Dewey Burdock Uranium Project (100% – SD, USA)

The Dewey Burdock Uranium Project is located in South Dakota and is a high-grade in-situ recovery deposit. Azarga Uranium owns 100% of the Dewey Burdock Uranium Project.

Location

The Company’s 100% owned Dewey Burdock Uranium Project is an in-situ recovery (“ISR”) uranium project located in the Edgemont uranium district, in South Dakota, USA. Through property purchase agreements, mining leases and/or mining claims, the Dewey Burdock Uranium Project is comprised of approximately 12,613 surface acres and 16,962 net mineral acres. The Dewey Burdock Uranium Project is the Company’s initial development priority.

History

Uranium was found in the Edgemont district in 1952. Early discoveries were at surface. Later drilling revealed deeper uranium deposits. In the mid 1970’s, Tennessee Valley Authority (TVA) bought a major interest in the area and made Dewey Burdock their main exploration target. Silver King Mines was hired as the operator by TVA and explored the property until the mid 1980’s.

Regional Geology

The Dewey Burdock deposit occurs in the Fall River and Lakota Formations of the lower Cretaceous age. The Fall River and Lakota formations consist of permeable sandstones deposited in a major sand channel system. The uranium occurs in the sandstones as classic roll front deposits favorable to ISR mining methods.

Summary of Mineral Resources

In December 2020, the Company filed an amended and restated NI 43-101 compliant independent Technical Report and preliminary economic assessment (“PEA”) for the Dewey Burdock Project prepared by Woodard & Curran and Rough Stock Mining Services (the “Dewey Burdock PEA”) with an effective date of December 3, 2019.

Note: mineral resources that are not mineral reserves do not have demonstrated economic viability.

The Dewey Burdock PEA resulted in a pre-income tax NPV of $171.3 million at a discount rate of 8% and an IRR of 55% compared to a post-income tax NPV of $147.5 million at a discount rate of 8% and an IRR of 50%.  The Dewey Burdock PEA post-income tax calculations do not include a corporate level assessment of income tax liabilities; taxes have only been calculated at the Dewey Burdock Project level. The estimate of income tax at the corporate level is subject to a number of additional considerations that have not been factored in when calculating income taxes at the project level, including, but not limited to, the capital structure to finance the Dewey Burdock Project, which has not yet been determined and loss carry forwards available at the corporate level.

The Dewey Burdock PEA estimated uranium prices of $55/lb U3O8, direct cash operating costs of $10.46 per pound of production and royalties and local taxes (excluding property tax) of $5.15 per pound of production.  The total pre-income tax cost of uranium production is estimated to be $28.88 per pound of production.  Income taxes are estimated to be $3.39 per pound of production.

Initial capital expenditures are estimated at $31.7 million.  The Dewey Burdock Project is forecast to produce 14.3 million pounds of U3O8 over its 16 years of production and the projected cash flows of the Dewey Burdock Project are expected to be positive in the second year of production, two years after the commencement of construction.

Details of the assumptions and parameters used with respect to the Dewey Burdock PEA, including information on data verification, are set out in the “NI 43-101 Technical Report Preliminary Economic Assessment, Dewey-Burdock Uranium ISR Project, South Dakota, USA”, dated December 22, 2020, with an effective date of December 3, 2019, a copy of which is available under the Company’s profile at www.sedar.com. The Dewey Burdock PEA is preliminary in nature; it includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves. There is no certainty that the Dewey Burdock PEA will be realized. Mineral resources that are not mineral reserves do not have demonstrated economic viability.

Regulatory and Permitting

The Company’s Dewey Burdock Project received its Source and Byproduct Materials License SUA-1600 on April 8, 2014 from the Nuclear Regulatory Commission (“NRC”), covering 10,580 acres. The Company controls the mineral and surface rights for the area pertaining to the NRC license.

Subsequently, in December 2020, a petition for review of contentions previously resolved in favor of the Company and the NRC staff was filed by certain petitioners with the United States Court of Appeals for the District of Columbia Circuit (the “DC Circuit Court”), which is the next court in line of jurisdiction. The Company’s response to the petition for review is due June 10, 2021. Despite any appeal, the current full effectiveness of the Company’s NRC license for its Dewey Burdock Project remains in place and the Company does not expect this petition for review to be successful. The Company has previously prevailed at both the Atomic Safety and Licensing Board and the NRC Commission on these issues.

In November 2020, the Environmental Protection Agency (“EPA”) issued the Company their final Class III and Class V Underground Injection Control (“UIC”) permits, and associated aquifer exemption, for the Dewey Burdock Project. Subsequent to the permits being issued, the Class III and Class V UIC permits were appealed to the Environmental Appeals Board (the “EAB”). The aquifer exemption was appealed to the United States Court of Appeals for the Eight Circuit (the “Eighth Circuit”). The EAB proceeding has been stayed until May 2021 and the Company’s next filing is due May 18, 2021. Further, the proceeding before the Eighth Circuit has been held in abeyance pending the resolution of the EAB proceeding. The Company does not expect either of these appeals to be successful and is now focused on obtaining the required state permits for the Dewey Burdock Project in conjunction with resolving these appeals.

The Company submitted applications to the South Dakota Department of Agriculture and Natural Resources (“DANR”) in 2012 for its Groundwater Discharge Plan (“GDP”), Water Rights (“WR”) and Large Scale Mine Plan (“LSM”) permits. All permit applications have been deemed complete and have been recommended for conditional approval by the DANR staff. The GDP and WR permits are subject to hearing with public participation. The hearing commenced on October 28, 2013 and continued through November 25, 2013, at which point it was determined that the hearing will resume once the NRC and EPA have ruled and set the federal surety. The LSM permit has been finalized subject to continuation of a hearing before the Board of Minerals and Environment, which commenced the week of September 23, 2013 and continued through November 5, 2013, at which point it was determined that the hearing will resume once the NRC and EPA have ruled and set the federal surety. The Company is focused on recommencing the hearing process for the GDP, WR and LSM permits now that the EPA permits and NRC license have been issued.

The Company continues to be in compliance with existing permitting and licensing requirements. Prior to commencing construction and operations at the Dewey Burdock Project, the Company requires three state permits to be issued by the DANR, the EAB appeal to be denied or resolved in favour of the Company, certain pre-operational conditions under the Company’s permits and licenses to be satisfied and the development and implementation of mitigation plans for protection of cultural resources under the programmatic agreement.

What’s Next

In parallel with advancing the Dewey Burdock Project on the permitting front, the Company will continue to evaluate project-financing options, with a view to having a funding solution in place prior to or concurrent with the finalization of permits.

Qualified Person

John Mays, P.E. and Chief Operating Officer for Azarga Uranium is a Qualified Person under NI 43-101 – Standards of Disclosure for Mineral Projects and is responsible for and has approved the technical disclosure on this website.