Western Uranium counts down lithium spinoff

VANCOUVER —Western Uranium (WUC-V, WURNF-O) anticipates the spin-out of lithium assets at its Kings Valley project in northwestern Nevada will be complete by this June.

The deal will see the creation of a new public company, Western Lithium, in which Western Uranium will retain roughly a 30% interest. Shareholders of record (to be set around mid-June) will also receive shares in Western Lithium proportionate to their holdings in Western Uranium.

The company has undertaken programs of confirmation and in-fill drilling on the lithium zones en route to producing a National Instrument 43-101 compliant resource estimate. About 6,000 metres of drilling (in 26 core holes and eight reverse-circulation holes) has been completed on the PCD lens –one of five pods of lithium mineralization identified on the project area.

In the early 1980s Chevron drilled out a large lithium resource with more than 40 billion contained pounds of lithium carbonate (non- National Instrument 43-101 compliant) estimated in the project area.

Lithium mineralization is primarily hosted in hectorite, a clay horizon, which is essentially a bentonite where lithium replaces magnesium in the chemical structure. Lithium grades within the hectorite at the PCD lens are reported to average about 0.28%.

Lithium carbonate has seen a recent rally in price — rising from about US$2.37 to US$3.66 per lb. during 2007 — driven by growing demand in the hybrid car battery sector. A 25% boost in demand is forecast from the 80,000 tons per year in 2005 to the estimated 100,000 tons for 2008.

Lithium-rich clays are also used in ceramics, paint products, desiccants- absorbents, and drilling fluid applications requiring high temperature thermal stability.

Western Uranium has projected its PCD lens alone could supply 10,000 tons of lithium carbonate annually for several decades. It plans a preliminary scoping study for the project and also says it is in discussions with a company that has developed a lithium-ion battery for use in hybrid electric cars.

Meanwhile the company is also getting geared up for a helicopter-supported drill program at its uranium projects at Kings Valley. Permits are in hand for drilling the Bull Basin and Old Man Springs uranium geochemical anomalies — expected to begin in May and consisting of at least 25 core holes on each of the two areas.

Earlier this year the company tabled its initial resource estimate for the North, South and Moonlight zones on the western flank of the McDermitt caldera at Kings Valley. The study reviewed 2.7 million inferred tonnes grading 0.081% U3O8 (for roughly 4.8 million contained pounds U3O8) in the three zones using a 0.05% U3O8 cutoff grade in the South and Moonlight zones and a 0.035% U3O8 cutoff in the North zone.

Kings Valley was first explored by Chevron Minerals and Anaconda in the late 1970s — identifying uranium mineralization associated with structural breccias, along lithologic contacts and as disseminated grains in late stage felsic dykes.

Last summer Western Uranium also formalized a strategic alliance agreement with Cameco (CCO-T, CCJ-N) that saw the uranium major invest $21.2 million the company.

Cameco bought almost 5.6 million Western Uranium units (each comprised of a share and half-warrant) at $3.80 apiece with the warrants exercisable at $4.25 for one year. The deal gave Cameco roughly a 10% interest in Western Uranium and rights to acquire a 70% joint venture interest in each economically viable standalone deposit developed within any of the junior’s current project portfolio (Nevada, New Mexico, Nunavut and the Northwest Territories) once 15 million contained pounds U3O8 are defined (classified as indicated resource or higher).

On either of Western Uranium’s Kings Valley project in Nevada or its Treeline property in New Mexico, the 15 million lbs. U3O8 must be in addition to current historical resources.

To initiate a joint venture, Cameco will pay a minimum of US$5 for each pound U3O8 of its 70% share of any resource or reserve outlined in a mine plan. Payments are also subject to additional premiums based on fluctuations in the uranium spot price.

Cameco is obligated to carry Western Uranium through to feasibility at any such joint venture profit.

Shares of Western Uranium have recently traded around $1.60, giving the company a $95-million market capitalization based on its 59.2- million shares outstanding. The stock has a 52-week trading range of $1.54-$4.15.