Rockgate and Delta Crash on Initial Uranium Results

Vancouver — Disappointing drill results from the first two holes at the Falea uranium joint-venture project in Mali, West Africa, recently sent share prices for Rockgate Capital (RGT-V, RCKGF-O) and Delta Exploration (DEV-V, DEVDF-O) tumbling to close at half their value.

The first two holes of a 16-hole drill program at Falea intersected Kania sequence sandstones at about 260 metres. The first hole cut 0.034% uranium and 0.4% copper over 4.5 metres and another interval of 0.05% uranium and 0.39% copper across 3.5 metres, while the second hole showed a more promising 0.207% uranium and 0.57% copper over 3.1 metres including 0.8 metre of 0.39% uranium and 0.61% copper.

The numbers did not satisfy investors. Rockgate plummeted 50% on the May 17th news, falling to $2.15 from $4.30 on trading volume of more than 4.1 million shares. Delta fared no better, dropping 51% from $2.48 to $1.21 on almost 3.5 million shares.

“There’s a whole lot of expectation and 0.2% uranium didn’t meet the expectation,” said Karl Kottmeier, president of Rockgate, the following day. “We’ve been battered around pretty good today, as has our partner, but that’s the way things go.”

Kottmeier said the companies thought it was important to release their early results as soon as possible, and that the initial findings are positive.

“From our perspective, we’re very encouraged and think the results we’re getting are economic, so we’re going to stick with our knitting and keep going,” he said. “We’ve got a drill turning right now and we’re going to keep it going.”

In November, Delta acquired rights to restart development in the 150-sq.-km Falea basin, located in western Mali. Cogema, now part of French energy giant Areva (ARVCF-O), had mapped and tested the area in an 86-hole program between 1977 and 1981, but despite finding copper and uranium mineralization they dropped the project because of depressed metal prices.

Rockgate soon entered into an option agreement with Delta that will see it acquire a 60% interest in the property in exchange for $1.5 million in exploration funding. Rockgate is expected to vest its interest in a few months.

Both stocks jumped in early May on the announcement that Pinetree Capital (PNP-T, ) had purchased 500,000 Rockgate shares at $2.70 apiece. The news rocketed Rockgate to $5.50 from $3.30 and sent Delta to $3.30 from $2.00. Both prices had settled somewhat in the weeks before the announcement, which sent them back downhill.

“People were looking more to what Cogema had seen, and so until we get Cogema-type numbers people are going to say we’re underachieving,” Kottmeier said.

Cogema’s exploration program found uranium levels ranging from 0.2% to 3% U3O8.