Western Lands Uranium Gopher for April 12, 2008

Mining uranium exploration press releases and news media reports for useful stuff (An occasional column)

The rise of nuclear energy, a second act if ever there was one, has given the price of uranium a shot in the arm. In western states in the U.S. interest in uranium mining is growing and with it comes another growth industry - the production of press releases about the uranium mining industry. In an effort to separate the really interesting from the merely informational, I'm posting my running notes on uranium mining in western states, albeit with a delay of a week or two.

The choices of the subjects are a combination of what I find in the press release pile and what looks interesting to me and for readers. I'm focusing mostly on western states that are "west" of the 100th meridian, but this isn't hard and fast. The states of interest are WY, CO, UT, TX, NM, AZ, & NV. For this reason I'm calling this series, which will appear occasionally, the "western lands uranium gopher." These are news notes and the content are not to be considered investment advice.

Colorado advances one uranium bill
Kills the other

A bill to strengthen state oversight of uranium mining passed the Colorado House and is headed for the Senate. A companion bill that would have released proprietary mining information to the public died in a house committee. House bill 1161 introduced by Ft. Collins Democratic Rep. Randy Fisher and John Kefalas passed on a voice vote on the House floor on April 1. Colorado Governor Bill Ritter said in a newspaper interview he supports the measure.

Kefalas said the bill was drafted to protect local communities. He said on the House floor, “This bill ensures uranium mining doesn’t leave behind a toxic legacy.”

If passed by the Senate and signed by the governor, it would require mining companies to show that they can restore groundwater to pre-mining conditions or to statewide standards for radioactive materials in water. The legislation is a political reaction to Powertech Uranium’s Centennial project located north of Nunn, Co, and 15 miles northeast of Ft. Collins. It has also become a poster child for the collision between expanding residential development and mining districts. A similar battle is shaping up in Canon City south of Colorado Springs. [See related story]

Rep. Don Marostica (R-Loveland) said he opposed the bill because it was based on fear and not facts. In debate on the House floor he said, “All this fear that we’ve been hearing about this in-situ mining . . . it is a 270 acre parcel of ground . . . which has a sandstone formation in which [groundwater] moves four-to-seven inches a year.”

Other northern Colorado representatives said the legislation was pushed through the House too fast. Rep. Kevin Lundberg (R-Berthoud) and Rep. Jerry Sonnenberg (R-Sterling) argued against the bill. Sonnenberg said on the House floor, “Let’s put the brakes on it.” He asked for a year long delay.

A second bill, HR 1165, that would have required uranium mining companies to notify the public about prospecting activities. Opponents said the bill went too far in forcing the release of proprietary information. Rep. Frank McNulty (R-Highlands Ranch) opposed the bill. He said that while the public has a right to know about mining activities through the permitting process, the way the bill was written would have forced miners to publish proprietary information about the value of their mineral deposits. The House agriculture and natural resources committee agreed and killed the proposed legislation by a 7-6 vote.

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Gentrified subdivisions in Colorado collide with uranium mines

Black Range Minerals (BRM), an Australian company from West Perth, seeking to develop a Colorado uranium mining claim, has run into opposition to its plans from Canon City, Colorado, homeowners. The firm has requested a conditional use permit for uranium exploration drilling in the Tallahassee district of Fremont County, Colorado.

Earlier this winter the firm began exploratory drilling and says initial results show potential for mining 500,000 tons of uranium ore annually over the next decade. Assuming a yield of four pounds/ton of ore, the potential resource is 125,000 pounds U3O8 annually or 1.25 million pounds over the next decade. At a price of $75/pound the potential value is about $94 million.

A homeowners’ association has asked the Fremont County Commissioners to deny the conditional use permit for the mine. Jim Hawkleee, the group’s leader, said that expanding residential subdivisions have placed 44 homes within 500 yards of the historic mining district. What has happened is that the rapid rise in the price of uranium has brought harsh lessons to unwary homeowners about laws governing mineral rights in Colorado.

Mike Hayes, BRM’s managing director, told a public meeting that the firm will “implement best practices” in its exploration efforts. BRM is drilling on 3,900 acres of leased public and private properties. So far 70 holes have been drilled to between 800-and-1,400 feet.

The firm received a go ahead from the relevant state agencies in Colorado, but failed to get approval of the conditional use permit from the county. The county shut down drilling and has scheduled a hearing for one on May 13. On April 3 the county planning commission voted 4-3 to recommend against the permit.

Hayes said his firm will continue to evaluate the economic potential of the area but it is not considering an ISR mine. “We will most certainly consider an underground mine,” Hayes told the Canon City Daily Record in March.

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Vane stopped for now in Arizona

A federal judge in Phoenix, Ariz., has blocked Vane Minerals, a U.K. mining company, from exploring for uranium near the Grand Canyon. Environmental groups sued the U.S. Forest Service for approving a plan to drill at 39 sites in the Kaibab National Forest. The Sierra Club and other groups claimed the Forest Service should have required a complete environmental impact statement for the exploratory drilling program.

U.S. District Judge Mary Murguia issued the temporary restraining order and preliminary injunction. She rejected the claim by the company and the agency that approval of the drilling could be based on a “categorical exclusion” since only exploratory work was being done.

A spokesman for the Sierra Club told the Associated Press that the judge acted because, “uranium mining near the Grand Canyon is not routine,” is controversial, and that the agency “mis-used” the categorical exclusion. A Forest Service spokesman declined to comment. When the Forest Service approved the exploratory drilling, it said it did so under the authority of the 1872 Mining Act.

U.S. Rep. Raul Grijalva (D-AZ) held a field hearing in Flagstaff on March 28 to get public comment on his proposed legislation to ban mineral exploration around the Grand Canyon. The Superintendent of the Grand Canyon National Park testified that “dire consequences” would occur if uranium mining is allowed to occur in the area. There are over 1,600 mining claims in the area where Vane planned to conduct exploratory drilling.

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First new uranium lease in North Dakota

Prospect Uranium has leased more than 1,000 acres of land near Amidon, North Dakota, and it is the first such lease in the state in the last three decades according to State Geologist Ed Murphy. The company has inked a deal for three, 10-year leases on 1,026 acres of private lands in Slope County, North Dakota for the Conners Uranium Project. Prospect Uranium CEO Jeff Janda said the company selected the sites after studying test holes drilling in the region more than 40 years ago. Prospect says it has records from 242 drill holes. Nine mines in the region produced 592,000 pounds of U3O8 between 1962 and 1967. The leases provide for payment of annual fees and royalties up to 5% of the net proceeds.

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New uranium rules in South Dakota

The South Dakota Water Management Board approved new rules for injection wells for uranium mining in the Black Hills region of the state. Powertech is exploring uranium deposits at several locations in the region and has drilled monitoring holes to determine radon levels and uranium concentrations in underground formations. Mike Cerpak, an mining engineer with the State of South Dakota, said two other firms were also exploring potential ISR mines in the area. Under the new rules uranium mines will be required to get a well permit before opening mining operations. The Board must now get funding from the South Dakota legislature to carry out its permitting process.

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Cameco gets attention from Wyoming regulators

The Wyoming Department of Environmental Quality issued a notice of violation against Power Resources which operates the Smith-Highland Ranch ISR uranium mine. The notice lists problems with groundwater contamination, multiple surface spills of chemicals, and an inadequate bond for restoration. Power Resources is a subsidiary of Cameco Corp. In 2006 the mine produced 2 million pounds of U3O8, and is expected to continue to produce at this level for the next few years.

Cameco Corp. spokesman Gord Struthers told the Tribune the report “is not a good reflection of our environmental performance.” He said the company will update its plans for groundwater protection and increase the funds set aside for site restoration.

The notice of violation comes at a time when the State agency is questioning the effectiveness of its oversight. The investigation into the conditions that prompted the notice of violation took more than a year according to John Corra, DEQ’s Director. He refuted criticism from the Powder River Resource Council that the department isn’t up to the job of regulating the uranium mining industry. Shannon Anderson, a staffer at Council, wrote a letter to Corra complaining that DEQ did not have the capacity to review performance on permits by mining companies.

“DEQ staff are not asleep at the switch,” Corra said, but he admitted to the Casper Tribune, “Had we exercised the proper level of oversight, things wouldn’t have gotten this far.”

DEQ’s original manager charged with overseeing the mine, Rick Chancellor, has since left the division for another assignment in state government. Don McKenzie, the new administrator, said as far as the violations are concerned, “I have no intention of allowing them to continue.” He called the current bonding level “grossly inadequate.” However, he is also allowing the mine to continue normal operations while it responds to the agency.

John Corra said that regardless of “what staff did or did not do, it does not relieve the permit holder from their responsibilities.”

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More trouble in Texas with the Goliad field

Uranium Energy Corp. (UEC) is running into opposition to its planned ISR mine in Goliad, Tex., according to a report in the Austin-American Statesman. The newspaper also reports that company executives have paid themselves lavishly while the firm is still years away from producing revenue.

Goliad County Commissioners sued the company in U.S. Federal Court alleging the firm violated the Safe Water Drinking Act by failing to fill in exploratory drill holes allowing storm water to pollute groundwater supplies. The firm said in a statement the allegations are “baseless.” It said that an investigation by the Texas Railroad Commission, which regulates ISR mines, concluded that no contamination had occurred as a result of the drilling activities. The county’s lawsuit says new drill holes have been found.

According to Amid Adnani, CEO of UEC, age 30, the potential yield of the mine could be up to 1.5 million pounds U3O8 annually over the next four years which at $75/pound would be worth $113 million/year. The “inferred” reserves of 5.5 million pounds are not “proven” under SEC rules.

According to the Austin newspaper, Adnani has little experience with uranium mining was previously employed in public relations in Vancouver, B.C. His father-in-law Alan Lindsay, age 57, took control of a shell company in Nevada called Carlin Gold and transformed it into a uranium exploration firm which is now listed on the American Stock Exchange. According to SEC filings Adnani was paid $212,000 in 2006. Lindsay’s compensation was almost entirely in the form of stock.

According to the Austin-American’s review of the SEC filings, in 2006 UEC spent $7.3 million on compensation for directors and consultants and $6.3 million on land acquisition. The company lost $43 million over the last two years. It has yet to make a profit. In December 2007 it raised $6 million selling stock at $3.75/share. At market close on April 4th it’s stock sat at $2.59/share a nearly one-third loss in value from the offered price.

The firm also has uranium holdings in Arizona and New Mexico. In June of this year the British Columbia Securities Commission (BCSC) conducted a review of the company's technical information disclosure practices under Canadian mineral resource disclosure requirements. Based upon this review, the BCSC issued a cease trade order in respect of UEC’s shares for not having filed technical reports under Canadian National Instrument 43-101 Standards for Disclosure of Mineral Projects.

In October UEC retracted its prior disclosures about its uranium holdings in all three states and filed the required reports with SEDAR.

Despite these problems, Adnani is optimistic. He told the newspaper, “if I can get 1 million pounds a year, I see a real opportunity to be a player.”

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Money & Mining News

Magnum Uranium Corp. has issued its first NI 43-101 compliant uranium resource report on its San Rafael project in Emery County, Utah. The “Down Yonder” deposit is part of a 6,000 exploration in a joint venture with Energy Metals Corp. Magnum has recently earned an 80% interest in the project. The report estimates an indicated mineral resource of 729,100 pounds U3O8 at 0.183% yielding 3.66 pounds per ton of ore; and inferred resources of 1,071,000 pounds U3O8 at 0.184% yielding 3.68 pounds per ton of ore.

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Wave uranium announced the acquisition of 1,042 acres in state mineral leases for its Grand County, Utah, holdings. The claims include most of an area which is known as the Mineral Canyon district and are adjacent to Wave’s holdings of 1,327 mining claims on nearby federal lands.

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Yellowcake Mining has applied for a permit with the State of Colorado to drill in the Uravan-Beck properties. The area was intensively drilled, but not mined in the 70s and 80s, by General Electric which worked at 22 locations during this time. Phase 1 drilling will start when the permits are issued.

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Ur-Energy has issued a preliminary assessment of its Lost Creek Project in Sweetwater County, Wyo. The independent assessment by Lyntek engineers of Lakewood, Colo, in accordance with NI 43-101, provides capital and operating cost estimates for start-up of production at the mine. The expected production capacity is 2 million pounds per year starting in 2010.

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USA Uranium has acquired the final 25% interest in the La Sal West mineral claim group of 111 BLM claims spread over 2,200 acres in the La Sal uranium district in Utah. The company now owns 100% interest in the property. The ore previously produced from this property contained 0.35% U3O8 and resulted in production of 1 million tons of ore. The company is using new, proprietary technology to explore the area for uranium deposits. It is a ground radon detection survey method. The technology has identified new deposits within the boundaries of five existing mines on the properties including the Blue Goose, Pine Tree, Canary, San Juan, and Junction mines. Shipment records from the 1970s indicate grades from 0.10% to 0.38% U3O8.

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Uranium International Corp. has appointed Richard M. Cherry as company President and a Director of The Board effective April 2, 2008.

Richard M. Cherry has over 34 years of experience in the nuclear industry, having worked for multiple companies in areas of uranium mining, production, conversion, marketing, and nuclear power generation. He currently consults to the uranium industry.

From 2000 to 2006, Mr. Cherry was President and CEO of Cotter Corporation and Nuclear Fuels Corporation, which are both affiliates of General Atomics Corporation. Mr. Cherry was responsible for all aspects of Cotter's mining and milling operations in Colorado, including uranium and vanadium production. Through Nuclear Fuels Corporation, he was responsible for the worldwide uranium marketing efforts of all uranium produced by General Atomics' affiliates to customers in the United States, Japan and Europe.

From 1997 to 2000, Mr. Cherry served as Vice President of ConverDyn and Nuclear Fuels Corporation. ConverDyn is a joint venture between Honeywell International and General Atomics formed to market uranium conversion services to large electrical utilities worldwide.

Mr. Cherry holds an M.S. in Mechanical Engineering from Wichita State University and a B.S. in Engineering Physics from the University of Oklahoma. He is a Licensed Professional Engineer (State of Kansas).

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American Uranium announced that in partnership with Strathmore Resources the firms have informed the NRC of their intent to apply for a license to operate a uranium ISR mine at the Reno Creek deposit in Campbell County, Wyo. The Reno Creek property is located within the historic Pumpkin Buttes uranium district of the Powder River basin in northeastern Wyoming. The federal application and similar state permits will be pursued in the Fall of 2009.

American Uranium is committed to spending $12.4 million to earn a 23% interest in the project this year and will spend $33 million over the next six years to earn a 60% interest in the mine.

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