When Japanese-owned JCU Exploration sought a partner for its Christie Lake property, 9 km along strike of Cameco’s (TSX: CCO; NYSE: CCJ) McArthur River — the world’s largest uranium mine in Saskatchewan’s Athabasca basin — Roger Lemaitre, president and CEO of junior explorer UEX (TSX: UEX), knew he had to have it.
“The whole time I was overseeing exploration for Cameco I always had my eyes on Christie Lake. I was interested in seeing what’s there,” he tells The Northern Miner during a phone interview. “And it’s the first time JCU has been looking for a partner, so we’re fortunate to get in.”
Under a new letter of intent (LOI), UEX could earn up to a 70% interest in the project by making cash payments of $7 million, and funding $15 million in exploration over five years.
Lemaitre says UEX is keen to explore the property, which has sat idle since 1997 — long before explorers recognized the potential for basement-hosted uranium deposits in the district.
“What we’re excited about the property more than anything else is that back in the early days, explorers were focused on the classic unconformity model approach, which is a successful model,” he says. “But they wouldn’t chase mineralization into the basement — it was really rare to do that. It wasn’t until the mid-2000s that a lot of work changed focus, and none of that has been applied here.”
Basement-hosted deposits in the basin formed when uranium-enriched fluids migrated through steeply dipping structures, which was the case at Fission uranium’s Triple R deposit — host to 79.6 million lb. uranium-oxide (U3O8) in 2.3 million indicated tonnes at 1.6% U3O8, and 25.8 million lb. U3O8 within 901,000 inferred tonnes at 1.3% U3O8.
The structures pierce the unconformable contact with overlying sediments and the radioactive fluids plume outwards through the permeable strata, forming flat-lying deposits such as those seen at McArthur River.
The McArthur River mine — which has operated since 1999, and is licensed until at least 2023 — hosts total reserves of 1.1 billion tonnes at 14.9% U3O8, for 345.2 million lb. U3O8.
Based on geophysical data, UEX says McArthur’s main plumbing structure, the P2 fault, extends onto the Christie Lake tenements for a 1.5 km strike through a series of en-echelon steps.
The structure hosts the property’s Paul Bay and Ken Pen deposits, which were reported in 1997 to have a non- National Instrument 43-101 compliant resource of 20.87 million lb. U3O8, within 9.5 million tonnes at 3.2% U3O8.
The mineralization sits at the base of the prospective unconformity under 420 metres of cover, and occurs as “blow outs” along the main structure, likely caused by intersecting faults, which Lemaitre says is “extremely common” in the Athabasca.
“That comes into play at every deposit without exception. You’ll see it at a regional scale, deposit scale and stope scale,” he says, adding that neither of the ore shoots have been tested downdip or down-plunge.
“It’s rare to have a property that has big, mineralized zones that haven’t been tested to their full extent, not to mention a suite of other targets in and around it,” he says.
Once UEX finalizes the terms of the joint-venture agreement, Lemaitre says the company will consider a $2.5-million program to delineate the resource in the new year, subject to financing.
Once that is complete, the company could explore the rest of the 79 sq. km property.
“To the south we know the depth to the unconformity is significantly shallower — less than 350 metres — coupled with a number of conductors that light up in geophysics,” he says. “But it’s never been drill tested, and that’s extraordinary to see in this district.”
The Christie Lake property is one of 16 projects in the Athabasca basin the junior has built into its portfolio, since it publically listed in 2002.
Although Lemaitre says Christie will “take most of our attention” over the next couple of years, the company is still advancing the wholly owned Hidden Bay project in northeast Saskatchewan and its Shea Creek project in northwest Saskatchewan, with 51% joint venture partner AREVA Resources Canada, a subsidiary of French nuclear giant Areva.
“Quite frankly, our strategy is to bring in as many advanced projects into our portfolio as we can handle, in advance to what we believe will be a run-up in the uranium price,” he says.
“I look at the fundamentals that are driving the uranium sector, and even the most pessimistic people predict a supply shortfall between 2020 and 2022,” he says. “Since 2009 — and post-Fukushima, particularly — utilities haven’t had to buy uranium because they’ve been covered, but those contracts start to roll over next year, and massively so in 2018. Even the biggest players out there are telling the world that the incentivized price to bring new production on board is going to be north of US$60 lb. U3O8.”
With uranium sitting at US$35 per lb. U3O8, a run up in prices is exactly what explorers will need to regain momentum in share value. UEX has seen its share price drop 59% to 12¢ per share since May.
“The start in the downward migration of uranium prices is pretty coincident with the changing oil price,” he says. “People tie energy together — whether it’s oil or nuclear power — and that’s really hurt a lot of companies, and we’re not an exception. But everything is coming together, so our medium-term outlook for uranium is extremely positive.”
UEX shares have traded within a 52-week price range of 10¢ to 37¢, and closed at 12¢ at press time. The company has 246 million shares outstanding for a $29.5-million market capitalization.