Uranium company Deep Yellow has decided to focus on early works infrastructure and initial engineering for its Tumas Project in the Erongo region.
Continuing with these carefully- considered programmes is expected to ensure a seamless and quick transition to the execution phase once suitable market conditions exist.
This means Deep Yellow has delayed its Final Investment Decision (FID) as it awaits more favourable uranium prices that it considers inevitable in a market that has been depressed for more than a decade due to persistent inactivity.
As such, the FID has been deferred to fully capitalise on the project’s upside potential, and thereby protect stakeholder value.
In a statement, Deep Yellow noted its board of directors has great confidence in the Tumas Project.
It highlighted that it is committed to delivering maximum value to stakeholders, and will await the inevitable higher uranium price that is expected.
The statement added that Deep Yellow is committed to becoming a reputable and reliable supplier of uranium, and has the capability to do so.
However, it will only proceed when market conditions change.
“We are at an extraordinary stage in the uranium supply sector. We have a situation where the long-term uranium market is essentially broken. This is due to more than a decade of sector inactivity, persistently depressed uranium prices, and utility offtake contracting practices that are yet to support the development of greenfields’ uranium production.
“Although the Tumas Project is economical at current long-term uranium prices, these prices do not reflect or support the enormous amount of production that needs to be brought online to meet expected demand.
Also, we can expect from experience that supply shortages will only be exacerbated by likely delays and, underperformance of the sector generally, stated Deep Yellow managing director John Borshoff.
He added that the Tumas project is ready to take the next step, provided a healthy uranium market prevails.
Borshoff noted that the final project approval will be delayed until uranium prices fully reflect a sustainable incentivisation environment, essential to encourage development of new projects for much-needed additional production.
“This is a deliberate strategic decision reflecting the company’s experience-based approach to sustainable uranium production. It is aimed entirely at preserving the company’s precious resources and reserves to achieve better value for Deep Yellow and its stakeholders, as well as facilitate continued growth.
“We believe our shareholders are patient and would prefer that we maximise value, rather than rushing to market. We will continue to derisk the project through a staged development approach,” Borshoff added.
Deep Yellow stated that additional detailed engineering carried out in the past three months has confirmed Tumas as a robust, long-life project.
Still, the key element to delivering FID was the prevailing uranium market conditions to justify development of a greenfield uranium project.
Borshoff stated: “Our unwavering view of the global uranium market and the long-term supply/demand equation remains clear. The demand outlook is undeniable, driven by decarbonisation efforts, forecasts of continued enormous energy demand growth, the prevailing structural supply shortages – and now having to deal with the added, newly-emerging requirements from the developers of energy-hungry datacentres, give clear upside for the supply sector”.
He continued: “The reality is there are limited greenfield uranium deposits available for start-up globally over the next 10 years to satisfy projected demand. New uranium supply will be virtually impossible to achieve in the current price environment. Nuclear utilities cannot ignore the fact that unless uranium prices increase to appropriate levels and large amounts of capital become available to the supply sector, those greenfields’ projects will remain undeveloped”.
In Deep Yellow’s statement, the company stressed that its board understands what it takes to build, develop and operate long-life uranium mines.
It is precisely through this market knowledge and understanding that the company will not proceed with full-scale construction until the uranium price reflects the mid to long-term demand forecasts, and the significant increase in supply required to deliver into a growing market.
“It is against this backdrop that we are comfortable with our decision to carefully progress areas of the project, such as early works’ infrastructure and detailed engineering – but not commit the capital to construct the process plant at this time,” Borshoff added.
Reptile Mineral Resources and Exploration, a wholly-owned subsidiary of Deep Yellow, manages the Namibian project portfolio, led by Tumas, which is held by its subsidiary, Reptile Uranium Namibia.