Sunday Morning Post - Who will control the Western Basin?
Athabasca – Who will control the Western Basin?
When one considers a high grade uranium deposit for a take-out target, I believe there is another reason that increases the value of PLS south. There are currently no mines or mills operating on the western side. There is also no large, high grade, and easily mined deposits on the west side either. The only mine on the west side was the former Cluff Lake mine. It was an open pit mine at surface, and about 60 million pounds were mined out. One the east side there are 3 mills, and only one, McClean Lake Mill capable of producing ultra-high grade ores.
There is the Shea Creek deposit (49% UEX 51% Areva) but it is extremely deep, further than 600 metres and extends to over 900 metres in depth. It is also spread out along a 3 km strike length. Someday it will get mined, but it would need some more synergies, to increase the value I think. Cameco also owns about 22% of UEX at last report. There are a lot of current exploration targets around the area. One only has to look at the great Cigar Lake deposit and the technical issues, delays, and change in cost to mine it. That deposit isn’t even close to the depth of Shea Creek. It will however still be profitable, due to extreme high grades.
So just north of PLS you already have two majors that have a stake on west side, Areva having more skin in the game. Areva (87% stated owned) was instrumental in getting recent restrictions lifted for the EU free trade agreement; they have been lobbying for years. Rio Tinto was a surprise purchase of Hathor. Now with rules being lifted on owning a mine 100 percent, they are a player in the basin. Their base metal mines are losing profit quickly as prices head down; they need commodities that are going up. It seems with all the exploration activity around PLS, more deposits will be found at some point. Who will be the winner around the play remains to be seen.
I estimate that it would take a deposit of minimum of 50-60 million pounds at a reasonable depth to justify building a new mill. Once a new mill is built all other deposits close by increase in value. The future major that will own PLS will have a huge, high grade, low depth, and technically de-risked deposit. They now can build a great mill. I think it would smart for them to build a world class mill at good TPD rate, but with a design that can be easily expanded due to market conditions. They then can pick up anymore discoveries around them with high ROI. If you own the mill, you could out bid the competition and still make money. They also can mill other company’s ore with no risk. I don’t see 2 large mills being built on the western side anytime soon. It’s a small club with major uranium players, they are competitors, but do business with each other all the time. If you owned another great deposit, why would you put up huge capital to build another mill when there is one already next door?
The whole uranium sector is consolidating; I wouldn’t be surprised to see Rio take a run at Denison as well in the future. Russian Government controlled ARMZ recently took out Uranium One. Russia has deep ties with the Kazakhstan State owned company Kazatomprom. The US has the most uranium consumption but not enough supply. Energy Fuels just took out Strathmore Minerals and they look to be concentrating on that play. I won’t list them all, and a lot people are aware of this that are invested in FCU/Alpha. If you’re new to the play, just a few internet searches and the data can be found easily. The point is good deposits and companies are disappearing fast. China has more reason than anyone to get more uranium to supply the massive amount of reactors coming on board.
With this, in my opinion, who takes over PLS will have the foot in the door to control the whole Western Basin. My opinion is that $7-$8 per pound in the ground is leaving, If not already left the building. The more they drill, expand the size the deposit, it not only raises pounds in the ground but the multiple.
Any thoughts, responses, different opinions, and constructive comments are good for the board.
Cheers
Presclubs
(Disclosure: I hold a long position in FCU, AMW. I am not a broker, professional analyst, or work for a financial institution. I am a retail investor. I do not receive commissions or compensation for posting. I have a group of friends who also are invested, and post on this site for their benefit and any other investors that find it relevant and create worthy discussion. It’s a hobby… I enjoy it. These are my personal opinions; investors should do their own due diligence on what to invest in)