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 January 2020, the Company filed a NI 43-101 compliant independent Technical Report and 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.

In addition to the ISR mineral resource estimate, the NI 43-101 resource estimate includes a non-ISR (located above the water table) mineral resource estimate containing measured resources of 857,186 pounds at 0.060% U₃O₈, indicated resources of 407,851 pounds at 0.053% U₃O₈ and inferred resources of 114,858 pounds at 0.051% U₃O₈ at a 0.20 GT cut-off. The non-ISR mineral resource estimate is not included in the mineral resource figures presented in the economic analysis for the Dewey Burdock PEA.  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 January 17, 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 Section 106 programmatic agreement (“PA”) was executed on April 7, 2014 by the Advisory Council on Historic Preservation, the NRC, the South Dakota State Historic Preservation Office, and the BLM. Subsequent to the PA being executed, the NRC issued a final Safety Evaluation Report and the Company’s Dewey Burdock Project received its Source and Byproduct Materials License SUA-1600 on April 8, 2014, covering 10,580 acres.  In the fourth quarter of 2016, the Company received approval from the NRC for the first amendment to the NRC license, which completed certain NRC license conditions. The Company controls the mineral and surface rights for the area pertaining to the NRC license.

The consolidated intervenors and the Oglala Sioux Tribe have filed an appeal to the NRC Commission for two contentions previously resolved in favor of the Company and the NRC Staff by the Atomic Safety and Licensing Board related to identification and protection of historic and cultural resources.  The Company expects that this appeal will be not be granted. The NRC license for the Dewey Burdock Project continues to remain in good standing.

The Company continues to be in compliance with the existing conditions of the NRC license and other permitting and licensing requirements. Prior to commencing construction and operations at the Dewey Burdock Project, the Company requires regulatory approvals from two other major agencies, the EPA and the DENR. These approvals include the final Class III and Class V UIC permits from the EPA and three state permits to be issued by the DENR.

Additional requirements that need to be addressed prior to commencing construction and operations at the Dewey Burdock Project include the satisfaction of pre-operational conditions under the NRC license and the development and implementation of mitigation plans for protection of cultural resources under the PA.

In August 2019, the Company received notice that the EPA issued revised draft permits for the Dewey Burdock Project.  The revised draft permits incorporate comments submitted to the EPA on the original draft permits, including comments submitted by the Company and pertain to the Company’s planned Class III and Class V UIC activities. The revised draft EPA permits addressed the majority of the comments submitted by the Company. This is a significant step towards the issuance of the final EPA permits and continues to advance the Dewey Burdock Project towards development. The Company remains focused on working with the EPA to obtain the final permits in the near-term.

The Company submitted applications to the DENR 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 DENR 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.  Subject to improved market conditions, the Company plans to re-commence the regulatory process with the DENR once the final EPA Class III and Class V UIC permits have been issued.

On July 8, 2014, the BLM requested additional information on the Company’s plan of operations for the Dewey Burdock Project. The Company submitted the requested information and anticipates that the BLM will approve the plan of operations in the near-term.

What’s Next

The Company remains focused on working with the EPA to obtain the final Class III and Class V UIC permits in the near-term. 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.