Toro Energy (Toro) has formally notified Deep Yellow (DYL) that it will not be proceeding to exercise its option to acquire the Napperby uranium project in the Northern Territory. At the current uranium price, the option purchase price would be approximately AUD57m.
The company has found out from the results of its scoping study and follow-up alternative development options that the current economics of the project, based on current long term uranium prices, do not warrant taking up the Napperby purchase option under the current terms with Deep Yellow.
Toro added that no significant additional uranium deposits with reasonable grade have been discovered in the region to provide support to the economics of the project. It is Toro’s current view that significant regional exploration will be required if additional resources are to be defined that may have a bearing on long term economics.
The company’s economic analysis of potential development scenarios indicated that the deposit was unlikely to exceed its internal rate of return requirements under present and near term uranium price scenarios.
In light of this, Toro made an alternative proposal to DYL to enable the project to be taken forward on terms acceptable to Toro. This proposal was considered by DYL but was not accepted.
In the interests of preserving shareholder value, the company will now allow its purchase option to lapse (saving the option call requirement of approximately AUD57m) and thereby allow operational control of Napperby to revert back to DYL from May 5, 2010, subject to final exploration rehabilitation requirements.
Toro will now provide additional focus to its exploration efforts in the Northern Territory looking for high grade deposits that are economically beneficial. The company is involved in discussions with potential third party investors interested in a coordinated exploration program in the Northern Territory leveraging a tenement position that has been three years in acquisition and development.
Toro’s projects such as Tanami, Sandover, Reynolds Range and Waterhouse will receive additional attention targeting higher grade sandstone or unconformity uranium mineralization.