Athabasca Basin attracts uranium explorers

Vancouver — The Athabasca Basin of northern Saskatchewan and Alberta is luring more and more junior companies eager to explore the potential for new uranium discoveries.

The region already accounts for about a third of the world’s uranium production, making Canada the largest producer by far.

The most dominant player in the Basin is Cameco (CCO-T), which has several producing uranium mines and a host of exploration projects. Over the past year, the company’s stock has risen almost 70%, to more than $100 from $60. The rise is directly attributable to the rally in world uranium prices, which is expected to continue.

The spot market for U3O8 grew by about 40% in value this year alone. Currently, the price is US$20.25 per lb. Worldwide demand for reactor fuel is the driving force behind the rally. Many new nuclear reactors are coming on-stream, particularly in Asia and Europe, and will require enriched uranium fuel rods to generate the steam that spins the turbines. Also, many of the existing ones are running at greater capacities and output in order to meet the rising demand for electricity in growing regions of the world. China plans to quadruple nuclear power generation by 2020.

Power utility companies are concerned about supply. A steady, reliable supply of the fuel is essential for uninterrupted operation. Therefore, the industry is witnessing increased interest in, and demand for, longer-term supply contacts.

Cameco, which turns out a significant portion of the world’s uranium, intends to expand production from its mines in the Basin. With operations such as McArthur River, the world’s largest high-grade uranium deposit, the company certainly has the potential to do so. French uranium miner Cogema, a subsidiary of Areva (arvcf-q), owns 30.2% of McArthur River, which has proven and probable reserves of 437 million lbs. grading upwards of 25% U3O8. Cameco, with 69.8%, is the operator.

Cameco’s 50%-owned Cigar Lake deposit is being advanced toward production, tentatively set to begin in 2007. Proven and probable reserves exceed 232 million tonnes grading 19% U3O8. Underground mining is planned to a depth of 450 metres. High-pressure water jets will be used to excavate the uranium ore. Also, as at McArthur River, robots will be used to mine ore, owing to the high levels of radioactivity. Cameco’s partners in the project are Cogema, with 37%, Idemitsu, with 8%, and TEPCO, with 5%. The mine life is projected to be 30-40 years.

Cogema’s presence in the Basin is significant. In addition to its joint ventures with Cameco, the company has the 70%-owned McClean Lake mine and mill complex, which produces 6.6 million lbs. U3O8 annually but has recently been re-permitted for a 33% increase in production capacity.

The Midwest project, which is jointly owned by Cogema (54.8%), Redstone Resources (20.7%), Denison Mines (DEN-T) (20%) and OURD (4.5%), hosts reserves of about 36 million lbs. U3O8 with an average ore grade of 4.5%. The deposit is expected to enter production over the next decade, feeding the McClean Lake mill.

An aggressive exploration program is being spearheaded by UEX (UEX-T). The company was formed by Pioneer Metals (PSM-T) and Cameco in 2002 to explore uranium deposits in the Basin. Pioneer transferred its uranium projects to UEX for 46.5 million shares, which were subsequently redistributed to shareholders. Cameco transferred its advanced-stage Hidden Bay project in exchange for 31 million shares, making it the largest stakeholder in the company.

UEX, in conjunction with Cogema, made a discovery at its Black Lake joint venture (70% UEX and 30% Cogema), on the northern rim of the Basin. Drilling intersected unconformity-type uranium mineralization in sandstones, immediately above the basement rocks of the Athabasca Basin. Hole 18 cut 4.4 metres (from 310.5 metres) grading 0.694% U3O8, including 3.3 metres of 0.848% U3O8 and half a metre of 1.96% U3O8. Uranium mineralization occurs primarily as pitchblende stringers in the basal sandstone unit but also includes some coffinite.

UEX recently closed two significant financings. In September, a planned $5-million financing increased to $7 million following Cameco’s decision to exercise its right to maintain its 26% interest (Cameco is UEX’s largest shareholder). And in late-October, a $10-million financing consisting of 4 million flow-through shares priced at $2.50 each was fully subscribed.

UEX now has about $25 million in cash, which will be used to step up exploration in the Athabasca Basin.

In September, JNR Resources (JNN-V) and International Uranium (IUC-T) made a significant discovery during drilling at the Moore Lake project. Hole 61 intersected 10 metres grading the equivalent of 4% U3O8, including a 1.4-metre section averaging 20% U3O8. The hole confirms previous intercepts of uranium mineralization encountered in other drill holes.

Geiger probe

The high-grade intercepts in holes 60 and 61 were determined using a calibrated Geiger probe that measures gamma radiation to calculate a grade estimate. This device is commonly used in higher-grade sections where extensive core loss occurs as a result of heavy alteration and structural disruption of the mineralized sandstones.

International Uranium is earning a 75% interest in the project from JNR in return for expenditures and investments of $4.4 million over four years.

In the vicinity of Moore Lake, United Carina Resources (UCA-V) recently entered into an option to acquire two claim blocks along the eastern rim of the Basin. The project is between Moore Lake and Cameco’s Rabbit Lake mine.

Meanwhile, junior explorer Canalaska Ventures (CVV-V) has completed its third round of property acquisitions and amassed 1,780 sq. km of prospective ground.

Canalaska’s holdings are chiefly in the eastern rim and along a corridor just west of the Key Lake, McArthur River and Cigar Lake mines. The company plans to launch an airborne geophysical survey before year-end.

A recent entry in the Athabasca Basin rush is Consolidated Abaddon Resources (ABN-V), which controls 170 sq. km on the Basin’s eastern flank. Among these are the Huard and Kirsch Lake projects, 12 km north of the McArthur River mine, and the Mann Lake project, 15 km south of McArthur.

Abaddon intends to carry out an airborne geophysical survey over the next month.

A participant in the region since 1999, Northern Continental Resources (NCR-V) is busy exploring its Russell project. The property, strategically situated between Key Lake and McArthur River, is the subject of some legal issues with Roughrider Uranium, which maintains it has a right to acquire a 75% interest.

Another experienced player is Strathmore Minerals, which holds ground 25 km west of Cogema’s Cluff Lake mine.

Uranium in the Athabasca Basin

Uranium mineralization in the Basin is classified as unconformity-related. Such deposits are formed at or below the unconformity contact of the Middle-Proterozoic Athabasca sandstones (about 1.5 billion years old), which were deposited into a large weathered basin structure (paleosol) of Early Proterozoic age (1.8-2.2 billion years old) composed predominantly of Archean granitoids and Early Proterozoic metasediments. Mineralization usually occurs right at the contact but can extend within the basement gneissic rocks for up to 500 metres, specifically where there are graphitic-rich sections (Wollaston Group stratigraphy). The entire package has extensive, regional-scale northeast-southwest faulting, which directly effects uranium mineralization and deposit formation.

Uranium primarily occurs as pods of massive-to-disseminated pitchblende enrichment at erosional breaks between the Athabasca sandstones but can also occur in vein structures and replacement zones beneath the unconformity, in the basement rocks.

The deposits tend to be small and ”
blind,” in that there is no surface exposure or expression. Fortunately for exploration crews, alteration haloes occur around the deposits for up to several hundred metres in instances.

The Athabasca uranium deposits have some of the highest ore values in the world. The ore at McArthur River, for example, averages 25% U3O8 and has a gross value of US$11,000 per tonne, based on the current spot market price of US$20.25 per lb. This extremely high-grade ore is actually blended with lower-grade material to improve handling and processing characteristics.

With annual power generation demand for uranium at about 160 million lbs., the 438 nuclear reactors in some 31 countries are all looking to secure a reliable source of fuel. Surplus demand will easily absorb any forthcoming new production, providing both existing producers and junior explorers with a strong commodity base price to sustain further exploration and development.