U3O8 Explores Guyana’s Remote Interior

It’s been more than 20 years since anyone’s gone looking for uranium in Guyana, but after a lot of digging around for uranium indoors, Toronto-based U3O8 (UWE-V, UTREF-O) has recently begun a 2,500-metre drill program in the South American country’s rainforest interior.

The company, through its 100%-owned subsidiary Prometheus Guyana, has the exclusive uranium exploration rights to 13,300 sq. km of land around the Roraima basin, which U3O8 is touting as an Athabasca basin look-alike — being similar in size, age and composition with uranium showings at or below the basin unconformity. About 30% of the world’s primary uranium is mined from the Athabasca basin in northern Saskatchewan.

U3O8 co-founder and director Keith Barron was working in Guyana, situated between Venezuela, Suriname and Brazil, in the 1990s when he stumbled across some old uranium data at the Guyana Geology and Mines Commission (GGMC).

Denison Mines (DML-T, DNMIF-O) and Cogema, a subsidiary of Areva (ARVCF-O), explored Guyana’s interior in the past — the former, between 1968 and 1970 and the latter between 1979 and 1984. Cogema eventually left because of the plummeting uranium price and the discovery of Cigar Lake, where it refocused its resources.

Barron sifted through hard copies of sometimes water-damaged, sometimes incomplete, assay results, drill logs and down-hole logs, leading him to spend nearly two weeks scouting around the old exploration site deep in the jungle. There, Barron came across some two-decade-old workings and was convinced that the site had uranium potential.

At the time, Barron was the vice-president of exploration for Aurelian Resources (ARU-T, AUREF-O), which shared an office in Toronto with Laramide Resources (LAM-T, LMRXF-O). Enter Allan Ibbitson, U3O8 co-founder and current president and CEO, then chief financial officer at Laramide.

“We pony’d up our ideas in late 2005 and decided it was a good idea to form a new company,” Ibbitson says.

U3O8 began as a private company in December 2005 with $800,000 raised through 48 friends and family members. The company did a second financing in September 2006 for $1.6 million because it was running out of cash, but not yet ready for its initial public offering. U3O8 had its IPO in December 2006, raising $30.3 million from 12.1 million shares.

The company has two adjacent properties. Permit A, acquired in November 2005, and the site of 32,000 metres of previous drilling by Denison and Cogema, is similar to the eastern edge of the Athabasca basin that hosted the shallow Uranium City and Beaver Lake uranium deposits. Permit B, acquired in June 2006, is an unconformity geological model covering the shallow eastern perimeter of the Roraima basin, and is comparable to ground along the eastern edge of the Athabasca, where Cameco’s (CCO-T, CCJ-N) Cigar Lake uranium project will begin production in 2010, producing 18 million lbs. uranium annually by 2012.

The focus in 2006 was setting up a base camp and ironing out the logistics for exploration. There’s a 2-km gravel airstrip on the property, which is a 1-hour flight from the capital, Georgetown, but the property can also be reached by river and road, depending on the season. A 10-hour jet boat trip along the Essequibo River from Parika, near Georgetown, is the preferred method for transporting equipment and people to the property as travel by road, along 200 km, takes about 12 hours.

“The road is bumpy, it’s rough, it’s pretty much impassible by the third week of the rainy season,” Ibbitson says.

One of the first things U3O8 installed at the camp was a diesel-powered generator so food, flown in weekly, could be kept fresh.

“It’s a difficult working environment,” Ibbitson says. “It’s important to have those creature comforts to retain people.”

Now there’s a core shack, a mess hall and lodging for the staff. A team of 50 field staff stay at the camp on a four-weeks-on, two-weeks-off rotation, with 25 members on site at a time. A satellite uplink and Voice-over-Internet Protocol phone were installed for easier communication with head office in Georgetown.

U3O8 plans to drill 12,000 metres in 2007. Phase one will consist of 16 holes to depths of 130 to 350 metres for a total of 2,500 metres. The drill team will be twinning many holes drilled by Cogema, which are between 100 and 150 metres deep, to prove assumptions about the project, plan for the next phase of drilling and make the data they have National Instrument 43-101-compliant.

The drilling began in March around the Aricheng area in Permit A. Earlier in the year the company completed a 358 line-km radiometric survey that consisted of east-west 100-metre spaced lines with readings taken every 12.5 metres. The data confirmed the previously identified targets defined by Cogema data and U3O8’s airborne geophysical survey.

The company is focused on three targets about 12 km east of the Roraima basin; Aricheng North, Aricheng South and Aricheng West, which could represent the roots of unconformity-related mineralization. Aricheng North is a northeast-trending shear zone with a strike length of 1,400 metres. Aricheng West is an east-west-trending fracture zone with a strike length of at least 600 metres. The Aricheng South target is associated with a 640-metre-long west-northwest-trending shear/fracture zone. Rock and chip samples collected from these areas graded up to 0.91% U3O8.

U3O8 has taken what Ibbitson terms “a bit of an unusual step” for a junior company drilling for the first time — the company has bought its own drills.

“Since it was such a limited program, we had great difficulty finding drilling contractors that had the availability, so I made the decision last fall to buy drills,” Ibbitson says.

U3O8 bought two used diamond-drill rigs in January — one is just two years old, but the other is 12, and needs to be rebuilt. The company also tracked down drillers who used these exact rigs in the past and hired them. While the drillers won’t be drilling full-time, Ibbitson says there’s enough other work to keep them busy, including rebuilding the older drill.

“It’s one thing buying a drill and another thing having qualified people to operate it,” Ibbitson says.

And while the company will enjoy an economic benefit from owning its own drills — Ibbitson estimates a cost of $80 to $100 per metre compared to $125 for contract drilling — he says money wasn’t the motivation for the decison.

“We did it out of a default position — we couldn’t afford to be delayed in our drilling programs waiting for contractors to become available,” he says. “Now we have the luxury of starting and stopping our drill programs at our leisure to examine our results. . . and not feel compelled to fulfill a contract and drill for the sake of drilling.”

Ibbitson estimates the first phase will be complete in late April. Core will be saw-cut in half at the camp core shack, then sent to a new Acme lab in Georgetown. There, it will be ground into a pulp before being sent to a larger lab in Santiago, Chile, for uranium analysis.