Kintyre

Kintyre is a uranium deposit that is amenable to open pit mining techniques. We own 70% and are the operator.

Location	Western Australia
Ownership	70%
End product	Uranium concentrates
Mine type	Open pit
Estimated resources (our share)	38.7 million pounds (indicated), average grade U₃O₈: 0.58% 6.7 million pounds (inferred), average grade U₃O₈: 0.46%

Background

In August 2008, we paid $346 million (US) to acquire a 70% interest in Kintyre.

2012 Update

This year we:

carried out further exploration drilling to test for other potential satellite deposits
completed the prefeasibility study
prepared a draft Environmental Review and Management Program
signed the Kintyre Mining Development Indigenous Land Use Agreement with the Martu

Prefeasibility

We completed the prefeasibility study, and found that, given the measured and indicated mineral resource estimate of about 55 million pounds (100% basis) at an average grade of 0.58%, current uranium prices and continued cost escalation in Western Australia, the economics of the project are challenging. The study was based on an open pit mine with an estimated mine life of about seven years, estimated total production of about 40 million pounds of packaged uranium at an average production rate of about 6 million pounds per year. To break even, the prefeasibility study indicates the project would require an average realized price of about $67 (US) or greater total production at uranium prices similar to today’s spot price.

Based on our review of the current market environment, we will complete the value engineering study currently in progress and the environmental permitting in order to maintain the ability to proceed with the project should the market factors improve the economics. However, we have decided not to proceed with the detailed feasibility study at this time.

Impairment charge

During the fourth quarter of 2012, we recorded a $168 million write-down of the carrying value of our interest in Kintyre. Due to the recent weakening of the uranium market, no increase in mineral resources in 2012 and the decision not to proceed to a feasibility study, we concluded it was appropriate to recognize an impairment charge for this asset. Kintyre remains an important asset in our portfolio. However, given the current state of the market, it was necessary to reduce its carrying value at this time.

Exploration

Ten additional prospective areas on the property were drill tested in 2012 and, to date, no additional resources have been identified.

Planning For the Future

Kintyre provides a potential opportunity for us to diversify our portfolio in mining method and geography. Any decision to further advance the Kintyre project through our stage gate process will ultimately be based on positive project economics - see Stage gate process for additional details.

Our plan for 2013 is to:

complete the value engineering study
complete registration of the Kintyre Mining Development Indigenous Land Use Agreement with the relevant government authority
submit an Environmental Review and Management Program
carry out further exploration to test for potential satellite deposits at Kintyre and at other regional exploration projects close to Kintyre

Exploration

In order to fully analyze the existing deposit data and prepare to effectively drill test any remaining targets, we will not undertake any additional delineation drilling at Kintyre in 2013. Exploration will be focused on potential satellite deposit targets.

Managing the Risks

We manage the risks listed here.