DYLLF: The Board has opted for a staged development approach at Tumas until uranium prices justify full-scale construction of a greenfield uranium project; meanwhile, an updated DFS was completed.
Deep Yellow (OTCQX:DYLLF) (ASX:DYL) remains on the threshold of entering the mine construction phase as management defers the Final Investment Decision (FID) for the Tumas Project due to tenor of the current uranium market. While spot price of uranium has been relatively stable around $80 since late 2024, the spot price has been weak dropping to $64.23 in March 2025 before recently recovering to $70 in early May. The Board has opted for a staged development approach until uranium prices justify full-scale construction of a greenfield uranium project.
The approved staged development for Tumas will enable the company to move quickly when market conditions improve. The staged development includes early-work infrastructure (such as powerlines, water pipelines, road work, site office construction & communications systems), additional detailed engineering work as well as scheduling work, all of which will enable a rapid transition to mine construction when market conditions warrant.
In December 2024, Deep Yellow announced an 18% increase in the Ore Reserve Estimate (ORE) for Tumas from 67.3 Mlb U₃O₈ to 79.3 Mlb U₃O₈, which helped extend the LOM to 30 years, with an average production rate of 2.46 Mlb per annum.
In April 2025, Deep Yellow released an updated Definitive Feasibility Study (DFS) for the Tumas Project, which reflects both design optimizations and adjustments for inflationary pressures since the 2023 Re-costing DFS. The post-tax NPV increased slightly to US$577 million (at US$82.50/lb. uranium), while the projected IRR decreased 19% due to higher estimated capital and operating costs. Initial capital expenditures rose by 15% to US$473.8 million, and the construction schedule was extended from 18 to 24 months.
Significant progress has been made on de-risking the Tumas Project through metallurgical test work and optimization studies that have enhanced the mining schedule and pit design. In addition, Deep Yellow is completing a 41,000m grade-control drilling program at Tumas 3, which will also help in preparing the tailings storage sites for when the processing plant is commissioned.
The Mulga Rock Project in Western Australia has shown promising developments with metallurgical test work establishing the commercial viability of recovering critical minerals alongside uranium. During the first half of fiscal 2025, a mini-pilot plant tested the beneficiation of bulk samples combined with RIL (uranium extraction) and RIP (for base metal and REE extraction). Final results are pending. A revised Definitive Feasibility Study incorporating uranium, base metals and rare earth elements is expected to be completed in Q1 FY2026.
The company remains well funded with a group cash balance of AUD$227 million as of March 31, 2025.
Deep Yellow Ltd remains on track to become a low-cost, Tier I uranium producer, which management defines as a multi-project producer of uranium with the capacity to deliver 5-10 million lbs. of uranium annually.
TUMAS PROJECT in Namibia (100%)
Due the price action of uranium since mid-2024, the FID (Final Investment Decision) has been deferred since the prevailing uranium market conditions do not prudently justify the construction of a greenfield uranium project like Tumas. Rather, the Board approved a staged development until the price of uranium is sufficient to incentivize a greenfield project that will fully benefit from the upside potential of Tumas, which would be in the shareholders’ best interests. Deep Yellow is positioned to move quickly when the uranium market improves.
The approved staged development effort includes early-work infrastructure and additional detailed engineering work. Specifically, early-work includes continuing with the development of non-processing infrastructure, such as powerlines, water pipeline, road work, site office construction, communications systems and pre-construction camp work to be utilized directly by Deep Yellow. Detailed engineering work encompasses prepping the process plant such that a more rapid transition to the construction execution phase is possible. Also the scheduling work is being optimized for the step-functions of executing the construction of the mine, such as commissioning the ramp-up of the processing plant and setting up the priorities for mining operations.
Grade-Control Drilling Program (August 2024 – April 2025)
In mid-August 2024, a 41,000m, pre-mining, grade-control drilling program (which is part of the development works) commenced at Tumas 3. Part of the program will help in preparing the tailings storage sites for when the processing plant is commissioned.
The spacing for the Reverse Circulation (RC) drill holes is 12.5m x 12.5m, which is optimal for paleo-channel deposits in Namibia. All the drill holes are logged with downhole gamma tools in order to determine uranium-grade estimations.
As of March 31, 2025, 2,802 holes (39,348m) were drilled, and entire program was slated to be completed at end of April.
Updated Definitive Feasibility Study (March 2025)
On April 8, 2025, Deep Yellow released an updated Definitive Feasibility Study (DFS) for the Tumas Project, which delivered a comprehensive reassessment and update of the Project's economic and technical parameters by accounting for design optimizations and inflationary pressures that have occurred since the December 2023 Re-costing DFS. Inflation has impacted both initial capital and operating expenditures. Significant project derisking has occurred through metallurgical test work, an updated resource model that incorporates additional infill drilling data and optimization studies that enhanced the mining schedule, pit design and tailings management. The construction schedule was extended from 18 months to 24 months
Summary of the key differences between the March 2025 DFS and the December 2023 Re-costing DFS:
Net Present Value (NPV) increased slightly due higher assumed price of uranium
2023 DFS (Post-Tax NPV at US$75.00/lb.): US$570 million
2025 DFS (Post-Tax NPV at US$82.50/lb.) US$577 million
Internal Rate of Return (IRR) decreased due to higher capital and operating costs
2023 DFS: IRR (post-tax) 27%
2025 DFS: IRR (post-tax) 19%
Operating Costs (first 20 years) increased slightly due to increased costs of labor, reagents and fuel, along with expanded ORE having a lower average grade (340 ppm U308 vs 298 ppm U308)
2023 DFS: US$24.42/t ore treated
2025 DFS: US$24.52/t ore treated
Initial CAPEX increased 15% due to higher construction/equipment costs, including contractor rates
2023 DFS: US$411.6 million
2025 DFS: US$473.8 million
Progress on Tumas Project Funding
Working closely with Nedbank (Mandated Lead Arranger), management is progressing toward securing debt financing that will help fund the construction costs of the Tumas uranium mine once the FID is made to proceed. Due diligence work is being conducted by an Independent Technical Expert in order to better position the company to go-to-market and secure lenders to fund the mine construction phase. Typically, debt issued for mine construction is secured by the assets and/or future cash flows of the project.
The team responsible for the Tumas Project’s finance facility is the same team which successfully achieved the financing for the Kayelekera Uranium Project (Malawi) and the Langer Heinrich Uranium Project (Namibia). Management anticipates that the financing loan would attract capital at a rate between 8% and 10%.
Anticipated Milestones – Tumas Project
Once management commits to an FID to construct a full-scale mining operation, production is anticipated to commence approximately 6-to-9 months thereafter.
The detailed engineering phase began soon after Ausenco Services Pty Ltd was selected as the preferred EPCM. Power supply and water agreements have been completed. As the Tumas Project is being further optimized, we expect announcements concerning additional engineering and associated studies being completed as well as progress concerning the project’s financing.
Additional resource drilling is planned for an area to the west of Tumas 3 with the goal of identifying an additional 30 Mlb U308 in order to achieve a 35+ year LOM.
UPDATE ON THE URANIUM INDUSTRY
Since January 2024, the contract price of uranium increased from $72.00 to roughly the $80.00 area in the fall of 2024, where it has since stabilized. However, the spot price of uranium has been volatile having peaked at $100.50 in January 2024 and afterwards declining to $64.23 in March 2025 before experiencing a slight uptick to $67.73 in April. In the first two days in May saw the spot price rally to $70.
Management believes that “the long-term uranium market is essentially broken” due to over a decade of under-investment and depressed uranium prices. Electric utility offtake contracting practices have been historically organized to be relatively indifferent to price, which leads to the dramatic cyclicality in the uranium mining industry (as with other metal mining industries, but probably more so). Historical utility uranium procurement practices are conducive to creating supply shortages that spark uranium prices to rise to such an extent that motivates the managements of uranium mining companies (and their lenders) to proceed with bringing new production online economically.
As a result, the current price of uranium does not support a sustainable incentivization environment for the development of greenfield uranium projects. Currently, there is a limited amount of greenfield uranium projects under development that are in queue for start-up to satisfy projected demand.
The company’s latest optimization work (updated March 2025 DFS) is based on US$82.50, which meets almost all of management’s development criteria, indicates that Tumas would be a long-life uranium Tier-1 operation with a NPV post-tax project of US$577 million (or AUD$912 million) generating a post-tax IRR of 19%.
MULGA ROCK PROJECT in Western Australia (100%)
Metallurgical Test Work (FY 2024)
A metallurgical test work program conducted for the Mulga Rock Project (Western Australia) was completed during the third quarter of fiscal 2024. The results established the potential commercial viability of recovering critical minerals (base metals and rare earth elements) along with uranium resource.
The 2024 metallurgical test work for Mulga Rock indicates that:
an overall uranium recovery rate above 90% is probable
overall recoveries for base metals (copper, nickel, cobalt and zinc) and rare earth elements (neodymium, praseodymium, terbium and dysprosium) are above 70% and
The 2018 DFS had uranium recovery rates in the 85.9%-to-89.6% range with no recovery assumed for critical minerals and only around 20% for base metals.
Metallurgical Test Work (FY 2025)
During the first half of fiscal 2025, a mini-pilot plant tested the beneficiation of bulk samples (composed of fresh ore collected through a diamond core drilling program) combined with RIL (Resin-in-Leach for uranium extraction) and RIP (Resin-in-Pulp for base metal and REE extraction). The mini-pilot plant test has been essentially completed, but the full results are not yet available. However, preliminary analysis on the initial available results appears to be similar to the results attained in prior metallurgical test work. Management will release the full mini-pilot results after the total analysis of the test has been received, verified and finalized. The information will be used to fine-tune the processing concept and design, which will lead to the development of the process flowsheet. Thereafter, a capital cost estimate will be assembled.
Hydrogeology Test Work (FY 2025)
During the third quarter of FY 2025, an evaluation of the pumping and wireline data parameterswas completed in order the complete the groundwater modelling. The technical assessments of these hydrological factors and benchmarking against past hydrogeological models began in the fourth quarter of FY 2025. The results will guide updating operational dewatering, reinjection and process water inputs for the sensitivity analysis associated with dewatering and reinjection schedules, which are important to the preparation of a revised DFS.
Anticipated Milestones – Mulga Rock Project
An updated MRE (Mineral Resource Estimate) for Mulga Rock (that includes multi-commodity processing) is expected to be completed within the next two quarters as well as the finalized results from the mini-pilot metallurgical program.
Management expects that a revised Ore Reserve Estimate (ORE) will to be completed in the fourth quarter of FY2025. The updated MRE and the results from the metallurgical mini-pilot program will be incorporated in the revised ORE.
Mining studies at Mulga Rock are scheduled to commence in the June quarter of 2025. Using the updated MRE and the revised ORE, a revised mining schedule will be developed.
A revised DFS for the Mulga Rock Project (including uranium, base metals and REE) commenced in the first quarter of FY2025 and is anticipated to be completed in the first quarter of FY2026.
Most Recent (February 2024) Mineral Resources Estimate (MRE)
On February 26, 2024, Deep Yellow released an updated MRE for the Ambassador and Princess deposits at the Mulga Rock Project. The total Measured, Indicated & Inferred U308 Mineral Resources increased 25.6% from 56.7 Mlbs to 71.2 Mlbs with Measured increasing 15.9%, Indicated increasing 57.1% and Inferred decreasing 30.3%, all at a at a 100 ppm U308 cut-off. The decrease of the Inferred resource was a result of an overall upgrade of previously lower grade material into the Indicated category. The updated MRE included drilling results from the 656-hole (36,647m) air core drill program completed in August 2023.
In addition, the updated MRE includes estimates for critical minerals (Cu, Ni, Co, Zn & Rare Earth Oxides) as eU308. Including the critical minerals, the total updated Measured, Indicated & Inferred eU308 Mineral Resources increased 85.7% from 56.7 Mlbs to 105.3 Mlbs with Measured increasing 77.8%, Indicated increasing 140.2% and Inferred decreasing 18.6%. There was also an overall upgrade of material from the Inferred into the Indicated category.
VALUATION
Broadly speaking, the public uranium companies can be grouped into three segments: producers, development companies and exploration companies. Producers are actively mining and generating revenues. Exploration companies are prospecting and/or drilling to establish mineral resources. In between these two segments are the development companies that already have established resources and are advancing through the process to bring a mine in operation, generally from the point of initiating a Pre-Feasibility Study to the actual construction of a mine. The comparable companies to Deep Yellow fall into this category.
Further, the comparable companies have been narrowed through quantitative factors, particularly those with a market capitalization over $500 million and trading above $0.50 per share. This process captures a range of well-funded junior uranium development companies, which are listed in the table above. Currently, the P/B valuation of these comparable companies is depressed in the 1.72-to-3.54 range. With the expectation that Deep Yellow’s stock will attain a P/B ratio of 5.0 (well below the average 5.5-to-5.9 range of junior uranium companies in the second half of 2024), our valuation price target is US$2.05.
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