and approvals by the BLM and USFS have been obtained under EAs and Findings of No Significant Impact (“
FONSIs
”) under NEPA. The Energy Queen and Redd Block IV Properties are located on private land and were permitted with UDOGM in the early 1980s by Union Carbide. The Energy Queen Property was developed and has conducted mineral extraction, but the Redd Block IV Property was discontinued soon after the start of construction. A mine and reclamation plan amendment for the Energy Queen Property was approved by the UDOGM on September 22, 2009. This amendment allows the Company to install water treatment and other new surface facilities to support extraction of up to 250 tons per day (“
tpd
”) of mineralized materials. Water discharge permits to allow initial and ongoing discharge of water from underground workings were also approved by the DWQ in 2009. Energy Fuels initiated permitting plans for additional facility expansion in 2012, but then deferred these plans when the Redd Block IV resource was acquired in the Denison acquisition. Engineering studies are being conducted to determine if the Redd Block IV resource can be extracted from the Energy Queen shaft and surface facilities. If this proves to be the case, the Energy Queen UDOGM permit would be updated to include the Redd Block IV area as well as other resources that have been acquired since the 2009 amendment. A Small Source Exemption that is in place for air emissions would also need to be replaced with an air permit because of the increased surface disturbance.
Though currently in standby status, existing mining operations at the Pandora, Beaver, La Sal and Snowball Properties are fully permitted with the State of Utah, the BLM, and the USFS. In order to allow expansion of the existing mines, Energy Fuels is in the process of obtaining regulatory approvals for expansion of the Pandora, Beaver, and La Sal operations through the UDOGM, the BLM, and the USFS. In late 2014, an EA, draft Decision Notice and FONSI were issued for public comment. In March 2015, in response to an objection filed by an environmental interest group, the USFS ruled that additional analysis was required before a modified Plan of Operations and EA could be approved for the proposed expansion. An expanded EA was finalized by the USFS and BLM in September 2017 and forwarded to Washington DC offices of the BLM for approval. On February 23, 2018, the BLM and USFS issued the EA, Decision Record (BLM)/Decision Notice (USFS), and FONSI approving the expansion, conditional upon the Company incorporating certain specific requirements into the Plan of Operations amendment and having the required reclamation bond in place. All other regulatory approvals needed for project expansion, including an air emissions permit, are in place.
Geologic Setting
The Colorado Plateau covers nearly 130,000 square miles in the Four Corners region of the U.S. The La Sal Project and other properties held by Energy Fuels lie in the Canyon Lands Section in the central and east-central part of the Colorado Plateau in Utah and Colorado. The Colorado Plateau’s basement rocks are mostly Proterozoic metamorphics and igneous intrusions. The area was relatively stable throughout much of the Paleozoic and Mesozoic Eras with minor uplifts, subsidences, and tiltings resulting in fairly flat-lying sedimentary rocks ranging from evaporites, limestones, and marine clastic sediments, through eolian sandstones, to detritus of fluvial systems.
The significant uranium deposits in the La Sal Project occur in the late Jurassic Morrison Formation. The Morrison comprises two members in the La Sal area. The lower member, the Salt Wash, is the main uranium host. The upper part of the Morrison is the Brushy Basin Member; it is from 350 to 450 feet thick. The Salt Wash, approximately 300 feet thick, consists of about equal amounts of fluvial sandstones and mudstones deposited by meandering river systems flowing generally toward the east. The Brushy Basin was deposited mostly on a large mud flat, probably with many lakes and streams. Much of the material deposited to form the Brushy Basin originated from volcanic activity to the west. The majority of the recovered uranium has come from the upper sandstones of the Salt Wash Member known as the Top Rim (historically referred to as the “
ore-bearing sandstone
” or OBSS), which ranges from about 60 feet to 100 feet thick.
Light-brown and gray sandstones and conglomerates of the 200-foot thick Cretaceous Burro Canyon Formation overlie the Brushy Basin. These crop out in the eastern part of the La Sal Project (over the Pine Ridge, Pandora, and La Sal/Snowball properties). This formation contains interbedded green and purplish mudstones with a few thin limestone beds. The Burro Canyon Formation is exposed covering the Brushy Basin at the west end of the La Sal Project, on the State sections and claims west of the Energy Queen. Locally, silicification altered the limestones to chert and some of the sandstones to orthoquartzite. Orthoquartzite cobbles and boulders litter the Brushy Basin slopes. In the central part of the La Sal Project (Beaver, Redd Block, and Energy Queen), the Burro Canyon is covered by a layer of alluvium and gravels shed from the La Sal Mountains to the north. These gravels vary in thickness from a thin veneer to over 120 feet thick.
The La Sal District uranium-vanadium deposits are similar to those elsewhere in the Uravan Mineral Belt. Host rocks within the areas surrounding the La Sal Project consist of oxidized sediments of the Morrison Formation, exhibiting red, hematite-rich clastic rocks. Individual deposits are localized in areas of reduced, gray sandstone and gray or green mudstone. The Morrison sediments accumulated as oxidized detritus in the fluvial environment. However, there were isolated environments where reduced conditions existed, such as oxbow lakes and carbon-rich point bars. During early burial and diagenesis, the through-flowing ground water within the large, saturated pile of Salt Wash and Brushy Basin material remained oxidized, thereby transporting uranium in solution. When the uranium-rich waters encountered the zones of trapped reduced waters, the uranium precipitated. Therefore, deposits vary greatly in thickness, grade, size, and shape. Vanadium may have been leached from iron-titanium mineral grains and subsequently deposited along with, or prior, to the uranium.
History
Numerous underground mines near outcrops in the eastern part of the La Sal trend (in the La Sal Creek Canyon District) were mined for vanadium during the early 1900s. Sometime after World War II (approximately 1948-1954), exploration work on Morrison Formation outcrops in the west end of the district resulted in the discovery of the Rattlesnake mine (open pit) two miles west-southwest of the Energy Queen shaft. Deeper deposits of the central La Sal trend (in the area of the La Sal Project) were discovered in the 1960s and developed for production in the 1970s through vertical shafts and declines. The La Sal Project and La Sal Creek District production, through 1980, amounted to about 6,426,000 pounds U
3
O
8
(average grade of 0.32% U
3
O
8
) and nearly 29,000,000 pounds V
2
O
5
(average grade of 1.46%). Most production in the district was derived from fluvial sandstones, mainly in the upper part of the Salt Wash Member of the Morrison Formation of Jurassic age.
The Pandora Property was operated by Atlas Minerals in the 1970s and early 1980s. Umetco Minerals (Union Carbide) operated the Snowball, La Sal, and Beaver properties during the same time period. The Energy Queen property, then known as the Hecla Shaft, was started in 1979 by the Union Carbide/Hecla Joint Venture. The Energy Queen stopped mining activities in 1983 due to inadequate uranium prices. GEUMCO (General Electric Uranium Mining Company) operated the Pine Ridge property in the late 1970s, producing from a sandstone lens in the Brushy Basin Member of the Morrison Formation. Pine Ridge was acquired by Minerals Recovery Corporation in 1981, which developed a decline to the Salt Wash Member of the Morrison Formation, but halted mining activities before any significant extraction of mineralized materials. A small project conducted mining activities in the eastern part of Section 2 (ML-49596) during the early 1980s. The amount of uranium extracted from this project is unknown. Low uranium and vanadium prices forced all mining activities throughout the district to cease about 1991. Mineralized materials from these projects have been successfully processed at the Company’s currently operating White Mesa Mill, and the now dismantled Uravan Mill (Umetco) and Moab Mill (Atlas).
Denison (previously named International Uranium Corporation, or “IUC”) began mining activities at the Pandora Property in 2006 and later from the Beaver shaft and La Sal decline. During the 2007 to 2013 time period, 446,000 tons of mineralized material were mined from the La Sal Complex and processed at the White Mesa Mill. This material had an average grade of 0.20% U3O8 and 1.02% V2O5 and contained 1,774,000 pounds of uranium and 9,098,000 pounds of vanadium.
From 2008 through mid-2012, Denison drilled 225 exploration and fill-in (confirmation) holes in the project area. Energy Fuels drilled another 27 holes on the Energy Queen Property and the State land to the northwest of the Energy Queen Property from 2007 through 2012. Due to declining uranium prices, mining activities ceased in October 2012 at the Beaver/La Sal Property and in December 2012 at the Pandora Property. Both projects were put on a standby status and are currently maintained in conditions that would allow them to be placed back into production within a few months’ time.
The Company owns the data on some 2,200 drill holes within the boundary of the property held as the La Sal Project.
Mineralization
The uranium- and vanadium-bearing minerals occur as fine-grained coatings on the detrital grains. They fill pore spaces between the sand grains, and they replace some carbonaceous material and detrital quartz and feldspar grains. The primary uranium mineral is uraninite (pitchblende) (UO
2
) with minor amounts of coffinite (USiO
4
OH). Montroseite (VOOH) is the primary vanadium mineral, along with vanadium clays and hydromica. Traces of metallic sulfides occur. In outcrops and shallow oxidized areas of older mines in the surrounding areas, the minerals now exposed are the calcium and potassium uranyl vanadates, tyuyamunite, and carnotite.
Some stoping areas in the Beaver/La Sal and Pandora/Snowball Properties are well over 1,000 feet long and several hundred feet wide. The Indicated Mineral Resources of the Redd Block and Energy Queen Properties identified through drilling are of similar size. Individual mineralized beds vary in thickness from several inches to over 6 feet. Throughout much of the La Sal district there are three horizons in the Top Rim that host the mineralization. They are 25-40 feet apart.
Kovschak and Nylund (1981) report no apparent disequilibrium problems in the other mining episodes of the La Sal area. Mining activities and milling by Denison and Energy Fuels shows that well-calibrated gamma probes equate well to the mill head grades indicating no significant disequilibrium exists. This is generally true of the Salt Wash uranium deposits because of the age of the mineralization and the hydrologic history of the host rocks. Therefore, Energy Fuels has no reason to anticipate any disequilibrium conditions within the unmined portions of the deposits on the project property.
Mineral Resources Estimates
Since the La Sal Project covers a length of ten miles and includes several project sites and facilities, the La Sal Project was divided into four blocks: Pandora, Beaver/La Sal, Redd Block and Energy Queen. The mineral resource estimation for the La Sal Project is based on the gamma logs from 1,993 historic rotary drill and core holes, 247 holes drilled by Energy Fuels and Denison from 2007 to 2012, and approximately 500 underground long holes. Mineral Resource estimates have been calculated using a modified polygonal method. The mineralization in the La Sal Project is interpreted as being hosted in the Top Rim sandstone of the Salt Wash Member of the Morison Formation. Total thickness of the host sandstone is between 60 and 100 feet.
La Sal Mineral Resources – Uranium and Vanadium
(1)(2)(3)(4)(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
Classification
|
Zone
|
Tons (000)
|
|
Grade % eU
3
O
8
|
Pounds eU
3
O
8
(000)
|
|
Grade % V
2
O
5
|
Pounds V
2
O
5
(000)
|
|
|
|
La Sal Measured Resources (M)
|
Energy Queen
|
262
|
|
0.19%
|
971
|
|
0.97%
|
5,100
|
|
|
Redd Block
|
336
|
|
0.19%
|
1,260
|
|
0.98%
|
6,615
|
|
|
Beaver/La Sal
|
215
|
|
0.19%
|
800
|
|
0.98%
|
4,199
|
|
|
Pandora
|
196
|
|
0.18%
|
701
|
|
0.94%
|
3,682
|
|
|
La Sal Indicated Resources (I)
|
Energy Queen
|
81
|
|
0.17%
|
268
|
|
0.87%
|
1,409
|
|
|
Redd Block
|
35
|
|
0.07%
|
47
|
|
0.35%
|
249
|
|
|
Beaver/La Sal
|
9
|
|
0.18%
|
33
|
|
0.96%
|
173
|
|
|
Pandora
|
7
|
|
0.14%
|
19
|
|
0.73%
|
99
|
|
|
Total (M & I)
|
1,142
|
|
0.18%
|
4,100
|
|
0.94%
|
21,525
|
|
|
La Sal Inferred Resources
|
Energy Queen
|
43
|
|
0.09%
|
79
|
|
0.48%
|
417
|
|
|
Redd Block
|
95
|
|
0.09%
|
171
|
|
0.47%
|
900
|
|
|
Beaver/La Sal
|
29
|
|
0.11%
|
67
|
|
0.60%
|
352
|
|
|
Pandora
|
18
|
|
0.12%
|
44
|
|
0.66%
|
232
|
|
|
Total Inferred Resources
|
185
|
|
0.10%
|
362
|
|
0.51%
|
1,902
|
|
Notes:
(1) The Mineral Resource estimate in this table complies with the requirements of NI 43-101, and the classifications comply with CIM definition standards and do not represent reserves under SEC Industry Guide 7. Mineral resources that are not reserves do not have demonstrated economic viability. See “
Cautionary Note to U.S. Investors Concerning Disclosure of Mineral Resources
,” above.
(2) Mineral Resources are estimated at a uranium grade x thickness (G.T.) cut-off of 0.20 G.T. (2 ft. of 0.10% eU
3
O
8
).
(3) Mineral Resources are estimated using a long-term uranium price of US$65 per pound U
3
O
8
and a vanadium price of US$6.50 per pound V
2
O
5
.
(4) The average V
2
O
5
:U
3
O
8
ratio used for estimating the vanadium Mineral Resources is 5.25:1. This value was based on historical milling of the mineralized material at White Mesa Mill.
(5) Numbers may not add due to rounding.
Present Condition of the Property and Work Completed to Date
Permanent structures existing at the Energy Queen Property include the head frame and a metal building containing an office, shop, showers, warehouse, and the hoist. The compressor is located in a separate building. One cased vertical ventilation hole was established into the underground working level. A small water treatment building and settling ponds are located on the San Juan County land in Section 5. In the past, water was treated with barium chloride to remove radium.
The Beaver and La Sal Properties are accessed through the La Sal decline with rubber-tired equipment. The principal shop, offices, and warehouse facilities used by all properties in the district are housed at the surface facilities of the La Sal decline. There are large fenced yards, as well as buildings for equipment and supply storage. It is used as a central receiving site for bulk and large orders, which are then distributed to the other Energy Fuels’ properties in the district and other parts of the region. The shop areas include facilities specific to electrical equipment, drills, mobile diesel equipment, and welding. Engineering, geology, safety, environmental, and supervisory and clerk offices are located here. There are also staff and underground crew’s dry rooms. Ample stockpile space is available for easy truck load-out for transporting mineralized material to the White Mesa Mill. Electrical lines and substations exist and are adequately sized for any future extraction potential of the Mineral Resources. The Beaver and La Sal Properties are dry, so no water treatment facilities are needed.
The surface infrastructure at the Beaver shaft location consists of the hoist house, hoist, and head frame. The shaft is 690 feet deep to the underground haulage level at the loading pockets top grizzlies, and 750 feet total depth. There are three pockets, two of 70-ton capacity and one of 90-ton capacity. This arrangement allows for separation of mineralized material and waste. The skips dump into a bin from which the mineralized material is trucked a short distance to a stockpile and subsequently loaded in to the trucks for haulage to the White Mesa Mill. The shaft conveyance system is certified for man trips, although the routine access for personnel is through the La Sal decline. Another building houses the compressors, which supply compressed air for the underground workings in the Beaver Project. Power lines and substations are in place. The Beaver Property is dry underground; therefore, no water treatment facilities exist.
Access into the Pandora Property is through a decline with rubber-tired equipment. Surface facilities here are less than at the other projects. They consist of a small office and shop buildings. A third building is used for storage of materials and equipment. Power lines exist to the property with enough capacity for the required load of potential future mining activities. The Pandora Property is dry underground.
In 1980, Umetco was planning to sink another shaft to access the Redd Block Mineral Resources. The project did not progress far. The infrastructure at the Redd Block Property associated with a possible new shaft consists of a cleared and leveled site large enough for future construction of all surface facilities that would be required. The power line and transformers are installed, and the concrete base for a compressor building has been poured. As mining activities progress, a water table in the Salt Wash sandstone host horizon will be between the current Beaver Property western underground workings advance and the east end of the Redd Block Mineral Resources. Seven monitor wells were installed by Denison around this proposed shaft site.
Five surety bonds, totaling $1,186,700 have been posted with regulatory authorities to secure reclamation at the various project facilities.
The Company acquired the Energy Queen Property in December 2006. The remainder of the La Sal Project, was acquired by the Company in June 2012, through the acquisition of the Denison US Mining Division. The cost of the La Sal Project has been fully impaired, and as of December 31, 2017, the total cost attributable to the La Sal Project and its associated equipment on the financial statements of the Company was nil.
The Company’s Planned Work
The Company intends to continue its permitting and related activities at the La Sal Project during 2018, as described under the heading "Permitting," above. The Company is also conducting care and maintenance activities on the facilities at the various properties within the La Sal Project, in order to maintain them on standby, pending improvements in uranium prices. Energy Fuels has evaluated numerous targets for additional surface drilling at the La Sal Project. However, there are no plans to perform the drilling in 2018.
During 2018, the Company plans to rehabilitate the La Sal mine access decline, which has deteriorated during the last 5 years of standby status.
The Daneros Project
Unless otherwise stated concerning land tenure and permitting efforts, the following scientific and technical description of the Daneros Project is derived from a technical report titled “
Updated Report on The Daneros Mine Project, San Juan County, Utah, U.S.A.
,” dated March 2, 2018, prepared by Douglas C. Peters, Certified Professional Geologist, of Peters Geosciences, Golden, Colorado in accordance with NI 43-101 (the “
Daneros Mine Technical Report
”). The author of the Daneros Mine Technical Report is a “qualified person” and is “independent” of the Company within the meaning of NI 43-101. The Daneros Mine Technical Report is available on SEDAR at www.sedar.com and on EDGAR at www.sec.gov. The Daneros Project does not have known reserves, and is therefore considered under SEC Industry Guide 7 definitions to be exploratory in nature, despite uranium extraction occurring as recently as 2012.
Project Description and Location
The Daneros Project is an underground project located in the Red Canyon portion of the White Canyon District in San Juan County, Utah, approximately 65 miles west of the White Mesa Mill. The Company holds a 100% interest in various groups of mining claims, including Daneros and adjoining historical sites, which can be developed in conjunction with the Daneros Project.
The previous owner of the Daneros Project, Utah Energy Corporation (
“UEC”
), gathered the necessary environmental data and obtained the approvals to open an underground uranium project in May 2009. UEC commenced active mining activities, including constructing a decline into the main Daneros deposit. The first loads of mineralized material from the Daneros Project were delivered to the White Mesa Mill in December 2009, and a toll milling campaign was conducted in the second half of 2010. The Daneros Project was acquired by the Company in June 2012 along with all of Denison’s U.S. Mining Division. Prior to being placed on standby in October 2012, mineralized material from the Daneros Project was delivered to the White Mesa Mill and processed for Energy Fuels’ account.
The extraction of all resources in the Daneros Project is by conventional underground methods. These methods have been used successfully in the region for over 70 years. The nature of the Shinarump uranium deposits requires a random room and pillar mining configuration. The deposits have irregular shapes and occur within several close-spaced, flat or slight-dipping horizons. Uranium mineralization often rolls between horizons. The use of rubber-tired equipment allows the workers to follow the mineralized material easily in the slight dips and to ramp up or down to the other horizons. The deposit is accessed from the surface through a 450 feet decline at a gradient of -15%. The Shinarump deposits are usually thinner than the underground height needed for personnel and equipment access. Therefore, the mineralized material is extracted by a split-shooting method. The project also employs an underground long-hole exploration drilling program, reaching out as much as 400 feet ahead of and adjacent to the workings, as guided by the project geologist.
Accessibility, Climate, Local Resources, Infrastructure and Physiography
The Daneros Project is located 3.3 miles southwest of Fry Canyon, Utah and is accessed via Radium King Road, which is maintained by San Juan County, approximately 13 miles south of Utah Highway 95. A series of bulldozed tracks and drill roads provide access throughout the project area, but access to the mesa tops is very limited. Electric power is generated on site. The shipping distance from the Daneros Project to the White Mesa Mill is about 65 miles.
The semi-arid climate of the White Canyon area is characterized by large daily and yearly temperature ranges and total annual precipitation of approximately 10 to 16 inches, mostly as sporadic, intense summer thunderstorms typical of the Colorado Plateau region. Winter snowfall is moderate and rarely stays on the ground very long. Weather conditions pose no impediment to year round work on the project.
Apart from previous mining activities, the only commercial land use purposes are cattle grazing and tourism activities such as hiking and mountain biking. Due to a shortage of water and thin soils, much of the White Canyon area is unsuitable for agriculture.
The project area is remotely located relative to water and power infrastructure. Housing for workers is mostly in camp trailers in Fry Canyon, or they commute from Blanding, Utah 65-miles to the east or farther. Blanding is a town large enough to host regional industrial activities, including stores and supply houses of sufficient size and inventory to meet most of the needs of an operation the size of the Daneros Project.
The project area is located along a north-south trending canyon, which is a tributary to Red Canyon, also known as Bullseye Canyon. The Red Canyon drainage flows westerly for approximately 25 miles to the Colorado River where it joins Lake Powell at the head of Good Hope Bay. The project portal area comprises steeply sloping, rocky ground and scree along the eastern slope of Bullseye Canyon. Very steep to vertical, and at times overhanging, cliffs 400 feet high rise from the slope about 250 feet above the portal.
Vegetation in the project area consists of sagebrush, juniper and piñon in the hills and slopes, while desert grasses, forbs, and shrubs are evident within the valley floors and on the mesa tops. Elevations in the region range from about 5,300 feet at the Fry Canyon townsite to over 7,000 feet on the surrounding mesa tops. The project portal is at about 5,750 feet above sea level.
Ownership
The Daneros Project is owned by the Company’s subsidiary EFR White Canyon Corp. The property consists of 141 unpatented mining claims located on federal land administered by the BLM in San Juan County, Utah, plus the State lease totaling approximately 3,072 acres. The property lies in Sections 1, (11, and 12 were dropped in 2014) T37S, R15E, SLM, Sections (4 dropped in 2014), 5, 6, 7, 8, (10, 11, 15, 17 dropped in 2014), and 18, T37S, R16E (and Section 31 and 33, T36S, R16E dropped in 2014).
The mining claims are maintained by making annual payments of US $155 per claim per year to BLM due September 1st each year, along with a nominal filing fee paid to the county within 30 days of the BLM filing of about $10 per claim. Work expenditures are not required. Holders of unpatented mining claims are generally granted surface access to conduct mineral exploration and mining activities. However, additional mine permits and plans are generally required prior to conducting exploration or mining activities on such claims.
A number of the claims bear production royalties. Claims hosting the Daneros deposit are subject to royalties ranging between 15% of "market value" of the mineralized material and 2.5% of gross proceeds as described in further detail in the Daneros Mine Technical report. Other claims are owned by the Company without encumbrances. The State lease carries the standard Utah royalty of 8% on uranium and 4% on vanadium.
Sufficient surface rights are in place for contemplated mining activities and waste storage. Since no milling activities are contemplated on the Daneros Project, no areas are required for tailings storage, heap leach pads, or processing plant sites.
Permitting
The primary permits required for mining activities at the Daneros Project include a mine permit issued by UDOGM and a Plan of Operations ("
PO
") approved by the BLM under the NEPA review process. UEC submitted a Plan of Operations for the Daneros Mine in 2008 that proposed a seven-year life of mine with production of up to 100,000 tons of mineralized material within a 4.5 acre disturbed area footprint. In 2012, the BLM issued an EA based on the 2008 PO that was subject to public review and comment. Following approval of the PO, an appeal was filed by Uranium Watch and associated environmental interest groups. The appeal was denied by the Utah BLM State office, then appealed to the Department of Interior Board of Land Appeals ("
IBLA
"), and denied by IBLA in September of 2012.
In early 2013, an amended PO and a Large Mine NOI were submitted to the BLM and UDOGM, respectively. The modified PO would allow production of up to 500,000 tons of mineralized material over a 20-year period and an expansion of the disturbed area footprint to 46 acres. An EA was issued for public comment in July 2016 and finalized by the BLM in late 2016. With the designation of the Bears Ears National Monument ("
BENM
") in December 2016, the BLM essentially suspended review while they considered if expanded mining operations, now adjacent to the monument, might adversely affect the monument. In September 2017 an updated EA that determined there would be no new impacts to the monument was forwarded to BLM Washington for approval. Since then, the BENM boundaries were modified by Presidential Executive Order, and the Daneros mine would be at least 15 miles from the nearest boundary. The EA, FONSI and PO amendment were issued by BLM on February 23, 2018. The Company expects approval of the NOI amendment later in 2018.
Daneros was initially permitted by the UDOGM under a Small Mine Permit approved in 2009. The Notice of Intent ("
NOI
") for a Large Mining permit was submitted to UDOGM in early 2013. In 2015 UDOGM concluded its technical and administrative reviews of the application. Approval of the NOI has been pending BLM approval of the EA and Decision Notice, which were issued on February 23, 2018, subject to certain specified requirements. As a result, the Company expects UDOGM approval of the modified PO and Large Mine permit within three to six months from the date of this Form 10-K.
Geological Setting
Major uranium deposits of the east-central Colorado Plateau district occur principally in two fluvial sandstone sequences. The older is located at or near the base of the Upper Triassic Chinle Formation and the other occurs in the Late Jurassic Salt Wash Member of the Morrison Formation. The main uranium-bearing unit at the Daneros Project and throughout the White Canyon district is the fluvial Shinarump Member, a basal, sandstone-conglomerate sequence deposited in a complex stream system, which unconformably overlies and locally scours into oxidized sedimentary units of the Moenkopi Formation.
The Shinarump Member consists of predominantly trough-crossbedded, coarse-grained sandstone and minor gray, carbonaceous mudstone and is interpreted as a valley-fill sequence overlain by deposits of a braided stream system. Uranium mineralization appears to be related to low-energy depositional environments in that uranium is localized in fluvial sandstones that lie beneath organic-rich lacustrine-marsh mudstones and carbonaceous delta-front sediments. The reducing environment preserved in these facies played an important role in the localization of uranium.
Uranium deposits consist of closely-spaced, lenticular mineralized pods which are generally concordant with bedding in paleochannel sediments. Single mineralized pods range from a few feet to a few hundred feet in length and from less than one to more than 10 feet in thickness. Deposits range in size from a few tons to more than 600,000 tons. The Shinarump deposits generally have low vanadium content, and are therefore not processed for vanadium recovery.
The uranium deposit at the Daneros Project, like nearly all others in the White Canyon district, is in the lower part of the Shinarump, especially where it has scoured into the Moenkopi. The lithology, facies, sedimentary structures, and locations within the channel deposits all were important in controlling the migration of fluids and localization of the deposits. Coarser-grained rock is more favorable than fine-grained sand or silt units. Most of the uranium mineralization is overlying impermeable siltstones of the Moenkopi or local siltstone lenses internal of the Shinarump. The lateral edges of channels where they are bounded by mudstones are also favorable locations for mineralization. Historical production from the White Canyon District exceeds 11 million pounds of U
3
O
8
.
History
The White Canyon mining district has a long history of exploration and mining. From 1949-1987 production from the district was 2,259,822 tons at an average grade of 0.24% U
3
O
8
for a total of 11,069,032 pounds placing it second, behind Lisbon Valley, for uranium production from the Chinle Formation on the Colorado Plateau.
Exploration for uranium has been going on in the White Canyon area since the late 1940’s. Prospectors used Geiger counters to investigate outcrops of the Shinarump Sandstone. The history of exploration is closely tied to the Atomic Energy Commission (
“AEC”
) buying program, opening and closing of the several processing facilities in the region, and the fluctuation of the price of uranium.
The properties in the Daneros Project area remained idle until 1946. From 1948 until 1951, White Canyon and the nearby Red Canyon and Deer Flat areas were subject to intense exploration. The AEC ore procurement program ended on December 31, 1970, and during the early 1970’s minimal production was recorded from the district.
Production from the district increased again by 1974 when the demand for uranium increased due to nuclear power generation. Exploration and production once again increased in the White Canyon District. In 1974, Utah Power and Light Company (
“UP&L”
) began to acquire properties in the White Canyon district, which included a 100% interest in the Spook-Bullseye property and a 60% interest in the Lark-Royal property both located near the Daneros Project in Red Canyon.
Between 1975 and 1985, UP&L conducted several phases of drilling leading to definition of the Lark, Royal, and Bullseye deposits near the modern day Daneros Project. UP&L drilled 595 diamond drill holes with an average depth of 510 feet and, following industry standard procedures, logged all holes using down-hole geophysical (gamma) probes to identify radioactive horizons. Anomalous horizons were sampled and analyzed for uranium.
UP&L never started mining activities in the White Canyon district, due to the collapse of the uranium price by 1982. By 1987 the last mines in the White Canyon district closed due to declining economics, socio-political factors and competition from lower cost producers. Following 1987, the properties were idle and little or no exploration activity took place in the White Canyon district.
In 1993 UP&L dropped its mining claims in the White Canyon District. In October 1993, Eugene and Merwin Shumway staked the Daneros claims that covered the deposits UP&L had discovered. Eugene and Merwin Shumway quitclaimed their claims to Wilene and Mike Shumway, Terry Leach, and James Lammert in March, 1994. No exploration or development took place between 1994 and 2005. From 2005 to 2007, these individuals began acquiring properties with known historic mineral deposits in the White Canyon district.
In 2007, Utah Commodities Pty, Ltd. who later changed its name to White Canyon Uranium Limited (“
WCUL
”), which operated in the United States through its wholly owned subsidiary, UEC, acquired a 100% interest in the Daneros claims from those individuals.
In December 2008, WCUL purchased 33 additional claims, known as the Lark-Royal Project, an extension of the Daneros Project, from Uranium One.
WCUL began drilling programs in Bullseye Canyon during 2007. The first program drilled 8 holes within the five Daneros claims. A second program in 2008 drilled 16 diamond drill holes and 1 rotary drill hole. Finally, a third program, also in 2008, drilled 11 diamond drill holes and 9 rotary drill holes. The success of this drilling provided the basis for mineral resource estimates relied upon by WCUL to commence mining activities at the Daneros Project.
The Daneros Project was constructed and uranium bearing material was extracted by WCUL, through its subsidiary UEC. WCUL gathered the necessary environmental data and submitted applications for approvals to open an underground facility at Daneros. A PO was submitted to the BLM and was approved in May, 2009, following which UEC commenced active construction at the project, including driving a decline into the main deposit at Daneros. The first loads of mineralized material from the Daneros Project were delivered to the White Mesa Mill in December, 2009, then operated by Denison Mines. In January 2010, Denison entered into a toll milling agreement with UEC, which was then a wholly-owned subsidiary of WCUL.
In 2011, Denison acquired all of the issued and outstanding shares of WCUL, including all of the shares of UEC. In June 2012, Energy Fuels acquired all of the issued and outstanding shares of WCUL as part of its acquisition of the U.S. Mining Division from Denison, which included the Daneros Project and all of the shares of UEC (which is now named EFR White Canyon Corp.). Denison, and then the Company, kept the project in operation using the same contractors (until placing it on standby in October 2012 after the Daneros Project Technical Report was written). During the 2009 to 2013 time period, 121,000 tons of mineralized material were mined at the Daneros Mine and processed at the White Mesa Mill. This material had an average grade of 0.26% U
3
O
8
and contained 629,000 pounds of uranium.
Mineralization
Uraninite (pitchblende) is by far the dominant primary uranium mineral in the Shinarump deposits. It occurs as distinct grains, fine-grained coatings on and pore-fillings between detrital quartz grains, partial replacement of feldspar grains, and as replacement in carbonized wood and other remains of organic matter. Metallic sulfide minerals are often abundant. Where secondary oxidation has occurred, minor amounts of uranyl carbonates, sulfates, and phosphates are found. The source of the uranium is not well established. Overlying shaley units of the Chinle contain clays derived from volcanic ash that is uraniferous. The source area of the arkosic sediments was also a uranium-rich province.
Daneros Mineral Resources – Uranium
(1)(2)(3)(4)(5)
|
|
|
|
|
|
|
Classification
|
Tons (000)
|
Grade % eU
3
O
8
|
Pounds eU
3
O
8
(000)
|
|
|
Daneros Measured Resources (M)
|
---
|
---
|
---
|
|
Daneros Indicated Resources (I)
|
20
|
0.36%
|
142
|
|
Daneros Total (M & I)
|
20
|
0.36%
|
142
|
|
Daneros Inferred Resources
|
7
|
0.37%
|
52
|
Notes:
(1) The Mineral Resource estimate in this table complies with the requirements of NI 43-101, and the classifications comply with CIM definition standards and do not represent reserves under SEC Industry Guide 7. Mineral resources that are not reserves do not have demonstrated economic viability. See “
Cautionary Note to U.S. Investors Concerning Disclosure of Mineral Resources
,” above.
(2) Mineral Resources are estimated at a uranium cut-off grade of 0.23% eU
3
O
8
.
(3) Mineral Resources are estimated using a long-term uranium price of US$55 per pound.
(4) Numbers may not add due to rounding.
(5) This Mineral Resource accounts for all material mined through October 2012, when Daneros was placed on Standby.
Additional Historical Resources
The Daneros property contains three historical mines, which produced in the early days of mining in the White Canyon District. These mines are the Lark/Bullseye, the Royal and the Spook. An historical resource estimate for the Lark mine was completed by UP&L in 1974. UP&L estimated that the Lark mine contained approximately 45,000 tons at a grade of 0.30% U
3
O
8
for 265,000 pounds of uranium. This historical resource estimate is based on both surface and underground long-hole drilling. Areas of influence are defined by connecting surface holes that are less than 100 ft. apart and to the mineralized extent of a long hole.
Peters Geosciences and the Company do not consider this historical resource estimate to be current mineral resources or reserves as defined under NI 43-101. Energy Fuels has only reviewed a limited number of data in connection with this historical estimate. Readers should be cautioned that a qualified person has not done sufficient work to classify this historical estimate as a current estimate of mineral resources or mineral reserves in accordance with NI 43-101. This historical resource estimate was classified as "Indicated Resources." However, this category was applied without using applicable mining standards and economics, and should not be considered reserves by industry definition. The Company believes this historical estimate is relevant and reliable, as the methodology was well documented and utilized industry standard practice. However, the methodologies used do not reflect current best industry practices. The Company does not consider these historical estimates to be equivalent to current mineral resources or mineral reserves as defined in NI 43-101, nor has the Company completed sufficient work to confirm a NI 43-101 compliant resource. Therefore, the historical estimates cannot, and should not, be relied upon as NI 43-101 resources or reserves.
Present Condition of Property and Work Completed to Date
The Daneros Project is fully permitted and constructed. The facilities consist of a modular trailer for the project office, two reinforced portals for access to and from the underground workings, a generator building, and an equipment storage and maintenance building. The deposit is accessed from the surface through a 450 foot long decline at a gradient of -15%. Two ventilation shafts daylight on the topographic bench above the underground workings.
The Daneros Project was acquired by the Company in June 2012, through the acquisition of the Denison US Mining Division. The cost of the Daneros Project has been fully impaired, and as of December 31, 2017, the total cost attributable to the Daneros Project and its associated equipment on the financial statements of the Company was nil.
The Company’s Planned Work
We are maintaining the project on care and maintenance. Additional permitting is ongoing as described above. Energy Fuels has reviewed the remaining resources and has evaluated prospective areas for future exploration drilling. There are no plans to perform any drilling in 2018.
Non-Material Mineral Properties
This section describes certain non-material mineral properties held by the Company. As these projects are not considered material to the Company's business, the Company may choose to pursue or to take under consideration the potential sale, joint venture, trade or other transaction involving one or more of these projects.
We hold the following non-material mineral properties:
Other ISR Projects
The Company's Properties located in the Powder River Basin, Wyoming, are as follows:
Our properties in the Powder River Basin of Wyoming, but outside of the Nichols Ranch Project, include 12,480 acres owned 100% by the Company through its wholly owned subsidiary, Uranerz. These properties include: the North Rolling Pin Property, the Reno Creek Property, the West North Butte Property, and the Collins Draw, Willow Creek, East Nichols, North Nichols, Verna Ann, and Niles Ranch properties. The Company, through Uranerz, also holds an 81% interest in the Arkose Joint Venture, which holds an additional 42,952 acres in the Powder River Basin.
In general, these ISR projects are located in basins containing sandstones of Tertiary age with known uranium mineralization. Limited exploration was conducted by Uranerz on each project except for Verna Ann and Niles Ranch.
The Reno Creek Property consists of three unpatented lode mining claims, 18 mineral leases, and three surface use agreements. The project area covers approximately 1,332.57 acres. The fee land in the project is covered by mineral leases, some of which have annual payments and some of which are paid up leases. The mineral leases have primary terms of 10 years and can be held by production (as defined in the leases). Some of the mineral leases will expire in 2018 and 2019; however the leases generally enable the Company to
extend the term of such leases, which the Company has done or intends to do. The fee surface is covered by three Surface Use Agreements, which include damage payments paid on an annual basis. Sixteen of the mining leases have a two-tier royalty based on the price of U
3
O
8
at the time of sale, which is 6% for a U
3
O
8
price less than $45.00 per pound or 8% for a U
3
O
8
price equal to or greater than $45.00 per pound. Two of these leases have a flat 8% of the total gross proceeds. Access to the project is off of Highway 387, which runs through the northern end of the project area. A technical report titled “
Technical Report, Reno Creek Property, Campbell County, Wyoming, U.S.A.
” dated October 13, 2010, was prepared by Douglass Graves, P.E. of Trec, Inc., in accordance with NI 43-101 (the “
Reno Creek Technical Report
”). Mr. Graves is a “qualified person” and “independent” of the Company within the meaning of NI 43-101. The Reno Creek Technical Report is available on SEDAR at www.sedar.com. The Reno Creek Technical Report reports the following mineral resources calculated in accordance with NI 43-101. None of these resources are reserves within the meaning of SEC Industry Guide 7. In November 2017, the Company announced that it had entered into an agreement to sell the Reno Creek Property to Uranium Energy Corp. (see
2017 Corporate Developments
, above).
Reno Creek Mineral Resources - Uranium
(1)(2)(3)(4)
|
|
|
|
|
|
|
Classification
|
Tons (000)
|
Grade % eU
3
O
8
|
Pounds eU
3
O
8
(000)
|
|
|
Reno Creek Measured Resources (M)
|
2,281
|
0.061%
|
2,782
|
|
Reno Creek Indicated Resources (I)
|
1,550
|
0.049%
|
1,511
|
|
Reno Creek Total (M & I)
|
3,831
|
0.056%
|
4,293
|
|
Reno Creek Inferred Resources
|
190
|
0.037%
|
142
|
Notes:
(1) The Mineral Resource estimate in this table complies with the requirements of NI 43-101 and the classifications comply with CIM definition standards and do not represent reserves under SEC Industry Guide 7. Mineral resources that are not reserves do not have demonstrated economic viability. See “
Cautionary Note to U.S. Investors Concerning Disclosure of Mineral Resources
,” above.
(2) Mineral Resources are estimated at a uranium grade x thickness (G.T.) cut-off of 0.20 G.T. (minimum grade of 0.03% eU
3
O
8
or minimum thickness of 1 foot).
(3) Mineral Resources are estimated using a long-term uranium price of US$65 per pound U
3
O
8
.
(4) Numbers may not add due to rounding.
Wholly-owned Powder River Basin ISR Mineral Resources
Through its wholly owned subsidiary, Uranerz, the Company owns properties in the Powder River Basin of Wyoming, but outside of the Nichols Ranch Project, comprising a total of 19,801 acres. These properties include: the North Rolling Pin Property, the West North Butte Property, and the Collins Draw, Willow Creek, East Nichols, North Nichols, Verna Ann, and Niles Ranch properties.
The North Rolling Pin property is discussed in the “
Technical Report West North Butte Satellite Properties Campbell County, Wyoming, U.S.A.
”, dated December 9, 2008, prepared by Douglas H. Graves of TREC, Inc. and Don R. Woody of Woody Enterprises and is available on SEDAR at
www.sedar.com
. Mr. Graves and Mr. Woody are “qualified persons” and are “independent” of the Company within the meaning of NI 43-101. The West North Butte satellite properties include West North Butte, East North Butte, and Willow Creek, and are described in the Technical Report titled “
Technical Report North Rolling Pin Property Campbell County, Wyoming, U.S.A.
” dated June 4, 2010, prepared by Douglas H. Graves of TREC, Inc. and is available on SEDAR at
www.sedar.com
. Mr. Graves is a “qualified person” and is “independent” of the Company within the meaning of NI 43-101.
Except as noted, the following description of these properties is based on the foregoing technical reports.
Wholly-owned Powder River Basin ISR Mineral Resources
(1)(2)(3)(4)
|
|
|
|
|
|
|
|
|
|
|
Classification
|
Property
|
Tons (000)
|
Grade % eU
3
O
8
|
Pounds eU
3
O
8
(000)
|
|
|
Powder River Basin Measured Resources (M)
|
North Rolling Pin
|
310
|
|
0.062
|
%
|
387
|
|
|
Powder River Basin Indicated Resources (I)
|
North Rolling Pin
|
272
|
|
0.051
|
%
|
278
|
|
|
West North Butte
|
926
|
|
0.153
|
%
|
2,837
|
|
|
Total (M & I)
|
|
1,508
|
|
0.116
|
%
|
3,502
|
|
|
Powder River Basin Inferred Resources
|
North Rolling Pin
|
39
|
|
0.042
|
%
|
33
|
|
|
West North Butte
|
1,117
|
|
0.120
|
%
|
2,682
|
|
|
Total Inferred Resources
|
|
1,156
|
|
0.117
|
%
|
2,714
|
|
Notes:
(1) The Mineral Resource estimate in this table complies with the requirements of NI 43-101, and the classifications comply with CIM definition standards and do not represent reserves under SEC Industry Guide 7. Mineral resources that are not reserves do not have demonstrated economic viability. See “
Cautionary Note to U.S. Investors Concerning Disclosure of Mineral Resources
,” above.
(2) Mineral Resources are estimated at a uranium grade x thickness (G.T.) of 0.20 G.T.
(3) Mineral Resources are estimated using a long-term uranium price of US$65 per pound U
3
O
8
.
(4) Numbers may not add due to rounding.
Arkose Joint Venture, Powder River Basin, Wyoming:
The Company, through its wholly owned subsidiary Uranerz, holds an undivided 81% interest in the Arkose Joint Venture, which holds an additional 46,748 acres in the Powder River Basin. Uranerz completed the acquisition of its interest in the Arkose Joint Venture mineral properties on January 15, 2008. This acquisition was completed pursuant to a purchase and sale agreement previously announced on September 19, 2007 between Uranerz, and NAMMCO, Steven C. Kirkwood, Robert W. Kirkwood and Stephen L. Payne (collectively, the “
NAMMCO Sellers
”).
In connection with the acquisition of its interest in the Arkose Joint Venture, Uranerz entered into a venture agreement dated as of January 15, 2008 (the “
Venture Agreement
”) with United Nuclear, LLC (“
United Nuclear
”), a limited liability company wholly owned by the NAMMCO Sellers and their designee under the purchase and sale agreement. Under the Venture Agreement, United Nuclear will hold (and contribute to) its nineteen percent (19%) working interest in the Arkose Joint Venture, and Uranerz will operate and be the manager of the Venture. Uranerz and United Nuclear agreed to contribute funds to programs and budgets approved under the Arkose Mining Venture in accordance with their respective interests in the Venture.
The Arkose Mining Venture includes the following property units on which Uranerz has conducted exploration:
*Now included in the Nichols Ranch Project as part of the Jane Dough Property.
Except as noted, the following description of the Arkose Joint Venture properties is based on a technical report titled “
Arkose Uranium Project Mineral Resource and Exploration Target, 43-101 Technical Report
” dated February 28, 2015, prepared by Douglas L. Beahm, P.E., P.G. of BRS Inc. in accordance with NI 43-101 (the “
Arkose Technical Report
”). Mr. Beahm is a “qualified person” and is
“independent” of the Company within the meaning of NI 43-101. The Arkose Technical Report is available on SEDAR at www.sedar.com.
In September of 2016 the Arkose Joint Venture elected to forfeit 190 unpatented lode mining claims covering 3,925 acres from its Kermit property and 144 claims covering 2,975 acres from its Lone Bull property, which constitute all of the Arkose claims in those projects. In addition, four mineral leases comprising 592 acres in the East Buck project were allowed to expire in 2016 without attempting to negotiate extensions to those leases. In 2017, several mineral leases in the Monument, Cedar Canyon, Sand Rock, East Buck and House Creek projects were allowed to expire; however, the Company does not expect the expiry of those property interests to materially affect our ability to continue exploration and extraction activities on our properties.
The Arkose Joint Venture properties are comprised of unpatented lode mining claims, state leases and fee (private) mineral leases, summarized as follows as of December 31, 2017:
|
|
|
|
|
Property Composition
|
Ownership Interest
(1)
|
Number of Claims/Leases
|
Acreage (Approximate)
|
Unpatented Lode Mining Claims
|
81%
|
1,338
|
26,523
|
State Leases
|
81%
|
3
|
2,080
|
Fee (private) Mineral Leases
|
81%
|
54
|
10,498
|
TOTAL
|
1,395
|
39,101
|
Notes:
(1) Subject to royalties.
Arkose JV-owned Powder River Basin ISR Mineral Resources
|
|
|
|
|
|
|
|
|
|
|
|
Classification
|
Property
|
Tons (000)
|
Grade % eU
3
O
8
|
|
Pounds eU
3
O
8
(000)
|
|
Energy Fuels Pounds eU
3
O
8
(000)
(5)
|
|
|
|
Arkose JV Measured Resources (M)
|
---
|
---
|
---
|
|
---
|
|
---
|
|
|
Arkose JV Indicated Resources (I)
|
---
|
---
|
---
|
|
---
|
|
---
|
|
|
Total (M & I)
|
---
|
---
|
|
---
|
|
---
|
|
|
Arkose JV Inferred Resources
|
East Buck
|
656
|
0.110
|
%
|
1.436
|
|
1,163
|
|
|
Little Butte
|
1,021
|
0.090
|
%
|
1.752
|
|
1,419
|
|
|
Sand Rock
|
184
|
0.100
|
%
|
381
|
|
309
|
|
|
South Doughstick
|
197
|
0.130
|
%
|
497
|
|
402
|
|
|
Total Inferred Resources
|
2,058
|
0.099%
|
|
4,066
|
|
3,293
|
|
Notes:
(1) The Mineral Resource estimate in this table complies with the requirements of NI 43-101, and the classifications comply with CIM definition standards and do not represent reserves under SEC Industry Guide 7. Mineral resources that are not reserves do not have demonstrated economic viability. See “
Cautionary Note to U.S. Investors Concerning Disclosure of Mineral Resources
,” above.
(2) Mineral Resources for the Arkose JV are estimated at a uranium grade x thickness (G.T.) cut-off of 0.20 G.T. (minimum grade of 0.02% eU
3
O
8
).
(3) Mineral Resources are estimated using a long-term uranium price of US$65 per pound.
(4) Numbers may not add due to rounding.
(5) “
Energy Fuels Pounds
” represent the 81% Company share of the Arkose Mining Venture properties.
Other Conventional Projects
Arizona Strip
The Pinenut Project is currently in reclamation. Mineral extraction at our Arizona 1 Project commenced in December 2009, and continued until the project was placed on standby in February 2014 due to the depletion of the readily available resources. The Wate Project and EZ Project are in the evaluation stage. Permitting at the Wate Project and the EZ Project is currently on hold. A description of the Wate Project can be found in the NI 43-101 report titled “
NI 43-101 Technical Report on Resources Wate Uranium Breccia Pipe-Northern Arizona, USA
” dated March 10, 2015, prepared by Allan Moran and Frank A. Daviess of SRK Consulting (U.S.) Inc. and available on www.sedar.com and on EDGAR at www.sec.gov. The EZ Project is described in the technical report titled “
Technical Report on the EZ1 and EZ2 Breccia Pipes, Arizona Strip District, U.S.A.
” dated June 27, 2012, prepared by David A. Ross and Christopher Moreton of Roscoe Postle Associates and available on www.sedar.com and on EDGAR at www.sec.gov.
Other Arizona Strip Properties Mineral Resources – Uranium
(1)(4)(5)
|
|
|
|
|
|
|
|
|
|
|
Classification
|
Property
|
Tons (000)
|
|
Grade % eU
3
O
8
|
|
Pounds eU
3
O
8
(000)
|
|
|
|
Arizona Strip Measured Resources (M)
|
---
|
---
|
|
---
|
|
---
|
|
|
Arizona Strip Indicated Resources (I)
|
---
|
---
|
|
---
|
|
---
|
|
|
Total (M & I)
|
---
|
|
---
|
|
---
|
|
|
Arizona Strip Inferred Resources
|
Wate
(2)
|
71
|
|
0.79
|
%
|
1,118
|
|
|
EZ1 and EZ2
(3)
|
224
|
|
0.47
|
%
|
2,105
|
|
|
Total Inferred Resources
|
295
|
|
0.55
|
%
|
3,223
|
|
Notes:
(1) The Mineral Resource estimate in this table complies with the requirements of NI 43-101, and the classifications comply with CIM definition standards and do not represent reserves under SEC Industry Guide 7. Mineral resources that are not reserves do not have demonstrated economic viability. See “
Cautionary Note to U.S. Investors Concerning Disclosure of Mineral Resources
,” above.
(2) Mineral Resources for Wate are estimated at a uranium cut-off grade of 0.15% eU
3
O
8
and for EZ1 and EZ2 are estimated at a uranium cut-off grade of 0.20% eU
3
O
8
.
(3) Mineral Resources for Wate are estimated using a long-term uranium price of US$38 per pound U
3
O
8
, and for EZ1 and EZ2 are estimated using a long-term uranium price of US$53 per pound U
3
O
8
.
(4) The Mineral Resources do not include any remaining resources for Arizona 1, because those given in the “
Technical Report on the Arizona Strip Uranium Project, Arizona, U.S.A.
” dated June 27, 2012 do not adequately address changes to the resource as a result of mining and the addition of potential additional mineralization as a result of underground drilling associated with mining activities.
(5) Numbers may not add due to rounding.
Colorado Plateau
As a result of declining uranium prices, the Rim property (the “
Rim Property
”) was placed on standby in March 2009, by the previous operator, Denison. It is maintained so that it can be restarted with little relative effort or development costs. The Rim Property is located 15 miles northeast of Monticello, Utah in San Juan County. The property consists of 26 unpatented lode mining claims, a private lease, and a Utah State Mineral Lease totaling about 1,100 acres. No exploration is planned for 2018.
The Whirlwind Project comprises 126 unpatented lode mining claims covered by three Mineral Leases and a Utah State Mineral Lease of 320 acres for a total acreage of about 2,800 acres. The property size (as reported in the NI 43-101 report “
Updated Technical Report on Energy Fuels Resources Corporation’s Whirlwind Property (Including Whirlwind, Far West, and Crosswind Claim Groups and Utah Metalliferous Minerals Lease ML-49312) Mesa County, Colorado and Grand County, Utah
,” dated March 15, 2011, prepared by Douglas C. Peters of Peters Geosciences, and available on www.sedar.com) has been reduced since the acquisition. The retained property continues to cover the known mineralized areas that are described in the Technical Report. The Whirlwind Project straddles the Utah/Colorado state line 4.5 miles southwest of Gateway, Colorado. The Whirlwind Project was refurbished by the Company in 2008, and remains on standby status. Exploration drill projects were conducted in 2007, 2008, 2009, 2010, 2011 and 2012. No exploration is planned for 2018.
The Sage Plain Project is a uranium/vanadium property in the evaluation stage. It is located in southeast Utah about 15 miles northeast of Monticello, Utah in the southwest continuation of the Uravan Mineral Belt. The project area includes one historic property, the Calliham Mine, which was operated by Atlas Minerals in the 1980s and briefly by Umetco Minerals Corp. in the early 1990’s. Calliham
ceased production due to low uranium prices. It consists of two fee mineral leases covering about 960 acres (Calliham and Crain) and a Utah State lease of 640 acres. A third fee mineral lease (Skidmore) has been terminated since the preparation of the Technical Report "Updated Technical Report on Sage Plain Project (Including the Calliham Mine) San Juan County, Utah, U.S.A." dated March 18, 2015, prepared by Douglas C. Peters of Peters Geosciences. No exploration is planned for 2018.
Other Colorado Plateau Properties Mineral Resources – Uranium and Vanadium
(1)(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
Classification
|
Property
|
Tons (000)
|
Grade % eU
3
O
8
|
|
Pounds eU
3
O
8
(000)
|
|
Grade % V
2
O
5
|
|
Pounds V
2
O
5
(000)
|
|
|
Colorado Plateau Measured Resources (M)
|
Sage Plain
(2)(4)
|
240
|
0.16
|
%
|
772
|
|
1.32
|
%
|
6,350
|
|
Colorado Plateau Indicated Resources (I)
|
Sage Plain
(2)(4)
|
13
|
0.10
|
%
|
26
|
|
0.77
|
%
|
199
|
|
Whirlwind
(3)
|
188
|
0.29
|
%
|
1,095
|
|
0.96
|
%
|
3,598
|
|
Total (M & I)
|
441
|
0.21
|
%
|
1,894
|
|
1.15
|
%
|
10,147
|
|
Colorado Plateau Inferred Resources
|
Sage Plain
(2)(4)
|
10
|
0.13
|
%
|
25
|
|
0.94
|
%
|
188
|
|
Whirlwind
(3)
|
437
|
0.23
|
%
|
2,000
|
|
0.74
|
%
|
6,472
|
|
Total Inferred Resources
|
447
|
0.23
|
%
|
2,025
|
|
0.74
|
%
|
6,660
|
Notes:
(1) The Mineral Resource estimate in this table complies with the requirements of NI 43-101, and the classifications comply with CIM definition standards and do not represent reserves under SEC Industry Guide 7. Mineral resources that are not reserves do not have demonstrated economic viability. See “
Cautionary Note to U.S. Investors Concerning Disclosure of Mineral Resources
,” above.
(2) Mineral Resources for Sage Plain are estimated at a uranium cut-off grade of 0.10% eU
3
O
8
. This cut-off grade is based on using a long-term uranium price of US$63 per pound U
3
O
8
and a vanadium price of US$6.75 per pound V
2
O
5
.Where vanadium assay data is available, that information is used to estimate the vanadium Mineral Resource. Where assay data is not available an average V
2
O
5
:U
3
O
8
ratio of 8.6:1 is used to estimate the vanadium Mineral Resource.
(3) Mineral Resources for Whirlwind are estimated at a uranium cut-off grade of 0.06% eU
3
O
8
. This cut-off grade is based on using a long-term uranium price of US$77.50 per pound U
3
O
8
and a vanadium price of US$7.50 per pound V
2
O
5
. Vanadium grades are based on assays where taken, and otherwise estimated at the average V
2
O
5
:U
3
O
8
ratio of 3.24:1.
(4) The Mineral Resources given for Sage Plain differ from those given in the “
Updated Technical Report on Sage Plain Project (Including the Calliham Mine), San Juan County, Utah, U.S.A.
” dated March 18, 2015. The Skidmore Lease portion of the property was dropped in 2016 and that Mineral Resource has been subtracted from that shown in the table.
(5) Numbers may not add due to rounding.
Exploration Properties
Department of Energy (DOE) Lease Tracts
We currently hold eight DOE uranium leases in the Uravan Mineral Belt portion of Mesa, Montrose, and San Miguel Counties, Colorado. The tracts are designated C-SR-12, C-SR-16A, C-AM-19, C-AM-20, C-CM-24, C-G-26, and C-G-27. A Federal Court Order in 2011 halted all physical work on these tracts until the DOE completes a full EIS on its Uranium Leasing Program. The Final EIS was made available and the Record of Decision was published in the Federal Register on May 12, 2014. The DOE’s preferred alternative is to resume the leasing program essentially as it was before the law suit. However, the DOE has not yet petitioned the Court to remove the stay on the leases; therefore, we have no plans for any additional exploration work in 2018. Prior to the 2011 stay, we conducted drilling on CM-24 and G-26.
Dropped Properties
The HC Claims (Calamity Mesa) and Torbyn Claims (Tenderfoot Mesa) were dropped by the Company during 2017. Neither property contained NI 43-101 compliant Mineral Resources.