VANCOUVER — There’s no sign of slowing down for junior explorer NexGen Energy (TSXV: NXE) at its Arrow uranium deposit in the southwestern part of the Athabasca basin in northern Saskatchewan, as recent drilling has tripled the strike length of known mineralization.
Travis McPherson, NexGen’s corporate development manager, says that despite the company’s aggressive drilling at the site, it has yet to hit a barren “duster hole” since discovering the deposit in 2014.
“We’re really excited and encouraged by the growing upside to the project,” he says in an interview. “Our mandate is to really test the limits of Arrow — we’re not drilling to protect the asset, we’re drilling to expand it.”
The company has reported 60.8 metres of total composite mineralization, which includes 4 metres of radioactivity measuring 10,000 to 45,000 counts per second (cps) on a bold 210-metre southwestern step-out from 15-44b — a record hole drilled in 2014 that returned 56.5 metres of 11.6% uranium oxide (U3O8) from 500 metres deep.
Total composite mineralization accounts for low to moderate readings below 10,000 cps, with no greater than 2 metres of barren material diluted within the calculated interval.
Other intercepts from the program include 170.5 metres of total composite including 13.2 metres measuring 10,000 to 61,000 cps on a 50-metre southwestern step-out from 15-44b, and 160.3 metres of total composite including 8 metres measuring 10,000 to 47,000 cps on a 100-metre southwestern step-out from 15-44b.
McPherson explains that assays won’t be received for another four to six weeks, but the scintillometer readings suggest high grades.
“When you see greater than 60,000 counts per second, that’s when we often see over 40% U3O8,” he says, adding that “when it’s between 10,000 cps and 60,000 cps,” the company doesn’t know.
McPherson says that the drill holes were angled slightly oblique to the mineralization, resulting in wider intercepts, but that “you can divide by four and you get the true thickness.”
Drilling at Arrow has outlined two prominent, vertically oriented shear zones called A2 and A3 that host a uranium deposit in the Athabasca known as an “ingress” sub-type.
Similar to Cameco’s (TSX: CCO) Eagle Point and Fission Uranium’s (TSX: FCU; US-OTC: FCUUF) Triple R deposits, mineralization at Arrow formed when uranium-enriched fluids brewed within near-vertical, anastomosing shear zones that cross-cut a 1.4-billion-year-old gneiss beneath the Athabasca basin.
The region’s other style of deposit, known as “egress,” occurs where these structures meet the unconformable contact between the basement rocks and the overlying and undeformed sediments. Examples of egress or “unconformity-hosted” types in the basin include Cameco’s McArthur River and Cigar Lake deposits.
In this instance, uranium-enriched fluids circulated upwards through the basement along the structures and permeated laterally into sandstones, forming pods of flat-lying mineralization.
Heat from the radioactive decay that followed drove uranium-enriched, oxidized fluids farther into the basin and altered the sedimentary host rock into brittle clays.
McPherson says that mining unconformity hosted deposits poses an “extreme technical challenge,” since groundwater seeping through the permeable and brittle host rock needs to be frozen solid before it can be mined.
“Cameco wrote the book on how to mine these deposits at Cigar Lake,” he says. “It took them 10 years to figure it out and (well over) initial capex, but they have it dialed now, and they’re the only ones who know how to do it.”
In contrast, he says mining Arrow would be easier and similar to underground mining at Eagle Point, where miners use longhole underground stoping to tap reserves of 15.2 million lb. at 0.6% U3O8.
“Any company that has experience with underground mining can mine Arrow,” he says. “The host rock is competent and it doesn’t require any freezing.”
Although NexGen plans to advance the project towards its maiden resource in the first half of 2016, McPherson says the company will still explore the project’s geological upside.
“The alteration in the new step-out holes looks to be just like the top of the high-grade core on the A2 shear we drilled previously,” he says. “Our technical team believes we clipped the top of a much larger mineralized system so we’re investigating that further, with more drilling down-plunge.”
Since discovering the Arrow deposit, the company has traced mineralization across a 645-metre strike length on surface that’s 215 metres wide and between 100 and 920 metres deep.
Cantor Fitzgerald analyst Rob Chang predicts that based on the assays to date, the deposit could have a resource of 114.9 million lb. U3O8 at average grades of 0.9%. Chang has a “speculative buy” rating on NexGen’s stock, with no price target on its shares.
The more advanced-stage Triple R deposit located just next door has an indicated resource of 2.3 million tonnes at 1.6% U3O8 for 79.6 million lb. U3O8, and an inferred resource of 901,000 tonnes at 1.3% U3O8 for 25.8 million lb. U3O8. The high-grade core of the deposit has 110,000 tonnes at 18.2% U3O8.
To put the value in perspective, NexGen says a grade of 1% U3O8 has the same value as 23.5 grams gold per tonne, assuming US$45 per lb. U3O8 and US$1,300 oz. gold. At 31.1 grams for every 1 troy oz., one tonne of material from Triple R’s high-grade core is worth a whopping US$17,886.
Denison Mines (TSX: DML; NYSE-MKT: DNN) and Fission agreed to merge in early July under a deal that valued Fission at $483 million, or $1.25 per share. The newly rebranded Denison Energy would start life with a $650-million market value at press time valuations.
For McPherson, the Denison-Fission combination adds to Arrow’s attractiveness.
“We think the deal is great because it basically leaves us as the last ones standing in the southwest Athabasca, with an asset that’s already showing all the characteristics of becoming a world-class deposit,” he says.
NexGen has traded within a 52-week range of 29¢ to 89¢, and closed at 79¢ at press time. The company has 253.4 million shares outstanding for a $200-million market capitalization.
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