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Strateco Resources: The Only Canadian Uranium Mine Applicant at CNSC
By James West
MidasLetter.com
Tuesday, July 14th, 2009
Strateco Resouces Inc (TSX:RSC) is the only company in Canada with a Uranium Mining project currently in the licensing process pipeline with the Canadian Nuclear Safety Commission, according to Strateco CEO Guy Hébert. The company's 100% owned Matoush Project in the Otish Mountains of Quebec is the focus of a continuing 60,000 metre drill program designed to meet the company's target of minimum 40 million pounds of Uranium Oxide resources before going into production at some point, they think, in 2013.
"Matoush is without doubt the main focus of the company," says Hébert "We will for sure be seeking the license for construction of the mill in 2010, which gives us 13 -1 4 months to determine exactly what the capacity of that mill should be.
"Last year we did 60,000 metres of drilling and we discovered two very big lenses, and the drilling we did earlier this year proved that we have additional mineralization not far from the main lens. The structure is very flat-laying and easy to follow, and so we are focused on defining it as quickly as possible so that we can submit the specifications for the mill in the licensing process, which takes about three years."
"At this point we can see2.3 million pounds per year of production, but optimally we would like to produce 4 million pounds per year which means we need to prove up at least 40 million pounds of uranium oxide because we are looking for a minimum mine life of 10 years."
The company is seeking to maximize the advantages of exploring in the province of Quebec, which is primarily a near 50% rebate on all exploration expenditures, before it becomes a producer.
"Being in Quebec, we are also induced to spend as much as possible on exploration before going into production because once we are a producer we are no longer eligible for the tax credits that currently sees the government of Quebec reimburse us for nearly 50% of all exploration expenditures", explains Hébert.
"For example, we did a financing for $8 million at $1.95 last year, of which we will be reimbursed by the government of Quebec $4 million, and when I reinvest that into exploration again, I get $2 million back the following year, and $1 million back the year after that for investing in exploration. and so on.So from an $8 million financing we actually get nearly $15 million to spend on exploration, which, as you can see, provides a strong incentive for drilling as much as possible before becoming a producer. So it really works out well considering the 3 year licensing and construction process for the mill.
We've already got about 20 million poundsso the potential for finding our target of 40 million pounds is very good."
Drill results announced last week certainly corroborate Hébert's optimism. In its latest press release, Strateco announced an intersection of 25.7 metres grading 0.61% U3O8, and also that it would "substantially" increase its drilling budget for the next two years.
"In our press release last week, the grade and width demonstrates the likelihood of such potential," says Hébert. The grade in this press release is equivalent in value to 1 ounce of gold per tonne, if we were drilling for gold, and if a company were to announce an intersection of 27 metres of gold at an ounce per tonne, well the stock would explode, but because its uranium, there is much less familiarity on the part of investors on how to properly evaluate that, and so we don't see the same effect."
"A grade of 0.6% uranium is equivalent to about 14 pounds of Uranium per tonne, so you can see where I get the analogy," he said.
According to that press release:
"The success of the drilling program completed in early 2009 on the southern part of the Matoush structure (Eclat property; see press release dated April 22nd, 2009) and knowledge of the property geology indicate that the Matoush structure could potentially contain sufficient uranium resources to feed an ore processing plan at a rate superior to the forecasted production of 750 tonnes per day in the scoping study (November 2008) for approximately 2.3 million pounds of U3O8 per year.
Strateco plans to carry out 60,000 metres of surface drilling per year in 2010 and 2011, in parallel with underground exploration work. The results of the surface drilling program should allow the maximum capacity of the Matoush ore processing plant to be established.
In 2010, Strateco plans to begin the environmental studies required for mill and tailings pond construction. These studies are required to obtain a mine construction permit."
The company's progress is not going unnoticed by the institutional investment community, who collectively share the sentiment that uranium prices will rise as the push for non-greenhouse gas emitting power sources causes more nuclear plants to be built and coincident rising demand for uranium.
Despite the rosy future, Strateco shares continue to be range-bound in the $0.80 to $1.00 per share level.
Does this mean that Strateco shares are cheap, at this point?
Investment banking firm Salman Partners Inc. said in a recent research note that it values "in-situ" uranium deposits at US$8.90 per pound, based on recent takeover transactions in the industry.
According to the report:
"Our use of US$8.90 per lb is based on what Cameco Corp. (CCO -TSX). and Mitsubishi Development Pty Ltd. paid Rio Tinto PLC (RIO - LSE) for the Kintyre uranium project in Western Australia, what AREVA paid for UraMin Inc. and what Denison Mines Corp. (DML - TSX) paid for
OmegaCorp Ltd.. We have also have included recent transactions, including Japan Australia Uranium Resources Development Co. Ltd. ("JAURD") and ITOCHU Corp.'s purchase of
a 35% interest in Mega Uranium Ltd.'s (MGA - TSX) Lake Maitland uranium project in Western Australia for US$49 million.
We have also included Paladin Energy Ltd.'s (PDN - TSX) purchase of Fusion Resources Ltd., which is at the advanced exploration stage at its Valhalla North project in Queensland, Australia for approximately US$13 million."
So what are the chances that Strateco could become the target of a larger uranium producer's buyout interest?
At this point, Guy Hébert is clearly determined to take Matoush all the way to production, but since this is Canada's only uranium deposit already well into the mandatory licensing process required by the Canadian Nuclear Safety Commission, Strateco could soon find itself on the radar of big producers with deep pockets.
Follow the company's progress online at http://www.StratecoInc.com.
SOURCE: 09071401_Strateco-resources-the-only-canadian-uaranium-mine-applicant-at-cnsc.php
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