GoviEx Uranium is a uranium development company with three advanced projects in Niger, Zambia and Mali. From these African assets, GoviEx boasts a total resource of around 230 million pounds of uranium in the ground, along with plenty of exploration upside at each property. The business was established in 2007 by Govind Friedland, the son of highly-successful North American mining entrepreneur Robert Friedland. At the time, Govind Friedland was living in Beijing and suffering the effects of the dangerous pollution that was engulfing the city as a result of the wide-scale burning of fossil fuels. It was at this point that Govind realised the necessity for alternative, clean sources of energy across the world and foresaw a bullish market for uranium.
Not long after the company was formed, an opportunity arose to acquire five mineral licenses in Western Niger, within one of the world’s most significant sandstone-hosted uranium deposits: the Tim Mersoi Basin.
By March 2013, the company had used a local drilling company named Esafor to complete 650,000 metres of drilling across the property, which had been christened the Madaouela Uranium Project. GoviEx’s CEO Daniel Major explains how the company’s cornerstone asset has progressed over the last five years.
“Just after that [March 2013], we completed our first pre-feasibility for the property. We submitted the mine application during 2015 and by January 2016 the mine was fully permitted from both a mining and environmental permit perspective.”
Then in June 2016, GoviEx completed a transaction with fellow Canadian miner Denison Mines, which was to prove a significant development in the company’s overall story. The deal saw the latter increasing its shareholding in GoviEx to 25%, and in return, GoviEx became owners of Denison’s other projects in Africa.
A mid-tier uranium producer
Thus, GoviEx became a multi-asset, Africa-based uranium firm with three advanced development projects, and from a shareholder structure point of view, the company became comprised of four major shareholders: Denison Mines, Govind Friedland, Cameco and Ivanhoe Industries.
This impressive capital structure provides a strong layer of industry knowledge from Denison and Cameco, two veterans of the global uranium space along with another experienced mining industry participant in Ivanhoe.
With a total resource estimate of 230 million pounds of uranium across its African projects, GoviEx is set to comfortably fit into the mid-tier of global uranium assets within the next five to 10 years.
Major admits that none of the three projects will fit into the large-scale bracket defined by mines such as Cameco’s McArthur River and Cigar Lake in Canada, but he points to the fact that all of the company’s assets are targeted towards producing more than 2.5 million pounds per annum for an extended period of time.
“That is positive as well because we are already permitted for two of our projects, and so when we come into production, we can slot in without making a major impact on the market. If you look at some of the big Canadian projects that are due to come up, they are very large and would have an impact on the market if they were to turn up tomorrow.”
In the aftermath of the 2011 Fukushima disaster, the nuclear industry went through what Major calls a ‘cultural shock’ with panic spreading through international markets. For example, Japan shut down all of its nuclear facilities for a full safety review and public sentiment in Germany shifted sharply away from nuclear energy in favour of renewables.
The result of this shift in attitudes on nuclear energy was a drop in demand for uranium across the world, which subsequently pushed the commodity price down, leaving the uranium mining industry in a quandary.
An end to the nuclear thaw?
In recent years however, Major has observed sentiments changing once again, with countries warming towards nuclear as a viable energy source, having received reassurance through the widespread introduction of new safety measures and protocols.
“As renewables have tried to increase their stake, there has been an increasing realisation that you do also need to have a baseload clean energy source from somewhere, and the only large, clear energy baseload source is nuclear,” claims Major.
This realisation has been reflected in a rising growth in nuclear demand at 3% while generation levels have returned to pre-Fukushima levels. “The Japanese are ramping up their re-starts. They currently have eight and are increasing that number, and the Chinese are on a very strong growth build at the moment with over 15 reactors currently under construction.
“We have now reached the fastest rate of reactor build for the last 25 years and new countries are coming onstream such as the UAE and India, who are building very fast; importantly, the US is now proactively protecting its nuclear reactors.”
Despite these positive developments taking place in markets across the world, the nuclear industry is faced with a big strain on the supply side, as a number of major uranium mines reach depletion over the next decade.
In fact, Major postulates that about 30 million pounds of uranium will come off the market in the next 10 years as older mines reach the end of their life, plus about 15 million pounds of secondary feed will also come off the market in the next five years.
“The other risk the industry is facing is the permitting process in some regions, particularly in Canada, where you’re looking at anywhere between 10 and 20 years to permit a uranium project.”
This lengthy permitting process described by Major could contribute to a potentially damaging lag in new supply coming online, and sharply brings into focus the fact that GoviEx has already fully permitted its projects in Niger and Zambia.
At Madaouela in Niger, the company has completed three different pre-feasibility studies on the project and is now working on further optimisations before it kicks off the definitive feasibility study later this year.
“We’ve been looking at what we can do to reduce consumables and reduce the size of the plant amongst other improvements, so that when we do the final feasibility study, it will be as optimal as we can get it,” says Major.
Key project parameters at Madaouela include a 21-year mine life and production of 2.7 million pounds per annum of uranium at a cash cost of roughly US$25 per pound, with pre-production capital at about $359 million; however, Major is hopeful that GoviEx can improve on these metrics in the final feasibility through its various optimisations.
The company is looking at modularising construction to accelerate the process and is also assessing the potential use of hybrid power at the site.
“Our current model takes power from Niger’s coal-fired national grid, but because the project is located in the Sahara Desert, it seems logical to leverage the 12 hours of sun a day by using solar.”
GoviEx also believes that a hybrid power system could reduce costs on power by about 25-30% compared to using the coal-fired grid alone, while a hybrid system would also provide greater flexibility.
“We have Medea Capital Partners working on the debt financing for the project and have got expressions of interest from a number of export credit agencies and commercial banks. We’ve also appointed Houlihan Lokey as our advisors on offtake,” he explains.
This crucial financing stage of the project seems to be in good hands, owing to the fact that individuals from Medea and Houlihan were part of a former team at Société Générale who worked on debt financing for several major projects during the last uranium cycle in Africa.
The final step of the company’s ‘fully-funded’ development strategy is project equity financing, after project debt and offtake participation. Once the strategy has been carried out, GoviEx will commence construction work at Madaouela, with the mine slated for completion within three years.
Mutanga and Falea
GoviEx’s other near-term, fully-permitted project is the Mutanga project in Zambia, which is giving the company a very nice problem to have. “That project is causing us some grief because it is almost as good as Madaouela,” quips Major.
Strengths of the Mutanga project include the fact that it is a relatively straightforward project. GoviEx is planning to develop an open pit, heap leach operation with very low acid consumption. The project also has a low CAPEX of $120 million for 2.5 million pounds per annum along with plenty of exploration upside.
The company has recently completed radon and trending work at Mutanga, which has provided a number of interesting drill targets that the company will test over the coming months. Major reveals that getting Madaouela into production remains the key short-term goal for GoviEx, but he anticipates that Mutanga is only a few years behind the cornerstone development.
“It will take three years to build Madaouela, then another two or three years to get Mutanga going, so within five years we could have two operations producing between five to six million pounds of uranium per annum, along with another advanced project in Mali.”
The Falea project in Mali is currently smaller than Madaouela and Mutanga, but it offers an interesting twist in the shape of significant silver and copper credits. In addition, an external company had previously completed a pre-feasibility study on the project, which means there is a full mine design already waiting for GoviEx.
“Overall, we have a big resource, we have permits in place and our strategy is to get these uranium projects going in an improving uranium market. That is the headline message we want to get across to investors,” concludes Major.
“We look forward to continuing our work to advance GoviEx’s mine-permitted projects in Africa, in cooperation with our host governments, stakeholders, and strategic partners,” adds executive chairman Govind Friedland.