Canalaska Uranium: Uranium + Diamonds

June 21, 2016

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The Athabasca Basin in Northern Saskatchewan hosts some of the richest uranium deposits in the world.  A fact Peter Dasler, the New Zealand born, CEO of CanAlaska Uranium (V.CVV) was well aware of in 2004 when the company  started exploration in the Athabasca.

“We were aware of new imaging technology which let us look deeper. Anglo American had developed the technology which essentially ran a loop of wire around the whole of a DC-3 aircraft and turned it into a giant metal detector. That technology was further improved and we were able to fly the target area with a Dash 8. We flew our ground right beside the Cameco Mc Arthur River mine and we were able to look 900 metres underground.” said Dasler.

The results of these flights encouraged CanAlaska to stake more ground in the area. A lot of ground. The company’s West McArthur project is very close to Cameco’s prolific McArthur River mine which is the richest uranium mine in the world. The company’s Cree East project encompasses 55,935 ha and is close to the formerly producing Key Lake Mine.

As well as its Saskatchewan properties, CanAlaska has been exploring remnant  outlier sandstone basin sand underlying rocks which extend the geology of the Athabasca basin into northwestern Manitoba.

Having staked the land, CanAlaska explored the land in more detail and, to fund the exploration activity, entered into funding agreements with Mitsubishi for the West McArthur property and a Korean Industry consortium for the Cree East project. All of which was going well when the Fukushima disaster struck in March of 2011.

Fukushima called the entire nuclear industry, worldwide, into question. With Japan and Germany announcing they were rethinking nuclear energy, the price of uranium declined. In 2007 the spot price touched $136 a pound, in January 2011 the spot price was $72 a pound and by June 2014 it was $28 a pound. With the decline in the price of uranium the stock market’s appetite for uranium explorers collapsed. CanAlaska had been trading at around $1.60 prior to Fukushima, by November of 2015 it was trading at less than $.10.

“Pre-Fukushima we had a 30 million dollar market cap, post-Fukushima we were down to 2 million.” said Dasler.

While the price of uranium has not increased, CanAlaska’s share price has rebounded significantly from its November 2015 lows. The company, while it slowed exploration activity in the wake of Fukushima, has continued to explore and to drill its properties in partnership with a number of companies.

This work began to pay off when CanAlaska did an option deal with Denison Mines to explore part of its Moon project to the northeast of the Key Lake mine. Denison drilled the property and in April 2016, on the first hole, hit elevated radioactivity. (press release here)

At its McArthur property, in January 2016, CanAlaska entered into an agreement to buy out Mitsubishi Corporation’s interest in the property. In February of 2016 CanAlaska entered into an earn-in  agreement with Cameco – one of the world’s largest uranium miners – to explore the McArthur West property. The agreement allows Cameco to earn up to a 60% interest in the property upon completion of 12.5 million dollars in exploration expenditures. (press release here). In that release Dasler is quoted as saying, “In the past there has also been co-operation between Cameco and the West McArthur JV with regard to overlapping survey areas. At this stage CanAlaska considers it prudent to utilize the expertise and funding that Cameco can provide, so that we can rapidly advance our opportunity for discovery of a new unconformity uranium deposit. We are very pleased to have been approached by Cameco, and to have concluded this significant agreement which allows multiple targets to be evaluated with minimum equity dilution to our shareholders while retaining a meaningful interest in West McArthur.”

In April 2016 Cameco and CanAlaska entered into another agreement which sold Cameco one of three properties CanAlaska holds in the eastern Athabasca. Here CanAlaska retains a royalty from the property as well as two prospective properties nearby. Dasler commented in the press release, “We are very pleased to have completed another deal on one of our non-core, but strategic properties in the eastern Athabasca. The commitment to drill the target gives CanAlaska shareholders a further opportunity to benefit from discovery, as we will retain a very valuable unhindered royalty on the project.”

These transactions, affirming CanAlaska’s role as a uranium incubator in the Athabasca region, caused the market to reassess CanAlaska’s prospects. Its shares went from $.10 at the beginning of 2016 to trade around $.70 in recent weeks.

CanAlaska got another boost when the Government of Saskatchewan flew an aerial survey near their claims. This high resolution survey showed “irregular features” and magnetic “blips”. These blips are 100 to 500 metres in size and, given the geology, there is a good chance that these are kimberlite pipes. There have been diamonds found in Saskatchewan and nearby in Alberta, and the intriguing question was whether or not these anomalies might be the “up-ice” source of those diamonds.

“We wanted to find a diamond explorer with cash to explore these features.” said Dasler. “CanAlaska needed to focus on our uranium properties and we couldn’t afford to use our cash to look for diamonds.”

On May 18, 2016 CanAlaska announced a $20.4 million dollar Option/Participation agreement with DeBeers Canada to explore the kimberlite-style targets staked by CanAlaska in the Northwestern Athabasca basin, Saskatchewan. By teaming up with DeBeers, CanAlaska ensures that its potential diamond deposits will be explored by a world recognized diamond explorer and miner.

Having 1,500,000 acres in the Athabasca Basin, often described as the Saudi Arabia of uranium, is a huge asset. CanAlaska, having weathered the post Fukushima depression in uranium prices and investment, is poised to see significant returns on that asset. At least the market seems to see that possibility.

At time of writing CanAlaska was trading at approximately $0.75 with 23 million shares outstanding and a market cap of $17 million.

Category: General