Investors Chasing Uranium Mining Stocks, Again: A Favorite Emerges
March 30, 2018
Fifty years ago, uranium fever hit Wall Street. It was then just a few years after a Navajo shepherd in New Mexico, by the name of Paddy Martinez, discovered ìyellow rocksî on his property, mistaking them at first for gold. An avalanche of 1950s dollars (more valuable than the ones we have today) poured into mutual funds and uranium mining stocks, sending their values to astronomical levels. Get ready for dÈj‡ vu all over again, as Yogi Berra once said. Trend spotter, James Dines, editor of The Dines Letter, believes uranium mining stocks could become just as hot, or hotter, than the Internet stocks of the 1990s. (Editorís note: StockInterview.com interviewed James Dines on July 20, 2004, when he forecast a ìbuying panic in uranium.î Since then, spot uranium (U3 08) prices have nearly doubled. Over the past 35 years, Dines has successfully predicted mega trends in gold, internet, palladium and uranium price movements). And now investors are chasing uranium mining stocks again.
A look at industry leader, Cameco (NYSE: CCJ), which money manager Robert Mitchell called the ìSaudi Arabia of uranium,î shows a three-year gain of more than 700 percent. Over the past few years, Australian-traded Paladin Resources, skyrocketed from under a dime to over $2/share (A$). A recent Forbes magazine cover story, entitled Going Nuclear, analyzed uraniumís recent price surge, ìOne reason the price of uranium should keep escalating is that producers are only starting to ramp up to meet the strong demand. Utilities globally need 180 million pounds of uranium annually, but at this point a mere 108 million pounds are coming out of the ground.î
Why the sudden jump? A Morgan Stanley institutional report, published in December 2004, explained that through the 1990s, uranium oxide prices stayed low because surplus uranium came into the market from weapons decommissioning. That surplus inventory worked its way through the market. The Morgan Stanley analyst forecast a ìdeep supply-side shortageî of uranium, citing that new mining production hasnít yet come online to remedy the deficit. In the year-ago forecast, the uranium deficit was expected to grow to nearly 20 million pounds this year (from a surplus of 6 million pounds in 2003), and then leap to a peak deficit of more than 35 million pounds in 2006. Deficits in excess of 30 million pounds were also anticipated for 2007 and 2008. According to the Morgan Stanley analyst, $50/pound may be possible in the spot price for uranium oxide, known in the trade as ìyellowcake.î
Mining Newsletters Favor Strathmore Minerals
Whatís that mean for uranium stocks? Higher prices should be anticipated as more investors, mutual funds and hedge funds search out the best returns. While the lionís share of investment dollars is likely to chase Camecoís price higher, the robust percentage gains in that stock may have already peaked. Generally, new money searches for well-capitalized junior mining stocks with solid uranium projects in their portfolio. One of those most frequently recommended among mining newsletter writers is Strathmore Minerals Corp, trading on the Toronto Venture Exchange (ticker symbol STM.V). Prominent among Strathmoreís projects are in-situ leach mining operations proposed for Wyoming and New Mexico, plus an aggressive exploration program in the worldís richest uranium areas, Saskatchewanís Athabasca Basin (home to uranium mining giant, Cameco).
In September, letter writer Lawrence Roulston of Resource Opportunities recommended Canadian-based Strathmore Minerals (TSX-V: STM), writing, ìThe company is systematically adding value to the projects most likely to be significant in the near term, especially those with near-term production potential.î Also in September, Resource World contributing editor, Alf Stewart, wrote, ìThe two deposits Strathmore is developing were ëcherry pickedí from the inventory of Kerr McGee, largest private explorer of uranium prior to that industry grinding to a halt in the early 1980s. As these properties are largely drilled off, Strathmore may be considered more of a uranium development company than an explorer.î This past June, money manager Adrian Day recommended uranium stocks in his research report, writing, ìSo I am focusing on four main areas in uranium, with one or two buys in eachÖ top exploration companies that have the goods and are likely to bring properties into production. Strathmore Minerals, with technically strong management, lots of properties, and a strong balance sheet, is arguably the best.î
New Uranium Discovery in the Athabasca Basin?
Hereís one of the stronger reasons why investors might anticipate a strong rally in Strathmoreís share price over the coming twelve months: In a November 16th news release (http://biz.yahoo.com/bw/051116/20051116005591.html?.v=1), Strathmore Minerals announced a discrete conductor, more than 30 miles long, after completing an airborne geophysical survey on the companyís Davy Lake property, in the north central portion of the Athabasca Basin. According to the companyís news release, ìThe conductor’s profile response indicates a deep and in places, broad source.î
Virtually all the significant unconformity uranium deposits known in the Athabasca Basin are directly associated with fault structures associated with graphitic conductors. Deposits such as Key Lake, Cigar Lake and McArthur River were found by drilling electromagnetic conductors located within magnetic lows.
In an interview with Jody Dahrouge, of Edmonton-based Dahrouge Geological Consulting Ltd, he told StockInterview.com, ìEarly indications are that this conductor is similar with other known uranium deposits, graphitic conductors with magnetic lows.î On a scale of one to ten, Dahrouge rated the Davy Lake conductor a ten. ìIt is a long conductor, cut by structures, with deep depth and associated by a late fault,î explained Dahrouge. ìIt is a high quality conductor that continues to depth, and it is typical of those occurring that are associated with known uranium deposits.î Dahrouge described how the MegaTem II airborne geophysical survey was able to pinpoint the conductor as shallow as 600 meters and running deep to 1200 meters. Dahrouge made comparisons to other uranium deposits in the Athabasca Basin. ìThe Sue Deposit near McLean Lake is associated with an electromagnetic conductor that is approximately 2.6 kilometers long,î he said. ìBased on our work at Waterbury Lake, we identified an 8 kilometers long conductor associated with the Midwest Deposit(s). The ‘P2’ conductor at McArthur River is approximately 13 kilometers long. This feature was first identified in 1984, by a ground Deep EM Survey. The Shea Creek deposits, located south of Cluff Lake, are associated with an approximately 25 kilometers long conductor, known as the Saskatoon Lake Conductor.î Dahrouge added, ìThese deposits are located at depths similar to what we expect at Davy Lake.î
What is probably most significant is Strathmoreís gamble, by exploring away from the eastern parts of the Athabasca Basin, some 300 kilometers from the eastern Athabasca Basin, where the major discoveries have been made. ìIt was virtually unexplored,î Dahrouge said with excitement in his voice. ìItís really virgin ground.î While there is ample evidence suggesting multiple uranium deposits in the Athabasca Basin, other junior exploration companies are looking at the shallow parts of the eastern basin, which may not likely yield economic uranium ore. One pundit acidly questioned some of the current exploration activity in the Athabasca region, ìAre they really re-flying old ground thatís already been flown a hundred times, or are they just releasing old data to save money?î Dahrouge pointed out that the uranium appears to be running deeper for many of the newer discoveries, as he believes the Davy Lake property might hold true for Strathmore Minerals in the north central part of the Athabasca Basin.
Important features in many Athabascan uranium deposits are the cross-cutting fault zones. Dahrouge confirmed the Davy Lake conductor has cross-cutting fault zones with a sinistral (left-sided) fault about halfway along its length. According to Dahrouge, there is also a ìconductor extension which crosses the fault from west to east and ëflowsí out into a small, sub-circular magnetic low.î As with many of the Athabascan uranium deposits, which tend to be found between overlying sedimentary units and underlying basement rocks, the Davy Lake conductor fits the bill. Strathmore Mineralís president, David Miller, told StockInterview.com, ìthe 50-plus kilometer geophysical anomaly appears to indicate a basement conductor.î However, Mr. Miller tempered the exhilaration in the air, ìA geophysical anomaly does not make an ore body. These exciting initial results will be followed up with infill geophysical lines, followed by ground geophysics, followed by shallow drilling, looking for alteration. When we have narrowed the target to drill, we will pull in the big rigs and test the conductor at the unconformity.î Dahrouge remains excited about the Davy Lake conductor, and said, ìClearly this represents an excellent exploration target for unconformity type uranium deposits.
What does all that mean? It could explain why Strathmore Minerals might well be on the road to a world-class uranium discovery as further exploration more clearly defines how valuable those newly discovered conductors might become. Meanwhile, Strathmoreís New Mexico and Wyoming properties (amounting to potentially several million pounds of uranium resource) are in the preparatory phase of the permitting process. As the spot uranium price inches forward to the widely accepted short-term target above $40/pound, several of Strathmore Mineralís properties may become instantly more valuable to a utility company who will someday need the companyís uranium oxide to fuel their nuclear reactor.
How Did ISL Uranium Mining Begin?
January 21, 2018
It’s time to rewrite the history books. In Situ Leach Mining (ISL), or Solution Mining, was not first commercially started in Bruni, Texas in 1973 by Westinghouse, a consortium of oil companies and others. The birthplace of ISL was never South Texas, as some have claimed. It was begun in Wyoming, about 16 years before an ISL operation was started in Texas. Why there has been a whitewash over the true history of ISL is not our concern. This series is an in-depth investigation into how and why ISL mining came about, how it has been tested over a period of nearly 50 years, and why this type of uranium mining will play an important role in providing U.S. utilities with the raw fuel to power nuclear reactors for the next few decades.
In this modern era of uranium mining, extremely skilled engineers, hydrologists and geologists establish ISL mining operations. Most insiders compare an ISL operation to a water treatment plant. Itís really that simple to understand. However, as with every modern industrial operation, the roots of ISL mining came about in a less genteel or sophisticated manner. In 1958, Charles Don Snow, a uranium mining and exploration geologist employed by the Utah Construction Company, was investigating a Wyoming property for possible acquisition for his company. During the course of that visit, he discovered a new method of uranium mining and helped pioneer its development into the modern form of ISL.
Since 1957, R.T. Plum, president of Uranyl Research Company, had been experimenting with a leach solution on his property at the Lucky June uranium mine. ìThey mixed up the sulfuric acid solution and just dumped it on the ground, and soaked it through the material and collected it in a little trench at the end,î Charles Snow told StockInterview. It wasnít very scientific. Snow added, ìThey were just learning how, and I observed it and thought that the application could be made through some of the ore that we had in the Lucky Mc mine.î The company was mining uranium this way because it was below the grades miners were used to, when mining. As Snow noted, ìIt was not worth mining.î But it was practically at the surface. He explained what they were doing at the Lucky June, ìThere was an area where uranium leached out to the surface in a small area, and it had a clay under-bed. These people put solutions onto the surface, collected the solution, and ran it by resin beads to absorb the uranium.î
While they only recovered about $3600 worth of uranium, roughly 600 pounds, Snow was impressed. He later wrote an inter-office memorandum in July 1959, with the subject header: ìRecovery of Uranium from Low Grade Mineralization using a leach in place process.î In his conclusion, Snow recommended, ìFrom the preliminary information available, it appears that it will be possible to treat very low grade mineralization for recovery of uranium at a large net profit.î He explained the process to his bosses, encouraging them to consider this as an option:
ìIn brief, the process introduces a leach solution onto the surface of the ground and allows the solution to percolate down through the area to be leached. The solution is then recovered from wells and circulated through an ion exchange circuit with the barren solution being returned to the leach area. Recovery of the uranium is made by stripping from the ion exchange medium.î
He wanted the Utah Construction Company to try this method of mining where there was low grade mineralization. Snow succeeded in convincing his bosses. That began yet another innovation for Utah Construction Company, the same company which helped construct the Hoover Dam, decades earlier, before it got into the uranium mining business.
Utah Construction Becomes the
First Commercial ISL Miner
Newspaper reports, through the 1960s, illustrate that ISL mining was in full bloom more than a decade before anyone in Texas began a commercial ISL operation. On June 18, 1964, the Riverton Ranger newspaper reported, ìThe Shirley Basin mine is on a standby basis. The timbers are being maintained and the water pumped out. Total production comes from solution mining.î Between 1962 and 1969, ISL was the only method producing uranium at Utahís Shirley Basin Wyoming. Later in that same article, under the section entitled, ìGas Hills Solution Mining,î it was reported, ìThe Four Corners area is ëminedí by solution mining techniques similar to those employed at Shirley Basin.î Credit for this new mining method is also reported in that same article, ìLucky Mc introduced the heap leach process of recovering values from low grade ores in 1960.î
Charles Snow explained how his company made the transition from underground mining to solution mining, ìThe underground mining at Shirley Basin was very expensive, and we were having a lot of heavy ground problems.î The sandstone aquifers containing the uranium were uncemented and brittle, supported with timbers. ìIn some places, it was too heavy to hold with timbers,î said Snow. ìWe had to use steel sets underground, and it was even mashing the steel sets. So the expenses were getting very high.î
Water was flowing into the open drifts at prodigious rates. Snow recalled, ìBarney Greenly said, ëLetís try solution mining over here.í They did a test, and it did operate quite well. They got some pretty good results. So the underground mine was shut down, and they went to a solution-mining program to produce the allocated pounds in the Shirley Basin area.î The procedure was tested for a few years before a full-scale commercial production began. This fulfilled 100 percent of Utahís Shirley Basin uranium production allotment from the AEC.
There were problems at first. ìWe started out initially using sulfuric acid, and we had some reaction with carbonates in the formation.î Sulfuric acid plus calcium carbonate produces calcium sulfate, and this plugged up the formation. Calcium sulfate is gypsum, which was insoluble in the leach solution. ìIt tended to plug up the formation and reduce the transmissivity of the fluid from the input hole to the output recovery hole.î
To prevent interference with the porosity of the formation, Snow switched to nitric acid, but admitted, ìWe were reluctant to use nitric acid because it was much more expensive than sulfuric.î But they did, because the nitric acid solution did not form gypsum. Unlike present-day ISL methods used in Texas, Nebraska and Wyoming, Utah Construction did not use a carbonated leaching solution in their solution mining. Nitric solution was used during the 1960s and continued until the Lucky Mc switched over to open pit mining.
It all started as a heap leach experiment. ìWe had quite a bit of low grade in Lucky Mc,î Snow told us, ìso we thought we would try a heap leach experiment.î Results were good on the test, and Utah pioneered ISL mining. Snow wrote in an August 2, 1960 memo, ìThe favorable results of the heap leach project and other research indicate that the process can be successfully applied in many of the low-grade areas to recover much of the mineralization.î Later in his report, Snow calculated reserves from random samples obtained from previous drilling at Lucky Mc, ìThe estimated reserve for the block is 147,000 tons @ 0.0361 percent U3O8, or 106,616 pounds of U3O8.î He estimated the program would cost $111,471. Using a value of $6/pound for U3O8, the anticipated returns were calculated as follows:
50 percent recovery: 53,318 pounds: $208,377
25 percent recovery: 26,654 pounds: $ 48,453
That was just the start. By the end of the decade, Shirley Basinís solution mining operation was producing U3O8 at comparable levels to present day production at any of the major U.S. ISL facilities. In a paper presented by Ian Ritchie and John S. Anderson, entitled ìSolution Mining in the Shirley Basin,î on September 11, 1967, at the American Mining Congress in Denver, Colorado, these Utah International executives explained the success of the Shirley Basin solution mining operation. In a summary explaining the companyís activities, we discovered the Shirley Basin operation not only filled the Atomic Energy Commission (AEC) allocation requirements from 1962 through 1969 but we learned of the sizeable commitments into the future Shirley Basin was to fill:
ìIn 1968 sales of uranium concentrate were made to purchases other than the AEC. One of the first sales was to Sacramento Municipal Utility District with a minimum of 950,000 pounds to a maximum of 1,100,000 pounds of uranium concentrate in 1971. Additional contracts were signed with General Electric Company and with Nordostschwerzerische Kraftwerke A.G. (Baden, Switzerland). The contracts called for delivery of 8,000,000 pounds of concentrate to GE between 1968 and 1975, and 500,000 pounds of concentrate to NOK commencing in July 1969.î
The single reason solution mining stopped, well before the first ìcommercialî ISL operation began in Bruni, Texas in 1973, was because of the improved market forecast for uranium in the 1970s. Utah Construction switched to open pit mining because they needed to produce a lot more uranium. The nuclear renaissance of the 1970s demanded massive quantities of uranium to fuel the rapidly growing nuclear power industry.
Don Snowís initial field tests, begun in the late 1950s, resulted in continuous production achieved by late 1962. Subsequently, production in the underground uranium mine was shut down by May 1962. The underground mine was maintained in a standby condition until 1965, when all underground operations were written off. Millions of pounds were mined by Utah Construction through its ISL operations in Shirley Basin. It wasnít heap leaching.
Sufficient evidence confirms that Wyoming, not Texas, first pioneered commercial ISL mining. Not only were well fields designed as early as 1960, but the entire concept of an ISL ìwater treatmentî plant can trace its roots to Utah Constructionís pioneer work. Everything from injection wells to production wells were pioneered in the early 1960s. We challenged Charles Don Snow that some have claimed it was heap leaching, not ISL mining. Snow shot back, ìNo, we drilled holes in the ground and the material had never been mined. We got our ideas, certainly, from heap leaching, which came from the copper industry.î Snow explained that after the solution mining experiment was successful, ìA recovery plant was designed and put into the hoist house, where they had had the underground mine. That was designed by Robert Carr Porter and Ian Ritchie.î Snow added, ìIn fact, Ian Ritchie and J.S. Anderson have a U.S. Patent on the well completion procedures that we used at Shirley Basin.î
Snow pondered if his friend Jack Bailey may have exported the ISL technology to Texas. ìJack Bailey was the Shirley Basin project manager for the underground mine when we switched over to solution mining,î Snow said. ìHe later went to work for Chevron, and Chevron had operations in Texas. I believe they even experimented with solution mining. Now, whether or not Jack was directly involved, I donít know.î As it is with history, many of the old-timers are gone. We were told Jack Bailey had had a stroke a number of years back, and did not trace this further. There may have been others. ìSome of the people from that area (Shirley Basin) had gone to Texas,î Snow recalled. ìThere is documentation, it was published information, and a lot of people who went to Texas, came from the Wyoming area. So, Iím sure there wasnít a paucity of information being transferred.î Ironically, the Westinghouse-led consortium, which included U.S. Steel and Union Carbide, among others, was called Wyoming Minerals. Now we know exactly why they chose that name.
While there have been a number of ISL operations built and operated in Texas, there may be little future for uranium mining in that state, unless there are new discoveries. By a few, Texas has been inaccurately called the ìhome of ISL mining.î Perhaps that came about because ISL operations continued, during the uranium depression of the past two decades, with small amounts of production occurring in Texas. According to Energy Information Administration figures published in June 2004, uranium reserves in Texas stand at 23 million pounds of U3O8 based upon $50/pound uranium. By comparison, Wyoming and New Mexico reserves, using that same benchmark, reach as high as 363 million and 341 million pounds, respectively.
This may explain the rush by junior exploration companies, such as Strathmore Minerals (TSX: STM; Other OTC: STHJF), Energy Metals Corporation (TSX: EMC), UR-Energy (TSX: URE), Uranerz Energy (OTC BB: URNZ), Kilgore Minerals (TSX: KAU) and others, to Wyoming. The large quantities of pounds are in Wyoming, not Texas. It may also explain why Uranium Resources (OTC BB: URRE) has looked beyond Texas into New Mexico to develop its ISL operation, and Strathmore Minerals has quickly been advancing through its permitting stage on one of its properties in that state. It is fitting that the big past uranium producing states may again become tomorrowís leading U.S. producers. In any event, the entire world of ISL mining owes a debt of gratitude to Charles Don Snow for his pioneering efforts in bringing a heap leach experiment into full fruition as modern-day in-situ mining.