Uranium digs get growing reaction
Strateco plans. Mine expected to be in place in 2011
LYNN MOORE, The Gazette, Wednesday, June 13, 2007
The $125-million question came at the end of uranium explorer Strateco Resources Inc.'s annual meeting in Montreal yesterday.
It was a natural one for Strateco, which is widely seen as the current leader of a growing pack of uranium explorers poking away in northern Quebec. Last year, about $16 million was spent on uranium exploration in Quebec.
This year's educated guess by government geologists is that about $30 million will be spent, much of it near the Otish Mountains. That's where Strateco has laid claim to 164 square kilometres that have about 88 drill holes in one sliver of the property.
"Should everything go according to plan ... when do you anticipate having a uranium mine?" a shareholder asked company president Guy Hebert, a mining veteran who has led successful exploration companies such as Audrey Resources.
He did not rush the answer. There are many hurdles between promising drill-hole results - where Strateco is at now - and a mining operation, especially for one of the most regulated metals in the world.
In addition to an array of resource calculations, feasibility studies and myriad permits, a formal environmental impact assessment has to be undertaken. If that assessment takes three years to complete, that's considered fast, Hebert told the assembly.
But, when all is said and done, "we think there will be a mine in 2011," Hebert said. And that mine should cost $125 million and require one year to construct.
With global energy demand rising steadily, nuclear-generated power is now seen by some as a viable alternative to coal and oil. According to the World Nuclear Association, reactors now number 435 and are expected to rise to 506 by 2015.
As a consequence, uranium prices have soared in recent years to a recent high of $138 U.S. a pound from under $10 U.S. in 1999.
Two-thirds of the world's uranium resources are found in Australia, Kazakhstan and Canada, notably in Saskatchewan's Athabasca region.
While uranium exploration in Quebec has been undertaken relatively close to Montreal, the province's Natural Resources Department sees two northern areas with tremendous potential for uranium, senior government geologist Serge Perreault said.
The leading contender is now the Otish Mountains basin, whose geology Perreault regards as being similar to the Athabasca's. It was initially explored by mining giants Cogema and Uranerz Exploration and Mining during the 1970s and early '80s before the price of uranium tanked.
Last year, grass-roots uranium exploration work began in the less-travelled region around Nunavik's Ungava Bay, an area known as the Core Zone.
The mineralization there, according to Perreault, is akin to that of the region of Namibia, which yielded the Rossing uranium mine, one of the largest open-pit uranium mines in the world and part of Rio Tinto PLC's realm.
In 2004, about $1.4 million was spent on uranium exploration in Quebec, Perreault said. Last year, about $16 million was spent and this year, the 15 to 20 companies that are probing for uranium will probably spend close to $30 million.
Among the companies exploring in northern Quebec is giant Saskatoon-based Cameco Inc. And, through a privately held junior explorer, France's Areva Group is also present. It's a vertically integrated state-controlled company that mines and enriches uranium as well as builds and services nuclear reactors.
According to Perreault and other close observers, Strateco's Matoush project in the Otish basin, about 300 kilometres north of Chibougamau, is Quebec's most advanced uranium exploration project.
That project and the area's potential have put the Otish "on a lot of people's radar," said Robert Orviss whose firm, Becher McMahon Capital Markets, has organized an Otish Basin Uranium Conference in Toronto on Thursday.
About 120 investors, ranging from institutional to individual, will be given an overview of the region and hear from some key companies operating there, Orviss said. Among the presenting companies are Strateco, Ditem Explorations, Dios Exploration, Golden Valley Mines and Cameco.
Hebert gave Strateco shareholders in Montreal yesterday a preview of the presentation he will make in Toronto.
Strateco, which recently moved to the big board of the TSX from the TSX Venture Exchange and is also listed on the Frankfurt Exchange, has done a series of "road shows" in Europe, Western Canada and the U.S. this year to raise the company's profile.
Its focus is the Matoush property where about $16 million will be spent on exploration work in 2007, Hebert said. At the camp, the working home to about 45 people, three drills are busy.
A milestone event is anticipated at the end of August, when the first uranium resources calculation, prepared to meet the criteria of National Instrument 43-101Standards of Disclosure for Mineral Projects, is expected to be released.
The "NI 43-101" was created after the Bre-X Minerals scandal in an attempt to protect investors from unsubstantiated mineral project disclosures. When Bre-X collapsed in 1997, more than $5 billion in shareholder value evaporated, after it was determined that there was no gold at its Busang site in Indonesia.
The first NI 43-101 report will be "a major major step (for Strateco) because everything is related to that, from permitting, to determining the capacity of the mine and the mine design. It is really basic," Hebert said in an interview.
Strateco has also engaged a company to begin work on an environmental impact study for a mining operation on the Matoush property.
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