WHY PROJECT READINESS IS VITAL TO PROTECTING THE TIMELINE TO PRODUCTION

It is my pleasure to be writing my first Sharing with Holders to you as CEO of Bannerman Energy.  This is an incredibly exciting time for the Company as we advance towards construction of our Etango project. I look forward to regularly updating you on key matters –  but rest assured you will continue to hear from Brandon on a regular basis also in his role as Executive Chairman.

An introduction

Firstly, a little about myself: I have been involved in the construction, engineering and management of mining operations over the better part of 30 years with extensive experience in Southern Africa. Developing mines is my passion, and I have a strong sense for, and focus on, the technical details that are often underweighted: project costs, risks, and timelines. It is for these credentials that I was originally approached by Bannerman to bring Etango into the development phase. You can read more about my experience here.

During my tenure at AMEC Foster Wheeler (now Wood plc), I had the opportunity to take part in the development of the Husab Uranium Project in Namibia. With a pre-production capital expenditure of approximately US$2 billion, Husab has a name plate throughput capacity of 15Mt of ore potentially producing 6000t of U3O8 annually. Etango-8 is of a considerably smaller scale and technically less complex than Husab. It is my resolute objective to deliver a world-class uranium operation at Etango.

Since my appointment to CEO in March 2024, we have begun to take the following first steps towards full construction of the project. There is a lot to update you on since the last Sharing with Holders.

Improved confidence in project design and schedule

The project team’s overarching objective over the past few months has been to continue with de-risking and simplifying the future construction of Etango as much as possible. This process has, in part, culminated with completion of the Front-End Engineering and Design (FEED) and Control Budget Estimate (CBE) workstreams – both of which have further de-risked Etango’s technical and financial parameters. (See the full ASX announcement from 11 June 2024 here).

We have been progressing FEED since the completion of the Etango-8 DFS in December 2022. This work was divided into two distinct phases.

Phase 1, involved risk identification and reduction through dynamic simulation modelling and cost-based trade-off analysis to identify optimal technical parameters. Dynamic simulation modelling was carried out by an independent industry expert. This involves simulating the material flow through the different mechanical equipment in series, to identify issues with sizing or specifications of equipment. Ultimately, it’s a tool used to improve design certainty and is designed to identify bottlenecks in the design that could hinder through-put targets being met. This process is highly valuable as we move towards construction because of the improved certainty of design related to the inter-relationship between selected mechanical equipment has been simulated an the result shave informed the revised cost estimates. 

Phase 2, followed this process and focused on finalising these technical changes; proving them up to, and beyond, a DFS-level of detail. Specific attention was allocated to finalising the communition circuit design (ie crushing process), a crucial component to the processing of ore via our heap leach operations.

The December 2022 decision to promptly progress to FEED work was a balanced one – given uranium was then trading at only US$48/lb - that has now proven to have added tremendous value by delivering project readiness and demonstrating ongoing financial robustness. We also now hold a more detailed construction schedule which supports a shorter timeline between FID and commencement of construction. It also gives us strong confidence that we have identified any further potential value-accretive options to Etango’s design through either reduced operating costs or improved technical viability. 

The reason project readiness is so vital is that it protects the timeline to achieve production of uranium in 2027. By being ready for construction, time lost between FID and full scale production is minimised.

The timing of FEED was possible through Bannerman’s robust cash balance and capital management strategy. Many peers in the space cannot necessarily afford this flexibility, which in my experience often detracts from project development through lost opportunities in design optimisation, de-bottlenecking of key works and in mitigating unforeseen delays later down the line. This was a direct result of Bannerman’s focus on strategic patience, which Brandon has previously discussed with you. It is another key trait that distinguishes Bannerman, and I plan to continue with this strategy as we approach the critical months ahead.

Delivering enhanced cost certainty

In case you are unfamiliar with it, a Control Budget Estimate is crucial in assessing, implementing and monitoring projected costs, as well as establishing robust cost control measures when construction commences.

The Etango cost estimates from the DFS were based on mid-2022 prices, and a lot has happened in global markets over the two years since then. However, despite high levels of global market volatility and inflation, I am delighted that we have contained resultant cost increases at Etango to only modest additions on what was forecasted in 2022.

The total pre-production capital estimate has increased by 11.3%, which was also inclusive of incremental scope changes that have further de-risked the delivery and operation of the project. Even more noteworthy, there was just a 2.6% increase in forecast operating costs – an outstanding result that is testament to the high-quality of the DFS.

To that end, when I joined Bannerman it was my expectation that I would be able to add immediate value simply by plugging gaps and fixing any issues in the DFS.  However, I was rather quickly, and pleasantly, surprised at the quality of the work done. Even after now objectively stress testing every aspect of the study, it has held up extremely well. In my experience, this is very unusual for a junior exploration and development business, and I believe it speaks volumes to the culture of professional excellence that runs deep at Bannerman.

The question I have frequently received from shareholders in recent months is “how out-of-date is your DFS?”. This is a legitimate concern, as many in the industry have often witnessed project costs go up by 30-40% between the study and development phases. We can now put this issue to bed. Investors that were previously cautious in this respect now have up-to-date figures, which are also based on an even tighter estimation accuracy band of +/-10% (vs the DFS at +/-15%).

Additionally, having numbers with this greater level of recency and certainty is also clearly attractive for potential partners as part of the strategic finance process we currently have in progress.

Etango-8 Key Operating Cost Estimates (DFS to CBE). Source: BMN ASX Announcement, 11 June 2024

Early works proceeding to plan

Our early works construction of the access road and construction water pipeline at Etango is going nicely and remains on schedule for completion next month.

Following completion of FEED, we have also now commenced detailed design work, starting with earthworks and concrete. These activities will place us in an highly advanced state of full project construction readiness; an effective definition of the term ‘shovel ready’.

There are many moving parts to project development, so the importance of maintaining strategic patience is as important than ever. Each choice along the path to, and during, construction will be assessed and validated to ensure alignment with our broader strategy. Robust discipline has gotten us to this point and will continue to guide our actions moving forward.

The construction of the water storage tank has commenced

In closing, there so much to be excited about at Etango. With the recent further technical and financial validation afforded by the completion of FEED and the CBE, I am confident that Etango has now become even more compelling within the uranium supply landscape – particularly when weighed against comparable projects in first world jurisdictions that have more complex cost pressures.

Only a handful of finance-ready greenfield uranium projects exist in the world today, and very few of these are of significant scale. This positions Etango to be a leading contributor to the global net-zero energy transition – a topic that is close to all of our hearts at Bannerman.

I look forward to updating you further as we continue to advance Etango. Thank you for your continued support and until next time, I wish you happiness and good health.

Kind Regards,
Gavin