VANCOUVER — There is critical mass building around the Patterson Lake uranium camp in the western reaches of Saksatchewan’s Athabasca basin, and Vancouver-based junior Azincourt Uranium (TSXV: AAZ) is hoping to make a big discovery.
In April the company signed a joint-venture agreement with Fission Uranium (TSXV: FCU; US-OTC: FCUUF) on a 274 sq. km piece of land called the Patterson Lake North (PLN) project, and Azincourt is wasting little time getting work on its earn-in and exploration requirements.
Azincourt president and CEO Ted O’Connor says that Fission originally staked the PLN concessions in 2004, and spent US$4.7 million in exploration on the project through 2008. Fission later discovered the J-Zone deposit at its Waterbury property, which Denison Mines (TSX: DML, NYSE-Arca: DNN) bought a 60% stake in for $70 million earlier this year.
During the acquisition, Fission spun out its Patterson Lake holdings, and made a discovery afterwards at its Patterson Lake South (PLS) joint-venture with Alpha Minerals (TSXV: AMW).
“Fission did a quite a bit of work on [PLN] over those four years,” O’Connor says during an interview. “During that time they completed airborne and ground-targeting geophysics, as well as about six drill holes that made it to the unconformity. Obviously their focus shifted with the J-Zone discovery near Rio Tinto’s (NYSE: RIO) Roughrider deposit, and then following the Denison deal it was PLS that moved to the forefront, so they were looking for someone to help fund exploration at PLN.”
Fission would initially approach Azincourt chairman Ian Stalker about the opportunity, but due to other obligations, Stalker would bring in O’Connor to helm the company. O’Connor spent the past 19 years with major Cameco (TSX: CCO, NYSE: CCJ) serving as director of corporate development, where he evaluated, directed and explored for uranium deposits throughout the Americas, Australia and Africa. O’Connor has plenty of experience in the Athabasca basin, having worked on Cameco’s McArthur River deposit and Hook Lake JV with Areva.
The arrangement will see Azincourt earn a 50% interest in PLN conditional on US$12 million in exploration expenditures, and cash payments of US$4.8 million over the next four years. O’Connor says that Fission has taken its first $500,000 cash consideration in shares, and will likely keep opting for equity-based payments. Fission will act as operator — and maintain a 2% net smelter return royalty — though O’Connor will be working with the PLN team during exploration efforts.
“Before I got into any of the technical data on PLN, I had known the area around the project. I’ve worked up there with Cameco, and when I started looking at some of the material I really liked what I saw,” O’Connor says. “I told the Azincourt gang that all the decisions I’ve ever made, in regards to getting involved in a deal, were based on geology. That’s where I come from. I have an eight- to ten-year history doing deals and managing partnerships. I do have to believe in this project, that it has a lot of good things going for it.”
As with many areas in the western Athabasca basin, PLN is almost fully covered with overburden that runs from 30 metres to 500 metres thick. That can make exploration a bit tricky, but the Azincourt-Fission team has already identified several targets for a US$1-million winter drill program that the company intends to run when frozen ground makes moving drills more economical. In the meantime the partners will spend $530,000 on a geophysics program with airborne and ground surveys to lay down an exploration grid.
O’Connor says that PLN has three geological areas. The southern portion of the project hosts a parallel trend to PLS that has similar geological flexure. Uranium mineralization at PLS is relatively shallow, which makes targeting more straightforward, compared to drilling for unconformity under thicker layers of overburden. To the north, drilling reaches below 350 to 500 metres of overburden. PLN’s northern areas will be the prime targets for depth-penetration surveys that use airborne geophysics to pick up conductors.
At the centre of PLN lies the third area, which O’Connor says is the most interesting.
“We have perhaps 200 metres of unconformity elevation change on that centre area,” he says. “That is coupled with a distinct demagnetization in the basement, so it could be a meta-sedimentary belt. I’ve seen a drill hole that has clear meta-sediments, which are the great host rocks up there. We haven’t seen much in the way of graphite in those holes, and we haven’t quite determined the orientation of the unconformity offset yet, but it’ll be our target.”
Azincourt will spend US$1.5 million in exploration this year, which is covered by the geophysics and drill programs.
By April 2016 the company will need to kick in another US$6 million, with the remaining US$4.5 million in exploration due by April 2017. Azincourt receives 20% in PLN over its first two years of investment, and 30% in the last two years.
The company raised US$1.5 million in late June to meet its 2013 work requirements at PLN. Azincourt issued 10 million shares at 15¢ per share during its raise, and has been on the upswing ever since announcing its agreement with Fission.
The company’s shares have jumped 200% — or 18¢ since early April — en route to a 27¢ close at the press time. Considering Azincourt has just 14.2 million shares outstanding, its daily trade volumes are relatively high at 106,000 shares.
O’Connor says that another uranium acquisition is a priority moving forward, and says the company is not constrained by “geography or models” in its search.
He comments that there may be opportunities to pick-up in-situ uranium resources from other companies that are struggling with financing in a tough junior market.
“In spite of what the spot price has done in the past two or three weeks, there is a lot of bubbling in the market [in regards to uranium],” he says.
“Everyone anticipates that shortfall in supply, while demand is going up. I can’t see the down-blending and dumping continuing. In light of the contracting that utilities and sovereign nations do with producers, which tends to be mid- to long-term, I think the spot price is not as relevant as people looking at the spot market think it is.”
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