Denison grows in Athabasca

Higher uranium prices have rekindled interest in the Athabasca Basin of northern Saskatchewan. Among the companies stepping up their efforts in the region is Denison Mines (DEN-T), which has signed two deals to earn interests in properties near producing mines.

An agreement with Cogema Resources will see Denison finance exploration on the Cogema property that surrounds the McClean Lake uranium deposit.

Denison can earn a 22.5% stake, identical to its portion of the McClean Lake property, by funding $5 million over six years. By the end of 2006 the company must have spent $1.5 million of that commitment, and would vest a 6% interest.

The agreement requires that minority partner, OURD Canada, which owns 15%, waive a first right of refusal on the sale. OURD is owned by a consortium of Japanese electrical utilities and has a 7.5% interest in the McClean Lake mine.

The property, dubbed Wolly for its proximity to Wollaston Lake, covers 23.7 sq. km on the edge of the Athabasca sandstone. The sandstone thins in the area and is no more than 200 metres deep on most of the property, making open-pit and borehole mining possible on deposits that lie at the base of the sandstone. Cogema has identified 13 drill targets for winter work.

In a second deal, Denison has agreed with its partners at the Wheeler River exploration project, near Key Lake, to earn an additional 20% interest over and above its current 40%. Denison would take on expenditure commitments of $3 million in three years to earn 10%, and $4 million in the next three years to earn the next 10%.

Currently Cameco (CCO-T) holds just over 45% of the property; the remaining 15% is held by Japan-Canada Uranium, a consortium of Japanese utilities and industrial conglomerates, including Mitsubishi (which owns half of Japan-Canada) and OURD. Cameco and JCU have yet to decide what each will contribute to the interest earned by Denison.

The property consists of 120 sq. km immediately west of the McArthur River mine, operated by Cameco. A quartzite “ridge” feature in the early Proterozoic basement rocks at McArthur is believed to have acted as a hydraulic barrier to mineralizing fluids there. This ridge also extends on to the Wheeler property. Geologists for Cameco and Denison surmise that the ridge is favourable for uranium deposition.

The sandstone in the area is as deep as 550 metres, which has hampered exploration in the past. Denison hopes geochemical surveys in the overlying sandstone will help guide the exploration for uranium.