County sponsors $70 million bonds for uranium project

By Sarah Pridgeon

 

The County Commissioners have pledged support to Strata Energy’s application for industrial revenue bonds to develop their uranium recovery project near Oshoto. Though the county will serve as sponsor for the $70 million worth of bonds, it will at no point be financially liable for repaying the loan.

The Lance Project, for which the funds are required, is expected to diversify the county’s tax base, by providing substantial tax revenues to the municipal, county and state governments, and create well-paid jobs for local communities. The bonds are to be borrowed from the state and will finance construction of well fields and a central processing facility to produce U308 (“yellowcake”.)

The project is located 24.5 miles north of Moorcroft, at Oshoto, and has one of the highest identified uranium resource deposits in Wyoming. Feasibility studies indicate there is potential for long-term mineral extraction activities at the site in the order of 20 or more years.

Strata intends to achieve licensing and begin construction of the facility within the next 15-18 months. The bonds would provide 47 percent of the total necessary funding for construction of the central processing plant and first wellfields.

The Lance Project will involve in-situ recovery of uranium, a method of extracting from underground deposits without the need for open pit or underground mines to reach the ore. A solution of on-site groundwater fortified with gaseous oxygen is injected into the ground, dissolving the uranium from its sandstone host.

The uranium solution is then brought to the surface through production wells and transferred to the central processing plant, where it is loaded onto resin beads, further concentrated and dried into yellowcake for market.

Environmental groups have challenged the practice, claiming leaks and spills are likely to have a drastic impact on groundwater sources, however Strata reports this method to have significantly lower environmental impact, including minimal surface disturbance and restoration of water to pre-mining standards once operations are concluded.

The loan is necessary, said CEO Mark Butcher at the public hearing held on Tuesday November 5, because financing is not easily secured in the current financial climate and in-situ mining requires significant up-front capital investment. Strata expects to repay the loan within seven to eight years.

Barbara Bonds, an expert on industrial revenue bonds from Freudenthal & Bonds law firm of Cheyenne, will be hired at Strata’s expense to protect the county’s interests.

“The financing agreement is between the county and the borrower, Strata,” explained Bonds at the hearing. “The county loans the money through a bank trustee and its job is finished there, but the county will still retain the right to have all administration costs paid and be kept informed of what’s going on.”

“It’s our intention that the county will never be liable for one dime – this is not your project to pay for,” she continued, going on to explain that the county also has the right to charge a fee of .125 percent of the $70 million total for its support of the loan.

The project extends northwards, beginning six miles north of Moorcroft, for a distance of 23 miles in length and five miles in width. Its estimated 22-year mine life is expected to extend significantly as exploration and resource conversion continues.

Strata anticipates that its permit to mine will be issued by the Wyoming Department of Environmental Quality in early November. Issuance of its source material and byproduct license from the U.S. Nuclear Regulatory Commission is expected in the third quarter of 2013, allowing construction to be completed at the beginning of the following year.

To be eligible for the bonds, Strata is required to prove that it will be creating employment opportunities; expanding the tax base and increasing revenue for the county; and promoting or developing use of manufactured and natural resource products within or without the state.

Strata has predicted that a workforce of around 60 will be contracted during the construction phase, the majority of whom will be masons, electricians, mechanical contractors, carpenters, plumbers, roofers and general laborers. Upon completion, 92 full-time operational employees will be required for jobs including administrative, plant production and wellfield operations, with 2.2 indirect jobs created for each full-time employee.

The average annual salary for workers on the Lance Projects is expected to be $65,000, which is 60.5% above the mean wage for the industry and above the 90th percentile for Crook County wages. Strata anticipates adding an annual payroll of $7.3 million to the Crook County economy for its full-time employees and contracted staff.

County ad valorem taxes on production, meanwhile, are projected to total $49.6 million over the first ten years of operations. Capital expenditures in conjunction with the Lance Project are expected to increase property valuation by more than $422 million and generate around $10 million in property taxes.

Strata has also issued a conservative estimate of increasing sales/use tax within the county by $26.5 million over the first 10 years. Crook County would receive 33 percent of this amount, plus the county’s allocation of state sales tax.

The Lance Project will also, says Strata, further diversify the economy of the county and expand its manufacturing base, significantly expanding employment in mining, construction and manufacturing.

Butcher and CEO Ralph Knode, representing Strata, initially informed the Board of Commissioners of their intent to pursue funding from the Industrial Development Revenue Bonds, through the Wyoming Business Council, at October’s regular meeting. The board gave their support for Strata to begin the process and, at the public meeting, passed a resolution to write a letter of support.

Strata will next provide its application to the Wyoming Business Council along with the letter of support from the county, beginning a lengthy and in-depth approval process. Recommendations from the WBC, Attorney General and State Treasurer are required before bonds can be issued, as well as approval from the State Governor.

“We’re really moving forward, this was a key component to bringing home a project that will benefit the state as much as ourselves,” said Butcher after the hearing. “At the local level, we’ve always had strong values in engaging local stakeholders. Exposure for the community now becomes a little broader as the project grows bigger, which we’re very proud of.”

Strata’s progress at every stage can be monitored through the county and Nuclear Regulatory Commission websites. “Everything we submit is available, or can be requested directly of us,” concluded Butcher.