Littleton, Colo.-based Ur-Energy (TSX: URE; NYSE-MKT: URG) has published a maiden resource estimate for its Shirley Basin uranium project in Wyoming’s Carbon County, indicating the deposit has 8.8 million lb. grading 0.23% eU3O8 in measured and indicated.
Shirley Basin is one of the two projects Ur-Energy received through its 2013 acquisition of Pathfinder Mines from an Areva affiliate, and may yet become a satellite deposit to the junior’s already producing Lost Creek uranium mine.
As part of that transaction, Ur-Energy acquired extensive historic drilling data, particularly on Shirley, which it analyzed and validated through its own drilling.
Shirley’s current resource includes 3,200 historic delineation holes that were drilled before Pathfinder terminated its mining operations in the Shirley Basin district in 1992, plus 14 confirmation holes Ur-Energy completed this May to test the historic data.
Ur-Energy notes the historic drilling focused on two resource areas that are within the boundaries of its current mining permits. These areas include the FAB Trend and Area 5 and contain close-spaced drilling on a 100-ft. grid, resulting in no inferred resources.
Combined, the areas host 1.9 million tons averaging 0.23% eU3O8 for 8.8 million lb. uranium, with 83% of the resource falling within the higher measured category.
The estimate used the well-known grade-thickness (GT) contour method and assumed a minimum grade of 0.02% eU3O8 and a minimum GT of 0.25.
Of note, the resource is shallow, starting at roughly 312 feet or 95 metres below surface, and high grade.
David Sadowski, an analyst at Raymond James, writes the new compliant measured and indicated resource confirms historic resources of 10 million lb. grading 0.21% eU3O8. “This is roughly four times the grade of the core Lost Creek area — a positive sign for eventual operating costs.”
Geological data suggests Shirley, described as a roll front deposit, is suitable to in-situ recovery (ISR), the same mining method the firm uses at the Lost Creek mine.
Ur-Energy is continuing its baseline testing to convert the existing permits to ISR methods from the conventional mining licenses, Sadowski notes.
Given the project is on a brownfield site, he estimates it would take the company a quick two years to complete permitting.
Sadowski models first production at Shirley in 2018, with throughput ramping up to 2 million lb. a year in 2020.
“We encourage investors to add to positions on confirmation of a rigorous, high-grade resource which underlined Ur-Energy’s production and cash flow upside once uranium prices improve, as well as our expectation of stronger plant performance and realized prices in second half of 2014,” Sadowski tells clients in a note.
He has an outperform rating and $1.80 target on the stock.
Cantor Fitzgerald analyst Rob Chang has a “buy” and $2.25 target, noting the company is one of his top picks in the uranium space.
Chang forecasts Ur-Energy will produce slightly less than 1 million lb. U3O8 in 2014.
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