Cauldron Energy lifts uranium grade, resource update at Bennet Well
Cauldron Energy's (ASX: CXU) shares should rise today as comparisons of assay results have seen a 68.3% increase in uranium grade width in the main mineralised zone from the gamma probe data.
Adding further fuel, an upgraded Resource estimate at its Bennet Well
uranium deposit in Western Australia is likely in second quarter 2014.
Other assays highlighted an overall 20% increase in total uranium compared to down-hole gamma probe data.
The
assay of YNDD018 returned a result of 5.1 metres at 1,209ppm uranium
from 89.5 metres, for a total grade width of 6,166ppm compared to gamma
probe data pf 6.46 metres at 567ppm for a total of 5,664ppm.
Bennet Well currently has a JORC Inferred and Indicated Resource of 15.7 million pounds of eU308 at 270ppm. It is part of the Yanrey Project located about 85 kilometres south of Onslow that is adjacent to Paladin Resources’ (ASX: PDN) Manyingee deposit that has an Indicated Resource of 17.8 million pounds of U308.
Head of operations Simon Youds said the results highlighted the potential benefit for the Bennet Well resources.
“We
can see clear evidence uranium content has improved more than 20% on
the already high uranium grades estimated from gamma probes. This
underpins the need for a resource upgrade,” he noted.
“ANSTO is
currently completing leach testing on this drill hole. We’re eagerly
awaiting the results as to what percentage of uranium recovery we get
from this high grade core sample from the mineralised zone.”
Cauldron
is now working with resource consultants Ravensgate to complete a JORC
2012 compliant revised resource. This is expected to be completed by the
second quarter of 2014.
Analysis of core samples is ongoing with
leach testing of selected mineralised intervals, and metallurgy to
quantify core permeability, porosity and grain density.
In
addition, high grade uranium intersections identified on the most
northern and southern drill lines at Bennet Well South show potential to
further upgrade current resource in both directions.
Drill Results and Exploration
The
location of YNDD018 on the on the most northern drill line within the
resource, opening up a large target region of interpreted palaeochannel
that is yet to be drill tested.
There are a lot of similarities
in geology with YNDD018 and high grade drill holes located on the
southern edge of the Bennet Well Central resource area, supporting the
potential to identify additional resources to the north.
Likely
resource extensions also exist to the south of the Bennet Well South
Prospect based on the recently completed diamond core program.
At
the southern end of Bennet Well South, an exploration hole YNDD020
identified two significant uranium zones totalling 2.1 metres at
1,188ppm U3O8 in assay and 2.98 metres at 676 ppm eU3O8 from gamma probe
data.
The two high grade uranium intersections identified at
either end of the Bennet Well South resource have highlighted the
potential for a significant resource upgrade for this area, subsequent
to further drilling.
The Bennet Well East resource is also open at both the northern and southern end.
Further
drilling both identifying resource extensions and closer spaced
drilling within the current resource region is required in future
drilling programs to increase the expected resource size.
Bennet Well, Yanrey Project
Bennet
Well is part of the 1,930 square kilometre Yanrey Project in northwest
Western Australia that is highly prospective for sandstone hosted
uranium mineralisation.
This is amenable to In-situ Recovery (ISR) mining, similar to Paladin’s adjoining Manyingee deposit.
Studies indicate that average grades of above 250ppm eU308 over 1 metre are potentially economic for an ISR mining operation.
Exploration
has identified 11 major palaeochannels, most with evidence of uranium
mineralisation. Yanrey has an Exploration Target of between 30 million
and 115 million pounds of U308 at grades of 250ppm to 900ppm.
There
is potential for regional annual production of 5 million pounds uranium
using ISR at low costs, high margins and low environmental impact.
Access is granted via the Great Northern highway and along the Twitchen road to Onslow.
The company had previously increased the project area from 440 square kilometres by entering into a JV agreement with Atomic Resources - now Intra Energy Corporation (ASX: IEC). Cauldron has the right to earn 70% of the uranium rights by spending $500,000 over three years.
Cauldron plans to bring Yanrey into production within the next five years.
Takeover Offer for Energia Minerals
The company is also looking to further extend its Yanrey Project through an acquisition of Energia Minerals (ASX: EMX) through an offer of one Cauldron share for every eight Energia shares held.
Acquiring
Energia will grant Cauldron economies of scale and further enhance the
ISR mining opportunity by controlling over 190 kilometres of contiguous
mineralisation.
Energia holds the Nyang Project, which includes the Carely Bore Deposit that has an Inferred Resource of 16.7 million pounds of U308 at 330ppm.
Even if the takeover is unsuccessful, there may also be opportunities for negotiations for joint work.
Analysis
The potential for the strong assay results from recent drilling to
further increase the current Indicated and Inferred Resources of 15.7
million pounds of eU308 at Cauldron Energy’s
Bennett Well deposit is another step forward for its plans to build an
In-situ Recovery mining operation at the Yanrey Project.
The increase in grade width is significant enhancing development plans and potential project economics.
That
exploration has highlighted further potential to also upgrade (and
possibly upgrade) resources at Bennet Well South Prospect and Bennet
Well East, which will in turn produce further economies of scale for the
company.
Demand for uranium is forecast to grow significantly in
the coming years, as supply becomes an issue with a higher uranium
price to benefit the company’s target of starting production at the
project within five years.
The swing factor remains Japan, where
last week the now government-controlled Tokyo Electric Power Company
gained approval from the government for its post-Fukushima business
plan. The plan hinges on the restart of two reactors at the
Kashiwazaki-Kariwa plant, being the first two reactors to pass new and
far more stringent safety requirements.
The restart of these
reactors will signal the rebirth of the uranium market, post-Fukushima,
and a rebound in the uranium spot price. Deutsche forecasts a spot price
of US$55/lb by the fourth quarter so there is plenty of upside for
investors in lightly valued Cauldron Energy at $0.10.
There are share price catalysts to look forward to in the near term including:
- Results of the leach testing soon; and
- The updated Resource in second quarter of 2014.
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