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TABLE OF CONTENTS Jun 16 - 22, 2014 Volume 100 Number 18 - 0 comments

Roughrider rises again

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By: Gwen Preston
2014-06-11

VANCOUVER — “We were shocked the land was available,” says Dale Wallster, a director of Kivalliq Energy (TSXV: KIV), in an interview. “So we staked it — but when you stake land in Saskatchewan, other interested parties can see what you’re doing online, and that means often you can’t stake fast enough before everyone else starts piling in.

“We staked a few bits and then waited until right after Christmas, when everyone was celebrating or asleep, to get the rest of the property,” he continues. “Within a week or two the ground all around had been snapped up, but we had what we wanted.”

That late-2013 staking effort became the Genesis uranium project, a 1,988 sq. km land package that starts 25 km northeast of Cameco’s (TSX: CCO; NYSE: CCJ) Eagle Point uranium mine and extends 90 km northeast to the Manitoba border.

Kivalliq may have staked it, but Genesis is about to become the basis for a new uranium explorer led by experienced hands.

The new explorer is Westham Resources (TSXV: WHR.P), currently a capital pool company with no projects. Under a new deal with Kivalliq, Westham can earn an 85% stake in Genesis by making staged payments totalling $1 million, spending $5 million on exploration and issuing shares totalling 20% of Westham’s outstanding count within five years.

The deal depends on Westham raising at least $2 million, a financing effort that Westham president and CEO Scott Gibson says is going well. Then, with a qualifying transaction complete, Westham will become a fully reporting mining issuer on the TSX Venture Exchange.

The company will also take on a new name: Roughrider Exploration (TSXV: REL).

Not just anyone could use the name. Roughrider is the name of the uranium deposit Hathor Exploration delineated in the southeast Athabasca basin, a discovery that quickly became a high-grade deposit hosting 58 million lb. uranium oxide (U3O8) and prompted a $650-million takeover by Rio Tinto (NYSE: RIO; LSE: RIO) in 2011.

As the founder of Roughrider Uranium, which became a wholly owned Hathor subsidiary in 2006, Wallster put together the exploration team whose belief in basement-hosted uranium in the Athabasca led them to the Roughrider deposit.

Wallster believes the concept of basement-hosted uranium still has lots of room to run, both inside and outside the basin. Genesis will test the latter.

The Genesis property lies along the Wollaston–Mudjatik transition zone, which is the northeast-trending divide between the Mudjatik geological domain to the northwest and the Wollaston domain to the southeast. These large tectonic domains underlie and extend outwards from the eastern side of the Athabasca.

All of the uranium deposits in the eastern Athabasca are associated with the Wollaston–Mudjatik transition zone. Wallster and Hathor discovered Roughrider along the Wollaston–Mudjatik transition zone. The Cigar Lake, McArthur River, Millennium, Phoenix, Eagle Point and Key Lake uranium deposits also lie along the transition zone.

However, the Wollaston–Mudjatik transition extends beyond the edges of the Athabasca basin. Wallster believes there is potential for uranium along this structure outside of where it is covered by a thick layer of Athabasca basin sediments.

The idea flies in the face of conventional Athabasca mentality, which held that the basin’s uranium stems from the unconformity. The unconformity is the sandstone transition between the sedimentary rocks of the Athabasca group that fill the basin and the deformed rocks of the underlying Archean Canadian Shield.

The unconformity is where explorers initially encountered high-grade Athabasca uranium and the association became rigid. Without a basin there is no unconformity and therefore, so went the logic, there will be no uranium. But Wallster disagrees.

“Everyone focuses on the unconformity, but I think the basement rocks are just as important,” he says. “At McArthur River they’re mining the basement. Same with Eagle Point — all the ore they’re mining there is basement rock. The basement is where we found Roughrider and where the mineralization is at Patterson Lake South and at Millennium.”

As he mentions, a slew of recent discoveries support the notion that the basement is an important uranium host, starting with Roughrider and continuing to the hottest uranium exploration play in Canada: the Patterson Lake South (PLS) project, where Fission Uranium (TSXV: FCU; US-OTC: FCUUF) is finding high-grade uranium in basement rocks in the southwest Athabasca region.

If uranium is in basement rock associated with the Wollaston–Mudjatik transition, Wallster sees no reason why that should stop at the edge of the basin. On the contrary: potential should track the zone where it extends out from the eastern basin northeast and southwest.

If the trend contains uranium beyond the basin, the mineralization should be easier to access, as the basement rocks are not concealed by a thick sedimentary package. In the basin, drills often cut through hundreds of metres of Athabasca sediments to reach the basement. At Genesis, the basement rocks are at surface.

“There might be some overburden, but if there’s outcrop it’s basement rock,” Wallster says. “Once we’re ready to drill, the holes will be short and not expensive.”

A question remains: if the Wollaston–Mudjatik transition zone extends out from the eastern basin to the northeast and to the southwest, why did Kivalliq focus on the northeast extension? Wallster says it was mainly a matter of availability.

Forum Uranium has long held ground covering the trend’s southwest extension. Wallster’s Roughrider Uranium also held ground there, which it released when focused shifted to the Roughrider discovery, but others have since taken up positions.

“In going back to that area around Christmas, we just couldn’t put together the same land package that we could put together at the other end of the transition zone,” Wallster says.

With the land package put together and a joint-venture partner set to provide funds, Kivalliq’s team is getting ready to hit the ground at Genesis. And it will be Kivalliq’s team at the site: the deal has Westham providing the money and earning in, but Kivalliq acting as operator.

For the partners it is an ideal situation. Westham needs to build up a technical team before it can operate an exploration project, which Gibson is confident he can accomplish over the next two years. Kivalliq’s technical team, meanwhile, is eager to get going on a fresh exploration opportunity.

Kivalliq already has a flagship asset: the Angilak uranium project in Nunavut, which is home to 2.8 million inferred tonnes grading 0.69% U3O8. The problem is that resource markets — especially the uranium market — are too weak to support the project.

“We’ve been pretty successful there in terms of going from zero lb. to 43 million lb. U3O8, and with one of the lowest discovery costs per pound out there,” Wallster says. “But with exploration dollars tightening up and with not a lot of people caring about finding more pounds in the ground, we said, ‘What should we do?’”

The Kivalliq team took a two-pronged approach. The first was to advance Angilak as much as possible, which meant engineering work and metallurgical studies. The second prong had the team consider other opportunities to find basement-hosted uranium — Angilak hosts uranium in the basement rocks beneath the Yathkyed and Angikuni sedimentary basins — and Wallster’s success at Roughrider had Kivalliq looking west to the Athabasca.

“I said, ‘If we’re going to look at the Athabasca basin, this is the ground we want,’” Wallster recalls. “I was shocked the ground was available. Given all the staking that has occurred outside the basin around PLS, it is amazing nobody had applied that logic here, where basement structures exit the basin in the same way.”

A few people applied that logic: Genesis has seen limited past exploration by three juniors. Wallster was involved in some of those early efforts, which outlined 30 uranium showings and several uranium-bearing boulder trains. The property, however, got overshadowed when Hathor discovered the Roughrider deposit.

“It never got the fair shake it deserved when we were there back in 2005 to 2008,” Wallster says. “Now I’m looking forward to moving this project ahead, and moving it quickly. And the Kivalliq team is chomping at the bit to get out and explore again.”

They can get out and explore once Westham closes its financing. Gibson says the minimum requirement is $2 million, but it looks like the raise will be oversubscribed.

“The reception has been positive, in spite of the markets and the price of uranium,” Gibson says. “And this will be a tightly controlled vehicle. If it all goes according to plan post-financing, we’ll only have about 16 million shares outstanding.”

The funds raised will go into paying for or exploring the project, because at the moment Gibson is Westham’s only employee. Building up a management team is one of his next goals, but for now an efficient structure makes sense.

“In these markets you have to be frugal, and our burn rate is going to be low,” Gibson says. “If we hit or if the story starts moving, a time will come when the company will need a more technical president, and we are already looking for that person. Until then, I’m here to make sure everything comes together and to tell the story.”

The first stage of work will focus on eight targets and involve geophysics, lake sediment sampling, soil sampling and prospecting. The partners hope the work will reveal reasons to drill at least some of those targets before October.

“It’s a great story and it’s going to be fun,” Wallster says.



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Properties in This Story

Genesis Property



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