Rose Petroleum's VANE signs big uranium deal with enCore Energy

The AIM-traded firm said the database was comprised of geological, geophysical, aerial photography, drilling, and evaluation data on the uranium breccia pipe district of northern Arizona - specifically the region south of the Colorado River where a number of discoveries had been made.

In return for VANE providing exclusive access to its uranium project database, enCore would issue to VANE three million ordinary shares in enCore which had a current market valuation of about $0.3m, and which represented approximately 2.1% of the existing share capital of enCore.

The shares would be locked-up for an initial four month period, after which Rose would be able to dispose of them, subject to certain orderly market provisions.

Rose said the initial term of the agreement would be five years, and enCore would seek - at its own cost - to use the database to generate exploration prospects and to subsequently develop those prospects into commercial operations.

If any of the prospects reached the development stage, VANE will have a one-off opportunity to participate in the projects, Rose Petroleum explained.

It said it would be able to participate up to a maximum 25% interest in any developed projects, at its sole discretion.

The purchase price for the VANE interest, at the development stage, would be 250% of the pro-rata exploration costs incurred on the project to advance it to the development stage.

From the point at which VANE acquired an equity interest in any project, it would be responsible for the development expenditure for its specific portion of its interest.

If VANE did not elect to participate in the projects in accordance with the agreement, Rose confirmed it would have no further rights in respect of that particular project.

Additionally, should VANE seek to develop any of its eight existing breccia pipe uranium projects on which it currently controlled the mineral rights, which were currently held on care and maintenance, enCore would have the opportunity to participate in those projects on the same terms that VANE could participate in the enCore projects.

Under the terms of the agreement, enCore will have a first right of refusal to acquire any mineral rights on those eight projects should VANE choose to dispose of them during the term of the deal.

As part of the agreement with enCore, VANE had excluded its North Wash stratabound vanadium/uranium project in Garfield County, Utah from the transaction, as discussions with third parties were already underway, which could lead to a separate divestiture of that project.

At North Walsh, VANE had previously announced that it had contracted an independent mining pre-scoping study in May 2012, upon the completion of a two-year drilling programme.

This company said the was prepared to determine the mining method and development costs in an effort to assess the general feasibility of the project.

Due to the strength of the present vanadium market, interest in the North Wash project had now “significantly improved”, Rose Petroleum reported.

It said the report covered preliminary design engineering sufficient to gain an indicative estimate of capital and operating costs, manpower requirements and a preliminary development and production schedule, and now showed it had the potential to be developed into a commercial project, with the group in ongoing discussions with third parties in respect of that.

Vanadium is a key component in redox/flow battery energy storage systems.

The company said the North Wash project, originally drilled by Cotter Corporation in the 1970s and subsequently acquired by VANE, had 162 drill holes - 34 of which were drilled by VANE in 2007 and 2008 - ranging from depths of 205 to 385 feet.

It explained that the internal resource estimate identified approximately 166,700 lbs of uranium based on close-spaced drilling, with a reasonable potential to double that estimate based on wider-spaced drilling southwest of the main resource.

Additionally, assays on drilling core indicated a vanadium to uranium ratio of 5:1, resulting in approximately 833,500 pounds of vanadium in the main resource and the potential for a total of 1.6 million pounds of vanadium, including the drilling to the southwest.

In 2012, the capital cost estimate for life of mine was $10m at around 200 short tons per day, including direct mining equipment costs, general mine surface facilities and indirect costs.

Operating costs were estimated at $72.38 per ton, including mining, crushing and sorting.

Transportation costs to a mill were estimated at $20 per ton.

It was estimated at the time that the cost to produce one ton of mine produce was $72 per ton.

Rose said that, including the costs of selective mining in the narrower parts of the resource at least one ton of waste is mined for each ton of ore, resulting in a cost to produce a ton of ore of $144.

In 2012, the contained vanadium and uranium value per ton of ore rendered the project uneconomic, but since then the vanadium price had risen from around $5 per pound to currently around $29 per pound, giving a per ton value of approximately $515 per ton.

Rose said milling costs were not currently available.

“I'm delighted that we have been able to complete this agreement with enCore to utilise our extensive database, which not only provides the Group with upfront consideration but which will also enable Rose to retain an interest in any projects that move forward to development should we wish to do so,” said Rose Petroleum chief executive officer Matthew Idiens.

“The North Wash Vanadium project offers significant potential value and we will continue to progress discussions with third parties to create value for shareholders.

“The joint venture Agreement with ENCORE, in addition to the disposals of the group's Wate project and the SDA mill in Mexico last year, is in line with our strategy of creating value from our non-core assets whilst focusing on our onshore North American oil and gas activities.”