(Disclosure: The following represents my opinions only. I am not receiving any compensation for writing this article, nor does Hydra Capital have any business relationship with companies mentioned in this post. I am long PLU.V).
Plateau Finds More Uranium, Talks Lithium: Making a Great Project Even Better
This morning Plateau Uranium (PLU on the TSX Venture) reported assay results from new drilling at the Macusani Project that suggests there may be a more or less horizontal layer of higher grade uranium and lithium mineralization within the main project area. The zone of most interest was drilled from "Platform 1" and is an 8-9 metre thick interval occurring at about 50 metres from surface with grades that are 2-3x the grade reported in the company's most recent resource report (link to a detailed discussion of the resource here). The company implies that this material could possibly represent a source of higher grade material in the early years of any future mine in order to improve the economics. More drilling will be required to determine just how much of this higher grade material there is, but that's not really what should have your attention... because the indicated economics are already incredible.
What should have your attention is that Plateau's existing project (newly-drilled high grade material aside) has some of the most robust indicated economics out there. Plateau took the opportunity to highlight the economics of the Macusani project at $40/pound U3O8 and it still shows a post-tax NPV of US$360 million (yes, USD) and a 29.2% post-tax IRR. I don't think I can think of another pre-production uranium project out there that can match those numbers. Most other companies have to run their projects at $60-65 uranium to make them look attractive, but today Plateau is putting its hand up and saying, "Hey, just so you guys know, we look pretty darn good at $40." Granted these are preliminary economics, but given what I've learned about the project, I'm not surprised that the numbers look as good as they do at this stage.
Plateau also went on to give a lot more detail on the nature of the mineralization, which I think is something that they must continue to do, because the nature of the Macusani project is so unique. As a result of the way this deposit was formed, in addition to the uranium mineralization, Plateau is also seeing what may be commercially interesting concentrations of lithium. Some preliminary work suggests that the lithium can indeed be leached from the rhyolite host rock using standard processes. In turn, the potential for the recovery of lithium as a byproduct should be evaluated in terms of making great economics look even better. Lithium recovery would also make the Macusani project a dual "energy metal" project, which on its own would be a neat show of geochemical serendipity.
I've described Plateau Uranium as a unicorn and I think that still holds true. If you really look at the volume of information on this project and talk to people who have taken the time to get to know it (investors, managers, and technical types alike), there is very little doubt that the Macusani project is something worthy of attention. Now, that on its own isn't good enough to bring investors all the way home, but the roadmap is pretty clear. With most of the key items squared away (resource size, project access, water, power, labour, infrastructure) Plateau just needs to keep moving the ball down the field with respect to metallurgy, permitting, costs, and surface rights/access as it drives towards completion of a full feasibility study. Today's news is another step in the right direction and the reference to the $40/pound economic case (and potential lithium kicker) should serve as another flare in the night sky if anyone is watching. Macusani is still elusive to most, but once you learn about this project it's not one that's soon forgotten. If Plateau management play their cards right and things even start to look like they are coming together, I think this Pacific Rim asset could attract attention from several different players who wouldn't even blink at paying 10 times Plateau's current valuation for the project. Who knows? Maybe one of them will look to take a 9.9% stake in Plateau sooner than I think and take a look behind the curtain... if I were them, I know I would.
Time will tell.