Perth - Boss Resources Ltd.
(ASX:BOE) recently entered into a binding but conditional agreement to acquire the 0utstanding 20% interest in the Honeymoon uranium project for 300 million Boss shares. If completed, this will increase Boss' ownership of the project from 80% to 100%.
Boss anticipates replacing solvent extraction with ion exchange at the project's processing facility (ion exchange is based on the same principles as solvent extraction but uses small resin beads rather than organic solvent to load the uranium). In support of this, Boss announced that the results of field leach trials at Honeymoon have exceeded expectations - a grade of 80 mg/l U3O8 (triuranium oxide) was achieved compared to the preliminary feasibility study (PFS) assumption of 48 mg/l U3O8.
Historically, more than $170 million has been invested in infrastructure at Honeymoon, one of only four uranium projects in Australia to be fully permitted for uranium mining. This reduces the capital cost (Stage 1 - US$10 million) and shortens the time frame for production to recommence in the future.
Analyst comment: Boss, which made a number of key announcements late in 2017, aims to hasten a potential restart of the Honeymoon uranium project.
Project ownership: Boss' agreement to increase its ownership in Honeymoon (provisional on shareholder approval) has had limited effect on our current valuation, an increase in project ownership being offset by increased dilution. That said, the numerous quantitative benefits of the acquisition include better use of management time and simpler negotiations with potential partners (project financier, offtake, government, etc.).
Field leach trials: as noted above, results exceeded expectations and in so doing supported Boss' aim of converting the current solvent extraction facility to one using ion exchange in its proposed Stage 2 and Stage 3 expansions. Given the significant increase in grade revealed by the trials, it is probable that operating costs - already low at US$23/lb - will be further reduced when results of the DFS are released later this year.
Uranium price: last year was one of the toughest in recent memory for the uranium price. However, the situation may finally be easing, since that price lifted from decade-long lows at the end of 2017, largely in response to two of the world's major uranium producers announcing cuts in production.
While the uranium price still has some way to go before Boss and other developers would consider commencing production, we believe everything points to further price appreciation through 2018.
Valuation: we maintain our valuation for Boss at $0.23/share.
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About Boss Resources Ltd:
Boss Resources Ltd. (ASX:BOE) has one of a few uranium projects ready to participate in the early stages of a new bull market; it truly is a product for this time. Against a backdrop of strengthening uranium prices, the Company has been proactively identifying, addressing, and positioning the Honeymoon Project to be Australia’s next producer of up to 3.2M lbs per annum.
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Source: Boss Resources Ltd. / The Sophisticated Investor
Adam Kiley Director
TSI Capital Pty Ltd