SXR Uranium One’s Dominion grows (June 22, 2006)

Higher uranium and gold prices and more than 30,000 metres worth of drilling have allowed SXR Uranium One (SXR-T, SXRFF-O) to substantially boost resources at its already large Dominion uranium project, near Klerksdorp, South Africa.

Over nearly a year, beginning in mid-2005, the company sank 105 BQ- (3.7 cm in diameter) and NQ-size (4.8 cm) holes in the Rietkuil 1, 2 and 3 sections and the Dominion 1 and 2 areas. So far, assay results have been received for 88 of the holes.

Dominion’s indicated resource is now pegged at 26 million tonnes averaging 0.083% U3O8 and 1.1 gram gold per tonne in four zones. The 47.5 million lbs. of contained U3O8 and 910,000 oz. of gold represent increases of 195% and 163% over SRK Consulting’s estimate at the end of 2005. Inferred resources have climbed by 36% to 178.4 million tonnes running 0.051% U3O8 and 0.63 gram gold, for 199.2 million contained lbs. U3O8 and 3.6 million oz. of gold, up 36% and 63%. Higher metal prices saw cutoff grades trimmed by 41% at Dominion and 29% at Rietkuil. The cutoffs are based on metal prices of US$45 per lb. of U3O8 and US$528 per oz. of gold.

The company says the 16% drop in the indicated resources’ average grade and 23% slip in inferred resource grade is not considered significant, as selective mining will target identified pay-shoot areas.

“The indicated uranium grade, while somewhat reduced from the December estimate, remains above the level we have been using in our mining plans and financial models,” said Uranium One chief executive Neal Froneman. “This bodes well for Dominion, which remains on track to begin producing uranium oxide in the first quarter of 2007.”

The revised estimate will be incorporated into an ongoing bankable feasibility study, which is expected in July.

Initially, Dominion is expected to annually produce more than 4 million lbs. by 2011. Mining will focus on ore down to 500 metres of depth during the first decade. In all, the mine is expected to have a total lifespan of more than 30 years.

Meanwhile, drilling continues, with another 35,000 metres planned to delineate the down-dip extension of high-grade zones during the balance of the year.

Uranium One is trying to prove up a historic resource estimate commissioned by former owner Anglo American (AAUK-Q, AAUKF-O, AAL-L) that tipped the scales at 464 million tonnes running 0.037% U3O8 and 0.57 oz. gold.

Uranium One says that so far drilling has confirmed historical geologic modelling and subsequent resource estimations.

Between 1955 and 1961, the Dominion mine produced 2.5 million lbs. of uranium oxide from ore running 0.094% U3O8. The Reitkuil mine produced 35,700 lbs. at a grade of 0.044% in 1988.

The project retains a substantial amount of infrastructure, including a 2.4-million-tonne-per-year gold plant and underground development. The carbon-in-leach plant is already processing ore from the adjacent Bonanza South gold-uranium project, but has considerable capacity for further expansion. During the first three months of 2006, the plant processed 32,251 tonnes of Bonanza ore running 1.31 grams gold.

Recent work at Dominion includes development of the R1 decline at dewatering and recommissioning of the shaft to the second level at Rietkuil. Development is underway on level 2. At Dominion, development of the D1 decline and excavation of the D2 portal is ongoing.

During the first quarter, the company continued facility upgrades to enhance power supply from state-owned power utility Eskom. Bateman Engineering began construction of the uranium plant, and began work on the first thickeners. The company has also ordered long-lead-time items, including autoclaves.

The company has also applied for mining rights, and is in the midst of the public participation processes. All of the surface rights required for the first phase of mining have been assembled.

Work at Dominion is being funded via a private placement of 22.3 million shares at $6.64 apiece in February.

Uranium One inked a required black economic empowerment deal with Micawber 397 in mid-2005. Micawber is 30%-owned by historically disadvantaged employees, with the local community also holding 30% through a separate trust fund.

The company was recently added to the S&P/TSX composite index. The shares currently trade at around $8.26 in Toronto, and in a 52-week range of 79 to $11.80.