Thank you for standing by, and welcome to the Paladin Energy Restart Plan presentation conference call. All participants are in a listen-only mode. There'll be a presentation followed by a question-and-answer session. If you wish to ask a question, you will need to press the star key, followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Ian Purdy, CEO of Paladin. Please go ahead.
Good morning, good afternoon, and good evening to everyone on the call. Thank you very much for joining us. With me on the call today are Peter Watson, who is a non-executive director of Paladin and the chair of our Board Operations Subcommittee. Peter has a strong technical background and has been actively involved in the overviewing and the development of our restart plan. I also have Anna Sudlow, Paladin CFO, on the line with me today. We're very pleased to announce the results of the Langer Heinrich Mine Restart Plan. The release of the restart plan is an important milestone for us and is the completion of our study phase, and behind the plan is over 18 months' study work by the whole team.
We're very confident we've delivered a reliable, commercially smart mine plan to bring our globally significant Langer Heinrich Mine back into production under the right uranium price environment. I'll now provide a quick run-through of the restart plan presentation and then open the call to questions. Before I kick off, please refer to our presentation and note the disclaimer statement on slide two. I'll commence my run-through on slide three, and I will give instructions on which slide I am as I move forward. Why Paladin? We've done a lot of work at Paladin since the start of the year to streamline the company and to create a sole focus on the restart of our globally significant Langer Heinrich operation in Namibia.
The Langer Heinrich Mine plan that we're releasing to the market this week and we're talking about today has confirmed our assets' position alongside other large-scale suspended uranium operations, and the metrics we're giving guidance to today highlight the performance that you would expect from this operation once it is back into production. We have a terrific advantage. Our existing infrastructure, our historic mine development, and very importantly, our 10-year operating track record and sales track record provides us with an early-mover option in what we see as an improving uranium market. We have a strong financial position. We have $35 million cash in the bank, and our forecast spend has been reduced by over 40% since the start of the year, and on a look-forward basis, we'll be very disciplined in holding our expenditure to below $10 million USD per annum.
The recent supply disruptions we've seen because of COVID-19 have exacerbated a long-term structural supply deficit in the global uranium market. We've seen some activity in the start of the year, which points that the market is moving into the right direction, and we expect that trend to continue later in the year. We have the right team to deliver and execute on the company's strategy. Turning to slide five. Before I start looking forward, just a quick look back. Langer Heinrich, Paladin owns 75% of the Langer Heinrich operation. We are the operator. We're very pleased to have a supportive partner in CNNC, the largest uranium agency in China. They own 25% and are extremely supportive of our restart plan. We have a 10-year production track record. We've produced and sold over $43 million of uranium yellowcake in the last 10 years.
Our mine site, our operations, and our logistics are fully permitted, and we're able to resume mining and uranium exports on our terms, and we're very pleased to be located in a uranium mining province within Namibia, which has an exceptionally stable regulatory regime. Moving to slide six. The primary objective of our restart plan, which comes after our release of the pre-feasibility study back in October, was to develop a low-risk, reliable plan, and we were looking at balancing the ability to rapidly respond to a strengthening uranium market but also maximizing the asset value. The outcome? We're very pleased with the outcome. The restart plan has optimized the previous PFS work and is largely based on the PFS work done previously, but what we've done, we've delivered a single particular path to bring Langer Heinrich back into production.
I just want to make the point the restart plan is now locked in, and this is the way we'll bring the production back at Langer Heinrich, and the forward work plans now are purely looking at fleshing out the technical detail. All key elements of our plan have been externally reviewed and verified by AMC Consultants and BQ Partners. Turning to slide seven. As I mentioned, our plan has confirmed the economic strength of our operation. Looking at the KPIs, and we'll talk in more detail to each of these KPIs, we've locked in a cost to restart the operations of $81 million. We have a very competitive life of mine C1 cost of production of $27 a pound.
We see ourselves as being probably at the front end of the second quartile in terms of industry cost curves, and we're very pleased to be positioned in such a competitive way with our producing peers. Peak production will run at just shy of 6 million pounds per annum for seven years during our peak phase. We have a life-of-mine of 17 years, and we've got an exceptionally low restart capital intensity of $14 a pound, and that reflects the fact that there's well over $500 million USD investment already sunk into our operations in Langer Heinrich. Turning to slide eight. We've categorized our restart costs into two categories. We refer to them as operational readiness, and the other bucket is plant improvement. Talking first about operational readiness, these are the items which are generally considered working capital and maintenance.
We have outstanding work orders, which we would complete as part of our restart program. We need to replenish our working capital and, in particular, our reagents that we use in our processing plant. And then we have to mobilize a workforce and recruit and train the workforce ahead of the production cycle. So all of that operational readiness comes to $34 million. We're also choosing to implement a discretionary capital improvement program on the plant for $47 million. Very simple process, very simple infrastructure changes. And these items have been well known and well understood for a long period of time. A lot of these items are works that were planned to be done previously when the plant was previously in operations. The primary reason for this discretionary spend is to improve plant reliability.
Put simply, these simple infrastructure and program changes we've initiated here will change our runtime from an historical average of 85% to 95%, resulting in higher production levels. These programs have a very strong payback and are the basis for a successful restart and, most importantly, are the basis for a stable production platform for the 17 years of operations we look forward to. I'll ask Peter Watson, if he wouldn't mind, to talk us through slide nine and maybe give us a bit of an overview of the programs we're looking at, Peter.
Yes, sure. Thanks, Ian. And good morning, evening, afternoon to everyone. I'm delighted to sort of give you my perspectives on this restart plan. And from 30 years of experience in project development, delivery, and operations, my role on the operations oversight committee has been very much working in a lot of detail with our technical management group as we refine the PFS outcomes and develop this restart plan. I was very fortunate to be able to visit the site in February this year just before the macroeconomic and pandemic lockdown struck and was able to, through that site visit, be able to, to my own personal benefit, reconfirm in my mind that this is a very well-preserved, world-class piece of infrastructure, processing infrastructure. The asset, when it was shut down, was preserved in a very rigorous fashion. Everything was cleaned out thoroughly and taped and preserved.
A lot of the work that has been going on through the care and maintenance activity has been starting to scope the refurbishment and asset integrity work that Ian's just mentioned as well around our maintenance and working capital. So I think we understand the asset extremely well. And from the asset improvement perspective, that's key and fundamental to this restart and underpins our economic objectives. As Ian mentioned, we really do need to focus on our historical availability issues, which were driven largely by external water interruptions and also the lack of surge and, if you like, managed buffer capacity between unit operations on the asset. And so this capital improvement program is very much focused on addressing those issues and underpinning that increase in availability, as Ian mentioned, from 85%-95%. They're very simple, almost fundamental improvements to the existing flow sheet.
In no particular order, if we start at the front of the facility, improving the selectivity in beneficiation from the crushed ore, selecting more specifically waste to be rejected to go forward into leach is a very simple operation and involves a second hydrosorter, which we already have one in place at the site, and it's operating extremely well and has done for many years. And that will replace the existing cyclone separation with improved efficiency. So we'll get better ore selectivity going forward from beneficiation into leach. And then leach historically has suffered from no surge buffer capacity between beneficiation and also has suffered the water interruption problems. And so the key to leach operations is stability and consistency of feed and conditions.
And so some improvements to the leach heating and mixing, the addition of some buffer capacity will provide a much more stable platform for our leach tanks. There's plenty of residence time. It's more about a stability, maintaining a stable operating profile to make sure that we get our leach recoveries that we know we can achieve. And then we move forward into thickening and pumping, just making sure that we maximize our water recovery through those processes. And because of the historical lack of upstream surge, historically, the thickening circuit has largely been used as a buffer, water storage buffering facility, for want of a better term. And so having that buffering and surge capacity upstream will now allow us to thicken and maximize our water recovery, which will complement the additional water storage to minimize the impact of disruptions from NamWater and Namibian water supply to the site.
And then towards the end of the facility flow sheet, we're going to improve our product drying and packaging plant. We're actually going to install a modular facility, which will improve our drying capacity of the product and make sure that we obviously minimize water but also maximize the product quality and benefit. And it also provides a large safety improvement initiative for us. All of those very simple flow sheet optimizations or enhancements have been coupled with some simple but improved process control and upgrade activity, which we refer to as our asset integrity work. And the focus now, as Ian mentioned, working forward into the restart implementation is actually de-risking and further refining the scope and packaging it in such a way that we can get very good quality, firm pricing for the execution of the work.
I think it's been a really well thought-through staged initiative to take the outputs of the earlier feasibility work, refining them, focusing them on a staged but prudent capital implementation program. And then there is an opportunity to further de-bottleneck after we've had two or three years of operation and really understand where the most efficient or most beneficial further capital potential spend would be to increase the throughput incrementally from our restart. I think the other thing that's important to note in this plan that underpins the early years or the first year is that the care and maintenance activity, which has been done extremely thoroughly, as I mentioned, sets us up for quite a rapid restart curve. And Ian will talk you through the assumptions there. But personally, I've had some experience on the restart of New Century Zinc in northwest Queensland, in Australia.
I think some of the learnings there have helped us focus on some of the smaller items yet still critical in terms of stability of operations that we will focus on towards the end of our care and maintenance and through our site restart activity year to make sure that the small reliability and asset integrity issues, instrumentation, pipework, the details around pumps and motor windings and coils, etc., are all addressed through our restart refurbishment activity. Therefore, we are expecting that we'll have quite a rapid restart up to nameplate capacity in the first instance. I'm very confident. I think we've got an excellent base case to move forward on. The team at site is doing an excellent job in maintaining and caring for the existing world-class asset. I'll be certainly happy to take questions towards the end of the call.
Hopefully, that gives you some oversight and overview on the basis and genesis and focus for this plan.
Thanks very much, Peter. Moving to slide 10, we'll now focus on the key operational metrics. We've been very transparent in the numbers we're providing to the market, and we're pleased with that transparency because we've done the detailed work to support the guidance we're providing. We've separated our life-of-mine plan into three phases. There's the ramp-up phase, which Peter's spoken about, which is one year to hit nameplate capacity. We then move to our mining phase, which runs from years two to eight. This is the phase where we're mining the remaining in-situ ore at the mine site. And then we move finally to the stockpile phase where we process our extensive raw stockpiles from years nine to 17. And each of those three phases have different characteristics, different economics. And in the table, we've provided KPIs on the physical metrics and also the absolute dollar metrics.
I'd just like to talk about a few of the attributes of each of the phases. Firstly, in the ramp-up phase, we've benchmarked a conservative 12-month ramp-up, as Peter mentioned, and we're very confident in that ramp-up. And we do expect to produce circa 3.3 million pounds of material during the ramp-up phase. We've made a decision to delay the mining restart and the mine feed to the plant until year two of our plan. And this has significantly de-risked the ramp-up phase with the sole focus in the first phase, the processing plant, and then a separate staggered ramp-up of our contract mining operations as a second activity. Looking at the mining phase, just by way of background, we've achieved very successful contract mining operations previously at Langer Heinrich. Those ceased in 2016. We are looking to reinstate a contract mining model. We will not be going owner-operator.
What we've done, we've rescheduled the mine plan to smooth the total mining material, average it out over a longer period of time, and this makes it much more conducive to negotiating a contract mining arrangement. You can see our total mining rate material is just under 30 million tons a year. We're talking mid-size equipment, and the mining itself is relatively straightforward. It's a sequence of pits, open pits, which are no more than 90 meters of depth, and a fair bit of the mining is also free dig. There is some drill and blast as well, so it's reasonably straightforward mining activity, very straightforward kit, and there's some very good contract miners in Africa that we've previously worked with, so that's the plan for the mining.
And during that mining phase, we will be doing a second phase upgrade of our plant, which is relatively modest, which will also give us more throughput. And we've scheduled that in for year three. Finally, in the stockpile phase, very straightforward. There's no mining activity. There's just rehandling costs and moving the stocks to the plant. Included in our stockpile phase, in our average CapEx spend, we've included $70 million of ongoing rehabilitation costs. Turning to slide 11, this graph highlights the profile of our production, which is the dark blue column, our material crushed, which is the light blue, and the feed grade to the mill, which is the green line. Again, there's more detail about the plan on the right-hand side. What I'd like to focus here is we've spent time reprofiling the production on an annualized basis.
And you can see from the dark blue columns, we've got very consistent production year on year. This is extremely important to us because we're looking to secure term contracts. And certainly, the steadiness of the supply levels lends itself to those term contracts. We've also left a little bit of performance on the table where we're assuming we're going to be blending in low-grade in each of the years during the mining phase to maintain that steady production level. We do have the ability, if required or if we desire, to change our mill feed over time and potentially push our production a little bit harder at any point in time. Moving to slide 12, I'd like to ask Anna to take us through the cost profile.
Thanks, Ian. Hello, everybody. During this restart planning process, we've conducted an extensive analysis of the Langer Heinrich cost base. This confirms the strong economics of the restart at the right uranium price. This slide provides a detailed cost per pound for each of the three production phases that Ian has mentioned. First, the year of the ramp-up, then the years of the mining phase, and then the stockpile phase, which has the different characteristics that we've discussed. Again, as Ian mentioned, we've been very transparent also on the cost detail in this restart material with the intent of providing everything that you need to derive a financial model of the Langer Heinrich Mine. The table on the left provides you with the production cash cost for each of those mining phases, as well as the life-of-mine averages.
It provides a C1 cost of production and also the corporate and other CapEx costs for each phase, so that'll allow the derivation of an all-in cost for the mine and for each of those phases. The graphics on the right mirror the production cost cash breakdown for the mining phase and the stockpile phase, and what you'll see there clearly is the differentiation in the mining cost between the two phases, reflecting the mining being done for the stockpile phase in the mining phase. As far as the key metrics, what we've demonstrated is a very low production cash cost for the life-of-mine of $27 a pound, and what this demonstrates is that Langer Heinrich will be a very cost-competitive mine, and as Ian mentioned, forecast to be at the front of the second quartile globally.
As far as some of the other key metrics, the ramp-up phase is particularly cost-efficient, and part of the reason for this is we're including the restock of the reagents in the $81 million of the restart costs. There's also, obviously, no mining during this phase, and as we've mentioned, we're using the existing medium-grade stockpiles during this period. The key difference really between the mining phase and the stockpile phase is the cost of the mining reflecting the stockpile phase utilizing the material that has already been mined, and this is best reflected in those graphics on the right-hand side. I guess one of the key messages from the cost profile is if you look at the cost and assume, say, a $50 per pound uranium price, the project has a simple payback of 12 months during the ramp-up phase.
Again, at $50 a pound during the mining phase, the project would generate $100 million per annum of free cash flow before we look at corporate and funding costs. And then if we look at the potential leverage to an increased uranium price of, say, $50 a pound during the mining phase, the project would generate $160 million per annum free cash flow over this period. So really, that's demonstrating a $10 per pound increase in the uranium price is a $60 million increase in free cash flow over that mining phase. So on that note, I'll hand back to Ian on the next slide.
Thanks very much, Anna. Turning to slide 14, I'd now like to spend a few minutes just talking about the global uranium market. And it certainly is a very interesting time in uranium. Slide 14, just talking about our position in the global uranium market, I can't stress how important it is for us that we have got a very successful track record. All of our future customers are going to be all of our old customers. They know us. They know our product. They're confident in our product. And they're confident in Langer Heinrich and Paladin. So we look forward to working with all of our old customers and recommencing our long-term relationship with them. The other point I would note is we already have a very good offtake in place for 25% of our forward-looking production with our partner, CNNC. That's a really important offtake for us.
It gives us exposure to the spot price, which we're very pleased with because we see a lot of upside. But more importantly, we get that exposure to the spot market by delivering product to our customer who take that product into China as they have done historically. We do not need to sell into the spot market, which we're very pleased about. So our sole focus going forward is to secure complementary offtake for the remaining 75%. And we'll be looking for a term offtake to complement our spot-based 25% offtake. Turning to slide 15, it's a really interesting time in the uranium markets. I think the underlying theme to everything is an ongoing structural supply deficit. I've provided a couple of graphs here. I won't go through them in detail. The one on the left is the World Nuclear Association reference case on supply and demand.
Interestingly, they're seeing a structural supply deficit going forward and growing significantly over time, and most importantly, I think, like a lot of the other market commentators, they're saying that to incentivize the restart of idle mine capacity and the development of new projects, which is absolutely required under all scenarios, you need an incentive price of over $40 a pound and up to $80 a pound uranium price. The graph on the right-hand side, this shows the gap between the primary supply, which are the stacked columns, and the primary consumption, which are the two lines across the top. I think, again, it's well documented and understood. There's been underbuying for many years, and that's been able to have been achieved because the industry has been able to run down excessive stockpiles. The view is the stockpiles are at a normalized level globally now.
And the reliance on stockpiles to fill a primary supply gap is something that is coming to an end. Turning to slide 20, this chart shows the term price and the spot price over the last decade. For us, the term price is the key. The spot market is an important economic indicator. It represents circa 20% of market volumes. The 80% of the product that is sold is sold into the term market. We have our spot exposure locked away with our existing offtake. We are now focused on the term market. And we're looking to secure approximately 75% of our production in term contracts for a period of circa five years. So the term market is very important to us. You can see from the graph, and there's some narrative there, that since about mid-2015, the market has moved into an area where pricing is unsustainable.
And I think it's very evident by the mine closures which occurred over the last five years that even the top producers in the market are unable to produce at a profitable level at the current pricing. So there is a need for the market to come back into balance. And I think we may be seeing the start of that process through recent developments. The last thing I'll mention on this slide is we've just highlighted the price movement since the start of the year. There's been mining operation disruptions at Cigar Lake, Kazatomprom, and some small disruptions in Namibia, primarily driven due to the COVID supply disruptions. We've seen a strong reaction in the price. And we think there's probably more to come later in the year. Turning to slide 17, finally, just looking at those primary supply cuts.
Since 2016, and this doesn't include the COVID disruptions, we see $45 million per annum of production cut on an annualized basis through to 2022. And finally, on the right-hand side, this graph looks at the contract coverage of the European utilities and the U.S. utilities. The cluster of lower lines, the three lines together, that's the U.S. utility coverage from 2020 to 2028 of their forward yellowcake purchases. And you can see they are overdue to come back to the market. And at the moment, there's particularly low contracting activity. But we're expecting that next cycle of contract activity to really start to ramp up later this year or first quarter next year. Finally, turning to slide 19, what does this mean for Paladin?
Firstly, we're going to continue to advance the critical path elements of our restart plan focused on detailed mine planning, as Peter mentioned, as-is condition surveying and the preparation for EPCM on the plants. We're going to utilize our forward work program to publish our revised ore reserve, and we're going to continue detailed technical and commercial work aimed at de-risking the restart activities. Secondly, we're extremely well poised to take advantage of an improving uranium market. As I mentioned, there's a growing structural supply deficit. There's been some activity in the pricing market this year, which we think may strengthen again later in the year. The U.S. contract coverage is particularly low, and we see this as a very good opportunity for us to secure the appropriate term contracts we need as the catalyst to restart our mine. Thirdly, we're competitively positioned versus other suspended mine.
I think the point I'd like to highlight here is our particularly competitive capital restart costs. Our capital intensity at $14 a pound compares with the greenfield's capital intensity well north of $100 a pound. So we are in a prime position to get moving quickly. And finally, we've got the cash in the bank. We've done the math on our cash burn. And that disciplined and patient approach has given us a significant runway to execute our strategy. So with that, I'd like to conclude my run-through of the presentation and open the conference call to questions.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Andrew Hines from Shaw and Partners. Please go ahead.
Thanks, guys. And look, well done on putting together a comprehensive plan. I think it looks very straightforward. I guess the two key questions from here in my mind are, what do we need to see to get term contracts done at around that $50 a pound price? And then how are we going to finance not just the restart, but I guess what are some fairly expensive notes that are sitting there and how you're thinking about refinancing the company? So on the term contracts, you've put a chart up there showing that there's obviously a premium for term over spot. Spot prices have pushed up towards that mid-30s. At what sort of price do you think we need to see the spot market to get those utility buyers offering term contracts at 50? And then perhaps then talk about how the financing works.
Thanks, Andrew. Look, it's a good question. At the moment, TradeTech are quoting a term price of $39 a pound, which is consistent with our view of the market, which has come up. It's come up from being quoted in the low 30s earlier in the year and certainly last year. I think we've been pretty straightforward in saying, look, at $39 a pound, that doesn't quite do it for us. So we would not restart on $39 a pound and say a $33 spot price. Whilst that price would well and truly cover our full operating costs in Namibia, we'd like to see a stronger margin coming back to the corporate to not only give us comfortable debt servicing, but also to provide an appropriate return to our shareholders. So that's where we're being very disciplined.
The numbers that Anna mentioned, there's some really interesting strong numbers coming at the $50 a pound. And certainly north of $50 a pound, we're extremely leveraged on the upside. So we're not too far off the window we need, but we're not there today. I think what we might see is further tightening in the spot market, potentially later this year or early into the next year. And we believe, if you look historically, once the spot market is traveling above $40 a pound and on an upward trajectory, contracts have been signed well above $50. So Paladin previously were signing contracts at $60 a pound when the uranium spot market was $45 a pound and moving up. So I think we're not far off the window, but it's just not quite there yet.
That's key for us that we need to be patient and we need to be disciplined because we want to make sure we maximize the value of our asset. Anna, would you mind talking about financing?
Yeah, sure. Sure, Ian. So thanks, Andrew. You'd be aware, obviously, that we're in the fortunate position where we already have the plant built. So the incremental funding for the restart is very small compared to other new projects. We've also got a fair amount of cash on the balance sheet. So we've got a lot of time available to us to assess the options. And the Langer Heinrich Mine cash flows for the restart are very strong at the right uranium price. And we have that 12-month payback at the right price. So we're in, I think, a strong position to negotiate appropriate funding structures. I guess ultimately, the funding will be dependent on a number of factors, and the key being the term of the offtake contract, the nature of that agreement, whether there's a floor price, the credit of the counterparties, and the structure of those contracts.
So all of those factors will be taken into account when we consider the most appropriate capital structure. We will be looking to maximize our debt position within a prudent liquidity and serviceability framework because we have got those really robust cash flows. But I think I would say that the focus at the moment is on ensuring we can get the term contract we need. And as we progress our funding options, we'll keep the market updated on those developments. But we see no need at this point to alter our capital structure until that contract is executed.
Excellent. Thanks, Ann.
Thank you. Your next question comes from James Bullen from Canaccord. Please go ahead.
Good morning, guys, and congratulations on getting this out. Just a few questions. Firstly, just on the $81 million for the restart, I was just wondering if you could tell us what level of contingency has been included in that. And obviously, we did hear about the fact that the kit was all shut down very nicely, but $34 million, I mean, that does seem quite low. I was just hoping to get some more confidence around the work that's been done and how it actually was all shut down to preserve it.
Thanks, James. Peter, could I ask you to answer that one?
Yeah, sure. Sure. Thanks, James. Yeah, so I'll go to the shutdown approach first because then that leads into the confidence levels of the existing asset and then talk about the capital. So when the facility was shut down, it was thoroughly flushed and cleaned. And we engaged all the major vendors for their advice on how to preserve key equipment items, things like crushers and large pumps, cyclones, etc., making sure that we dealt with the potential for brinelling on bearings, etc. So all of those key vendor inputs have been taken forward into the initial shutdown and preservation activity, even to the extent where all of the instrumentation on the site has been benzobathed to prevent moisture ingress after being thoroughly lubricated and all of the pump bearings have been turned and where appropriate, shafts of pumps have been supported to take the pressure off the bearings.
The facility has been very well set up for the current maintenance activities. In terms of then developing the capital, the work that's been done through the feasibility activity has focused on two things. One is what is the refurbishment and/or maintenance replacement requirements for the existing assets? That's gone right down to every piece of equipment, every major structural item to do an initial condition survey. That, as Ian mentioned, flowed through into about 1,500 work orders that are sitting in our system at the moment that define exactly what has to happen to each of those items of equipment to reconnect operations or put them back in service.
There are some staging in that, or there is some staging opportunity which we've taken up in our, as you say, modest capital to restart in that, as an example, if a structural steel member has some surface rust, but it's not structurally causing any integrity concerns, then we'll deal with that later as part of an ongoing maintenance program but if there are any items of structural steel that need replacement, they've been identified and put into that work order program so the refurbishment work's been very thoroughly defined and what will happen in the current workforce planning activity is to actually package all of that work into commercial scope frameworks so that we can then get very good quality risk profile for our execution in the field when we reach that point of a restart decision.
So that's much more scoping and commercial contracting focus for that work moving forward. In terms of the new capital items, they've been developed with existing facility knowledge in terms of, for example, the leach surge upgrade. We have existing tanks. We know exactly what's required to implement that surge capacity. It's a case then of market pricing and the confidence level in the market pricing. Same thing with, for example, the second hydrosorter and the product drying container package. We've had vendor quotations to support the current capital estimate. There's a 15% contingency put across all of those items to reflect the fact that we don't know exactly when we're going to place the order. But the scope has been, I'd say, better than feasibility. It's probably almost bankable feasibility stage definition of the scope requirements, but it comes down to updating and validity of vendor pricing.
So I think we're well covered in terms of the capital. It is modest, but that $47 million of what we refer to as discretionary is, I think, very well defined and very targeted for its impact on the restart. Hopefully, that answer is sufficient.
Brilliant. Yeah, that was great. Thank you very much. And just on the mining phase, is there scope to actually increase that beyond the six to seven years?
James, there is potentially. We've had quite a positive reconciliation historically between our resource modeling and our actual mined ore. We're going to look at all of that going forward. We're just going to continue to do the detailed mining. And there is an opportunity to potentially get a little more ore out at the back end of that plan. So that's something we'll be looking at over the next 6-12 months. So we're going to take the mine planning right through to the point where we've got a contract mining schedule of works and draft contract ready to go. And then we're going to put that on the shelf ready for implementation when we need to.
Brilliant. Thank you very much.
Thank you. Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. Your next question comes from Larry Hill from Canaccord. Please go ahead.
Morning, guys. Well done for getting the study out. A quick question might be just around what has happened year to date in uranium and what the impact of supply cuts that have been announced have sort of meant to guys who are out there looking to engage with potential future supply and your project as a 12-month restart being a short lead time to that potential supply and whether the interest has picked up and maybe what has happened currently versus what your expectations were maybe at the start of the year?
Thanks, Larry. Look, it's an interesting one because there has been a very significant upward movement in the spot price year to date. Having said that, the real impact of the COVID disruptions at Kazatomprom and to a degree at Cameco are yet to be seen. I mean, Kazatomprom, whenever you turn off a mining operation, there's always a lag time before you actually stop the production coming out the back end of your process. So it's an interesting one because I think the supply cuts really are going to start to show their teeth in the second half of the year. And certainly, that's why we think there could be some more activity later in the year in the spot market. Having said that, it's an interesting one, again, because the spot market's an important indicator for us, but it really is secondary to the term market.
Just to explain, the term market is fundamentally a bilateral negotiation market. We will sign contracts with individual utilities and build a book and end up having a book of term contracts to underpin our restart. The market analysis of the term market is at best a lag indicator, and it's not terribly transparent being a confidential bilateral negotiated market. So we don't think there's going to be a lot of indicators other than the spot price coming out to the market to show what's happening in the term market. The key to the term market is the U.S. utilities returning to that term market. They were due to do so this year. Some would say they're overdue. I think with the COVID issues, that certainly put that program back.
I think certainly what we're seeing and what we're seeing from the market commentators and our colleagues is there's not a lot of on-market contracting happening right now in the U.S. market or even the European market. There are discussions off-market about long-term contracts, but we expect the market activity to pick up later in the year. But certainly, going into calendar year 2021, we expect that activity to ratchet up significantly. So I think, well, it's a spot market movement is a really good sign and certainly will be a catalyst maybe for driving the term market activity up. Ultimately, the pricing will be determined in those bilateral conversations.
Thanks for that, Ian. I'll hand it over.
Thank you. Your next question comes from John Mills, who is a private investor. Please go ahead.
Yeah. Hi, guys. Thanks for the presentation. It's very useful. Just in relation to the term contracts that you're seeking, I'd be interested to know, I guess, the conditions of those contracts. I mean, are you looking for 100% of them to be based on a fixed price or the market price or some combination thereof? Thanks.
Thanks, John. I can talk about some key elements we'd be looking for. Obviously, it's subject to negotiation. I think the key for us is to have a floor price, and that floor price mechanism, whatever that may be, will be what we use to underpin the economics of our operation. So we'll be looking for a floor price. We'll be looking for tenor, so Anna and I believe five years plus would be appropriate to achieve the appropriate debt structure we're seeking. We'd be looking for some upside. There will be a ceiling price, but we'd like to see some upside in that contract as well, and I think also importantly, we'd also be looking at our counterparty and the complementary nature of those counterparties to our existing offtake and amongst the book build we're doing, so I think they're the types of elements. There's lots of variations.
It's down to individual contracts. Each region globally tends to have a different style of contracts. We know them well. We know the customers well. We know what we've done previously. Another discussion, John, may be some prepayment and some offtake funding as part of the package. So we're open to all of that. We're quite flexible in our ability to structure these contracts. But the key element will be achieving that floor price. And that's really going to support the economics of our operation as it goes through its restart process.
Okay, great. Yep, that's helpful. Thank you very much.
Thank you. Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. I will now give you a few moments to register your question. Your next question comes from Fred Woollard from Samuel Terry Asset Management. Please go ahead.
Hi. Can you just tell us how remediation costs are included in your costs?
Sorry, Fred, I missed that.
Yeah. Can you tell us how remediation costs are included in your costings, please?
Fred, yeah, I can. What we've done is we've included $70 million worth of remediation works on an ongoing basis, and that's included in our average CapEx, primarily during the stockpile phase. So that $70 million is in our cost guidance. We haven't guided on final closure costs, which are closure costs after the 17 years of operations. Our current accounting provision for closure costs is circa $100 million. We expect with the extra mine pits that we'll be mining during the future mining phase, I think just a ballpark figure, somewhere circa $150 million USD is as good a number as I can give you today, of which $70 million is included as ongoing CapEx in the guidance we've given. So if you wanted to have a very rough ballpark estimate of closure costs in year 18, say circa $80 million is a pretty fulsome estimate.
Thank you. There are no further questions at this time. That does conclude our conference for today. Thank you for participating. You may now disconnect.