A word that ‘sends money running’

In a relatively mining friendly country like Canada, few things can take the sails out of an explorer’s stock as quickly as the mention of the word moratorium.

The word means a delay; a suspension of activity; a temporary pause in action. But when it comes to mining, it’s a dirty word that also means uncertainty — a right turnoff to investors.

Take Aurora Energy Resources (AXU-T, AUEGF-O), for example. Focused exclusively on Labrador’s Central Mineral Belt (CMB) with the promising and fast-moving Michelin uranium project, the company’s stock has been buffeted in large part by a bill proposing a three-year moratorium on uranium mining and milling on Inuit Labrador land, on which much of its project rests.

Its shares traded at around $5.70 recently, but in October, when the legislation was first introduced by the Nunatsiavut Labrador Inuit government, the stock was trading at around $14. Aurora shares have traded between $5.05-20.09 in the last year.

With 620 sq. km of land on the CMB, junior Crosshair Exploration (CXX-V, CXZ-X) has also suffered losses. The TSX Venture board and Amex-listed stock has been hit by a double whammy: uncertainty in the CMB and the sagging U. S. markets. It recently traded at around 88 — less than half its value in October.

The company is lobbying to change the wording of the bill, which was to have been debated at presstime.

“It’s just a poor choice of words and it’s one that spooks the capital markets,” says Crosshair Exploration chief executive Mark Morabito. “That word (moratorium) sends money running in the other direction.”

Aurora would also like to see the wording softened, says Andrea Marshall, a company spokesperson.

“The term itself, the whole implications of it, does affect the investment atmosphere,” she says. “Anything that could help to bring some light and bring a more positive feeling towards exploration and development (in the CMB) would help us get the funding to move forward with exploration.”

The bill would affect only Labrador Inuit land, which comprises 15,800 sq. km along the coast of northern Labrador, and parts of the CMB. A larger coastal area totalling 72,500 sq. km, the Labrador Inuit Settlement Area, is jointly controlled by the Nunatsiavut and provincial governments and would be unaffected.

Nunatsiavut Minister of Land and Resources William Barbour, who introduced the legislation last year, defends the bill, arguing there’s a solid reason behind it.

“Under our final land claims agreement there is a requirement that. . . we have to have a land-use plan in place before any major development,” Barbour says.

A land-use plan outlining areas that would be open for development was supposed to have been completed by Dec. 1, 2008. But the target is impossible to meet, Barbour says, and the land-use planning board has requested an extension to March 31, 2011 — the same day the moratorium will be revisited if it is passed by the assembly.

It’s no secret that mining can’t take place without a land-use plan, Barbour says; it’s something the Nunatsiavut government has warned exploration companies about.

As for its effect on investment, Barbour explains the legislation does not affect exploration.

“The investor community is saying, ‘Look, I don’t understand what’s going on here. Why should I invest?’

“Very simply, the law allows for exploration to continue.”

It’s possible that the wording could be changed when the bill is debated (scheduled for April 8-9), and before it is voted on one last time, he says. The bill passed its second reading in March.

Other than their quibble with the word moratorium, Crosshair and Aurora — which is planning a prefeasibility study on its Michelin project — don’t have a problem with what the Nunatsiavut government is trying to do.

They appreciate that, as a new government established at the end of 2005, the assembly is trying to come up with some ground rules.

“We understand that they need to have this discussion, they need to find out more information themselves so that they’re more comfortable with development,” Aurora’s Marshall says.

And Aurora is optimistic that development will eventually proceed.

“They have been very clear that they’re looking as a government to develop their region, so we feel that, over the longer term, this is positive, and that we can work together for a longer-term industry.”

Aurora is planning both open-pit and underground development at Michelin over a 10-year period. The Michelin and Jacques Lake deposits, plus six satellite deposits, contain a measured and indicated resource of 83.9 million lbs. uranium oxide, plus 49.8 million inferred lbs. Grades vary from 0.06-0.13% U3O8 and the mineralization is near surface, occurring in hard rock.

Because no company in the CMB, including Aurora, is in an advanced enough position to start up a uranium mine in the next three years, Morabito believes the bill to be superfluous. But he realizes the government just needs time to get up to speed on how to handle development.

“If you look at the speed at which Aurora has developed (Michelin), it’s remarkable,” he says. “But it’s too fast for (the Nunatsiavut government) and I can understand that. And all they want to do I think is put some braking action in place, slow it down so they can get their hands around it, develop their proper policies and develop some government infrastructure.”

But Morabito is worried that the market is not making a distinction between companies whose projects fall on Labrador Inuit land, such as Aurora, and those whose projects fall outside that boundary.

“Our entire resource area and the corridor that we’ve outlined, which we believe would be the ultimate mine environment for the (feasibility), is outside, so we’re not going to be affected. Even if they passed a permanent moratorium, it wouldn’t make a difference. They can’t legislate on us anymore than B. C. can legislate on Newfoundland.”

As for Aurora, Marshall says the company will be moving ahead with a prefeasibility this year whether or not the bill is passed. Slated to start in May and wrap up by late summer or early fall, the prefeasibility will include engineering and infill drilling work.

The company has no current plans to expand its holdings outside of the CMB.

The CMB, part of which lies on Labrador Inuit land, has seen an explosion in interest, with the Newfoundland and Labrador Department of Resources estimating 2007 spending on uranium exploration at $52.3 million, up from only $250,000 in 2004.

Barbour knows he’s taking a risk his bill could scare off investment and the jobs that come with it.

Mega Uranium (MGA-T, MGAFF-O), which has properties in Australia, multiple parts of Canada, Cameroon, Mongolia and South America, said in March that if a moratorium is passed, it may change its plans to spend $9.1 million this year — 20% of its overall budget — on its CMB projects.

In the meantime, Barbour won’t be rushed to make decisions about uranium development, which the Inuit fear could negatively affect the environment.

“We’re not operating on Aurora’s timeline. . . We’re operating on the Nunatsiavut government’s timeline.”