UEX Corp (UEX) - Technical Analysis & Due Diligence
UEX Corporation is a Canadian uranium exploration and development company formed in 2002 under an agreement between Cameco Corporation and Pioneer Metals Corporation. The company is listed on the Toronto Stock Exchange (TSX-V: UEX), and the OTC Markets (OTCQX: UEXCF). The company is an active explorer in the Athabasca Basin in northern Saskatchewan, the most important uranium-producing district in the world, accounting for 16% of the global uranium production in 2014.
Merlin Marr-Johnson caught up with Roger Lemaitre, President, CEO, and Director, UEX Corp. along with Chris Hamel, Vice President of Exploration.
Roger is a Professional Engineer and Geologist with over 2 decades of experience with senior and junior mining companies. He previously served as the CEO and Executive Director at URU Metals Limited. Over the course of his career, Roger has held numerous senior management positions including the Director of World Exploration Projects for Cameco Corporation. His educational credentials include a Master of Applied Science degree in Geology from McGill University, a Bachelor of Applied Science degree in Geological Engineering from Queen's University, and an MBA from Athabasca University.
Christopher Hamel joined UEX Corp. in 2016 and has held the position of Chief Geologist between 2017 to 2020. Chris has been in the mineral exploration industry since 2001, working with DeBeers Canada Exploration and Cameco Corp. before joining UEX Corp. As the Chief Geologist and Exploration Manager, he has participated in the planning and execution of successful drill programs at Christie Lake, West Bear, and the Hidden Bay Project along with the discovery at Michael Lake in 2021. His educational credentials include a B.Sc. degree from the University of Saskatchewan. He is a Professional Geologist and a member of the Association of Professional Engineers and Geologists of Saskatchewan.
UEX Corp. has made significant advancements in the discovery and development of new and existing uranium and cobalt deposits in the Athabasca Basin. The company has 4 flagship projects in its portfolio, the Christie Lake Project, the West Bear cobalt-nickel project, the Horseshoe-Raven Deposit, and the Shea Creek property.
UEX Corp. is a uranium explorer and developer focused primarily on the Athabasca Basin. The company has multiple development-ready projects which are being run through partnerships with other companies. It also has a portfolio of projects from the grassroots level, providing investors an opportunity to gain leverage on the uranium pricing as the company has a large resource holding.
The company prioritizes growth through exploration and discovery and has one of the top portfolios for a junior explorer within the uranium space. UEX Corp. is presently focused on its Christie Lake Project and Hidden Bay Project. The company is working towards a partnership with Orano Mining to help carry out operations at Shea Creek, a site that has been inactive for the past 2 years.
The company's Hidden Bay Project is one of the best basement-hosted deposits in the basin. Its Christie Lake Project is a largely unexplored trend of the McArthur river deposit that continues to the UEX Corp property.
The company has allocated a higher budget to the Christie Lake Project. The Hidden Bay Project is a very shallow deposit, featuring holes at a depth of 200m. These holes go into the basement terrain, providing the company additional mileage for tested targets at a much lower capital cost.
The Christie Lake Project features 400m-420m sandstone with a 30m-50m glacial overburden on top. This project offers minimal drilling obstacles when it comes to lake or ice drilling. A large portion of the drill component is expected to be land-based.
The Athabasca Basin
The Athabasca Basin currently has 3 operable mines. The first one is the Cigar Lake mine, a Cameco operation with Orano mining. The McArthur River mine is currently on care and maintenance due to the historically-low uranium pricing. The Lake mine is a 100% owned Cameco project that has been under care and maintenance for the past 4 years. The Basin also features additional opportunities that are under development by junior mining companies. The majority of the mines are present on the eastern side of the basin. Although the basin features one historical operation on the west end called the Cluff Lake operation. This operation ran for 20-25 years starting from the late 90s.
According to UEX Corp, uranium pricing between $50-$60 is sustainable for long-term contracting. The company believes that the pricing needs to be incentivized to bring the projects back into production. It has been positioned in the lowest half of the cost group. Historically, each operation from the Athabasca Basin since the 1960s has been in the low-cost half.
UEX Corp. is focused on the Athabasca basin as it offers a low-cost half, a priority for the company. This is because building a uranium mine is a highly cost and time-intensive process. Additionally, the regulations around uranium operations add to the complexity. It is important for companies to ensure profitability before commencing operations.
The company believes that a profitable uranium mining operation should be priced below the $50 mark. Additionally, developers must be capable of handling the risk of market flow. If the operation does not have a low-cost half, the producer would struggle to gain leverage over the market pricing.
The Athabasca Basin is known for its extremely high uranium grades. In fact, the grades are higher than 1% per 10,000 ppm (parts per million). Due to the geology of the basin, the deposits are formed at the uniformity and have strong alteration due to significant brittle fracturing through the fault zone. This zone poses water-related challenges that can impact the overall grades. This issue has been apparent at both Cigar Lake and McArthur River.
The grades present here are within the 2.5%-4% range depending on the structure. The higher grades pose a risk of radioactive exposure, particularly through radon. To ensure a safer operation, the company needs to carry out remote mining techniques for moving slurries. This significantly increases the per ton cost of operation, however, due to the higher grades, the operation can still be sustained. The company anticipates that the per-pound operating cost for McArthur River, Cigar Lake, and Rabbit Lake would be similar to Cameco's Eagle Point mine.
The Athabasca basin features classic unconformity pods with a lateral strike length between 30m-50m in an economic deposit. The Cigar Lake deposit features a 50m strike length. These regions are traced on the basis of grades.
It is preferred when the unconformity deposits are present above 500m or more. This ensures that the grades are high enough to be economic. UEX Corp. has extensive experience with basement mineralization, especially for McArthur River and Zone 2 at the river, which has been mined for the past 10 years. Since the strike length of these basement deposits is 60m, the company can extract significant pounds from a very small place, making them highly-attractive targets.
The Athabasca Basin features saturated sand along with water, leading to higher mining costs. Meanwhile, a lode gold vein-type basement deposit has less water exposure, making it an economically viable operation, especially if it features a thicker sandstone cover.
Each deposit within the Athabasca Basin begins with a fault. The company anticipates that this trend will be visible at McArthur River, Cigar Lake, and Christie Lake. The Athabasca Basin features graphitic rocks that serve as conductors. An EM (Electromagnetic) survey leads to long regional-type features where the graphitic plane serves as a weakness. Upon the application of regional strain, the rocks break and provide a reduction in basement fluids. These fluids connect to the overlying oxidized sandstone fluids that often feature uranium, leading to the identification of a potential deposit. It is at this point where the deposits start to precipitate.
The graphite presence serves as a highly efficient reductant that enables the efficient extraction of uranium from hydrothermal solutions. This is also the reason behind the presence of higher grades in the Athabasca Basin.
Magnetic and airborne EM surveys offer efficient methods for the inference of local geography and the meta-sedimentary corridor. The Athabasca Basin features a corridor of meta-sediments whose base lies on top of archean domes. These domes feature graphitic pelite units that can be preferentially broken. Additionally, the overlying pelites and the underlying archean domes form a highly-efficient competency contrast that facilitates permeability of the structure as it heads downwards into the basement.
The company has successfully identified the underlying corridors within the deposits through magnetic surveys and drill holes. The basement deposits form below the unconformity. Equipped with an extensive database of drill holes, the company can extract these deposits efficiently without the need for extensive geophysics.
At the Christie Lake project, the company has an in-depth understanding of one of the trends. It plans to carry out additional EM and magnetic survey work to identify additional underlying trends.
The Hidden Bay Project
UEX Corp. anticipates that the Hidden Bay project features basement structures similar to Cameco's Eagle Point mine. The 2014 discovery of the Arrow deposit instilled confidence in explorers that basement deposits have the potential to host significant tonnage. The company believes that Hidden Bay features similar basement deposits as Arrow.
The Hidden Bay project has a well-built infrastructure and is situated between 2 world-class mills in the eastern Athabasca Basin. The average grade for this project is expected between 1-2%. Meanwhile, the Horseshoe-Raven deposit features 0.2% grades at the surface.
In 2022, the company plans to follow up on the holes drilled in the previous year. These drill holes are present on the company's fixing grade that feature a glacial terrain of uranium-bearing boulders. During the 2021 drill program, the company identified hydrothermal alteration and structural characteristics at the Hidden Bay project similar to Horseshoe-Raven. This demonstrates that the area has a significant resource-building potential.
UEX Corp. also seeks to carry out additional work at the Grid, an area within the Hidden Bay located towards the south. This region was previously explored in 2015. The company intends to commence follow-up work along with target generation and evaluation of the old drill core. The area has had first pass drilling done in the 70s and 80s. The company seeks to determine its exploration potential.
In 2020, UEX Corp carried out a first pass series of drill holes at the Vixen deposit, indicating the presence of a hydrothermal alteration. In 2021, the company plans to allocate additional resources towards the evaluation of the target area for uranium and nickel grids. The company has a mineralized hole in close proximity to the Horseshoe-Raven deposit.
The Horseshoe-Raven deposit features mineralized intersections 10m-20m in width along with 0.1-0.2 grades. The defined resources are situated 2 km from this region. UEX Corp. has had the project in its portfolio for the past 5.5 years. The company developed a 5-year plan before initiating drilling. The year 1 plan was to grow the Paul Bay deposit. The company successfully grew the deposit and for the past few years, it has carried out extensive exploration to gain a better understanding of the unconfirmed potential. The company was successful in uncovering a smaller deposit on the unconformity trend. It plans to continue operations on this deposit in 2022.
The company currently seeks to explore the basement-hosted deposits along the trend. Following this, it plans to explore the 2 sub-trends within the corridor that lead up to the McArthur River mine.
Between 2016-2021, the company has acquired significant data pertaining to the geology, structure, and alteration of the deposits. These deposits also include Paul Bay, Ken Pen, and Ororo. The data has provided insight for the company into the structural controls along the trend. This data negates the need for systematic testing while enabling the company to be highly precise with drill targets.
The company's technical team has been working on a plan for the Christie Lake deposit. Upon acquisition of the asset, the team put together a geology map. The technical team continues to refine the map along with the structure and structure controls of the deposits. Every hole drilled seems to have similarities between the deposits and areas with sporadic basement mineralization. This insight enables the company to develop a workflow for 2022.
As per the company, every high-grade deposit within the Athabasca Basin whether unconformity or basement occurs where the main trend is either offset or intersected. The Shea Creek Project is an example of this classic pattern. The company is utilizing the collective datasets to target new resources.
Targets 2021 and Beyond
UEX Corp. plans to work on the Christie Lake project along the Paul and Orora trends during the winter. This is because the deposits are within reach from land even during the winter season. The company has plans for a 100% field budget on the Hidden Bay and Christie Lake projects.
Christie Lake and Hidden Bay projects are the company's priority targets in the Athabasca Basin. As Orano operates the project, UEX Corp. is looking to convince the company to carry out operations at Shea Creek.
Christie Lake and Hidden Bay deposits have an indicated resource of 67-68Mlbs and 28Mlbs inferred resource along with 1.4% indicated grades and 1% inferred grades.
Rigorous analysis of existing information along with the review of the drill core has led to the conclusion that 50% of the pounds observed at Shea Creek are hosted in the Kianna deposit, meanwhile, 90% of the Kianna deposits are located in the basement, below the unconformity. The company's team has identified the same fault structures across 10 high-priority targets.
Additional structures are seen hitting the main trend at the unconformity. These structures are mineralized and the company has tried hitting these targets with vertical drill holes into a sub-vertical body. Although the structure has confirmed mineralization, the company is looking to determine the scale of mineralization to determine its economic viability.
The depth to the unconformity at Shea Creek is 700m. In order to test these targets present under the basement, the company is looking to drill holes up to a depth of 900m. This will enable the company to reach the bottom of the Kianna deposit for testing the cross-cutting structures. Orano, the project's operator, has previously employed directional drilling for several years for accurate target testing. The estimated cost of testing is $10M for 10 high-priority targets.
UEX Corp. currently controls 100% of the Horseshoe-Raven deposit. However, this deposit isn't currently planned for development. The River and Millennium projects are being operated by Orano, this has enabled UEX Corp. to focus on the growth part of its business and generate value for investors through new discoveries. The company intends to carry out a brownfield-type exploration program across all its projects.
UEX Corp. intends to ramp up its exploration pursuits in 2022 compared to the previous year. The company intends to share specific details regarding the same through an upcoming press release.