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Thursday, March 01, 2007

Cigar Lake update

Cameco issued a press release today about their progress in dealing with the Cigar Lake mine flood. Anything to prolong the effort is likely to add more force pushing the price of uranium higher. The price of uranium is still at $85 and the good news is that 950K pounds of uranium was sold at this new price in six separate transactions, not just the single 100K pounds at the auction in late Feb. And also that...
Rumors have begun from very reliable sources that the next spot uranium sale, offered by Mestena Uranium LLC, should result in a triple-digit result: US$100/pound.
If you say so. I'm happy with $85. But Mr Market is depressed for some odd reason and uranium stocks are down quite a bit, including Strathmore Minerals.

Getting back to Cigar Lake, 11 of the 14 holes needed for phase 1 have been drilled. A bunch of concrete has been pumped into the mine which will eventually seal off the leak. This will continue in successive layers.
Cameco expects to complete the work necessary to seal off the water inflow in the second quarter of 2007, provided that the current pace of drilling is maintained, and the concrete solidifies as planned to provide reinforcement and prevents or reduces water inflow sufficiently to enable mine dewatering.
They're also applying for permits to drill 4 larger holes to dewater the mine. They already have the equipment.

In "late March 2007" they intend to release a National Instruments* 43-101 compliant technical report which will contain the estimated timelines, changes in the amounts of resource and reserve estimates, cost estimates, the mining method, etc.


This tells me very little. I'm guessing that if something goes wrong and causes a longer-than-expected delay, it will probably happen in later phases. Or else additional delays might be in the technical report. Given that this isn't even the first big flood in the mine, it's quite possible that they dewater the mine only to have it flood again (hopefully again with no one getting hurt).

Uranium Spot Price (courtesy of U3O8.biz)

* [UPDATE: not] the Labview guys.

UPDATE same day:
Strathmore Minerals just posted a new press release. They're starting the permitting process on the Wyoming SKY project which will be an in situ recovery (ISR) operation which is cheaper and more environmentally friendly than conventional mining. They can do this because of the nature of the deposits. 1033 acres. Strathmore just finished an NI 43-101 compliant report on the property. Indicated resource of 948K pounds at 0.07% (which I assume is about 1.4 pounds per ton). There's an additional inferred resource of 54K pounds. Assuming they can mine about 65% of all that, this has a street value of roughly $45 million (59 cents per share) after subtracting an assumed $25 per pound cost of extraction. It's at a reasonable 950 feet deep. Permeability and porosity of the sandstone are good and it's between thick layers of shale, which is good for ISR mining using what is essentially carbonated water.

Also there are some new hires. Two geologists: one is experienced, another is a recent graduate. Also a CPA.

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