| Marenica Energy (MEY)

2nd Mar '10 by wantedman

51 comments 12529 reads

Australian uranium explorer with a license in Namibia

Outstanding shares: 449 Mio

Major shareholders:

1.AREVA: 47.56 Mio = 10.59 %

2.Batavia Mining: 27.50 Mio = 6.12 %

3.Nikolaenko: (a Russian who was formerly the biggest shareholder) quantity unknown,but based on the AGM 2009 where about 60 Mio shares voted against a Polo director,one can speculate Nikolaenko ( and friends,associates) may still be MEYs biggest shareholder.

Marketcap:

63.56 Mio AUD (as of 10th May 2010 =shareprice of 0.14 AUD)

Website: http://www.marenicaenergy.com.au

Latest Research Report: http://www.marenicaenergy.com.au/investors/research_pdfs/1000427_marenica_bgf_research.pdf

Projects:

1.Marenica (main project)

ASX:MEY has a 75-80 % stake here. (BEE issue)

Currently proven resources of 85 Mlbs uranium at an average grade of 170ppm
These are known as the paleochannels (secondary uranium)

Further drilling confirmed,that the ressource has a western extension,which is currently being drilled among other targets.( a total of 16 new potential zones have been identified)

It should be noted,that Marenicas license is just 30 km from AREVAs Trekkopje !

2.Scaddan (lignite)

(rather unimportant compared to Marenica)

Directors:

John Young (CEO and geologist)
Graham Woolford (chairman)
Neil G Biddle (geologist and director of Batavia Mining)
David G. Sanders (lawyer)

Current valuation (shareprice of 0.14 AUD = 0.69 USD/lbs uranium)

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About the Author

Wantedman

Premium Member

51 comments

wantedman

1st Mar '10

Hello everybody,

I just had some hours to reflect this upgrade,here are my thoughts on the whole matter:

1.The Upgrade is definitely way above the expectations!

Why could that have happened ? Here is my explanation:

"...The SRK estimate has been derived using both GFSA and MEY probe data, with the resulting grades reported as U3O8. This reflects the correction of the original eU3O8 values to U3O8 equivalents, using a linear regression equation prior to estimation of the block grades..."

Obviously certain parts were not included in the November upgrade:

"....The Mineral Resource estimate reports from a palaeo-channel domain and from secondary mineralisation in the basement which outcrops to the west of the channel and which forms the footwall to the channel deposit. This sub-channel basement domain was previously excluded from the November 2009 resource estimate...."

This part alone accounts for 21 Mlbs !!!

2.Trading...

...is dissapointing ! Some bigger party is clearly selling otherways we wouldnt see this sp!
But to stress this point: This is the first day after the announcement and the market probably needs some days to fully grasp what this means for MEY!
I guess we can expect some very fine updates from Fat Prophets and the likes over the coming weeks,so we should have a certain amount of attention.
Furthermore Institutionell Investors will need some time as well to analyse this release and are not likely to decide by "feeling"....

3.What does this Upgrade really mean for us ???

Well Marenica was valued at 1.95 USD/lbs before this upgrade.
Right now (trading at 0.18 AUD) we are valued at 0.84 USD/lbs.
We just increased our overall resource by 120 % along with considerably increased grades (from 150-155 ppm before to now 170-175 ppm) Now the grades are extremely important if it comes to economics (and again just compare to AREVAs average grades at Trekkopje of 128 ppm !)

4.Valuation:

I recently showed that the valuation for other uranium exploration companies is somewhere in the 4 USD/lbs area.
Now Marenica just changed from a minor uranium deposit to a worldclass one,well above Forsys or Deep Yellow (as a comparisson) if it comes to the ammount.

Further points you have to consider are:

-Geology, primary or secundary uranium ? a point which is clearly favourable for MEY
-Depth of the resource:
With our uranium being just 0-40 m below surface we do have an impressive advantage over fellow companies such as Extract ( or BMN,DYL,...) who need to remove 60-300 m of rock just to reach their uranium.

As a conclusion:

Congratulation to all the people who are able to buy into this stock at these (ridiculous) low prices (which i didnt think possible after this announcement) but i am willing to take bets that this stock will trade at much higher prices in the shortterm...

Enjoy your Day

Wantedman

marben100

1st Mar '10

Well done, wantedman. Looks like a great result for MEY shareholders. :0)

Regarding Extract, don't forget that some of our resource lies just beneath sandcover - so no time-consuming blasting needed before we access the first ore. This is especially true in zone 1, where substantial amounts of ore lie between 0 and 87m below surface. 3 holes in one 100m x 100m cell have returned an AVERAGE grade of over 360ppm across the whole 0-87m interval (including a 40m intercept in one hole grading over 1,000ppm).

Not intended to knock MEY but to illustrate just how mindblowing Rossing South is by comparison with other Namibian finds.

Now... I guess I'd better study MEY's announcement in more depth. If the SP hasn't leapt, might be worth picking up a few tonight. :0)

marben100

1st Mar '10

Just one small point... I note that the Marenica project is only 80% owned by MEY, so an adjustment may be needed to the figures. Any idea who owns the other 20% and what the terms are (i.e. are they free carried)?

Cheers,

Mark

Mikrokosmos

1st Mar '10

Silly games are going on here!
Why we have definately a 4-5-bagger:

- 85 mlbs is a range for a stand-alone-project

- the pound uranium is valued with 0,9 USD (normal 4!!!)

- 16 new mineralisation zones

- AREVA took 10,6% of MEY, a prove in "everything is okay with this project"

- 80% of resource not deeper than 40 m

- heap leaching possible

- primary mineralisation-zones possibilities

- further paleochanel structures

- scoping study in June

- may appear of the radar of institutional investors

- raising uranium-price

...

It looks like someone wants the sp-level at AREVA-deal-niveau. Give him no chance! Anytime the seller, the wallbuilder has no more shares, so the sp will be raising in fair regions.

another example:
lets compare our neighbour Forsys with Marenica...

Forsys has a market cap of 347 mio AUD.
They have 71 Mio pound uranium.
So the pound is calculated with 4 USD.

Lets look at Marenica:
Marenica has a market cap of 81 mio AUD.

Marenica has 85 Mio pound uranium.
So the pound is calculated with less than 0.90 USD.

Funny that the Marenica resource is much better to mine, than the Forsys one.

Isn't this a little bit pervert?

...it seems, AREVA started the take-over-games yesterday.
The only logical reason for this incredible things, they happened yesterday! AREVA is the only one, who has an advantage in this sp. If another one wants to sell so much, he wouldnt be so stupid and let it see in the orderbook. And further would not throw so cheap. Every person i spoke today couldnt believe this ironic sp. It seems, AREVA has some mates in position for offloading and dumping the sp. The question is: how many shares do they have. The solution for a better and fair sp (35c) is, we need more volume, than they have. If this will happen, we will see a quick-monster-raising of the sp.
So its important to tell everybody about this bad games, AREVA want to play and tell everyone that mey is one of the chaepest and safe x-bagger. We are shareholders, and we want a fair range in SP. After positive scoping-study we have easily a 5-bagger! So lets play our games, and not the games of AREVA.

wantedman

1st Mar '10

Hello Marben,

The remaining 20 % belong to a Namibian party.Meys managment told me,that this is necessary according to Namibian laws.
So i was kind of confused when i noted that EXT still owns Rössing South a 100%. But we know about BEE, so probably Ext will have to split with 25 % as well.
Mey is currently in negotiations with another Namibian Businessman who wants to acquire another 5 % of MEY.
No details of these negotiations were published yet.

I am a little bit worried about the wall in the orderbook.Here is a link for live level 2 depth of MEY:

http://cb.iguana2.com/netwealth2/depth/wme

We have this wall between 0.185 and 0.20/0.21 AUD area since Arevas entry in December and now is the first real attempt to crash it.Yesterday somebody was clearly selling and keeping the sp down.

IMO the only party interested in keeping the sp down would be AREVA.

Today Germany closed at 0.137 Euro which equates to 0.207 AUD on record volume of more than 5 Mio shares traded.Lets see what Australia can make with this assist.

Mikrokosmos

2nd Mar '10

Marben, they got it. Closed at 20.5c
Very fine...9,7 Mio Buy-Volume, 3,5 Mio Sell-Volume.
BOT very strong. The wall has breaken.
We need to catch the 21c. Then we have a ticket to the old alth at 41.5c from the end of 2007.
So lets going on....we need more volume...
Germany is hitting 14c at the moment.

wantedman

6th Mar '10

Now this is bad news !!!

http://www.bloomberg.com/apps/news?pid=20601012&sid=aHOHhZ7X8J04

Areva’s 2012 Uranium Output Target May Be Trimmed 20% on Prices

By Anna Stablum

March 5 (Bloomberg) -- Areva SA, the world’s third-largest uranium miner, may cut its 2012 output target by as much as 20 percent as a slump in prices prompts a review of projects, a company official said.

The company said in September it expected to produce about 12,000 metric tons of uranium in 2012 and warned expansion plans could be modified because prices may no longer justify the cost. Uranium for immediate delivery fell 45 percent to $40.50 a pound in 12 months and is 70 percent lower than the record $136 reached in 2007, according to Georgia-based Ux Consulting Co.

“There will be either a halt or delays in some of the large projects,” Sebastien de Montessus, the director of Areva’s mining unit, said by phone. “We have the flexibility to lower the 2012 target of 12,000 tons by more than 20 percent depending on market conditions.”

Global uranium supply will outpace demand until at least 2017, according to estimates made in December by BMO Capital Markets. Producers started new projects and sought to expand existing mines as prices advanced to a record three years ago.

Areva expects to announce a new production target for 2012 in June and projects being reviewed include ones in Niger, Kazakhstan and Namibia, De Montessus said in the interview Feb. 23. Production exceeded 8,500 tons last year.

The Paris-based company was the third-largest uranium producer in 2008, behind Rio Tinto Group and Cameco Corp., according to the London-based World Nuclear Association. Data for last year isn’t available yet.

McClean Mine

Areva closed its 1,500-ton-a-year McClean mine in Canada last year and will suspend production at its McClean Lake mill in the middle of this year. It retains a stake in the 6,000-ton- a-year McArthur River mine, which is still operating.

The company also has two mines in Niger, producing a combined 3,000 tons. The potential expansion of one of them, Somair, is being reviewed and a separate project in the country, Imouraren, is already delayed.

Areva holds 51 percent of the 3,000-ton Katco mine in Kazakhstan and an expansion there is under review, as is the Trekkopje project in Namibia.

wantedman

9th Mar '10

wantedman

17th Mar '10

New radio interview from CEO John Young:

http://www.brr.com.au/event/64719

wantedman

19th Apr '10

A very intersting article on AREVA with a lot of relevance to Marenica:

http://www.ft.com/cms/s/0/4951b5b0-4b3c-11df-a7ff-00144feab49a.html

Areva close to finalising €3bn fundraising

By Peggy Hollinger in Swapkopmund, Namibia

Published: April 19 2010 03:15 | Last updated: April 19 2010 03:15

Areva is hoping to finalise its €3bn ($4bn) fundraising by the end of the month, an operation that will see the entry of Middle Eastern and Asian investors in the capital of the French state-owned nuclear group for the first time.

Anne Lauvergeon, head of France’s state-owned nuclear group, said the arrangements had entered the final stretch and “the ball is in the government’s camp” as it negotiates value and governance conditions.

The sovereign wealth funds of Qatar and Kuwait and the group’s Japanese partner Mitsubishi Heavy Industries are expected to participate in the 15 per cent share sale.

The French group needs the funds to help it meet almost €10bn of investment commitments in its reactor, fuel cycle and mining businesses.

About €4bn has already been set aside to expand Areva’s mining operations to 2012. The group intends to double its share of the world uranium market from 17 per cent to 30 per cent by 2020 by developing new projects in Africa, the Middle East and Canada.

Areva is keen to diversify its mining portfolio away from its reliance on politically instable Niger, which has in the past supplied more than 40 per cent of its uranium needs. Though it is developing the world’s biggest uranium mine at Imouraren, Niger will in future contribute less than a third of Areva’s uranium.
The group has developed a new technology that will allow it to expand its prospects by extracting commercial quantities of uranium from very low grade ore. The technology is being used for the first time at its new Trekkopje mine in the Namib desert, Namibia’s biggest ever inward investment at $1bn.

The mine is expected to produce more than 3,000 tonnes of uranium a year by 2012. Last year the group became the world’s biggest supplier of uranium, with 11,000 tonnes.

Ms Lauvergeon was in Namibia last week to inaugurate the desalination plant that will serve the Trekkopje mine. Jordanian officials at the inauguration said the Trekkopje technology had been a key reason for awarding Areva an exploration license in February, as their country’s deposits were low grade.

Areva also seems well placed to build Jordan’s first nuclear reactors. Officials said the French company’s newest reactor, the 1100MW Atmea – a smaller version of the new generation EPR being built in Finland and France – was “a good design”.

Jordan is planning to name three preferred bidders to compete for the contract for at least one reactor by the end of April. Success in Jordan would go some way to compensating for the setback in Abu Dhabi when a South Korean bid was favoured over the EPR.

wantedman

24th Apr '10

Some updates on Marenica,as they are just doing a roadshow through Germany,which i visited yesterday.

As an introduction,here is their most recent presentation:

http://www.asx.com.au/asxpdf/20100421/pdf/31pwz8hbnsdbc4.pdf

Impressions from their roadshow:

MEY is shaping more and more into a worldclass resource.The new management proves again,that they are fast forwarding the project (remember they are just working for about a year now) Scoping study can be expected in the first week of June,drilling results before that.

One of the most important issues that i learned from their presentation:

John Young (CEO) explained in detail the positive effect of the screening and scrubbing process for our resource. This process is unique for only a few resources.

Bannerman cant do it,Extract cant do it (primary uranium in much harder ore) ACap cant do it (although secondary uranium-their mineral would dissolve in the water) Only Areva (Trekkopje) with similar ore and Paladin (= Langer Heinrich) have benefit from this process in Namibia.

Now from Marenicas official presentation,there a some points you should read carefully:

"...90% of the uranium can be retained in 37 % of the ore..." and the increase rate for the grades is between 242% to 375 % depending on wether its calcrete or weathered bedrock.

Here are the maths what this process means for our resource:

The 85 Mlbs would shrink to 76 Mlbs (=90 %) while grades would increase from 170 ppm to ~ 650-700 ppm (242-375 % )at an average.

Now this really looks impressive:

76 Mlbs at 650-700 ppm ! What is best that the costs for this process would be marginal at an estimated 0.50-1.00 AUD per lbs.

The market just hasnt grasped this yet.Hopefully the scoping study will change exactly that.

CAPEX somewhere between 100-150 Mio USD. OPEX probably with a maximum of 32 USD (Alkaline leaching) but might be well under 30 USD (have to wait for the scoping for a more detailed number )

One of the few uranium explorers,that already solved the BEE issue satisfactory for the Namibian government (this issue will have to be approached by competitors (Extract for example)

Probably skipping PFS and going straight through to BFS after the scoping.Production possible as early as late 2013/early 2014

More confident than ever.

Wantedman

wantedman

27th Apr '10

Hello fellow investors,

Here is the best research report i have seen so far on Marenica.It was written by Warwick Grigor,an analyst of BGF Equities. I called this guy 3 weeks ago to get some better understanding on certain issues (screening and scrubbing for example) He did a splendid job of research on Marenica.
We have to thank him for that.
(As i got this as a pdf i cant provide a link unfortuantely-but if intersted contact me via boardmail)

Now just read and enjoy:

First,the most important sentence of the whole piece:

Disclosure: BGF Equities Pty Ltd have not been paid fees by MEY for the preparation of this report. It has not been paid corporate fees. The authors do not own shares in
MEY.

Marenica Energy Ltd MEY-Initiating Coverage

Progress on metallurgy will lead to signifificant upgrade of economics

Recommendation: BUY for Project Upgrades

Investment Perspective: We have upgraded our view on MEY following two key events; the acquisition of 10.6% of the Company by Areva, and the 120% increase contained uranium resources, following the boost in grade from 140 ppm to 170 ppm.
MEY is one the cheapest entries into the Namibian uranium sector, as demonstrated by the comparative table on page two with an EV of A$0.93/lb.
While we have less guidance on capex and opex for a possible development, as the scoping study is not due until mid 2010, we may find that the association with Areva gives MEY some unique benefits. Infrastructure sharing would lower capex. The ability to deliver pregnant liquor to Trekkopje for stripping could significantly lower capex and reduce financial risk.
A corporate outcome would also be an option for Areva if it decided it made sense to own Marenica outright, to maximise its presence in the region. Given what it paid for Trekkopje, MEY would be cheap at twice its price. While the in-situ grade is modest, test work is showing that a simple mechanical upgrading of the ore can lead to grades in excess up to 500 ppm prior to leaching. This significantly improves the economics relative to the hard rock alaskite projects in Namibia.
Many questions will be answered with the release of the scoping Study, which could lead to a significant re-rating of the stock.

Primary Points

1.Resources
Grades and tonnages
recently improved

-Historical resource grade shown to be understated; revised up from 140 ppm to 170 ppm
-120% increase in contained U3O8 to 85 Mlbs (38,500 t), Indicated and Inferred
-Increase in resources expected from continued drilling

2.Excellent Jurisdiction
Namibia - one of the best
countries in the World

-Namibia is an established uranium producing country
-Mining law is amongst the most favourable in the World
-Government is supportive of new projects

3.Project Status
Metallurgical test work
points to grade lifting by
200-300%

-ANSTO test work shows scrubbing and sorting delivered 90% of the uranium into 37% of the ore, giving a 200-300% boost in grades before leaching
-96% extraction of uranium to solution in laboratory tests
-Scoping Study due for completion in June 2010

4.Strategic Shareholder
Areva on the register adds
to the allure, and possibly
the economics

-Strong vote of confidence with shares purchased at 21? in December 2009
-Opportunity for co-operative development with Areva?s Trekkopje project e.g. use of water from desalinisation plant, sharing stripping and back end of plant facilities
-Better ability to debt finance project

Economics of the Marenica Uranium Project at Spot and Long Term Prices

We have run tables estimating the impact of the pre-concentration stage in the treatment of the Marenica ore. Table 1.
below shows the impact on the tonnages and the grades, with 90% of the uranium reporting to the concentrated
tonnage.

Table 1 - Impact of Pre-Concentration

JORC Resource" 227 mill. tonnes at 170 ppm
Contained Uranium" 85 mill. lbs U3O8 (38,500 tonnes)
On Pre-concentrating" 75 mill. tonnes at 500 ppm
Contained Uranium" 76 mill. lbs U3O8 (38,500 tonnes
Plant Feed" 10 mtpa at 170 ppm
Leach Feed " 3.3 mtpa at 500 ppm"

We have estimated project economics using numbers that need to be verified when the Scoping Study is released in June/July, but we believe they are within the ballpark. These are tabled below. Notable observations:

? the $100m capex might seem low, but given the friable nature of the ore the front end of the circuit should be much cheaper than for hard alaskite orebodies found in Namibia
? the pre-concentration methodology has been show to work on bench scale test, but this needs to translate to commercial scale operations
? we have used two uranium prices;
? spot US$40/lb - at this price the rate of return would be unacceptable
? long term US$60/lb - at this price it would be a very profitable operation
? it is generally accepted that at US40/lb, very few new uranium mines would be developed. This would
result in a seriously shortfall in supply over the next 5-10 years.
? the spot price is relevant to minor amounts of uranium and is therefore not considered a sound price to
use for mines with long term production potential, that could appeal to nuclear power utilities.
? We have not fully considered the opportunity to share facilities with Areva, or the possibility of delivering
only pregnant liquor to Areva for uranium stripping+

Table 2 - Marenica Project Economics

Marenica Project Economics (80% MEY)
Capex! $100m
Scrubbing Circuit Feed 10 mtpa
Leach Circuit Feed 3.3 mtpa
Leach Head Grade 500 ppm
Recovery Rate 85%
Uranium Production 1,122 tpa MEY Equtiy
MEY?s Equity $40.00/lb $60.00/lb
Revenue US$m 98.916 148.373
Royalty 5% 4.946 7.419
Net Revenue 93.970 140.955
Operating Costs $35./lb 86.551 86.551
Gross Cash Flow 7.419 54.404
Per Share 1.6? 11.96?
PCG 9.2x 1.3x
Capex Payback Yrs 10.8 1.5

Now there comes a comparrison table with a comment on Marenica:

Planning screen and scrub to reduce mass by 65%, with 90% of U3O8, which lifts grade by approx. 3x into the leach circuit. Pregnant resin to be sold to/contracted to third party for final product. This might be Arveva, at Trekkopje, as Areva now hold 10.6% of MEY shares. Table assumes the grade can lift from 170 ppm to 500 ppm, with initial plant feed of 10 mtpa reducing to 3.3 mtpa into the leaching circuit.

Marenica Uranium Project, Namibia (MEY 80%)

Background

Marenica Energy?s main project, Marenica, is strategically located in the uranium-rich Damara Province Namibia, where the Rossing (RIO) and Langer Heinrich (Paladin) mines account for more than 10% of the world mine supply of uranium. Trekkopje (Areva) and Rossing South (Extract) promise to boost Namibia?s proportion of World supply to 20%. Other projects in the province include Etango (Bannerman), Inca (Deep Yellow) and Valencia (Forsys). These projects combined will ensure that Namibia remains one of the most important countries in the resurgence of uranium and nuclear power.

The Marenica uranium project is covered by EPL 3287. centred 65 km E of Henties Bay and 60 km W of Usakos, intersected by a regional road. The licence was first granted in November 2006, for a period of three years. During the December quarter of 2009, the EPL was renewed for another two years by the Ministry of Mines and Energy.
MEY became involved in April 2006, when a joint venture was signed with Jaco Smith and MEY became Exploration Manager. Ministerial consent for the joint venture was obtained in May 2006. Environmental Clearance was received in July 2006.
The licence was transferred to Marenica Minerals (Pty) Ltd, a Namibian registered company, in June 2007. The licence was renewed (with a 25% reduction) for a period of two years from November 2008 to November 2010.

Geology and Mineralisation

The licence geology is dominated by the Damara Mobile Belt, which comprises erosional sediments from the Mokolian Group, which hosts several large deposits including the Rossing Uranium Mine and the Navachab Gold Mine.
The region is dominated by eroded sediments and exposed granites and intrusions. Overlying the sediments are calcrete and gypcrete occurrences.
The Marenica Project covers areas of resistant marble domes and schists, with numerous late-stage dolerite dyke swarms that can be from 1 to 150m in width. Numerous latestage faults cut the area and these have provided channel paths for the dykes.
There is an extensive network of ephemeral river channels with broad alluvial and colluvial cover, typically draining to the SW. These frequently obscure the palaeodrainage related calcrete mineralisation within the project.
Reconnaissance drilling in the 1970s first identified the two styles of mineralisation being investigated by MEY today; uranium in nodular and tube-like structures within calcrete and gypcrete sediments, and secondary mineralisation that occurs as infill along joints, planes and fractures within the basement rock.

Exploration History

Pre-Marencia Energy

The radiometric anomalism on the Marenica licence was first identified in the 1970s when the Geological Survey of Namibia flew several airborne radiometric surveys.
In 1973, the Atomic Energy Board examined the area in conjunction with the Damara Mining Company of South Africa. A scintillometer survey was undertaken with follow-up trenching and sampling. Uranium was identified with secondary mineralisation.
In 1976, Gold Fields Mining and Development Ltd conducted work on what is now the NE extent of EPL3287, continuing until the relinquishment of the ground in the early 1980s. Approximately 2,000 bore holes were drilled for over 32,000m. Beneficiation test work was conducted, including radiometric sorting, attritioning and alkaline leaching. Gold Fields calculated an estimated resource of 5,535 t of ?recoverable? uranium at a grade of 205 ppm eU3O8, and an additional resource of 2,600 t at a grade of 200 ppm eU3O8. A cut-off grade of 80 ppm was applied.

Post Marenica Energy

MEY commenced with mapping, rock chip sampling, trenching and airborne radiometric and gravity surveys. This work improved the accuracy of the database and interpretations, and resulted in much of the earlier identified schistose rock being reclassified as granite and alaskite, thereby increasing the prospectivity for basement-hosted primary mineralisation.
MEY identified 1,945 Gold Field drill holes, finding 582 of these had collapsed but a total of 24,127m of drill holes were found to be open. MEY drilled 150 RC holes in the first half of 2007, as part of a validation exercise, with half being alongside Gold Field
holes. An initial JORC resource of 31 Mt at 210 ppm was calculated in November 2007. RC drilling recommenced in November 2007, drilling to extend known mineralisation to the east, and in-filling
between Gold Field anomalies 3 and 4. Drilling was mostly on 600m x 200m spacing, while resource calculation areas were drilled on a 120m x 120m pattern to depths of 10-25m.
From May to July 2008, the Phillipus prospect was tested with 12 holes for 1,540m. The target was primary alaskite mineralisation on the northern margin on the Marenica Dome. Three layers of mineralisation with grades of 50-200 ppm, in combined thicknesses of 3 to 60m.
From July to November 2008, a further 264 holes were drilled in the paleochannel area for 12,386m, mostly on a 600m x 300m grid.
Diamond core drilling was conducted in April and May 2009, to provide geotechnical, mineralogical and metallurgical samples for scoping and feasibility studies. Seven HQ core holes were completed for 771m. This was followed by further RC drilling for resource calculation data, with 587 holes for 10,690m. The resource was upgraded to 122 mill. tonnes at 140 ppm in November 2009. A further 30 RC holes were drilled on the Phillipus and
Springbok targets in 2009.

The Current Exploration Programme

A 5,000m programme of air-core drilling, designed to test regional palaeo-channel targets, commenced in February 2010. Three targets are being tested with 115 holes drilled to an average depth of 8m.
The Recent Resource Upgrade On 1 March 2010, MEY announced a 120% increase in the contained uranium incorporating recent drilling and an extensive programme of re-probing holes drilled by Goldfields and subsequently comprising;

? probing of unlogged historic drill holes: 291 holes/6,718m
? probing of new in-fill drill holes: 249 holes/4,762m
? probing of exploration drill holes: 19 holes/2,384m

SRK Consulting conducted an updated resource assessment, calculating a JORC compliant 85 mill. lb U3O8 (38,500 t) resource, including the correction of eU3O8 values to U3O8 equivalents using linear regression, tabled below:

Methodology of Resource Calculation

The resource covers the palaeo-channel domain and secondary mineralisation in the basement which outcrops to the west of the channel and which forms the footwall of the channel deposit. The sub-channel basement was previously excluded from the resource calculation.
Ordinary kriging algorithms were used for block grades, but a Uniform Conditioning analysis was applied, considering the large block size and the shallow nature of the orebodies.
The individual Selective Mining Unit (SMU) was 10x5x2m, assuming this is an achievable mining size. There has been no consideration given to mining or processing recoveries, mining losses or dilution. The density of the palaeo-channel material was assumed to be 2.2t/m3, and the basement material 2.61/tm3. The Indicated material is in the central portion of the deposit that has been more closely drilled, as well as the boundary between the channel and basement domains.

Mineralogy and Metallurgical Testwork

Three styles of mineralisation have been identified at Marenica with carnotite comprising 85% of the uranium;
? primary, hyrdrothermal uraninite
? secondary oxidised bedrock carnotite
? calcrete-hosted carnotite

Metallurgical test work is ongoing. During 2009, 600 kg of mineralised material was collected from two costeans. Both palaeo-channel and weathered granitic bedrock material was collected. These samples were shipped to Cardiff University in the UK, to test for amenability to alkaline leaching processes similar to those employed by Langer Heinrich and Trekkopje. More recently, the Australian Nuclear Science and Technology Organisation (ANSTO) has been conducting test work at its Lucas Heights facility in Sydney. Tests on two 500 kg samples have confirmed that the ore is amenable to upgrading using screening, scrubbing and ore sorting
methods. The grade of the calcrete ore can be lifted by up to 240% by rejecting 63% of the material, retaining 90% of the uranium in the process.
Results from the weathered bedrock indicate that 90% of the uranium can be preconcentrated into 30% of the ore, lifting the sample grade from 232 ppm to 871 ppm, being a 375% lift in the grade. The process used by ANSTO is effectively a scubbing and
washing of ore crushed to 25 mm i.e. simple mechanical process. This method has been found to be more effective than radiometric sorting. Bottle roll tests have given encouraging leaching results but there is concern that generation of fines could be problematic for a heap leach operation i.e. fines could cause ponding and incomplete leach coverage. Agglomeration would be necessary.
Given the amenability to scrubbing and sorting to boost the head grade by 200-250%, it is likely that agitated leach tanks will be preferred to heap leaching. Work is continuing to assess and improve the rheological characteristics of the slurry for the alkaline leaching stage.
Initial tests have shown good leaching characterisitcs with 96% uranium extraction within a 24 hour period from both calcrete and weathered bedrock material. The testing process is yet to address the recovery of uranium once it is dissolved into solution. An appropriate ion exchange (IX) resin needs to be identified for resin in pulp (RIP) recovery.

Exploration Upside

As with many uranium projects, there continues to be sound exploration potential for expanded resources. In November 2009, a new airborne survey identified 16 new targets in both palaeo-channel and bedrock terrains. A 5,000m aircore drilling programme commenced in February. On 23 March 2010, MEY announced the first
results from this programme, with Target MA5 looking like a western extension of the current resource. Intercepts were in
the range of 1.4 to 3.0m, and grades were 106-259 ppm. The targets being tested are shown on the diagram below.

Finances

MEY currently has $3.5m in the bank. MEY is obliged to make payments based on the size of the resource calculated. The recent increase in the resource resulted in the payment of $648,400 plus GST.

Share Register

Like a number of other uranium exploration companies in Africa, MEY was approached by Polo Resources Plc in mid 2009, to conduct a placement of shares. As with the other companies, Polo decided to divest its holdings to concentrate on Extract Resources. The Polo holding of 10.57% in MEY was sold to Areva NC in December 2009.
The appearance of Areva on the share register could have significant implications for MEY, both corporately and operationally. Apart from being a world-leader in uranium and nuclear power, Areva is developing the large tonnage, low-grade calcretised palaeo-channel Trekkopje uranium deposit located 25-30 km to the south of the Marenica uranium project.
The Areva presence on the register will add to shareholder confidence, though it is still only a small holding in the eyes of Areva. However, it does open the door to sensible cooperation on the operational front. Significantly, Areva has invested heavily in local infrastructure that could benefit MEY e.g. the water desalinisation plant at Wlotzkasbaken, 30 km north of Swakopmund.

wantedman

28th Apr '10

And here is the link to the research report:

http://www.marenicaenergy.com.au/investors/research_pdfs/1000427_marenica_bgf_research.pdf

xigris

1st May '10

Thank you for keeping us up to date on the Marenica story Wantedman, its certainly an interesting prospect. Ultimately, I am sure that you are correct that Areva will buy out the Marenica shareholders.

However, I remain concerned about how Marenica intends to fund further exploration and a Scoping Study.

From the latest Quarterly Cashflow Report Marenica has cash of A$1.348m and deposits of A$2.382m. This is with a quarterly spend of A$1.709m.

I don't see how they are going to survive to the end of the year without another fund raising exercise. I have been burnt by too many companies in similar situations, i.e. a good asset, but limited funds to develop it. Therefore, I remain an interested spectator.

When the funding issue is resolved, it may be a different story for me.

Best wishes and good luck,

Chris

wantedman

11th May '10

Hello fellow investors,

I guess most of you will have read the article: "Uranium-a place to hide" which i posted some days ago at HC and Sharescene: (if you didnt take a look here)

http://dailyreckoning.com/uranium-a-place-to-hide/

I want to draw some conclusions from this article for Marenica, as i do think some of the facts mentioned in there will have a significant impact on our project on the positive side.

1.It gives us an explanation for the currently depressed spot price with the Uzbeks having to sell their annual production of 6.5 Mio lbs into the spot market because they didnt honor their long term contracts in the past.

2.(And this really is the key point for us)
It states that RIOs Rssing mine and the Kazackhs have to cope with an OPEX north of 50 USD/lbs !!! (or even more than 55 USD/lbs)
While this is hardly surprising for Rössing,after all their mine is nearing the end of its mine life cycle,IMO this is thrilling news if it comes to Kazakhstan.
This country is another player that is responsible for the depressed uranium price.
Most industry observers (and me) were very surprised to see that this small country was able to increase their annual production over recent years,up to date making them the worlds number 2 ranking producer.
But if they are selling their uranium at such cheap prices and having to pay 55 USD/lbs (according to their own analysis) for producing,lets think about what that will mean for Marenica ?!

Well here is my favorite quote from this article:

"These are fine conditions for investors in low-cost uranium mines to make a lot of money."

In MEYs latest presentation the company estimated the OPEX to be around 32 USD. Now you have to savour this.
It would mean less than 60 % of Kazakhstans costs.And remember worlds No. 2 producer with an output of currently more than 30 Mio lbs/year.
So long before our resource is likely to be uneconomic other sellers on the market will have to strike their colors.And to stay in the picture not a small vessel,but a huge three master.

Our CAPEX was estimated at ~ 100 Mio USD,so no big obstacle from this side (just compare to Bannermans sum of 555 Mio USD-from where do they want to get this kind of money in current market conditions,without even a cornerstone investor on board ?)

Of course these numbers are just estimates,but IMO they are based on well established facts (close to surface mineralisation,resource grades amenable to 250-350 % increase after screening and scrubbing,etc...)

Furthermore i trust that our management would not have published numbers like these,if they would expect the scoping study will not be able to prove this.
(I guess everybody in the Australian uranium industry knows what happened to Bannerman after they did this mistake last year...)

So the scoping study will have to show,what Marenica is worth (meaning our undervaluation) and i have every confidence it will do exactly that.

Coming to the depressing shareprice:

Yes there seems to be a seller in the market who throws his shares on the market-no matter how cheap the price is.With ridiculously low volume he is able to sink MEY from 0.14 down to 0.125 AUD.(as happened yesterday) FRUSTATING !!!

But does this change any of the fundamentals ???

Or the fact that AREVA is on board (and by the way was willing to pay 0.184 AUD/share last year before ! a 120 % increase of our ressource)

Or the fact that MEY is one of the very few Namibian uranium plays that already has nearly solved its BEE-issue?

Or the fact that an excellent infrastructure is already in place (thanks to AREVA) water will be available.

Or the fact that we upgraded our ressource from 38.6 Mlbs to 85 Mlbs along with increasing grades from 140 ppm to 170 ppm ? (and this really should tell everybody what happens here: our shareprice currently is lower than before this upgrade !!??!!?? )

So, fellow investors just a few more days or weeks of patience now and all the nonbelievers will see the final result.

I am looking forward to read this study.It should lower the risk for potential investors significantly and i believe this will be appreciated by the market.

Wantedman

marben100

11th May '10

Hi wantedman,

I think there is an important subtlety about Kazakh production costs to appreciate. CURRENT costs are much lower than US$50/pound - e.g. see this, relating to Uranium One: http://www.miningweekly.com/article/uranium-one-posts-loss-on-higher-costs-2010-05-10

The Canadian company, whose main operations are in Kazakhstan...

...The average realized sales price during the first-quarter was $46 per pound, down from $49 per pound a year ago. While the average total cash cost per pound of uranium sold was $19 during the quarter, up from $17 during the year-ago period...

I suspect that the $50 figure may be the MARGINAL (or future) cost of production, i.e. Kaz can't easily increase production much further without sharply rising costs and there is doubt about their ability to maintain low costs for future production, as the cheapest to extract near-surface resources deplete.

Hopefully, we have now seen the bottom of the U spot market. If so, this could be a favourable time to invest in U miners/explorers.

Best,

Mark

wantedman

11th May '10

Thanks Mark,

For clarifying on Kazakhstan operational costs.Although Uranium One is only one of the companies present there (would be interesting to know about other OPEX figures from Kazakhstan) , I never really researched into this country (and its uranium companies), as i am not keen on investing in companies which might be dis seized by the government (directly or indirectly) You have heard about Uranium Ones case...

But i share your thoughts about hopefully having seen the bottom of the U price.The possible future-low-cost-producers like EXT and MEY will stand to profit immensely from this scenario.Both are targeting to produce around 2013/14 which should be the year of a turnaround in the supply/demand-scenario for uranium.Here is a post from someone named binbin who wrote something about this matter some days ago at HC:

There has been a lot of concern amongst uranium investors/ bulls recently regarding the new nuclear arms reduction treaty (New S.T.A.R.T.) recently signed by the US and Russia on 8 April 2010 mainly because of the possible implications it may have on the expected supply/ demand imbalance that was supposed to occur in 2013 as a result of the termination of the Megatons to Megawatts program.

For those who aren't familiar with the Megatons to Megawatts program, the program involved the down blending of weapons-grade uranium or Highly Enriched Uranium (HEU)from dismantled Russian nuclear warheads into Low Enriched Uranium (LEU) to produce fuel for American nuclear power plants.

To understand the importance of this program, an understanding of the current state of the supply and demand of uranium is required.

As at the 1 May 2010 (http://www.world-nuclear.org/info/reactors.html), there were 438 nuclear reactors operating in the world, 54 reactors under construction, 148 reactors on order or planned and 342 proposed. The 438 reactors currently operating, consume 68,646t of uranium per annum. Total uranium produced in 2009 on the other hand was only 50,572t or only 73.6% of actual reactor uranium fuel requirements. This means that all the uranium mines in the world do not currently produce enough uranium to meet reactor requirements. The shortfall of 26.4% is currently being made up by the Megatons to Megawatts program, and other reprocessing/ recycling methods eg MOX etc.

You can understand now why most uranium bulls/ investors were quite excited about the Megatons to Megawatts program coming to an end in 2013 which would have led to a potentially serious shortfall in uranium supply leading to a sky rocketing uranium price, and their obvious subsequent disappointment when a new S.T.A.R.T. treaty was signed recently that could potentially extend the Megatons to Megawatts program.

The research I have done to date however appears to indicate that the expected supply shortage in 2013 is still very likely and there is still hope for uranium investors/ bulls for the following reasons:

1)The new treaty is still not finalised and may take a while to be approved by the Senate. After a closed door meeting in Capitol Hill on the 21 April 2010, Senator Jon Kyl, the Republican partys whip in the Senate, told Reuters it would undoubtedly be months before he announces his decision on whether to back the new START. There is a long way to go before anybody can really make an informed judgment about the treaty, he said. In addition, both the US and Russia have 7 years from the date the treaty is finalised to reduce their nuclear weapons by 30%.
2)Even if the US and Russia get their act together and manage to implement the dismantling of nuclear warheads reasonably quickly, the US and Russia may not have the ability to accelerate the down blending of HEU to LEU to meet the expected increase in demand. A presentation done by the Institute of Nuclear Materials Management in July 2008 (http://www.nti.org/c_press/LSHH%20INMMPaper%20Final%20Logo.pdf) regarding the possibility of 'Expanding Russian HEU Blend Down' arrived at the following conclusion :
Although both the uranium and enrichment markets are presently stressed with a perceived supply deficit, it is unlikely that any of the options (from their recommendations) can be executed quickly enough to offset the current short term gap between uranium supply and demand. It was also noted in the presentation that the US do not currently have sufficient facilities in place to accelerate the down blending of HEU to LEU for nuclear power reactors. It is also important to note that since this presentation was done, China and India have significantly increased the number of Nuclear reactors they plan to build.
3)The actual quantity of additional weapons-grade uranium expected to be created from the treaty is still unlikely to be sufficient to meet expected increases in demand or possibly even existing demand. To understand this point, it is essential to understand some key facts. The Megatons to Megawatts program over 20 years is expected to dismantle 20000 nuclear warheads which equates to 500 tons of HEU. Once down blended, 500t HEU makes 15000t LEU which is the equivalent to about 152000t of natural uranium. The US and Russia currently have 7276 active nuclear warheads remaining as at April 2010 (Nuclear warhead numbers are estimates from the Natural Resources Defense Council published in the Bulletin of the Atomic Scientists). As the new treaty is expected to reduce the number of active nuclear warheads to 3100 (1550 each for US and Russia), this would mean that only 4176 will be dismantled. This equates to approx. 105t HEU which makes 3150t LEU or 31920t of natural uranium. As the new treaty is meant to go on for 10 years, this means that they can only be expected to release onto the market an additional 3192t of natural uranium a year which only amounts to less than 5% of existing annual nuclear power reactor requirements. This is significantly less than the 10,600t of natural uranium that the Megatons to Megawatts program is currently supplying to the market until 2013.

So based on the above points, it appears quite likely that a uranium supply deficit will still happen around 2013 unless production from uranium mines around the world increase significantly in the next 3 years. However this is highly unlikely if the uranium price continues to remain at around $40/lb in the short term and $60/lb in the longer term as most mines would be uneconomical to mine at these low prices.

marben100

11th May '10

Hi wantedman,

I have been taking quite a close look at Kaz operations and whilst I don't have other figures to hand my recollection was that costs were currently well below US$20, due to cheap ISL (in-situ leach) extraction - but there is considerable doubt whether this is sustainable.

Cheers,

Mark

wantedman

14th May '10

Radio interview with Chairman Graham Woolford.
Published in Germany yesterday.Questions are in German,but you dont miss much if you dont understand them-important are Grahams answers.

Not much new stuff in there,but confirms most of the things we know.

One interesting aspect though,Graham expects the overall resource to probably end up in the 120-140 Mio lbs area:

http://www.brn-ag.de/beitrag.php?bid=17197

wantedman

25th May '10

Excellent article about uranium supply and demand:

http://www.ifandp.com/article/003819.html
Although from last month a really good read,with further indications about Kazakhstan uranium future:

Although Kazahkstan boosted its uranium output by 59 per cent in 2009 to 35,000t and more recently saw a 63 per cent increase in its 1Q10 production, some of its largest mines are approaching the end of their working lives and newer projects have higher capital and operating costs. In addition, Macquarie Commodities Research in a report issued in February indicated that it expects Kazakhstan’s 2010 production target of ~18,000tpa up from the ~13,600t seen in 2009, “to be rescinded in the next six months.” The consultancy is also expecting to see “further project delays and cancellations resulting in market tightening by 2011/2012.” Kazahstan’s own data allegedly indicates that the country’s 2009 output rate might not be sustainable at around US$40.5/lb.

Marenica Energy (MEY)

Australian uranium explorer with a license in Namibia

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Wantedman

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