Minesite.com, May 23, 2007
Trailblazing Yellowcake Secures Its First Uranium Project
By Robert Wallace, CEO Yellowcake plc
Until last year I have been a contributor to minesite.com. This includes what I believe was one of the first features written in the UK on the imminent resurgence of uranium mining, entitled A New Yellowcake Age Dawns, published on 10 September 2004 and available here in the minesite.com archives.
Since then the resurgence has taken place with a vengeance as nuclear power has been transformed from being the "Cinderella of energy generation" as described then, making uranium into the belle of the ball for mining investors. The Intergovernmental Panel on Climate Change, meeting in Paris in February this year issued a definitive report on behalf of 133 countries concluding that Global Warming was a fact and that the burning of fossil fuels was a contributor. James Lovelock and James Moore, two of the founders of Greenpeace, have both stated that nuclear power generation is the only way to produce base-load electricity with zero emissions.
In consequence, many countries across the world are now planning to install or increase their number of nuclear reactor plants. The world currently produces only just over 100 million pounds of mined U308 a year but demand from the 435 existing reactors is already 180 million pounds and is set to increase to between 212 and 238 million by 2015*. Russia has stated that it is not going to supply down-blended uranium (some 20 million pounds annually) from its weapons arsenal after 2013 and the race is on to discover and develop new mines to cope with the inexorable need.
Yellowcake plc was listed in London on PLUS market in July 2005, the first and, as far as we are aware, the only portfolio in the world to invest solely in the uranium mining industry. It made its first investments in late September 2005 when the spot price of uranium was US$34 a pound, up from US$7.10 a pound in 2002. Initially the portfolio majored on producers like Cameco and Areva but despite the price accelerating to US$120 today the best investments have been the explorers and developers which are seeking to supply the shortfalls foreseen for the future.
Some, like Paladin Resources and SXR Uranium One, have already reached the goal of becoming producers but many other companies are actively striving to emulate this feat. Along with a horde of heavily promoted "moose pasture" hopefuls, there is a select band of well-managed, geologically-savvy uranium explorers which are making real strides in uncovering and developing commercially viable deposits. It is the concentration on these companies that has allowed our portfolio to increase in value by more than fourfold since we started investing some 18 months ago.
In parallel with managing the portfolio we have also been searching for the perfect direct project in which to invest. Having reviewed and rejected a number of projects in the FSU, Africa and North America, it is perhaps no surprise that we have concluded an option agreement on Grease River, a project in Canada's Athabasca Basin district.
The Athabasca Basin currently produces almost 30 per cent of the world's uranium supply, from some of the world's largest and richest mines. Its soubriquet of "The Saudi Arabia of Uranium Mining" is well-earned. The Province of Saskatchewan is recognised as the best jurisdiction in the world for uranium exploration and mine development and there is a substantial and informed workforce and service industry available.
Most deposits in the Athabasca are of the unconformity type, found at or near the junction between the Archean and Aphebian rocks of the basement and the overlying sandstone sedimentaries. The McArthur River mine with reserves of 272 million pounds U308 grading 24.3% and the Cigar Lake mine containing 116 million pounds U308 with an average grade of 19% are located in the eastern side of the Basin at depths up to 800 metres. However, accessible basement ores are found outside the Basin proper. Here the sandstone that once covered the basement has been eroded, leaving deposits exposed at surface, offering far cheaper exploration and production potential.
The Grease River project, comprising 68,000 hectares in three blocks, lies immediately outside the northern rim of the Basin, between 10 and 50 kilometres from the Fond du Lac uranium deposit. Daily scheduled flights and gravelled roads connect both Fond du Lac and the nearby settlement of Stony Rapids to the south. The project covers large and strong lake sediment and radiometric anomalies as identified from Geological Survey of Canada surveys performed in the 1970's. In the late 1970's and early 80s considerable surface exploration was done on the Central and Eastern blocks by Uranerz Exploration, SMDC(now Cameco) and Eldor Resources. This exploration confirmed these anomalies and located lakes with even higher uranium values (up to 1,870 ppm uranium). In addition to these very high lake sediment anomalies, surface prospecting produced soil anomalies reaching 1.3% uranium, and showings with up to 1.6% U308 in grab samples.
The Canadian junior explorer CanAlaska Uranium holds 100 per cent ownership of the claims. Yellowcake has entered into an option agreement with CanAlaska to earn a 60 per cent ownership interest by funding the exploration. One of the big advantages for us is that CanAlaska's experienced geologists under Karl Schimann, one of the original Cameco team that discovered the Cigar Lake deposit, will act as operator for the project and will be responsible for supervising and carrying out all exploration activities.
The pending 2007 summer exploration programme will include airborne geophysics over all three blocks, lake sediment and soil geochemistry, prospecting, and mapping with a 12-man team on the ground. The objective is to locate the historical geochemical anomalies and showings, put them in the framework of present-day knowledge of Athabasca uranium deposits, and define drill targets using prospecting, mapping of bedrock and surficial geology, geochemistry, and geophysics.
Johannesburg/London-based UraMin has joint venture interests in Canada, potentially earning 50 per cent of the Rea Project in the Athabasca Basin and Waseco's projects in the Labrador Trough. Apart from this, Yellowcake is the first purely UK company to venture into the thriving Canadian uranium industry and we are looking forward to doing some exciting trailblazing as the results flow from this summer's exploration.
* Consulting Low Case and High Case estimates January 2007
Note: Maps of the Grease River project appear on www.yellowcakeplc.com