A third uranium mine in Namibia?
The excitement that Paladin Resources Limited (TSE: PDN ) is quietly creating in the uranium mining sector is putting African uranium mining squarely in the spotlight. The country of Namibia, bordering South Africa, Botswana, Angola and the South Atlantic Ocean, is already one of the world’s key uranium producers – supplying global utilities with between six and eight percent of the world’s newly mined uranium oxide to power their nuclear reactors. In a historic development, two sales contracts were recently announced to purchase uranium from Paladin’s Langer Heinrich uranium project before the mine is brought into operation (scheduled to open in September 2006). Both contracts, announced eight days apart in late January of this year, were each to supply more than 2 million pounds of U3O8 between 2007 and 2012. The company’s Jan. 27 news release named an unspecified U.S. utility as one of Paladin’s new clients.
Namibia is a favorable country for uranium mining. In October, the Minister of Mines and Energy, Erki Ngimtina, told the country’s National Assembly: “Namibia should consider using its uranium ore reserves in light of rising global uranium prices.” The country has already been doing so through Rio Tinto Group’s Rossing uranium mine for the past 25 years, which employs more than 800 workers. With the addition of Langer Heinrich, more uranium will be mined.
Rossing is one of the largest open-pit uranium mines in the world and has solid reserves. According to the company’s website, this mine “currently produces about 7.7 percent of the world’s uranium.” The Rossing uranium deposit is an intrusive deposit with intrusive rocks in this category that include alaskite, granite, pegmatite and monzonites. Deposits of a similar type around the world include Palabora in South Africa and Ilimausak in Greenland. In South Australia, a similar intrusive deposit – Radium Hill – was mined from 1954-1962.
Paladin’s success story has spurred another junior uranium company, Forsys Metals (TSX: FSY ), to move forward with its advanced-stage uranium exploration project in Namibia’s Erongo region. Last May, a bottom fishing investor could easily buy shares of Paladin Resources for under C$1/share (the low price was C$0.86). These shares recently traded as high as C$3.30/share – a 300 percent (or more) gain in less than twelve months. How does Forsys Metals stack up against giant uranium mine Rossing and Paladin’s booming Langer Heinrich? Shares of Forsys Metals today are in the same trade that Paladin Resources could have found less than a year ago. Forsys has initiated a pre-feasibility study on the company’s uranium deposit in Valencia, which should increase investor interest if the company makes positive strides toward that goal.
Forsys Metal’s uranium deposit in Valencia
Forsys Metal’s uranium deposit in Valencia is located 35 kilometers along the geological strike from the Rossing uranium mine and approximately 40 kilometers north of the Langer Heinrich deposit. “This is a granitic uranium deposit (uranium mineralization in granite) that is geologically similar to Rossing,” said Dwayne Parnham, CEO of Forsys Metals. “We have completed a technical report compliant with National Instrument 43-101 confirming the historic workings of Goldfields Namibia between 1973 and 1986. It outlines a historic resource of more than 20 million pounds of U3O8.” Parnam explained that the mineralization is exposed at surface and the deposit remains open to further expansion. “Valencia is also a field that we think can be moved fairly quickly into a production scenario,” Parnam pointed out. “The deposit is suitable for conventional open pit mining methods.”
According to National Instrument Technical Report 43-101 filed in October 2005 on the Valencia Uranium Property by Graham Michael Greenway, Registered Geologist with the South African Natural Science Professions Council, “Uranium mineralization is present on the Valencia Project property as uraninite ( UO2 ) mineralization… Uranium mineralization is identified over an area of 1100 m north-south by 500 m east-west… Uranium mineralization occurs primarily in the finer-grained alaskite… Uranium mineralization is variably distributed in the alaskite intrusions and in many cases, the high-grade mineralization is in contact with barren or poorly mineralized alaskite.”
The Valencia project area is located in the central area of the African Damara orogenic belt. This belt belongs to the Late Precambrian, Early Paleozoic, and Pan-African mobile belt systems that cross the African continent. Moderate to high degree of metamorphism and voluminous granitic intrusions characterize the Central Zone. In a 1992 report titled Uranium: The Mineral Resources of Namibia, published by the country’s Ministry of Mines and Energy and the Geological Survey, geologists Roesener and Schreuder wrote: “All the uranium-bearing granite deposits discovered in Namibia are located in the Central zone. “
The geology is similar to the Rossing uranium mine, according to Duane Parnam. Greenway also suggested geological similarities. In his CV, Mr Greenway revealed that he had completed a mineral resource assessment for the Valencia project while employed by Rossing Uranium Ltd. A graduate of South Africa’s University of Natal, Greenway worked for 15 years as a geologist, ten of those years spent evaluating and calculating mineral resources. In his conclusion filed in National Instrument 43-101, Greenway wrote: “The Valencia Uranium Project contains an alaskite-hosted uranium deposit similar to other uranium deposits found in the central area of the Damara Orogen. The main zone of mineralization is 520 meters wide, 720 meters long and 200 meters thick and occurs from surface to a depth of 360 meters.” Greenway estimated that at a cut-off grade of 017 kg/t U3O8, the currently defined inferred mineral resource at Valencia is 32 million tonnes at a content of 0.22 kg/t U3O8.
When water costs are high, uranium mining can become expensive and uneconomical. Forsys Metal’s property in Valencia is located in a desert region. Distant water requires a pipeline. For example, the current pipeline to the Rossing uranium mine requires 2 million cubic meters of water pumped into it daily. Mr Parnham does foresee this as a potential hazard, but believes the pipeline to the Rossing mine could be extended to the Valencia deposit if it becomes a uranium mine. Langer Heinrich also has a pipeline to pump the precious to extract uranium. However, there is a flip side to this concern. The Rossing mine is reportedly producing uranium at less than $20/pound. Some estimates are as high as $12/pound, but with a rising spot uranium price that seems destined to exceed $40/pound, any production cost below $20/pound, in sufficient quantity, can be bankable. One uranium insider suggested that Rossing may be in the process of expanding uranium production, due to the sharp increase in the spot price of uranium, to triple its current capacity.
The water issue can be addressed in the context of Namibia’s energy import climate. The country currently reportedly imports about 80 percent of its energy from South Africa. The controversial Swakopmund desalination plant, first announced in 1998, could be rebuilt to meet the country’s growing water needs. The country may need to drill more water wells. In any case, miners can become creatively inventive when faced with environmental concerns to produce their commodity. In this case, helping Namibia solve its water problems could very well help that country accelerate its industrial growth strategy.
Based on his company’s rising monthly potential asset value driven by a surge in spot uranium prices, Parnam minced no words on the direction Forsys Metals is headed, “We think we have a situation where we can follow rapidly pre-feasibility stage by doing some limited amount of verification drilling and geotechnical drilling, and then make a formal decision to move immediately to a bankable feasibility stage.” How fast can Forsys Metals advance? In the case of Paladin Resources, they fast-tracked their project in less than two years. Will history repeat itself with Forsys Metals? Stay tuned.
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