UEX, Areva boost resources at Shea Creek

UEX (UEX-T) has bumped up resources at its 49%-held Shea Creek uranium project in the Athabasca basin of northern Saskatchewan. The project boasts the largest undeveloped uranium resource in the much-coveted basin, and third largest overall, behind Cameco’s (CCO-T, CCJ-N) McArthur River and Cigar Lake deposits.

Shea Creek hosts the Kianna, Anne and Colette deposits, and the recently defined 58B deposit. It’s the most advanced of the nine Western Athabasca uranium projects UEX jointly holds with project operator and majority-owner Areva Resources Canada.

The latest estimate, prepared by Advantage Geoservices, shows that Shea Creek contains 67.7 million lb. uranium oxide (U3O8) from 2.1 million indicated tonnes grading 1.48% and another 28.2 million lb. U3O8 from 1.3 million inferred tonnes at 1.01%, at a cut-off grade of 0.3% U3O8 — reflecting increases of 6% and 15% over the May 2010 estimate by Golder Associates.  

The new resource incorporates all four zones and is based on 477 holes completed from 1992 to the end of 2012. Similar to the Golder estimate, Advantage controlled the impact of anomalously high-grade samples by capping grades, but also applied restricted interpolation ranges on high-grade samples, causing declining resources in the Anne and Colette deposits.

The junior says much of the mineralization at the project occurs over a 1 km strike length in the southern portion of the Shea Creak deposit trend at the Kianna and Anne deposits, which make up more than 80% of the current resource.

Global resources at Shea Creek stand at 95.9 million contained lb., marking a growth of 8.8%, or 7.8 million lb., with total grade slipping 4.2% to 1.3% U3O8, Raymond James analyst David Sadowski notes, adding that he was disappointed with the update, as he had expected a growth of at least 12 million lb., given that 116 holes were drilled since the Golder estimate.

But Sadowski highlights that a positive development in the revision included the Kianna deposit growing 11.8 million lb., or nearly 30%, to 51.7 million lb. U3O8, with grade improving by 4.5% to 1.4% U3O8 — making it in his view “one of the more prolific single deposits of uranium mineralization globally.”

UEX says that resources at Kianna increased with the discovery of new basement-hosted zones, including the Kianna East zone, and thorough drilling. The junior adds that this, along with the newly delineated 3.4 million lb. 58B deposit, was responsible for the growth in the 2013 update.

On the flip side, UEX says that resources at Colette fell 27% to 13.5 million lb. grading 0.74% U3O8 following restriction of mineralization in the deposit’s central and southern portions based on new infill drilling.

While no drilling was conducted at the Anne deposit since 2010, resources dropped 8% to 27.4 million lb. due to the more conservative approach used to interpret high-grade samples.

Despite the smaller-than-anticipated boost in the resource estimate, Sadowski maintains that Shea Creek has the potential to host 150 million lb. U3O8.

“Although initial resource data dampens our outlook somewhat on the eventual size and grade potential of Colette and 58B within the confines of their current strike length, we remain encouraged by the prospectivity of basement zones at Kianna and Anne and ground to the north of Colette and south of Anne, as well as at the multiple conductors running parallel to the [33 km long] Saskatoon Lake conductor,” he notes.

UEX stated in April that it has an option to increase its exploration spending on the project by up to $4 million a year, noting it could expand its interest in Shea Creek and its other eight joint-venture projects with Areva to 49.9% by spending $18 million by the end of 2018, which in turn would boost its attributable resources.

Sadowski notes that the budget this year was expanded to $5.1 million to $6.1 million, of which UEX would shoulder $3.5 million to $4.5 million.

On the resource news, UEX shares gained 9% to close April 18 at 49¢. Sadowski lowered his price target to $1.20 from $1.40 but reiterated an “outperform” rating.

The company has 221.5 million shares outstanding and $11 million in cash.