Baselode Energy (FIND) - High-Grade Uranium; Unconventional Thinking

The high-grade uranium deposits of the Athabasca Basin are seen as the holy grail for uranium investors. Have they been wrong all along? Can they get permitted? Is the permitting process putting off institutions from providing CAPEX? Do the structural faults and water table / basin mean they can get permitted to be mined?

We ask these questions to James Sykes, CEO of Baselode Energy (TSX-V: FIND). He is a young and energetic geologist, and he has 12-years of Athabasca Basin uranium exploration and discovery experience as a structural engineer and discovered the Arrow deposit for NexGen Energy. He clearly knows a thing or two about that Athabasca Basin. Why then has he opted for a uranium project just outside of the Athabasca Basin, in what he is calling Athabasca 2.0? He has doubts about whether projects in the Athabasca Basin can actually be mined. This is a view that will likely see him ridiculed by many uranium investors and companies, so is there any evidence behind this concept?

Matthew Gordon talks to James Sykes, August 2020

Baselode Energy is the first of a new wave of uranium explorers that are trying to position themselves favourably to leverage rising uranium prices ahead of the emerging bull market (assuming you believe the uranium macro story). The company has two uranium projects: The Shadow Project and the Hook Project. Both are very early stage, but both exhibit promise says Sykes.

The Shadow Project

The Shadow Project is 100%-owned with no underlying royalties.  The property encompasses ~42,000ha along the Virgin River Shear Zone adjacent to the Athabasca Basin.

The company asserts that Shadow exhibits all of the similar structural and geophysical features synonymous with the “Best-of-the-Best class” of Athabasca high-grade uranium deposits, such as the McArthur River and Arrow. It also claims there is a degree of 'natural uranium enrichment in (the) basement rocks.'

A >10 km-long airborne radiometric anomaly has been identified at the property, and the plan moving forward to to focus on historical data and get a team on the ground in the next few months to explore the radiometric anomalies and learn the geology of the area.

The Hook Project

The Hook Project is 100%-owned with no underlying royalties or option agreements. The land package covers ~30,000 hectares, and it is situated c. 60km northeast of the Key Lake mill and 75km southeast of McArthur River. Hook is right on the edge of the Athabasca Basin. It is clearly the secondary priority for Baselode Energy, and very little work has been done on it at this point.

Athabasca 2.0

So, why does Sykes have this conventional methodology? What is the rationale behind it? Baselode Energy claims that Athabasca 2.0 has numerous advantages over the Athabasca Basin that make it a more attractive prospect for institutional investors and potential strategic partners.

Strictly speaking, Athabasca 2.0 is meant to refer to the kinds of deposits that Baselode Energy has acquired.  Shadow and Hook are both basement-hosted uranium deposits, which are different from their Athabasca-based peers with 'conventional unconformity-type deposits in the basin.' So, what does this all mean if we unpack it?

Alleged Advantages of Basement-Hosted Deposits over Athabasca Basin Deposits

• Simpler geology
• More 'competent' rock
• Easy mineability
• Examples: Arrow, Rabbit Lake, Eagle Point

It is interesting to note that Arrow is also a basement-hosted deposit, so did Sykes learn this secret there?

Alleged Main Issues Associated with Unconformity-Type Deposits

• Complex geology
• Incompetent rock
• Mining engineering challenges
• Deeper mines require freezing
• High CAPEX
• Examples:   McArthur River, Cigar Lake

For those that aren't geological experts (like me), in geology, competence refers to the degree of resistance of rocks to deformation or flow. In mining, 'competent rocks' are those in which an unsupported opening can be made.

There is clearly a rationale behind this thesis, and we have been keen to get some Athabasca-based uranium companies on the show to get their take on things; none have been forthcoming yet, but we hope this changes in the near future because we'd love to get a well-rounded understanding of this issue. Do you think these are genuine and meaningful observations, or is this just another uranium CEO talking his playbook and aggressively marketing?

The Athabasca Basin has always been the king of uranium deposits, and even Baselode Energy acknowledges this. It is fully aware that the high-grade deposits in the Athabasca are much lower-cost operations compared to alternative jurisdictions, and it is also aware that the average grade is ~3.95% U3O8, while the rest of the world averages ~0.15%. However, it believes Athabasca 2.0 is even better.

Investors should also remember the extremely protracted permitting timelines for Athabasca-based projects. However, Sykes claims he isn't worried about permitting, which is one hell of a statement to make in Canada! He thinks the reason for these timetables is because these projects are being discovered at-depth underneath sandstone or they are close to big lakes with drainage systems that concern First Nations decision making. Will Baselode Energy's "uniquely-situated" shallow deposits have better luck?

Sykes has been determined from day 1 to seek out uranium deposits that have a real possibility of becoming a mine, and he sees to think he has cracked it. Will the government take a look at Baselode Energy and see it as a project to throw support behind? Sykes makes a really bold claim: "any company that is exploring within this sandstone itself, if you are deeper than 100m sandstone cover, it is going to be challenging for anyone to move those into a mine." I can't what to hear what some of the other uranium juniors have to say about this!

Baselode Energy currently has around C$500,000-$700,000 in the treasury which should be "sufficient" to get the company's exploration programme started. An airborne survey at Shadow is up first. However, it is obviously going to need to raise capital soon. In September, the company will look to raise C$1.5-2M, maybe even more, but it is keeping it quite tight. The corporate structure is also quite tight.

Sykes has invested around C$50,000 of his own money into the company, which isn't particularly significant. He also states that "we'll see" when we ask if he will buy shares on the open market once the ball is rolling. That's not encouraging, though Sykes reputation may redeem him somewhat.

What did you make of James Sykes and Baselode Energy? Is the Athabasca Basin 2.0 an area you will be investing in?

Company Website: https://baselode.com/