Cigar Lake
Cigar Lake is the world’s second largest high-grade uranium deposit, with grades that are 100 times the world average. We are a 50% owner and the mine operator.
Cigar Lake, which is being developed and scheduled to begin production this year, is one of our three material uranium properties.
| Location | Saskatchewan, Canada |
| Ownership | 50.025% |
| End product | Uranium concentrates |
| Mine type | Underground |
| Estimated reserves (our share) | 108.4 million pounds (proven and probable), average grade u3o8: 18.30% |
| Estimated resources (our share) |
1.1 million pounds (measured and indicated), average grade U3O8: 2.27% 49.5 million pounds (inferred), average grade U3O8: 12.01% |
| Mining methods | Jet boring |
| Target production date |
Begin commissioning in ore mid-2013 First packaged pounds in the fourth quarter of 2013 |
| Target annual production (our share) | 9 million pounds at full production |
| 2013 forecast production (our share) | 0.3 million pounds |
| Estimated decommissioning cost (100% basis) | $49 million (pending regulatory review) |
Background
Development
We began developing the Cigar Lake underground mine in 2005, but development was delayed due to water inflows (two in 2006 and one in 2008). The first inflow flooded shaft 2 while it was under construction. The second inflow flooded the underground development and we began remediation late in 2006. In 2008, another inflow interrupted the dewatering of the underground development. We sealed the inflows and completed dewatering of shafts 1 and 2. In 2011, we completed remediation of the underground.
Mining method
We will use a number of innovative methods and techniques to mine the Cigar Lake deposit:
Bulk freezing
The sandstone that overlays the deposit and basement rocks is water-bearing, with large volumes of water under significant pressure. We will freeze the ore zone and surrounding ground in the area to be mined to prevent water from entering the mine and to help stabilize weak rock formations.
Our plan is to use a hybrid freezing approach. We will use surface freezing to support the rampup period and underground freezing for the longer term development of the mine. Through 2012, we continued to drill freezeholes from surface, expand the surface freezing infrastructure and put the new freezeholes in operation. To meet our production schedule, the ground has to be fully frozen in the area being mined before we begin jet boring.
Jet boring
After many years of test mining, we selected jet boring, a non-entry mining method, which we have developed and adapted specifically for this deposit. Overall, our initial test program was a success and met all initial objectives. This method involves:
- drilling a pilot hole into the frozen orebody, inserting a high pressure water jet and cutting a cavity out of the frozen ore
- collecting the ore and water mixture (slurry) from the cavity and pumping it to storage (sump storage), allowing it to settle
- using a clamshell, transporting the ore from the sump storage to a grinding and processing circuit, eventually loading a tanker truck with ore slurry for transport to the mill
- once mining is complete, filling each cavity in the orebody with concrete
- starting the process again with the next cavity
Jet boring system process
We have divided the orebody into production panels, and will have one jet boring mining unit operating in a panel. At least four production panels need to be frozen at one time to achieve the full production rate of 18 million pounds per year. At full production, two jet boring machines will be working at a time, while the other two are being moved, set up, in the backfill cycle or on maintenance.
Milling
We have signed agreements with the owners of the Cigar Lake project and McClean Lake mill to process all Cigar Lake’s ore slurry at the McClean Lake mill. To process Cigar Lake ore slurry, a number of mill modifications have been completed. The McClean Lake joint venture is required to further modify and expand the mill to process and package all of Cigar Lake’s current mineral reserves. The Cigar Lake joint venture has agreed to pay for the capital costs for such modification and expansion.
2012 Update
During the year, we:
- completed the sinking of shaft 2 to its final depth of 500 metres
- began installing shaft 2 infrastructure, including construction of a concrete ventilation partition, installation of electrical cable, water services, ore slurry pipes and hoist systems
- began commissioning of the surface ore loadout facility
- remediated a portion of an existing mine development tunnel and continue to explore ways to optimize our methods of ground support
- resumed underground development in the north end of the mine
- completed mine development on the 500 metre level
- replaced temporary contingency pumps with permanent infrastructure
- completed the Seru Bay pipeline
- completed all engineering designs and drawings for the project
- constructed the primary clarifier infrastructure
We also assembled the first jet boring system unit underground and moved it to a production tunnel where we:
- began preliminary commissioning and system testing
- established temporary infrastructure to support testing in waste rock
Costs
As of December 31, 2012, we had:
- invested about $911 million for our share of the construction costs to develop Cigar Lake
- expensed about $86 million in remediation expenses
- expensed about $63 million in standby costs
Our total share of the capital cost for this project is about $1.1 billion since we began development in 2005. In order to bring Cigar Lake into production in 2013, we estimate our share of capital expenditures will be about $182 million, including $27 million on modifications to the McClean Lake mill. Our share of standby charges until production is achieved this year are estimated to be about $52 million.
Licensing
The Canadian Nuclear Safety Commission (CNSC) approved AREVA’s amendment to the operating licence for the McClean Lake mill to process Cigar Lake ore.
Planning For the Future
Production
In 2013, we expect to:
- test the jet boring unit in waste and begin commissioning of the system
- complete the installation of all infrastructure required to begin production
- bring the mine into production in mid-2013
- produce the first packaged pounds from AREVA’s McClean Lake mill in the fourth quarter
We expect our share of production to be 0.3 million pounds in 2013.
Given the scale of this project and the challenging nature of the geology and mining method, we have made significant progress. We will continue to develop this asset in a safe and deliberate manner to ensure we realize the economic benefits of this project.
Licensing
We have submitted an operating licence application to the CNSC. The CNSC will be holding a public hearing in the second quarter of 2013 as part of the process to obtain our operating licence. Our construction licence is currently set to expire on December 31, 2013. We anticipate that Cigar Lake will be in a position to start mining in ore following the safe commissioning of the ore processing circuits in mid-2013.
Caution regarding forward-looking information
Our expectations and plans regarding Cigar Lake, including our expected share of 2013 production and capital costs, are forward-looking information. They are based on the assumptions and subject to the material risks discussed here, and specifically on these assumptions and risks:
Assumptions
- there is no material delay or disruption in our plans as a result of ground movements, cave ins, additional water inflows, a failure of seals or plugs used for previous water inflows, natural phenomena, delay in acquiring critical equipment, equipment failure or other causes
- there are no labour disputes or shortages
- our expectation that the jet boring mining method will be successful and that we will be able to obtain the additional jet boring system units we require on schedule
- we obtain contractors, equipment, operating parts, supplies, regulatory permits and approvals when we need them
- processing plants are available and function as designed and sufficient tailings facility capacity is available our mineral reserves estimate and the assumptions it is based on are reliable
- our Cigar Lake development, mining and production plans succeed
Material risks
- an unexpected geological, hydrological or underground condition or an additional water inflow, further delays our progress
- ground movements or cave ins
- we cannot obtain or maintain the necessary regulatory permits or approvals
- natural phenomena, labour disputes, equipment failure, delay in obtaining the required contractors, equipment, operating parts and supplies or other reasons cause a material delay or disruption in our plans
- processing plants are not available or do not function as designed and sufficient tailings facility capacity is not available
- our mineral reserves estimate is not reliable
- our development, mining or production plans for Cigar Lake are delayed or do not succeed for any reason, including technical difficulties with the jet boring mining method or our inability to acquire any of the required jet boring equipment
Managing Our Risks
Cigar Lake is a challenging deposit to develop and mine. These challenges include control of groundwater, weak rock formations, radiation protection, water inflow, mining method uncertainty, regulatory approvals, tailings capacity, surface and underground fires and other mining-related challenges. To reduce this risk, we are applying our operational experience and the lessons we have learned about water inflows at McArthur River and Cigar Lake.
Water inflow risk
A significant risk to development and production is from water inflows. The 2006 and 2008 water inflows were significant setbacks.
The consequences of another water inflow at Cigar Lake would depend on its magnitude, location and timing, but could include a significant delay in Cigar Lake's development or production, a material increase in costs or a loss of mineral reserves.
We take the following steps to reduce the risk of inflows, but there is no guarantee that these will be successful:
- Bulk freezing: Two of the primary challenges in mining the deposit are control of groundwater and ground support. Bulk freezing reduces but does not eliminate the risk of water inflows.
- Mine development: We plan for our mine development to take place away from known groundwater sources whenever possible. In addition, we assess all planned mine development for relative risk, and apply extensive additional technical and operating controls for all higher risk development.
- Pumping capacity and treatment limits: We have pumping capacity to meet our standard for this project of at least one and a half times the estimated maximum inflow.
We believe we have sufficient pumping, water treatment and surface storage capacity to handle the estimated maximum inflow.
Jet boring mining method and units
We have successfully demonstrated the jet boring mining method in trials. This method, however, has not been proven at full production. We have developed and adapted this method specifically for this deposit. As we ramp up production, there may be some technical challenges, which could affect our production plans. There is a risk the rampup to full production may take longer than planned and that the full production rate may not be achieved on a sustained and consistent basis. A comprehensive testing, pre-commissioning, commissioning and startup plan has been implemented to assure successful startup and on-going operations. We are confident we will be able to solve challenges that may arise, but failure to do so would have a significant impact on our business.
Our mining plan requires four jet boring system units. We currently have one unit and, in 2011, agreed to purchase an additional three units. There is a risk that rampup to full production at Cigar Lake may take longer than planned if the manufacture or delivery of these three units does not take place as scheduled. As part of our startup plan noted above, we are working with our supplier to assure timely delivery of these units. The second unit is scheduled to arrive in Canada in early 2013 and work has begun on the third unit at the supplier’s facilities.
We also manage the risks listed here.