The Langer Heinrich Royalty was created pursuant to a letter agreement dated May 31, 2002, between Paladin Resources Ltd. (now Paladin Energy Ltd.), through its subsidiary, Paladin Energy Metals Ltd. (now Paladin Energy Minerals NL) and Aztec Resources Limited. Such royalty interest was subsequently acquired by Mega Redport Pty Ltd., a wholly owned subsidiary of Mega Uranium Ltd. The Langer Royalty is a PR royalty of A$0.12 per kilogram of U3O8 produced from the Langer Heinrich Mine and sold by Paladin and Paladin Energy Metals Ltd.
According to publicly available information, the Langer Heinrich Mine is located in Namibia, 80 kilometers east of the major seaport of Walvis Bay and about 40 kilometers south-east of the large-scale, hard-rock Rossing uranium project operated by a subsidiary of Rio Tinto plc. The mine is a surficial calcrete type uranium deposit. The project is operated by Langer Heinrich Uranium (Pty) Ltd., a company that is 75% owned by Paladin Energy Ltd. ("Paladin") and 25% owned by CNNC Overseas Uranium Holding Limited, a wholly owned subsidiary of the China National Nuclear Corporation.
Construction of the Langer Heinrich Uranium Project commenced in 2005, and staged commissioning of the plant began in August 2006. The mine was officially opened in March 2007. On May 25, 2018, Paladin announced that the Langer Heinrich Mine was to be placed on care and maintenance and stopped presenting ore to the plant because of persistently low uranium prices.
The information below regarding project milestones and recent developments for the Langer Heinrich Mine has been summarized from Paladin's public disclosure and from other publicly available materials.
The Langer Heinrich Mine deposit was discovered by General Mining Union Corporation Limited ("Gencor") in 1973. Between the late 1970s and 1980, Gencor completed substantial technical work, including a full project-evaluation study, metallurgical studies, multiple exploratory shafts and construction of a 300,000 tonne per year dry screen plant and pilot plant at the Langer Heinrich Mine. In 1998, the Langer Heinrich Mine was acquired by Acclaim Uranium, which completed additional drilling and a pre-feasibility study between 1999 and 2002. In August 2002, Paladin acquired Langer Heinrich Uranium (Pty) Ltd. from Aztec Resources Ltd (formerly Acclaim Uranium NL).
Paladin filed a resource estimation in April of 2005, and in July of 2005, announced that the Ministry of Mines and Energy in Namibia approved the grant of a mining licence covering the Langer Heinrich deposit for a 25-year term. Initial construction at the Langer Heinrich project started in September 2005, leading to the mine's official opening in March of 2007.
The Langer Heinrich Mine had its first full year of production in Paladin's fiscal year ended June 30, 2009. Since then, Paladin has completed two expansion projects, the first being the Stage 2 expansion in fiscal 2010 and the second being the Stage 3 expansion that took place in fiscal 2012.
In July of 2014, Paladin announced the completion of the sale of a 25% stake in the Langer Heinrich mining operations to CNNC Overseas Uranium Holding Limited. In May of 2018, Paladin announced that it has received the consent of relevant stakeholders to place the Langer Heinrich Mine on care and maintenance and that it had stopped presenting ore to the plant.
In its annual report for the year ended June 30, 2019, Paladin announced that in February 2019 it had completed a concept study that identified multiple options to reduce operating costs, improve process plant performance and potentially recover a saleable vanadium product. Such annual report also disclosed that in March 2019 it commenced a two-stage pre-feasibility study respecting a potential re-start of mining operations at the Langer Heinrich Mine upon a sustained recovery in uranium prices, with the first stage expected to be completed in September 2019 and examining a rapid, low-risk restart of the mine and the second stage expected to be completed in March 2020 and involving a more detailed study, including process optimization aimed at lowering costs, recovering vanadium and potentially increasing production in the later stages of the mine life. In the report, Paladin also disclosed that a re-start would be considered only if forecast cash flows from uranium sales provide an appropriate return on investment.
On October 14, 2019, Paladin announced the completion of the first stage of its pre-feasibility study, which included a JORC(1) compliant mineral resource estimate for the Langer Heinrich Mine with measured resources of 71.87 mmlb of U3O8 (66.2 million tonnes at an average grade of 0.049% U3O8) and indicated resources of 17.96 mmlb of U3O8 (18.8 million tonnes at an average grade of 0.044% U3O8). Such resource estimate was reported on a depleted basis to June 30, 2018 and did not include stockpiles. Paladin's disclosure regarding the prefeasibility study included: (a) an estimate of US$80 million required for the rapid restart of the mine, including US$38 million for plant repair and improvement and US$42 million for working capital; (b) an initial production capacity of 5.2 mmlb, while processing high and medium grade ores for approximately an 8-year period (after a 12-month ramp-up), followed by production capacity of 2.7 mmlb while processing low grade ores for approximately 12 years; and (c) a resulting average life of mine all-in sustaining cost of approximately US$33 per pound, consisting of life-of-asset mining costs of US$8.40 per pound, processing costs of US$18.20 per pound, other operating costs of US$2.60 per pound and capital costs of US$3.80 per pound. Paladin further disclosed that it had identified opportunities, requiring estimated discretionary capital expenditures of US$30 million, to significantly debottleneck existing mining and mineral processing operations to 6.5 mmlb per year and reduce all-in sustaining costs by approximately US$4.50 per pound.
The table below sets forth historic production for the Langer Heinrich Mine for each of the years ended June 30, 2016, 2017 and 2018, as reported by Paladin in its annual reports for the period.
Production Cost of Production
Year ended June 30: (mmlb) (US$/lb)
2018 .......................................................... 2.739 26.23
2017 .......................................................... 4.149 18.91
2016 .......................................................... 4.763 25.88
(1) The 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves.