Just a few days after BHP Billiton announced it would mothball more than $60 billion in expansion projects, the company announced Monday that it had signed an agreement to sell its Yeelirrie uranium deposit in Western Australia to Canada's Cameco for US$430 million.
Uranium was discovered at the Yeelirrie site in 1972 by Western Mining Corporation, which was acquired by BHP Billiton in 2005. Yeelirrie is one of Australia's largest undeveloped uranium deposits.
An historic estimate of the mineral content of the deposit was prepared for BHP Billiton in June by an international mining consulting firm, which assessed that Yeelirrie hosts a measured and indicated resource of 139 million pounds of U3O8, with an average grade of 0.13% U3O8. This estimate is based on Australia's JORC Code and has not yet been classified as current mineral resources under Canada's 43-101 standards.
However, Cameco said it believes that the total uranium content of the historic estimate may be overstated by 10%. The company estimated that 50 million pounds of U3O8 now reported as indicated resources would have to be re-categorized as they are not supported by sufficient drilling density. Additional drilling for geochemical sampling will be required, the uranium miner said.
Nevertheless, Cameco CEO Tim Gitzel said, "Yeelirrie represents an attractive deposit that fits well with Cameco's vision and corporate strategy."
BHP CEO Marius Kloppers said last week that the company had no plans to develop any uranium projects other than Olympic Dam. A proposed US$20 billion expansion of Olympic Dam has been scrapped.
Kloppers said the uranium projects were too small a scale to fit into BHP Billiton's portfolio.
Cameco expects the transaction to close by the end of this year, subject to approvals from the government of Western Australia and the Australian Foreign Investment Review Board. Upon closing, stamp tax duty of about US$22 million will be payable by Cameco to the Western Australia government.