Uranium may not generate the same excitement as it did 12 months ago, but for mineral exploration minnows like Aura Energy, the prize of finding a substantial uranium deposit still offers plenty of rewards for shareholders.
Let’s not forget that until 2003/2004, the spot price for uranium was hovering around US$10/pound. Today, even with a pullback from the spike in uranium prices in 2007, the price is still up 400% this decade. For uranium explorers therefore, there is still plenty of potential to hit the jackpot.
Interestingly, while the uranium price has pulled back, the world’s lurch back towards nuclear power hasn’t abated. Even in the UK, British Energy, once written off as a lame duck, was nearly sold to the French energy conglomerate, EDF, reportedly for $25 billion. Another French 200lb gorilla, Areva, has also made its presence felt in recent years, aggressively expanding is development of new uranium mines in anticipation of substantial demand for its nuclear power plants from emerging economies like China and India, but also from Western economies who only a few years ago were supposed to be mothballing all of their nuclear plant capacity when the current generation of plants came to the end of the their natural life. Not so any more, with several countries completing an impressive 360 degrees u-turn in the face of soaring gas and oil prices. The anti-nuclear lobby must be stunned.
Sweden is an excellent case in point. Sweden is an established destination for mining companies particularly base metals, but in recent years three companies have made solid progress on developing advanced uranium assets. Bizarrely, Sweden, who already generates more than half of its electricity from uranium, placed a moratorium on new nuclear reactors back in the 1970’s. The socialist party that enacted the initial ban decided that the incident at Three Mile Island in the United States was enough evidence to drop nuclear. But rather than mothballing its current plants, decided that when those plants came to their natural end, they would not be replaced with new ones. This ruling stayed in place until quite recently, when the right wing of the Sweden’s political landscape finally got its act together and formed a coalition. One of the first things they did was force the socialists to accept that Sweden couldn’t drop its nuclear power option. Low and behold, the ban was lifted to allow current nuclear plants to expand. Over those three decades, uranium mining in Sweden died a slow death. This all changed with the change in stance coupled with a rise in uranium prices, and subsequently successful exploration endeavours by Mawson Resources (TSXV: MAW) and Continental Precious Minerals (TSX: CZQ). Aura Energy, who started off life with uranium interests in Australia and West Africa, spotted a chance to grab some now very prospective ground on the same trend as Continental, and to date the results generated have rewarded the initiative.
Technically Aura Energy’s most advanced asset is actually in Western Australia, at Wondinong, where a small JORC compliant resource (2.6 million pounds at a cut-off grade of 150 parts per million U308) has been defined at one of many calcrete projects the company has. Unfortunately, Western Australia still hasn’t lifted a long standing ban on uranium extraction, so for the moment, the project has no chance of moving to production. Aura is also conducting first and second pass drilling at its grassroots projects in the Gunbarrel Basin.
In West Africa, the current ambitions are to build a position in Niger, which is the 5th largest uranium producer in the world already, and a traditional stomping ground of Areva. Three applications have been submitted, covering prospective areas for high grade sandstone deposits. Three exploration licences, covering 3600 square kilometres, have also been granted in Mauritania, where Murchinson United (AIM & ASX: MUU) recently announced a joint venture with Areva. Aura’s projects in Africa are folded into an “African Alliance” with GCM Resources (AIM: GCM), best known for its very large, but undeveloped coal project in Bangladesh. The alliance is straight forward enough – Aura brings the exploration skills to the table, GCM brings a financial contribution and its contacts in London and Africa. Assuming anything potentially economic is discovered, GCM would step in to help secure additional finance.
There are no doubt that Aura’s projects all have the right address for a uranium junior, but Sweden is currently where all the excitement is. Aura has 14 shale-hosted projects in Sweden, and the company’s target is to define 100 million pounds of U308. The Alum Shale uranium province in Sweden may not have the same stature as the Athabasca Basin in Canada or equivalent provinces in Australia, Niger or Namibia, but that could be about to change. Consolidated Precious Minerals recently updated its 43-101 inferred resource estimate at the Viken licence to 437 million pounds of uranium grading 0.017% U308. The inferred resource also contains significant quantities of molybdenum, vanadium (900 million pounds of molybdenum oxide, and 7.14 billion pounds vanadium oxide). A further 40,000 metres of drilling was also approved to upgrade more of the resources to indicated.
For Aura Energy, this is very good news indeed, as Continental Precious Minerals is boosting awareness of the region, and indirectly increasing Aura’s profile. Aura’s licences sit north-west of the Viken licence, and drilling at the Haggan Licence has already confirmed alum shale at an average thickness of 115 metres in the 11 holes completed to date, and assays have confirmed similar grades of mineralisation to Viken. Aura has only scratched the surface in Sweden, the but initial results are encouraging. Undoubtedly, if Aura can continue to expand the footprint of the shale, and continue to build up a database of grades and continuity, then the company would be in strong position to find a larger partner to take the project to the next step.
This is all pillow talk however at the moment. What is more concrete is that Aura Energy has built up a quality portfolio of assets in three uranium districts. Only one has to come good.
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