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 Mon Jul 25, 2016
Bottom-Fish Comment: Canalaska's West McArthur ready for second Cameco drill hole
    Publisher: Kaiser Research Online
    Author: Copyright 2016 John A. Kaiser

 
Canalaska Uranium Ltd (CVV-V: $0.93)
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Bottom-Fish Comment - July 25, 2016: Canalaska's West McArthur ready for second Cameco drill hole

Canalaska Uranium Ltd suffered a delay during July when Cameco was unable, due to ground conditions, to move the drill rig to the next target location on the West McArthur project it optioned 60% earlier this year. The first hole completed in June did not intersect anything qualifying as a discovery but did provide further contextual support for the presence of a major deposit associated with the same conductor as the nearby Fox Lake deposit. Cameco moved the rig to a target elsewhere, possibly the adjacent Fox Lake project for which it earmarked $7 million exploration in 2016. According to Canalaska CEO Peter Dasler the rig is now back on West McArthur with drilling set to resume shortly. The followup drilling delay collided with the arrival of the summer doldrums to sap Canalaska's market momentum, though in my view the strength during the past couple months has more to do with the Athabasca Basin kimberlite project optioned 70% to De Beers. As far as I can tell Cameco is not working with the sort of geochemistry supported geophysical targets that Uravan has developed at its Outer Ring project. In my view the market is treating the West McArthur uranium play as a free lunch on the diamond play which I believe attracted the investors who put up $1.1 million through a private placement of $0.56 units in June brokered in part by Leede Jones Gable.

Dasler was able to round up footage from early 1992 when Seattle's KOMO TV covered Canada's First Diamond Rush. It seems that the video compilation which captures both the excitement and skepticism of that period has resonated with investors who see a repeat of the past in the making. The Athabasca diamond play is not yet at the stage of the KOMO TV coverage in 1992 because we do not have confirmation that the targets are kimberlites, let alone diamondiferous, and even farther removed from evidence of economic potential. When you watch the old-timers in the Yellowknife cafe muttering about how they will believe it when they see the diamond production, one has to keep in mind that BHP had already delivered a bulk sample for the Point Lake pipe, though one also has to remember that the Point Lake pipe was eventually discarded as a dud in favor of better pipes such as Panda. Canalaska makes an interesting comparison with Dia Met in that Dia Met also had a 29% net interest with a major as a partner. The chart below, taken from my PDAC 2009 Diamond Session Technical Talk, shows how steeply the stock prices climbed once the market became convinced that the "discovery" was real.

Although we are not yet at a stage where TV camera crews can be expected at Athabasca Basin, the speed with which De Beers has collected kimberlite samples (June 22, 2016) is stunning. De Beers is not telling Dasler any details, other than the fact that samples have been shipped to South Africa. I suspect that the samples have already been screened for heavy minerals and shipped for picking of kimberlite indicator minerals and ultimately micro-probing for diamond bearing potential. That suggests that visual examination has already confirmed the presence of kimberlites. These samples were collected before De Beers started an airborne geophysical survey now underway on much tighter spacing than the 400 m government grid. Over 75 circular magnetic high anomalies ranging up to 500 m in diameter have been isolated on the Canalaska ground alone using the 400 m grid data. There has been some muttering that magnetic high anomalies tend not to be diamondiferous kimberlites, but in the weakly magnetic sandstone setting of the Athabasca Basin, especially in this area where the magnetically more complex basement rocks are more than 2,000 m deep, almost any intrusion will show up as a magnetic high.

Canalaska's diamond play will likely rest during August as the market awaits news from De Beers that it will mount a late summer early fall drill program on targets not compromised by swamp or water, something De Beers almost has to do in order to meet its January 31 $1 million spending deadline. My suggestion is that bottom-fishers turn their attention now to the West McArthur drill program and watch for evidence of a high grade uranium discovery (see the May 17, 2016 OV which imagines the market impact if Cameco scores a McArthur River lookalike). Incidentally, the IPV Chart for the diamond play would be almost identical to that for the uranium play because the only difference is Canalaska nets 30% for the diamond play and 40% for the uranium play. Both plays are seeking major discoveries that in light of only 30 million fully diluted Canalaska shares could generate eye-popping Dia Met style price gains.

 
 

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