EXCLUSIVE TO SIGHTLINE U3O8: Any time a commodity price heads towards a high note, we see an abundance of newly minted exploration companies and newly identified projects of great prospect. In the absence of a defined resource, exploration companies must raise financing on a demonstration of superior talent, superior technology and superior indications of a new discovery.
As we look towards an anticipated resurgence in uranium prices we should expect to see the same from companies heavily promoting their uranium projects.
Investors – especially those new to the sector – need to know how to recognize good news but should also prepare themselves as explorers use every trick in the book to generate above average hope and expectation about their particular project.
So, what should an investor know as they ready themselves to read the press releases of a uranium explorer in the coming year?
High grade results are not simply 20% and higher!
The abundance of news out of Saskatchewan’s Athabasca Basin over the past two decades have educated the investing public that high grades of 20-50% should be expected in drill results. All will point to the MacArthur River and Cigar Lake deposits that host resource grades of approximately 20%.
What is forgotten, however is that most uranium mines around the world have operated during more normal times in the range of 0.10% ore grade. Some operate at as low as 0.02%. Keep in mind that NexGen’s Arrow deposit and Fission’s Triple R deposit currently sit at 1.5% and 2.5% resource grade, respectively.
Investors need to remind themselves that the threshold for high grade is not double digits but more in the range of 1% and drill results north of 0.50% are well worth getting excited about.
Results stated in “ppm” should not be ignored!
Uranium assays stated in parts per million (ppm) are often dismissed by investors as a failure. What must be remembered, however, is that uranium deposits in the Athabasca Basin are discrete pods typically smaller than a football field. Drill holes can miss a deposit by a very narrow margin.
It is safe to say that, most exploration holes drilled in the history of the Athabasca Basin have returned 0% uranium. In the exploration stage, ANY reasonable uranium mineralization is an exciting find and worthy of follow up. This is not to say that a deposit exists, but the odds have just increased exponentially.
As a reference point, investors can keep in mind that 1% U3O8= 8,500 ppm and 0.05% = 425 ppm.
The existence of Alteration should not be ignored!
Many press releases disclosing the results of a drill program will discuss the existence of alteration minerals – with or without the identification of uranium mineralization. During the uranium deposition process, surrounding rock will be “cooked” due to excessive heat and other chemical adjustments. This rock will be observed as bleached or, in places, intensely altered producing clay minerals and chlorite.
Such alteration minerals (particularly in conjunction with elevated uranium) are typically found near significant deposits. In exploration, finds such as alteration are vital in vectoring efforts towards a potential discovery.
Counts per Second (CPS) are not Assays!
A scintilometer (or Geiger counter) detects gamma rays based on the collected vibrations of an internal crystal. Those vibrations are displayed as “counts per second”. Every crystal is different and no two scintilometers will give you the same reading in the same situation.
A handheld scintilometer is used in exploration to identify what could potentially be uranium in core (depending on the instrument used, it could also be thorium giving off those gamma rays). Explorers use these tools to determine what core should be sent for assay. Precise counts per second will differ depending on how the unit is held, how far away from the rock it is, the shape of the rock, nearby rock, etc. Counts per second from a handheld scintillometer cannot be converted into % U3O8!!
A downhole scintilometer is the same device but can provide considerably more information. It is carefully lowered down a completed hole and takes a series of consistent readings all the way down and up. These reading can be converted into eU3O8(equivalent U3O8) but only if the probe has been calibrated against a known, assayed, uranium rich drill hole. Like the handheld unit, every probe has a crystal that is unique to that unit. Probes can be calibrated at research labs or against other uranium rich holes the explorer has drilled and assayed.
Every successful hole should have an eU3O8
With very few exceptions, every explorer in the Athabasca Basin is armed with a downhole gamma probe. It allows them to identify a successful hole in the field and tee up their next hole immediately. Most explorers will not disclose eU3O8numbers as their probes have not been adequately calibrated to known assayed holes or they simply prefer to wait for true assays to be returned.
The message here is that if an explorer is reporting results from a handheld unit instead of their more reliable and accurate downhole probe, there may be a reason for concern. Further, if they are reporting cps instead of eU3O8results, there may also be an underlying concern.
“Off-Scale” is not always Off-Scale!
Both handheld and down hole scintilometers come in a variety of maximum scales. Further, most downhole probes max out at very low grades. For higher grades, explorers have to upgrade to a “triple-gamma” probe. The fact that an explorer has hit a spot that took their unit up to 9,999 is certainly great news but is only a measure of high radiation levels. No definitive conclusions can yet be stated.
More insidious explorers go as far as to “define” their use of the term “off-scale” allowing them to use it in a headline even if it didn’t reach the maximum measure of the unit. That is, a newer handheld unit may go much higher than 9,999 cps but in the fine print, they have defined off-scale as anything more than 10,000 cps.
Read the fine print.
Watch for Invented terms!
National Instrument 43-101 carefully defines the manner and method of reporting mineral resources and mining projects. Prior to the defining of a mineral resource, however, the specifics are much less distinct. Investors must be mindful of terminology that has been invented or augmented by an exploration company in order to promote their findings.
For instance, if a drill hole is “mineralized”, what does that mean? It is not a regulation defined term.
If you are a uranium exploration geologist, “mineralized” most likely means a level of contained uranium worthy of follow up, which in the Basin might be in the range of 0.05% or 4-500 ppm. If you want to say that ALL of your drill holes were mineralized, however, you may define it in the footnote as anything greater than 0.005% U3O8,- less than that could be picked up within most rocks on the face of the planet.
Other such defined terms are “composite mineralization’ or “composite grade”. Here, the reporting explorer has gathered up any interval of “mineralization” and added them up no matter how far apart in the hole they may have been found. For example if, in a 500 metre deep hole, an explorer found a metre of mineralization at the 150 metre mark and another 2 metres at 225 metres and 2 metres at 450 metres, they could report having found 5 metres of composite mineralization in that hole (as defined in the footnote). The investor may consider the composite mineralization to be a mineable grade and thickness but in reality, none of the individual intercepts are.
Once again………read the fine print.
Where are the Assays?
After getting investors all frothy with terms such as off-scale or mineralization or composite mineralization, sometimes the assays are less exciting than had been hoped. You may want to hold your reaction to news until that explorer eventually reports real assays. There have been many cases where true assay results are immaterial and are not subsequently reported or are hidden in the middle of big tables. Explorers may continue to use the previously reported defined terms despite the existence of real assays.
Beware the Evil Twin!
Over the past 2 decades, there has been considerable exploration work done in the Athabasca Basin including extensive drilling. In an amazing stroke of talent, explorers will acquire projects that have been extensively explored only to make an almost immediate new discovery. How could past explorers have been so incompetent as to miss something right under their noses?
In reality, the previous explorer most likely spent considerable time following up on their own successful drilling before determining additional investment to be fruitless. By re-drilling (twinning) that prior team’s discovery hole, newcomers can now announce the discovery of something that was never lost in the first place.
There are numerous situations where an explorer has acquired a historic project with great potential. A little research, however, will reveal that previous owners made a significant discovery that may have been followed up with hundreds, if not thousands of holes, never being able to put together a minable resource.
By touting new technology and theories and ignoring work performed to date, explorers can turn back the clock, “re-discover” a new prospect in their first hole and recreate the excitement of their predecessors.
But What is the True Width?
True width is just as it sounds….how wide is your deposit, as opposed to how deep is your deposit.
A deposit, the shape of a thin carrot looks identical to a deposit shaped like a watermelon if all you do is continue to drill it through the center from top to bottom (down-dip). Many junior explorers may be reluctant to drill a hole from an opposing angle for fear of unmasking their watermelon for the carrot it truly is.
If an explorer is not drilling their discovery at an opposing angle to the mineralization or worse, is simply neglecting to report true width, you may have an impostor in your midst. Check out the geological section – if there isn’t one, that could be the first hint of deceit.
A Picture Paints a Thousand Words – but not always the Truth!
Sometimes a technically complete, detailed, colorful, geophysical image does not provide the clarity intended. Many investors appreciate a visual image, helpful in understanding the intention and direction of an explorer’s efforts and findings. The complex map sitting on the geologists table, however, might not do the trick.
Many companies will provide simplified illustrations intended to explain a technical point or geographically orient the reader. As with any other information contained in the press release, however, that illustration must be true, accurate and technically supported.
Investors must make sure that it is clear as to what the information is being depicted, how it was determined/obtained, how it is measured and what the scale is.
Cartoons depicting “conceptual blobs, boundaries and findings without technical support should not be taken seriously. Such images become even more dangerous when they are comparing their illustrated results to other more well-known deposits or structures.
For exploration companies, it is sometimes hard to convey to a reader the technical success of a survey or drill program when it is anything short of a major discovery. As these companies strive to explain and describe their work, there will be a natural tendency to do so in the most positive and relatable manner.
While attempting to show the brighter side of their results, however, many may cross the line and utilize terms and adjectives that exaggerate and even mislead the reader. Omitted information and cleverly defined terms will go even farther to purposely deceive.
As with most things in life………. buyer beware.