Junior uranium explorer picked as speculative buy

Dale Hoffman’s JNR Resources (JNN-V) was recommended as a speculative buy at 20 by Wolverton Securities analyst Tracy Hurley, based on the recent discovery of unconformity-type uranium mineralization at the company’s Moore Lake property in Saskatchewan and the subsequent resumption of drilling. However, Hurley does caution investors that there is only one drill intersection of mineralization to date.

On May 8, JNR announced it had intersected highly anomalous radiometric values while testing a 1,000-metre long east-striking basement graphitic electromagnetic (EM) conductor at the Moore Lake joint venture project, 40 km northeast of the Key Lake uranium mine. The EM conductor occurs near the nose of an interpreted fold closure. The third hole of a 5-hole spring program intersected a 10.4-metre-thick interval of strongly clay altered and carbonaceous mineralized basal sandstone overlying an unconformity at a depth of 269 metres. The mineralization occurs near the footwall of a 125-metre wide fault zone that has resulted in extensive structural disruption and alteration of the overlying sandstone. The upper basement rocks are bleached graphitic sediments.

Analysis by the Saskatchewan Research Council indicated a grade equivalent to 0.44% U3O8 over 9.2 metres from a downhole depth of 262.15 to 271.15 metres, including a 2-metre interval of 1.16% U3O8. Core loss over the 9.2-metre interval was 20%. The mineralized zone also contains anomalous base metal values running as high as 1.3% nickel and 1.9% cobalt over 0.5 metre.

Two immediate follow-up holes, 4 and 5, tested the EM conductor at 200-metre stepouts east and west of hole 3, encountering “encouraging geology and elevated radiometrics.” Hole 5, which was collared 200 metres to the west of hole 3, intersected a sheared column of sandstone overlying strongly altered basement rocks. “The geochemical results from the sandstone column of hole 5 are especially encouraging and indicate that the mineralizing system clearly extends in this direction,” states JNR in a recent press release.

Prior to JNR staking the property in 1998, previous EM work had detected numerous basement conductors with highly variable orientations. Past diamond drilling intersected intensely altered sandstone and basement rocks, with weak uranium mineralization at the unconformable contact between them.

JNR has resumed follow-up diamond drilling at Moore Lake with an 8- to 10-hole program. The second round of drilling will first test the geometry of the system with a fence of holes, on 20-metre centres, around discovery hole 3.

The Moore Lake project is one of nine properties covering more than 2,000 sq. km in the Athabasca Basin of northern Saskatchewan that are held on a 50-50 basis with Kennecott Exploration, a division of London-based Rio Tinto (RTP-N). The properties are subject to a joint venture agreement that gives Kennecott the right to elect to earn a 65% interest in each individual property by incurring $10 million in exploration expenditures. Kennecott can earn a further 5% by funding all additional expenditures required to advance the property to a production decision, or by spending a total of $100 million on exploration.

Kennecott has agreed to subscribe to a $200,000 private placement in JNR consisting of 800,000 units priced at 25 apiece. A unit will consist of one common share and one warrant entitling the purchase of an additional share at 30 for a 12-month period. JNR will use 100% of the proceeds to fund its share of the next round of drilling on Moore Lake. Kennecott will also provide an additional $200,000 for the drill program.

Within 30 days of receiving all data from the Moore Lake drilling program, Kennecott will have the one-time right to exercise its option to earn a 65% interest in the property. If Kennecott should elect not to, the Moore Lake property will no longer be included in the joint venture and JNR will be free to develop the property on its own.

In the meantime, summer exploration programs are also planned for the joint venture’s Lazy Edward Bay property and for a further 170 sq. km of ground added to the Moore Lake project.

JNR has a 52-week trading high of 30 and a low of 8, with 29.8 million shares outstanding, or 44.9 million fully diluted. It has $1.2 million in working capital.

JNR President Dale Hoffman re-directed the company into a pure uranium exploration play in 1997. Under the direction of Les Beck, a former executive director of Saskatchewan Energy and Mines, JNR began aggressively acquiring land in the Athabasca Basin, where 18 uranium deposits totalling over 500,000 tonnes U3O8 have been discovered since 1968.

The high-grade deposits of the Athabasca basin are typically associated with the erosional boundary, or unconformity, between graphite-bearing metamorphic rocks of early Proterozoic age and middle-Proterozoic sandstones. Among the unconformity deposits there are McArthur River, which has reserves totalling 668,000 tonnes at an average grade of 17% U3O8 and resources of 859,000 tonnes grading 12% U3O8, plus Cigar Lake, which has reserves of 1.2 million tonnes grading 14% U3O8. Cameco (CCO-T) has a stake in both deposits.

Last fall, Cameco announced the discovery of high-grade uranium at its 57.47%-owned La Rocque Lake claims, 55 km northwest of its Rabbit Lake operation and 750 km north of Saskatoon. Three of 20 holes drilled during 1999 encountered uranium in excess of 8% U3O8 about 280 metres below surface. Hole 34 intersected 3.6 metres of 8.2% U3O8, hole 40 yielded 7 metres of 29.9% U3O8 and hole 42 hit 2.5 metres of 19.1% U3O8.

The zone of high-grade mineralization defined by the three holes has an apparent length of at least 200 metres and is considered to be open along strike. The La Rocque Lake claims had been intermittently explored since 1979. Of the 22 holes drilled to the end of 1998, only two holes encountered anomalous uranium, which Cameco defines as any intercept exceeding 0.1% U3O8 for at least 1 metre of width. The 1998 intercepts included 0.93% U3O8 over 1.4 metres and 0.17% U3O8 over 3.8 metres, in two holes 6 km apart.