SXR Uranium One’s Dominion grows (July 03, 2006)

Higher uranium and gold prices and more than 30,000 metres worth of drilling have allowed SXR Uranium One (SXR-T, SXRFF-O) to substantially boost resources at its already large Dominion uranium project, near Klerksdorp, South Africa.

Over nearly a year, beginning in mid-2005, the company sank 105 BQ (3.7 cm in diameter) and NQ-size (4.8 cm) holes in the Rietkuil 1, 2 and 3 sections and the Dominion 1 and 2 areas. So far, assay results have been received for 88 holes.

Dominion’s indicated resource is now pegged at 26 million tonnes averaging 0.083% U3O8 and 1.1 gram gold per tonne in four zones. The 47.5 million contained pounds U3O8 and 910,000 oz. gold represent increases of 195% and 163% over SRK Consulting’s estimate at the end of 2005.

Likewise, inferred resources have climbed to 178.4 million tonnes running 0.051% U3O8 and 0.63 gram gold, for 199.2 million contained pounds U3O8 and 3.6 million oz. gold, up 36% and 63%, respectively. Higher metal prices allowed cutoff grades to be trimmed by 41% at Dominion and 29% at Rietkuil. The cutoffs are based on metal prices of US$45 per lb. U3O8 and US$528 per oz. of gold.

The company says the 16% drop in the average grade of the indicated resources and 23% slip in inferred resource grade are not considered significant, as selective mining will target identified pay-shoot areas.

“The indicated uranium grade, while somewhat reduced from the December estimate, remains above the level we have been using in our mining plans and financial models,” said Uranium One chief executive Neal Froneman. “This bodes well for Dominion, which remains on track to begin producing uranium oxide in the first quarter of 2007.”

The revised resource estimate will be incorporated into an ongoing bankable feasibility study, which is due in July.

Initially, Dominion is expected to annually produce more than 4 million lbs. U3O8 by 2011. Mining will focus on ore above 500 metres of depth during the first decade. In all, the mine is expected to have a total lifespan of more than 30 years.

Meanwhile, drilling continues, with another 35,000 metres planned to delineate the downdip extension of high-grade zones during the balance of the year. Uranium One is trying to prove up a historic resource estimate commissioned by former owner Anglo American (AAUK-Q, AAL-L) that tipped the scales at 464 million tonnes running 0.037% U3O8 and 0.57 oz. gold, for 378 million contained pounds U3O8 and 8.5 million oz. gold.

Uranium One says so far drilling has confirmed historical geologic modelling and subsequent resource estimates.

Between 1955 and 1961, the Dominion mine produced 2.5 million lbs. uranium oxide from ore running 0.094% U3O8. The Reitkuil mine produced 35,700 lbs. at a grade of 0.044% in 1988.

Project infrastructure

The project retains a substantial amount of infrastructure, including a 2.4-million-tonne-per-year gold plant and underground development. The carbon-in-leach plant is already processing ore from the adjacent Bonanza South gold-uranium project, but has considerable capacity for expansion. During the first three months of 2006, the plant processed 32,251 tonnes of Bonanza ore running 1.31 grams gold per tonne. Measured and indicated resources at Bonanaza total 3.8 million tonnes grading 0.009% U3O8 and 5.5 grams gold.

Recent work at Dominion includes development of the R1 decline and dewatering and recommissioning of the shaft to the second level at Rietkuil. Development is under way on level 2. At Dominion, development of the D1 decline and excavation of the D2 portal is ongoing.

During the first quarter, the company continued facility upgrades to enhance power supply from state-owned power utility Eskom. Bateman Engineering began construction of the uranium plant and on the first thickeners. The company has also ordered items with long lead times, including autoclaves.

The application for mining rights is currently in the public participation phase. All of the surface rights required for the first phase of mining have been assembled.

Work at Dominion is being funded via a $170.6-million private placement of 22.3 million shares at $7.65 apiece in February. Net proceeds came to $161.2 million after a 5.5% agents’ commission.

Further funding will be required to complete the Dominion project, previously tagged with a price of US$130 million, as the placement funds will also go toward advancing the company’s other projects, including the Honeymoon in situ-leach uranium project in Australia, where a production decision is expected later this year.

At last count, the Honeymoon project was home to an indicated resource of 2.8 million tonnes grading 0.12% U3O8, for a total of 7.3 million lbs. Capital costs are pegged at US$30.9 million.

Both Dominion and Bonanza are covered by a required black economic empowerment deal inked with Micawber 397 in mid-2005. Micawber is 30%-owned by historically disadvantaged employees, with the local community also holding 30% through a separate trust fund.

SXR Uranium One was recently added to the S&P/TSX composite index. The shares currently trade at around $8.26, and in a 52-week range of 79-$11.80 in Toronto.