McArthur River is a uranium mine located in the Athabasca Basin, 620 km north of Saskatoon, Saskatchewan, Canada. The deposit is steeply dipping, sitting atop a graphitic fault zone overlaid by Athabasca sandstone. McArthur River is 69.8% owned by Cameco, with the remainder owned by Orano (previously AREVA). McArthur River was first prospected in 1980, followed by underground exploration in 1993, reaching commercial production in 2000. 327.5 M lbs U3O8 since production began. As of the effective date of the current NI 43-101 report, McArthur River is on care and maintenance, pending restart. A restart is proposed based on a price of C$56.39/lb U3O8, demonstrating maximum NPV with early project start.
| Year of Restart | 2020 | 2021 | 2025 | 2030 |
|---|---|---|---|---|
| NPV8% (C$ ‘000,000) | 2,973 | 2,761 | 2,012 | 1,211 |
The underground mine is accessed via three shafts. Production mining uses either raisebore or longhole. A third method known as boxhole, using a pilot hole and reamer both operated from an undercut sill, is approved for mining but not currently in use. The raisebore method drills a pilot hole from a top access, with a cutter head attached at the bottom access, and pulled through. After mining is complete, the excavation is backfilled with cement and the adjacent excavation takes place. By overlapping these cylinders, a 97.5% recovery is achieved with 17% cement fill dilution. The use of longhole stoping provides an alternative that achieves bulk production and minimizes fill dilution. Due to high pressure groundwater inflow, challenging ground, and the need for radiation protection, ground freezing is used at McArthur River. Reserves are planned using a price of US$44/lb U3O8, with 99.4% mine recovery, 42% waste, 6.8% backfill dilution, and 99% mill recovery for a cutoff grade of 0.80% U3O8. Over its 23 year mine life, ore from McArthur River is processed at the Key Lake Mill, 83.3% owned by Cameco and the rest owned by Orano. Ore is blended with low grade feed from mineralized waste and recycled product to manage mill head grade. Following a year one production of 4 M lb U3O8, the operation produces 18 M lb U3O8 over LOM, before scaling down in the last two years for a total of 393 M lbs, of which 274 M lbs represents Cameco’s share. With an operating cost of $14.97/lb and LOM CAPEX of $941 M, the project has a NPV8% of C$2.97 B in 2020 with pre-tax IRR of 11.6%.
| Classification | Tonnes (‘000 t) | Grade (% U3O8) | Contained (M lbs U3O8) | Cameco’s Share (M lbs U3O8) |
|---|---|---|---|---|
| Reserve | 2,572.5 | 6.91 | 391.9 | 273.6 |
| Resource (M+I) | 132.9 | 2.65 | 7.8 | 5.4 |
| Inferred | 80.5 | 2.25 | 4.0 | 2.8 |
McArthur River has a large, high grade Reserve and there is no impetus for accelerated exploration. The deposit is well delineated but there is limited near mine Resource discovery potential. As a mature operator, Cameco has been able to optimize mining and milling to reduce CAPEX and OPEX from $2.5 B and $19.23/lb in the 2012 Technical Report, to $658 M and $14.97/lb respectively. At the time of writing the report, the project had an IRR of 11.6%, which could be sensitive to project delay and cost overruns. However, current uranium prices are well above the input used at the time of the study and likely represent project upside. With existing infrastructure, well defined deposit, experienced operations, and elevated uranium prices, McArthur River may become a cornerstone asset for Cameco once again.
The information presented above does not constitute investment advice. This is a summary from the NI43-101 Technical Report effective Dec 31, 2018 (INSERT), with commentary from the author. Statements above do not represent the views of Cameco. If any discrepancies arise, the information contained within the NI43-101 are official and final. For latest depletion data, please refer to the AIF update.