Despite State Government optimism this week that BHP Billiton's sale of its Yeelirrie project to Cam- eco would put development of the uranium mine back on the agenda, the Canadian company is in no hurry to rush the project into production.
The deal is not expected to close until near the end of the year as Cameco needs to win support for the deal from the Foreign Investment Review Board, among other details, but even then it may be some time before a clear development timetable emerges.
Because Cameco is listed in Canada, the company's first order of business after the close of the $430 million purchase would be to translate BHP's historical drilling and resource estimations into a formula acceptable for release to the company's home stock market, according to Cameco Australia managing director Brian Reilly.
"It's a large asset, and we would say best of class, but until we do our own resource estimation it's still early in terms of next steps," he said.
Once a new resource estimate is prepared Cameco would need to re-calculate the project's development costs, in a cost environment far hotter than earlier development estimates, and restart the long road to winning environmental and community support for the project, Mr Reilly said.
Though market observers had assumed Yeelirrie would take the place of Cameco's stalled Pilbara uranium project in its development pipeline, Mr Reilly said Kintyre was very much in the company's thinking.
Cameco stalled development of Kintrye earlier this year, saying the project could not break even at uranium contract prices of below $US67 per pound. Industry sources say the long-term pricing is hovering at only $US10/lb below that level, and was expected to rise in the wake of BHP's decision to abandon development of its Olympic Dam expansion, which would have delivered 40 million pounds of cheap uranium into world markets.
Given Kintyre's location, and particularly the 2000km trek needed to move uranium ore to Kalgoorlie, where it would be railed to either Darwin or Adelaide, Mr Reilly said it was clear the break-even price for Yeelirrie would be lower than its Pilbara project. But far from abandoning work at Kintyre, Mr Reilly said Cameco had accelerated exploration at the project, hoping to extend the resource base and bring down average costs of production. Four drilling rigs are working at the site, and Cameco is expecting to launch a definitive feasibility study in the near future."Despite what are clearly challenging economics for the Kintyre project we are advancing it through to a final investment decision, which we anticipate sometime in 2014," he said.
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