CanAlaska Primed for a Big Uranium Discovery in Athabasca

CanAlaska Primed for a Big Uranium Discovery in Athabasca

May 13, 2007 Filed Under: Lead Mining, Uranium Mining  

With the spot price of uranium rising at exponential rates, uranium miners are flying high following decades of depressed prices and little new mine development or exploration activity. Shares of Denison and Energy Metals Corp. umped 5% last week following rumours that they were on the acquisition radars of Cameco and France’s Areva, two of the world’s largest uranium miners.

When it comes to high quantities of high-grade and relatively easily accessible uranium ores, Canada’s Athabasca Basin is geologically unique in the world. Encompassing an area of some 100,000 square kilometres in northern Saskatchewan and a small portion in Alberta, the region is the source of approximately 30% of the world’s uranium.

Looking to follow the path blazed by Cameco and Dension, CanAlaska Uranium Ltd. may be on the verge of becoming the third major uranium producer in the region. The company on May 7 announced that it had signed a Memorandum of Understanding (MoU) with a consortium of South Korean companies led by the Hanwha Corp. to negotiate investment terms for the exploration of CanAlaska’s Cree East Project.

The MoU is the latest in a series of initiatives undertaken recently by CanAlaska’s management aimed at further defining and developing 17 wholly-owned and two optioned uranium projects in the Athabasca Basin.

Interest from South Korea Trading Consortium

With a prospective property portfolio encompassing over 3,900 square miles in the Athabasca Basin – as large, or larger, than that of Cameco and Areva combined – CanAlaska ranks as one of the largest landholders in the region. The company has spent more than C$15 million during the past two years exploring these properties and delineating a number of uranium targets.

During the winter 2007 season, the company completed exploration work on eight individual projects, with drill testing undertaken on five. ”Drill results have been highly encouraging, with the confirmation of uranium mineralization and the interception of large geothermal alteration zones indicative of favorable host geological conditions. Ongoing drilling will serve to define the extent of the mineralized systems,” management stated in a media release.

CanAlaska management has been able to attract large, international trading and commercial investors to fund much of its planned exploration work, the latest being the MoU with the Hanwha-led South Korean consortium.

During an extendible exclusivity period that ends June 30, CanAlaska and the Korean consortium will work on a best efforts basis to set up an investment plan and structure that will grant the latter a 50% interest in the Cree East Project in return for funding uranium exploration expenditures, according to the MoU.

Covering a 559-square kilometre area of Wollaston-Mudjatik rocks, Cree East is located in the southeastern Athabasca Basin some 25 kilometres west of the Key Lake Uranium mine. CanAlaska geologists last year collected over 2,000 surface and more than 400 lake sediment samples in high-priority areas identified as a result of airborne surveys undertaken in 2005.

Having defined three large areas of surface dravite and clay alteration and anomalous uranium concentrations up to 13.1 ppm in boulder samples, the geologists hypothesize that an unconformity and basement style uranium mineralization may lie in close proximity to the surface in these areas. Additional supporting data was obtained from ground IP-Resistivity surveys that showed evidence of strong alteration in sandstone strata overlying the basement rock, according to a company media release.

As Wells as Yellowcake

The Korean Consortium MoU follows a 60% ownership option agreement CanAlaska announced on April 16 with Yellowcake plc to fund exploration of the Grease River Project. Yellowcake is a UK-based portfolio management company dedicated to investing in uranium developers, explorers and producers. The Grease River Project comprises 12 claim blocks spanning 68,250 hectares located along the Athabasca Basin’s northern rim.

Under the terms of the agreement, Yellowcake will fund exploration expenditures of C$5 million, invest an additional C$300,000 in cash and grant CanAlaska 2.5 million Yellowcake shares over a four-year period. A joint venture, 60% owned by Yellowcake and 40% by CanAlaska, is to be formed once these obligations have been met. CanAlaska will be the Project operator and will be responsible for carrying out all exploration activities, according to a media release.

The Geological Survey of Canada in the 1970s identified large lake sediment and radiometric anomalies in the Project area that reached values of several hundred ppm and high equivalent uranium combined with elevated uranium/thorium ratios.

These anomalies were confirmed by other companies along with the identification of other lakes with uranium values up to 1,870 ppm in the late 1970s. Surface prospecting yielded soil anomalies as high as 1.3% uranium and grab samples produced showings of up to 1.6% U308. The source of the geochemical anomalies has not been found, according to CanAlaska management.

And Mitsubishi

On April 11, CanAlaska announced the completion of an agreement with Mitsubishi Development Pty Ltd., the Australian mining subsidiary of the Mitsubishi Corp., Japan’s largest trading company, to undertake uranium mining exploration on the West McArthur project. Located approximately 8 kms west of the McArthur River uranium mine, the Project comprises nine claim blocks spread across 359 sq. km.

Under the terms of the earn-in option agreement, Mitsubishi stands to acquire a 50% equity stake in the Project by investing a minimum C$11 million in cash and exploration payments to CanAlaska over a three-and-a-half year period. In addition, the Mitsubishi Corp. subsidiary will recompense CanAlaska more than C$2.65 million for exploration work undertaken since June 1.

A 3,600 metre ”Phase Three” drilling programme began on March 13 following identification of uranium mineralisation and ”typical unconformity-style uranium halos in two areas on the northern portion of the claim holdings,” according to CanAlaska management.

”Initial drilling results revealed uranium mineralisation and significant zones of hydrothermal alteration, indicative of a favorable environment for uranium deposition. Active drilling and exploration will continue in the winter of 2007 at West McArthur and at four other significant projects,” they reported in a media release.

A Speculative Play

”We don’t want to mislead you into thinking this is anything other than a very speculative uranium play. But it is a good one given its massive holdings in the richest uranium producing area in the world and a strong management team. Now that the boring preliminary geology is out of the way and aggressive drill programs set over the remainder of 2007 and with its share price considerably off its highs, we think CVV is one of the more exciting junior uranium stock plays in the market now,” metals and energy analyst and advisor Jay Taylor of Taylor Hard Money Advisors, Inc. wrote in a recent report.

In addition to its large portfolio of prospective landholdings in the Athabasca Basin, ”One of the things I like most about CVV (CanAlaska) is its project generation model in the uranium sector,” he opined. ”The beauty of this model from a shareholders perspective is that dilution is reduced as other companies spend their cash to fund drilling.”

Taylor notes that in addition to Mitsubishi Development, Yellowcake and the likelihood of the Korean Consortium helping finance its exploration programmes, International Arimex Resources Inc. and Northwestern Mineral Ventures are doing likewise for CanAlaska’s Key Lake and Waterbury Lake prospects, respectively.

”Overall, CVV holds 19 projects in what is legitimately described as the ”Saudia Arabia of uranium. Now with drilling getting underway on a number of projects in an aggressive manner, things could get very exciting for CVV shareholders in the weeks and months to come,” Taylor wrote in a recent report.

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