Canalaska Uranium Ltd released radiometric assays on March 27, 2024 for two additional holes at its Pike discovery on the West McArthur property on the eastern flank of Saskatchewan's Athabasca Basin. The market had a lukewarm reaction to the news because the followup holes to WMA082-04 released on February 28 only stepped 20 metres across the graphitic pelite structure. The importance of hole #4 was that it intersected high grade mineralization at the unconformity between the overlying sandstone and the basement granite within the northeast oriented structural zone which is filled with graphitic pelite. The initial news did not include a section with the #4 hole but the latest news does and it is the combination of the plan and section presentation of the drilling so far which is the real importance of this update. This tells us that Canalaska is starting to understand the geometry of the Pike zone,
Hole #5 was a 20 m stepout to the north across the strike of the graphitic pelite filled structural corridor which yielded 4.5 m of 1.4% eU3O8 which included 2.0 m of 2.78%. As the section shows this hole intersected uranium only in sandstone before hitting basement, which is due to a local fault that downdropped the sandstone northwest of the main structural corridor. I suspect the mood was rather glum when they finished hole #5 - where is that graphitic pelite corridor? These are the sort of local geometry complexities encountered when delineating unconformity style deposits.
With hole #6 they tried only a 10 m stepout and this time did intersect high grade uranium of 11.5 m at 10.84% eU3O8 including 9.5 m as 12.99%. So they know the mineralized portion of the corridor is at least 20 m wide. What we do not yet have are stepouts along the strike of the structural corridor. We also do not have new information about how the uranium mineralization behaves deeper within the pelite zone, though the earlier #2 hole intersected the graphitic pelite at about 40 m beneath the unconformity and nipped 6.3 m of 1.03% U3O8. This hole intersected the pelite zone about 30 metres along strike to the northeast.
I have created an outcome visualization for a McArthur River clone discovery which imagines what 1,062,000 tonnes of 16.46% U3O8 might be worth at the scale McArthur was developed (200 tpd). Yes these high grade unconformity deposits are small; Pod 2 at 17.3% has a rock value of $33,563 per tonne at $88/lb U3O8. At $88/lb U3O8 price that outcome indicates an after-tax IRR of 52.1% and NPV of CAD $7.9 billion at an 8% discount rate. Based on Canalaska's 212 million fully diluted and 83.3% net interest that converts into an NPV per share price target of $30.84 per share. For that sort of future outcome the $0.61 stock price represents good speculative value, which means that S-curve action has not yet kicked in with the Pike zone.
To get a sense of how close we are to a tipping point for S-curve action I tracked down a paper Mining the high grade McArthur River uranium deposit written by B.W. Jamieson for Cameco. This paper has reserve estimates for Pods 1 and 2, of which Pod 2 is the larger at 577,000 tonnes of 17.3% U3O8. The paper describes Pod 2 as having a strike length of 100 m, height varying 30-90 m and width typically 20 m. The specific gravity of U3O8 is 8.3 but the ore will be lower. If we assume dimensions of 100 m x 20 m x 60 m = 120,000 cu m, and divide the 577,000 t Pod 2 by that number we get a specific gravity of 4.8. Pod 2 was delineated from underground (500-600 m depth). The paper includes a geology diagram showing the complexity of Pod 2.
To create some tonnage context for the Pike there is about 25 m along strike on both sides of this line of 3 holes across the corridor before earlier holes potentially limit the zone. This allows us to assume a scenario of 50 m of potential strike by 20 m width and say 50 m depth as a delineation target. Using 4.8 as a specific gravity that translates into a "pod" of 240,000 tonnes. If you use the McArthur grade of 16.46% U3O8 that translates into about 87 million lbs of U3O8, less than a quarter of McArthur's 380 million lb endowment. So we are not yet at McArthur tonnage scale, and, of course, the average grade remains to be determined.
It is important to keep in mind the intensity of the mineralization and alteration halo of the Pike Zone which is what allows us to dream about a McArthur clone outcome. While a drill is testing other targets at West McArthur until late April, Canalaska has stopped drilling the Pike zone while it awaits geochemical assays to confirm the eU3O8 readings. Canalaska plans to resume delineation drilling of the Pike zone in June. I've added green circles to the plan and section to illustrate the delineation focus for this summer. I've also added blue ovals to the plan view to show what Cory Belyk means when he talks about a "string of pearls" occurring at the unconformity within the graphitic pelite structural corridor. Maybe the roving drill still at West McArthur will hit another pearl, which would be an S-curve tipping point because it would eliminate concerns that the Pike zone is just "this little thing" at 815 m depth. |
