Annual Report 2006
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NOVA ENERGY LIMITED ANNUAL REPORT 2006 ANNUAL REPORT ENERGY LIMITED NOVA // ANNUAL REPORT 2006 Vivid_9765 CONTENTS C COMPANY STRATEGY ...................................................................................... 2 N A 2005/2006 HIGHLIGHTS .................................................................................. 2 M CHAIRMAN’S LETTER TO SHAREHOLDERS ...................................................... 3 D URANIUM OUTLOOK ........................................................................................ 4 M M PROJECT LOCATIONS & TENEMENT SCHEDULE ............................................. 8 M M DEVELOPMENT PROJECT .............................................................................. 10 R EXPLORATION PROJECTS .............................................................................. 15 N SAFETY & ENVIRONMENT ............................................................................. 20 L 1 COMMUNITY .................................................................................................. 20 W A FINANCIALS .................................................................................................. 21 P P W A T F E W NOVA ENERGY LIMITED CORPORATE DIRECTORY Nova Energy Limited Share Registry ABN 92 111 5999 154 Computershare Investor Services Level 5 Ms Erica Smyth, Chairman 115 Grenfell Street Dr Tim Sugden, Managing Director Adelaide SA 5000 Mr Richard Pearce, Non-Executive Director Australia Mr Peter Bowler, Non-Executive Director Mr Greg Barrett, Company Secretary ASX Code: NEL Mr Burkhard Eisenlohr, Exploration Manager Issues Capital: 57,050,001 shares Registered Offi ce Auditors Nova Energy Limited KPMG Level 2 Central Park 16 Ord Street 152-158 St Georges Terrace West Perth WA 6005 Perth WA 6000 Australia Australia Postal Address Annual General Meeting PO Box 584 10am Tuesday 14 November 2006 West Perth WA 6872 Rydges Hotel Australia Cnr Hay Street & King Street Perth WA 6000 Telephone: +61 8 9321 1411 Australia Facsimile: +61 8 9226 2958 Email: [email protected] Website: novaenergy.com.au ANNUAL REPORT 2006 1 COMPANY STRATEGY Nova Energy Limited will generate wealth for its shareholders by becoming a signifi cant uranium miner; supplying clean, responsibly produced and marketed energy to the world’s electrical utilities. The Company will pursue development of its Lake Way and Centipede project while lobbying for political change in the State of Western Australia. In parallel, the Company will focus exploration and acquisition activities in jurisdictions that are favourably disposed towards uranium mining, including South Australia, the Northern Territory and parts of Africa. The Company’s activities will be characterised by transparency, public consultation and an unwavering commitment to safety and responsible environmental management. 2005/2006 HIGHLIGHTS In the 2006 fi nancial year, the Company achieved the following signifi cant milestones: • Listed on the ASX on 23 August 2005 and raised $6.0 million • Established JORC-compliant resources at the Lake Way and Centipede uranium deposits • Completed a scoping study that confi rmed the fi nancial viability of the Lake Way and Centipede uranium deposits • Acquired exploration properties in Western Australia, South Australia and the Northern Territory • Commenced land access negotiations for a number of properties • Acquired exploration properties in Guinea, West Africa • Assessed uranium exploration and development opportunities at a number of global locations 2 NOVA ENERGY LIMITED CHAIRMAN’S LETTER TO THE SHAREHOLDERS Dear Shareholder, It is my pleasure to present Nova Energy’s fi rst Annual Report. The Company was listed on the Australian Stock Exchange in August 2005 with the stated intention of developing uranium deposits in Western Australia and exploring for other uranium deposits throughout Australia and overseas. In only nine months there have been a number of encouraging developments. The Company established a JORC-compliant uranium resource at Lake Way and Centipede and confi rmed the fi nancial viability of this resource as a mining project; negotiated land access agreements and acquired new exploration projects in the Northern Territory and Africa. Ms Erica Smyth, Chairman Meanwhile, the Federal Leader of the Opposition announced his intention to review and potentially overturn the Australian Labor Party’s ‘Three Mines Policy” in 2007. It is widely expected that this will provide an opportunity for the Labor Governments of Queensland and Western Australia to modify their policies. Since Nova’s listing the spot price of uranium has risen from US$29/lb to US$52/lb, refl ecting increasingly competitive bidding by electrical utilities due to both rising consumption and the beginning of a decline in secondary supplies. As indicated in the Uranium Outlook section of this report, prices are expected to remain robust for many years as the uranium market transforms to a production-based supply system. In the new fi nancial year Shareholders can look forward to a continued fl ow of positive news. The Company anticipates substantial increases in uranium resources at Lake Way-Centipede will fl ow from its September / October 2006 drilling campaign, the commencement of drilling at several of its exploration projects, and perhaps most importantly for near-term shareholder value, further steps towards policy change at both federal and state levels. Nova Energy will continue to engage with Stakeholders in this uranium mining debate. Erica Smyth Chairman ANNUAL REPORT 2006 3 URANIUM OUTLOOK A Nuclear Renaissance Nuclear energy is emerging as a key component of many nations’ energy strategies because it offers large-scale base load electricity generation, very low CO2 emissions, long term energy security and diversity, and stable and increasingly competitive electricity prices. Throughout the world, concerns about climate change, spiralling gas and oil prices and geopolitical issues are positively infl uencing public attitudes towards nuclear power. According to the World Nuclear Association (http://www.world-nuclear. org) in 2006 there were 442 reactors operating in 30 countries. Another 30 reactors were under construction, 56 fi rmly planned and a further 150 proposed. By 2015 the number of operating reactors is expected to rise to 506. Nuclear Energy’s share of global electricity Mock-up of completed Olkiluoto 3, 1.6 GWa nuclear reactor in Finland, expected to be operating in 2009. Image courtesy of TVO (www.tvwo.fi ) production is expected to remain around 16 per cent. In the United States of America, licence renewals for many of the country’s 103 reactors have been approved and up to 27 new reactors are under consideration. France, with close to 80 per cent of its electricity already generated by 59 plants, has confi rmed its long term commitment to nuclear energy with approval of a new generation of reactors. Finland is currently constructing its fi fth reactor, a large third generation pressurised water unit. The UK has given its clearest signal yet that it will consider replacing ageing reactors with new models. Japan, with 29 per cent of its electricity being supplied by 53 reactors has fi rm plans to increase the nuclear share to 40 per cent by 2030. South Korea aims to increase Daya Bay Reactors 5 & 6 under construction in Guangdong Province, the nuclear share of electricity from 38 per cent to 60 per cent by 2035. Southern China, June 2006. Russia plans to build another 40 reactors by 2030, partly because of an anticipated peak in gas production by 2030. To meet their burgeoning energy demands, China and India plan to build 56 new plants by 2020. 195 780 Indonesia, Malaysia, Vietnam and Turkey have also signalled their 180 Net Generation 720 intentions to construct nuclear plants. 165 660 150 600 Improving Reactor Effi ciencies 135 540 120 480 While net capacity continues to rise through new reactor builds, the 105 420 effi ciency of existing reactors is also improving. Average load factors 90 360 have steadily increased from around 68% in 1990 to 75.5% in 2000 75 300 BkWH Number of Units 60 240 (World Nuclear Association, 2005), with many United States reactors 45 Units Operating 180 achieving 90% or more. 30 120 15 60 0 0 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 Number of reactors operating in United States and annual energy output in billion kilo-watt hours. Source: United States Energy Information Agency. 4 NOVA ENERGY LIMITED URANIUM OUTLOOK (CONTINUED) Rising Demand for Uranium Extended licensing periods, new reactor builds and increased effi ciencies are driving increased demand for uranium. The World Nuclear Association’s reference case sees uranium demand rising from 65,478 tonnes in 2006 to 78,003 tonnes in 2015 and 110,776 tonnes in 2030. Secondary Supply Forecast to Decline Since 1985, primary mine supply has provided 60 to 70 per cent of reactor demand. The supply gap has been fi lled by inventory derived from stockpiles of highly enriched uranium (HEU), low-enriched uranium (LEU), re-enriched tailings and mixed-oxide fuels (MOX). These secondary sources are forecast to decline markedly over the Projected uranium demand to 2030. next 10 years, exacerbated by the termination of Russian HEU supplies World Nuclear Association reference case, 2005 in 2013 (which currently provide around 10 per cent of United States electricity). Declining Reactor Inventories United States reactor inventories have declined considerably since the mid-1980s. Reactor requirements are now equivalent to one