Canadian Junior Doubles Uranium Resource in Athabasca

The junior uranium company Hathor Exploration Ltd. (TSX:HAT) has demonstrated progress in advancing and developing its high grade, world class uranium asset known as the Roughrider uranium deposit.   Last week the project became the third richest in the Athabasca Basin according to a new resource estimate.

Interviewed last week on Business News Network, Chief Executive Officer and President Michael Gunning said only Cameco (TSX:CCO) (NYSE:CCJ) and Areva Group’s (EPA:CEI) McArthur River and Cigar Lake mines have larger deposits. Dr. Gunning was pleased and confident of the relative importance of the news, “with a global average grade of 0.5 per cent U3O8 per uranium deposit, Roughrider’s grade is clearly above and beyond most of the world’s uranium deposits.”

The news release indicated the East Zone of the deposit, located within the Midwest Northeast project, has been estimated to contain 30 million pounds of uranium grading 11.58 percent. Effectively, this nearly doubles the volume of Roughrider to 54 million pounds, making it one of the richest deposits in Northern Saskatchewan.

Historical context

In April, Hathor received the first uranium mineral lease in Saskatchewan since 1985 for its 543 hectare site, renewable every 10 years. The upgrade from a mineral claim to a mineral lease gives the company the exclusive right to explore for and eventually mine the area.  Also during the same month Hathor signed a binding letter of agreement to acquire all of the issued and outstanding shares of Terra Ventures Inc. which gave Hathor a 100 percent interest in the Midwest Northeast property and a 98 percent interest in another Athabasca Basin project at Russell Lake.

A production decision has not been disclosed at this point following the relevant resource estimate from the East Zone; however, the market has responded strongly to the positive development.  Since the news release shares of Hathor have appreciated 11.8 percent from $2.46 per share to the current valuation around $2.75.

Diversifying geopolitical and capital risk

Trailing its anticipated launch date by roughly 12 months, Areva has announced that it is looking for a partner to start mining at its Namibian uranium asset with production expected to start at the Trekkopje mine by the end of 2013. It is expected this project may yield 3,000 tonnes of uranium per year through a heap-leaching process.  Irrespective of uncertainty surrounding nuclear safety and uranium demand subsequent to the crisis at the Fukushima Dai-ichi nuclear power plant, the vice president of Areva South Africa, Enrico Barbaglia, said there would be no further delays.

Although there are question marks about the future developments of mining in the country, Mr. Barbaglia said Trekkopje will not be affected by a recent government decision to oblige future mining operations to enter into a joint venture with state-owned mining company Epangelo.  His confidence was demonstrated as he was quoted in an interview with Reuters, “This doesn’t affect us. We are talking with Epangelo, but that is to identify interesting areas for new exploration activities. These talks need to regain focus.”

Most analysts believe Trekkopje can only be economically practical with average long-term uranium prices ranging between $70-80 per pound because of the deposit’s low grades. Mr. Barbaglia addressed the issue by comparing similar projects, “the Trekkopje mine is under pressure for price, but you will be hard-pressed to find any project today where the dynamics are different.”  Mr. Barbaglia said Trekkopje will be the lowest grade uranium mine ever taken into production.  The news has not had a significant impact on share prices or on the volume of shares traded.  Earlier in the month the company reported a 2.2 percent increase in revenue over the same time period last year, which had been attributed to rising prices of uranium over the quarter which provided a tailwind for the mining and enrichment business of the company.