Aurora builds Labradoruranium inventory

SITE VISIT

Postville, Labrador — Born of a uranium asset spinoff from Fronteer Development Group (FRG-T, FRG-X) and partner Altius Minerals (ALS-V) in early 2006, Aurora Energy Resources (AXU-T, AUEGF-O) has enjoyed a successful first year with its Central Mineral Belt (CMB) projects in coastal Labrador as it moves to build the metal inventory on a number of mineralized zones.

Uranium’s recent record spot price run to the US$75-per-lb. level has spurred an investor rush to companies with actual “pounds in the ground.” Aurora has emerged as one of the market’s favourites with its flagship Michelin project in the emerging CMB uranium district.

A mix of both institutional and retail shareholders propelled Aurora to a more than 400% gain since its initial listing a year ago, making the explorer one of the better performers in the energy metal sector. After raising about $100 million through the initial public offering and a couple of equity financings, the company has seen its market capitalization soar to the $1-billion level, surpassing both its parent companies.

Michelin underwent a considerable amount of exploration in the past. In the early 1950s, a territorial government initiative to attract development to the region prompted a consortium of multinational corporations to form the British Newfoundland Corp. (Brinco) to evaluate opportunities in Labrador.

Brinco transferred mineral exploration rights to its subsidiary Brinex, which subsequently discovered the Michelin and Kitt uranium deposits in the mid-1950s. After a brief period of exploration, work was suspended until the mid-1960s, when Brinex partnered with the German energy company Metallgesellschaft in a joint venture that eyed bringing the deposits to production.

The 1970s saw further work on Michelin by Brinex, backed by Commonwealth Edison, including over 32,000 metres of drilling in 290 holes; a decline was also driven into the deposit to access material for a bulk sample. Resource and positive feasibility studies were completed in 1979, however, significant weakening in the uranium price curtailed development plans and prompted Brinex to cease work, eventually allowing its claims to lapse in the early 1980s, following site rehabilitation.

The main Michelin orebody, hosted in a quartzo-feldspathic volcanic sequence, outcrops and extends over a strike of about 1,200 metres. It consists of several east-northeast-trending sub-parallel mineralized zones that dip about 53 to the south-southeast.

During a recent site visit, The Northern Miner observed the adit driven by Brinex, but it had been covered with waste rock from the operation and appeared backfilled.

Aurora, through predecessors Fronteer and Altius, began exploration on Michelin in 2003 to retest the historical portion of the deposit and to bring any potential extensions into a revised resource estimate.

Drill data compilation from the historic Michelin zone (surface to about 250 metres depth) led to a 22% boost from past estimates to about 22.2 million contained pounds U3O8.

In mid-February, Aurora tabled a new resource estimate for the Michelin deposit and the newly discovered Jacques Lake deposit, situated 25 km away, that totaled an impressive 58 million lbs. U3O8 in the measured and indicated categories and a further 38 million lbs. U3O8 in the inferred category.

Almost 90% of these pounds are in Michelin, which has a strike length of 1 km, has been drilled to a depth of 750 metres, and remains open in all directions.

With a current global resource approaching 100 million pounds U3O8, Aurora describes its project as “the largest undeveloped uranium deposit in Canada.”

The geology

The project is situated in eastern Labrador’s Central Mineral Belt, an assemblage of Archean to Meso-proterozoic rocks in the northeastern Laurentian Shield.

Both stratabound and shear-hosted uranium mineralization occurs at Michelin within the meta-volcanic suite of porphyritic tuffs and fragmental rhyolites, and is associated with structural zones parallelling the east-northeast-trending and moderately south-dipping stratigraphy.

Although the structural controls of mineralization are well understood, geologic studies of the camp are also examining it as a potential iron oxide-copper-gold (IOCG) hybrid project.

Uranium mineralization at Michelin occurs primarily as small disseminations of uraninite associated with strong hematite alteration. It is hosted in fine-to-coarse porphyritic phases of a felsic metavolcanic suite with higher grades generally associated with the coarser phases.

During the site visit, Aurora showed off core from hole M-06-13 averaging 0.21% U3O8 over 48.5 metres and from hole M-06-16 returning 59.4 metres of 0.18% U3O8 — described by the company as “some of the best grade-thickness intervals ever intersected at Michelin, all within 420 metres of surface.” The telltale scintillometer provided squealed confirmation of the broad uranium mineralized sections in the core.

“2006 drilling has extended the Michelin deposit by more than four hundred metres,” says Aurora president and CEO Mark O’Dea.

In wrapping up last year’s drill program on Michelin, the company also notes the main shoot remains thick and high-grade at depth, giving the higher-grade core of the deposit a significant boost.

Highlighted results include the following:

* hole M-06-38A delivered 4.6 metres (from 604 metres down-hole depth) running 0.31% U3O8;

* 9.6 metres (from 636 metres) grading 0.2% U3O8 in hole M-06-41;

* hole M-06-42 returned 39 metres (from 689 metres) averaging 0.11% U3O8;

* hole M-06-43 cut 17.8 metres (from 700 metres) of 0.23% U3O8, including 1.52% U3O8 over 1.17 metres; and

* hole M-06-43 intersected two parallel zones of mineralization: 21.8 metres (from 714 metres) of 0.2% U3O8, including 1 metre of 1.83% U3O8, and 16 metres (from 746 metres) of 0.13% U3O8.

O’Dea says the company has drilled 37 holes totalling 25,000 metres at Michelin.

“One hundred per cent of the holes drilled at Michelin (in 2006) have intersected uranium mineralization,” he says.

Other targets

Beyond Michelin, previous exploration has identified a number of other mineralized zones along the predominant northeasterly structural trend.

Discovered in the late 1970s, the White Bear Lake target is located about 20 km east-northeast of Michelin. Several holes from past programs cut uranium values up to 0.21% U3O8 across 20.3 metres within a 3-km-long anomaly, but were never followed up.

The Rainbow zone, located just 3 km southwest of Michelin and along trend, was also the subject of a modest 7-hole drill effort in the late 1970s. Values of up to 0.21% U3O8 over 11 metres were encountered at relatively shallow depths of 30 metres. The zone remains open in all directions with Aurora looking to test its potential both along strike and downplunge. Recent exploration reveals similarities between portions of mineralization at Rainbow and the upper parts of Michelin.

A 9-hole drill program completed at Rainbow in mid-2006 also intersected a number of significant, near-surface uranium intervals including a 3-metre section grading 0.42% U3O8 in RZ0611. Based on compilation of past and recent results, Aurora has delineated an initial deposit on the zone over at least 300 metres of strike and across a true-thickness width of up to 13 metres. The company notes drilling has not tested below 150 metres depth.

Aurora has also identified a number of target areas based on its programs of the past few years. An airborne radiometric survey conducted over its CMB project lit up a number of significant anomalies.

One of the largest is at Jacques Lake, located about 25 km northeast of the Michelin project along a structural corridor and in a similar setting. Although not a new discovery — it was identified in the mid-1950s by Brinex —
Aurora has outlined a target zone 5 km in length with uranium mineralization intersected in two parallel zones across significant strike. Drilling has indicated zones extend to depth and along strike, with the company noting improved thickness and grade.

“Over the past twelve months, Jacques Lake has gone from an encouraging discovery to a developing resource with size potential similar to that of Michelin,” says Aurora chief geoscientist Rick Valenta. “In addition, we now know the rocks that host the Jacques Lake deposit extend for over twenty kilometres to the west, with at least five additional drill-ready targets.”

Mineralization has been intersected over a strike length of roughly 600 metres, with a thick, central, high-grade zone taking shape similar in size, shape and grade to Michelin. The zone has an average true thickness of 20 metres.

Following up on the 50 holes drilled in 2006, Aurora plans to begin a 20,000-metre drill campaign at Jacques Lake this year aimed at resource expansion along strike and at depth, plus some infill work. The company notes drilling has not tested below 235 metres depth on the project.

Aurora remains encouraged at the project’s expansion potential, having confirmed bedrock uranium is much more widespread than indicated by the geophysical data. Holes drilled well outside the main Jacques Lake radiometric anomaly have returned significant uranium mineralization.

Several kilometres south of Jacques Lake is the company’s Otter Lake project. Also lighting up as a large airborne radiometric anomaly (about 3 sq. km) it was drill tested in 2005, returning grades of up to 1% U3O8 over narrow widths.

Another project area that has Aurora excited is Melody Lake, located about 10 km north of Michelin. Initial boulder sampling in 2004 returned high-grade values of up to 28.2% U3O8. Although the likely source of the mineralized boulder train remained elusive to previous explorers, the company feels that its coincident gravity highs and lake sediment geochemistry anomalies provide an attractive drill target.

Some 50 km northeast of Michelin lie Aurora’s Inda, Nash and Gear deposits. Located on a parallel trend to the “Michelin corridor,” the historical deposits occur in a rock suite including carbonaceous sediments that form an attractive host for high-grade uranium mineralization.

Recent initial drilling by Aurora turned up a number of high-grade intervals including Inda hole 1, with three separate parallel mineralized zones consisting of: 5 metres (from 117 metres) grading 0.12% U3O8, followed by 3.6 metres (from 147 metres) of 2.2% U3O8 (containing a 1-metre interval of 6.77% U3O8) and a 2.9-metre intersection (from 163.5 metres) averaging 0.39% U3O8.

Beyond its exploration focus, Aurora has also been moving on addressing permitting and infrastructure issues. Socio-environmental initiatives have begun, with the company aiming for a permitting timeline of around six years.

A preliminary economic assessment is on the board for mid-2007. An early stage mining plan foresees initial open-pit development on Michelin to tap near-surface mineralization.

Metallurgical test work will look to follow up on past testing by Brinex that processed about 5 tonnes of material.

Aurora says Michelin ore presents a low level of technical risk, based on low measured radon gas levels to date.

Aurora also notes it has hosted site visits for uranium purchasers from a number of nuclear utility groups.

The local community of Postville stands to see significant economic benefit from planned development. Of the 70 personnel involved in Aurora’s CMB project, about 30 come from the town, which would likely serve as the support centre for operations. The community is situated on Kaipokok Bay, which is generally ice-free about seven months of the year, but could be passable year-round using an icebreaker.

Shares of Aurora Energy have recently rallied to new highs touching the $16.69-level. At presstime, Fronteer reported holding about 47% of the Labrador-focused uranium explorer’s 65.5 million shares.