The Uranium Supply Crunch: Strong Demand Spurs Exploration in the Athabasca
ANALYSIS—ProspectingJournal.com—Recently, we touched on the sizzling Canadian uranium scene after Rio Tinto threw its weight around Saskatchewan’s renowned Athabasca Basin via the takeover of Hathor Exploration [HAT – TSX] and its Roughrider uranium project for $654 million. This takeover has since fed into a continuous stream of good news for uranium investors, as Harper just reached an agreement with China to significantly increase Canadian uranium exports.
The export increase will come from majors such as Cameco [CCO – TSX], whose goal of doubling uranium production to 40 million tonnes by 2018 will put particular focus on Canada’s Athabasca Basin. Yet, because mines are difficult to build and demand is challenging to meet, Cameco CEO Tim Gitzel has predicted the future of uranium mining as one that will see “significant supply challenges.” That is, China has 26 power plants under construction, with dozens more planned for the future. Worldwide,, an estimated 96 new reactors will come online across the world by 2021.
Within the Athabasca Basin, which is the largest uranium producing region in the world, there is now an immense opportunity for investors looking to catch a junior that could be the next “Hathor.” The Athabasca Basin occupies an area of approximately 100,000 square kilometres and accounts for 30% of global primary uranium products; yet, due to projected demand, this figure is expected to increase significantly over the next decade as major operations (below) ramp up production.
Needless to say, those who missed the boat on Hathor should now be looking at junior’s like Unity Energy Corp. [UTY – TSX.V], whose ambitious exploration and development strategy places the Company in an excellent position to take advantage of future demand. Controlling 9 exploration projects, UTY’s activity covers approximately 27,500 hectares in the eastern Athabasca Basin. Of these projects, subsurface uranium has been discovered on the McKenzie Lake and Close Lake deposits.
Like real estate, location is everything. For Unity this equates to its “boardwalk” properties, which are mineral-rich deposits that are strategically positioned close to the Hathor Roughrider Deposit, major claims, and nearby mines. As mentioned in our previous article, Fission Energy’s [FIS – TSX.V] announcement to commence its $7.3 million, 25,000m exploration program at Waterbury Lake—its flagship property—bodes well for Unity, as Unity’s Waterbury Lake Project (WLP) is proximal to Fission’s property, as well as the recently acquired Roughrider Zone.
The Waterbury Lake Project is a great example of a prime exploration location. On top of being next to Hathor and Fission, the WLP is just 9km south of the Midwest Mine, which is controlled by AREVA Resources Canada and Denison Mines Corp. Recent interpretation of Unity’s 2010 VTEM survey identified 3 target zones—the Huskie, Charger, and Bishop—which have returned positive results: 0.16m of 22.17% U308 and 1.0m of 4508PPM U. The WLP is also surrounded by Cameco claims, as well as companies undergoing exploration drilling in what the media has labelled a “hot” zone. As a result, Unity is designing ground programs that could lead to drilling in the near-future.
West from Waterbury Lake, Unity has the Close Lake Project (CLP), Hoppy Lake Project (HLP) and Kirkpatrick Lake Project (KLP), all of which hold promising signs for future exploration. As mentioned, the Close Lake property, which covers an area of 596 hectares and is only 10.6 km northwest of the Cigar Lake mine, has undergone recent drilling. An 8-hole drill program uncovered uranium: analysis of a 20cm split sample at 622m gave a value of 1069 ppm (greater than 0.1%) U over 0.20m.
The HLP, covering 1,924 hectares only 10km from Cigar Lake, shows similar mineralization to the CLP. Meanwhile, the KLP contains an area of 1,271 hectares with targets predicted to be high grade at ~500m. Offering close distance to the Cigar Lake and McArthur Mine, as well as promising results thus far, these projects are ripe for future exploration.
To the east, the Lampin Lake Project (LLP), Milikin Creek Project (MCP), Thorburn Lake Project (TLP), and Mitchell Lake Project (MLP) all offer consider exploration opportunities. The LLP contains a fault controlled target that is only 500m from Cameco’s Q123 grid, which has reported positive drill results. The TLP lies just 1.6km from a 5.17 million lb deposit. The MCP has seen significant past exploration activity, with a Mag/EM survey having detected a northeast trending moderately conductive anomaly, spanning ~4.5km. And the MLP lies right next to significant exploration projects, such as UEX’s Hidden Bay Project, Fission’s Minor Bay Project, and other projects controlled by Denison Mines and JNR Resouces.
In the south, the McKenzie Lake Project (MLP) covers 14,500 hectares and is approximately 43 kilometres from the McArthur River mine. A fall 2010 radon gas and radiometric soil borehole survey revealed three target zones, which suggest the presence of on-surface uranium mineralization that can be tested with a focussed drilling program.
With promising early-exploration results, as well close proximity to uranium mills and major land positions, it’s no wonder that Unity is excited. The Company has less than 22 million shares outstanding and a market cap under $6 million, making it undervalued for the projects it currently holds. The Company is also tightly held by a strong management team and has no warrants outstanding. Its exploration team consists of dedicated industry professionals, including the involvement of local first nations peoples. And, as a bonus, Unity is in the process of spinning out its Dickens Lake gold assets as a new issuer called Patrone Gold Corp.
The demand is coming and the future fundamentals are bright. With a full-blown uranium shortage expected by 2016 (according to Drolet & Associates) and Canada’s recent agreement to increase exports to China, the “big question,” as Cameco’s Tim Gitzel stated, is “where is this production going to come from?” It will have to come from uranium-rich regions like the Athabasca. And within this region, majors will have to dramatically increase their reserves through exploration and development.
This is where Unity comes in. The Company asks, “What if you could go back in time and buy Hathor at $0.25/Share?” Perhaps you can: with Unity’s large portfolio of well-positioned exploration properties, the Company is well on its way to proving up valuable uranium deposits and attracting the majors, which will help Canada meet the future supply crunch.
Disclaimer: The author does not currently hold any shares of any of the companies mentioned in the article. However, some members of the ProspectingJournal.com may or may not have interests in one or more of the companies mentioned at the time of publication. Staff members from the Prospecting Journal reserve the right to acquire interests in any of the companies mentioned after 36 hours have elapsed upon initial publication of this article. Unity Energy is a sponsor of ProspectingJournal.com.