Extract joins uranium stampede in Namibia

SITE VISIT

Swakopmund, Namibia — The high-pitched wail from the handheld spectrometer intensifies as the geologist creeps across the dry, rocky terrain of Extract Resources’ (EXT-T, EXT-A) Husab uranium project in Namibia.

Holding the spectrometer beneath a shaded overhang in the dusty Namib Desert, Keith Webb, senior geologist for Extract, watches the digital clock as a minute ticks away.

Time’s up: 0.06% U3O8, the reading says.

Disappointed, Webb shuffles a metre or two away and tries again. He’s been here before.

This time, the device reads 0.087% U3O8. He’s a little more satisfied and moves on, and with the flip of a switch the headache-inducing blare of the spectrometer returns.

“It’s not rocket science here,” Webb says over the noise. “We know where the mineralization is on surface, but we need to get the stuff at depth.”

That’s no surprise considering the Husab project is located within 50 km of some notable uranium deposits, putting Extract in exploration catch-up mode.

The company, which released a scoping study in November, has been working to get an initial resource estimate on the Ida Dome target out by the end of February. The resource will be updated in April, and then followed by a feasibility study during the second half of the year.

All these efforts are bringing the company steps closer to its neighbours, many of which are already producing, or well on their way.

The first that comes to mind is Rio Tinto (RTP-N, RIO-N), with its 69%-owned Rossing uranium mine, which produces 7% of world supply at 8 million lbs. U3O8 per year.

Also in the area is Paladin Energy’s (PDN-T, PDN-A) Langer Heinrich mine, which produces 2.6 million lbs. U3O8 per year; Forsys Metals’ (FSY-T, FOSYF-O) Valencia deposit, where a resource of 32 million lbs. U3O8 has been delineated and a feasibility study is under way; and Bannerman Resources’ (ban-t, bmn-a) Goanikontes deposit, which has an initial resource of 27 million lbs. U3O8.

“There’s been quite a stampede through here,” says Extract managing director Peter McIntyre.

Extract, based in Perth, Western Australia, where uranium mining is not allowed, is a part of a worldwide wave of explorers reacting to the jump in uranium prices.

The company, which listed on the Toronto Stock Exchange in October, was originally focused on gold in the Murchison area of Western Australia.

“I remember when uranium hit twenty dollars (US) per pound I thought, ‘maybe we should go get some uranium rights,'” McIntyre says.

The property has been mined for both fluorspar and copper in the past.

But the company’s business development manager Richard Henning says Extract is not interested in those minerals.

“With the improved uranium prices, the uranium potential value significantly outweighs the other minerals,” Henning writes in an e-mail.

Extract originally got involved in Namibia by acquiring a licence through West Africa Gold Exploration, a subsidiary of Kalahari Minerals (KAH-L) in May 2005. Kalahari, which still has copper and uranium properties in Namibia, holds 36% of Extract.

Extract began drilling the Ida Central prospect of the Ida Dome area in April 2006. By then, uranium had reached a price of more than US$40 per lb.

In November that year, the company was granted another licence for the property that included Ida Dome’s Garnet Valley target, which Extract began drilling last June.

Now, with world demand projected to outgrow supply in future years, the company has 630 sq. km of land to explore for uranium.

The geology

The company is looking at alaskite and calcrete-hosted uranium mineralization. Alaskite-hosted uranium deposits are leucogranites that have exploited pre-exisiting structures such as unconformity surfaces and occur as extensive sheet-like intrusions or branching dykes, resulting in bulk-tonnage, low-grade deposits such as Rossing and Valencia.

Calcrete-hosted uranium deposits are found near major drainage systems — much of the Husab area is dominated by flat desert areas eroded by the Swakop and Khan rivers and their tributaries, creating targets for defining paleochannel and calcrete-hosted mineralization similar to that of the Langer Heinrich deposit.

The Husab land package includes the Rossing South area, which, true to its name, is located about 5 km south of the Rossing mine.

It also includes the Hildenhof area, an eastern extension of Bannerman’s Goanikontes Dome, where uranium anomalies have been detected over a 2,000-metre strike length.

Mineralization from the Langer Heinrich mine also extends onto Extract’s property, but that’s not a top priority for Extract at the moment.

Instead, the company is focusing on the Ida Dome area of Husab, which was explored by Anglo American (aauk-q, aal-l) in the 1970s, and has come quite a ways in a short time.

The Ida Dome scoping study found that a low-grade open-pit mining operation would be economic.

Drill results up to 100 metres in depth were considered in the study, but the company says that drilling has shown that mineralization extends to at least 400 metres below surface.

The study reported a conceptual resource (not compliant with National Instrument 43-101) of 54 to 63 million tonnes grading between 0.018% and 0.027% U3O8 for a total of between 24.7 and 41.2 million contained pounds U3O8. It was estimated that Extract could produce about 2.92 million lbs. U3O8 per year through a 6-million-tonne-per-year plant using sulphuric acid leach, ion exchange and solvent-extraction technology.

With an estimated head grade of 0.026% U3O8 and a recovery rate of 85%, the mine life was projected at nine years, though it was noted that no metallurgical test work has been done on the Ida Dome deposit.

The cost of the project would be US$211 million with operating costs of US$29.15 per lb. U3O8, (about US$85 million per year), accurate to within 30%.

Contract mining services, which would include the supply of trucks and excavators, would be used in the open-pit operation.

Water and sulphuric acid would make up about half of the operating costs. At this point, Extract would have to import the acid through the Walvis Bay port, but the company is looking into producing its own sulphuric acid in Namibia or purchasing it from another company, should a local source become available.

“Ultimately, it’s a matter of what makes the most economic sense,” Henning says. “The notion of having our own plant has a lot of merit as the generation of electricity is a useful byproduct.”

Ida Dome

When Extract began drilling at Ida Dome in April 2006, it began with data from 60 legacy holes drilled by Anglo American in the late 1970s on two targets now called Garnet Valley and Holland’s Dome (formerly known as anomaly A and D, respectively). The best Anglo intersection was 43 metres grading 0.037% U3O8 from 19 metres depth, though most targets were tested to depths of about 50 metres.

“We’re not sure on the rationale back then,” McIntyre says of the depth. “Many holes ended in mineralization.”

Extract has a lot of ground left to cover. Uranium mineralization stretches about 10 km northeast to southwest, but less then 25% of the strike length has been tested by drilling. Mineralization has been confirmed by alaskite outcrop, field and ground spectrometers surveys, channel sampling and some drilling.

Extract plans to have completed at least 60,000 metres of drilling by mid-2008 on the deposit, with about 40,000 metres to go as of mid-December.

The Ida Dome, which hosts seven different uranium outcroppings, is the most advanced area at the Husab project.

Drill results released in late November from Garnet Valley were the best the company had seen yet, including hole GDD004, which returned 86 metres grading 0.035% U3O8.

Other highlights included 26 metres of 0.042% in hole GRC050, 34 metres of 0.04% U3O8 in hole GRC051, and 15 metres of 0.034% U3O8 in hole GRC052.

“While these may be our best assay results today, there is still a lot more data in the system which we expect will continue to support our resource target for this area,” McIntyre said in a statement at the time.

Extract has not avoided the slow return of drill results experienced by the rest of the mining industry.

While the company waits for results, geologists take spectrometer measurements of core and reverse-circulation rock-chip samples during drilling and geological logging to give them an idea of where the mineralized zones are.

So far, the deeper diamond-drill holes are opening up the mineralization at Garnet Valley, showing that grades increase with depth.

Henning says Extract has enough money to finish off drilling, but more funding will be needed for equipment and the completion of the feasibility study.

That’s part of the reason for listing on the TSX, which has seen a stream of dual listings by Australian companies seeking greater exposure to investment capital. Extract’s share price has seen little movement over the last month or so, holding steady at $1.20 per share.

Husab is well located, about 50 km east of Namibia’s only deepwater port in Walvis Bay. Namibia’s port authority, Namport has confirmed with Extract that there is storage space for imported sulphuric acid, should the company go the import route.

Nampower, the national electricity supplier, has said that a supply of 25 to 30 megawatts would be made available for Extract’s plant.

In December, the company signed a memorandum of understanding to begin formal discussions with NamWater about securing water supply for the Ida Dome project.

NamWater has plans to build a new desalination facility that could supply a minimum of 4 million cubic metres of water per year to Ida Dome by March 2011. In return, Extract must agree to buy a specified volume of water each year.

During the summer, Extract set up a more permanent camp with an office building for the exploration team, near the Garnet Valley target. Because desert temperatures vary between scorching hot and freezing cold, tents have been set up on wooden platforms to keep workers off the ground.

The original camp had to be moved because the level of radiation was too high and the company didn’t want to take any chances.

Henning says the previous camp is now an exploration target, as outcropping uranium there showed levels of 0.01% U3O8.

“The new camp is about 500 metres from the previous one and is situated there as much for better access and logistical reasons as anything else.”

Rocks mark the boundaries of the lane leading from the flat gravel highway to the camp so as to disturb as little of the area as possible. That’s because part of the company’s lease is on national park territory.

Extract dropped some of the parkland last year, explaining that portion of the property wasn’t economically viable.

In the new year, Extract will start drilling again, with an additional drill rig bringing the total to six. Rossing South — which has seen very little work so far — will be getting more attention, with one rig dedicated to the area for exploratory drilling. If things go well, another rig will be added in April.

The company is hopeful that Rossing South will be its next deposit, but concedes that it’s too early to make bold forecasts.