| Now that the spot uranium price has sustained above | | | | How much does each well cost? That depends upon |
| $40/pound, after a 20-year drought and a bottom of | | | | the depth of the roll front deposit. While explaining |
| $6.40/pound at the end of December 2000, hundreds | | | | that costs are fixed and variable, Anthony computed |
| of junior exploration companies have thrown their hat | | | | the cost of a production well for a 500 foot deposit |
| (and possibly your money) into the ring. Both | | | | at $15,000. An injection well could cost $11,000 to |
| Canadian and Australian junior uranium companies | | | | install. By comparison, in New Mexico, where the |
| hope to raise the big money required to bring a | | | | deposits are wider and of higher grade, a 2000-foot |
| uranium property into production. A perceived | | | | production well might cost $27,000 and the injection |
| uranium supply crunch has added to the frenzy. As | | | | well could cost $18,000, and it would still be economic. |
| occurred with previous uranium cycles, only the | | | | Obviously, the deeper the deposit, the more it will |
| strong will survive. While numerous Canadian junior | | | | cost to extract the uranium. Not only will the capital |
| exploration companies hope to find a new discovery | | | | costs increase, but operating costs will be greater. |
| in various uranium-prospective regions through | | | | Uranium grades can be a contentious point. "Grade is |
| Canada, one of the safest investment strategies is | | | | the driving force," Harry Anthony shot back. We |
| to speculate on those companies, whose properties | | | | asked him about companies which said they could run |
| were drilled during the previous uranium bull market | | | | an economic ISL operation with grades as low, or |
| (1974-1980). Many of those properties had uranium | | | | lower than 0.02. Anthony laughed, "They are crazy. |
| deposits delineated by major oil and uranium | | | | They'd be out of business before they started." |
| companies, who did not blush at spending tens of | | | | Catchpole was more reserved in responding, "It |
| millions of dollars to find uranium. Some of these | | | | probably wouldn't have an economic recovery." |
| companies acquired the drilling databases and the | | | | Strathmore's David Miller offered a more technical |
| properties, which were abandoned over the past | | | | analysis, "Frankly, that will not likely have enough |
| twenty-year uranium depression. Some of those | | | | recoverable pounds. The operating grade feeding the |
| companies have been actively moving their projects | | | | plant will be too low." What is the best grade? Miller |
| forward to production, using a more environmentally | | | | wanted to see properties with deposits that average |
| friendly mining method than the conventional mining | | | | on the order 0.5, 0.10, or 0.15. "It depends upon the |
| of an open pit or underground mine. It is called In Situ | | | | deposit," Miller added. Uranium grades can impact the |
| Leach (ISL) mining, or solution mining. An ISL uranium | | | | cost of operating an ISL plant. Anthony gave an |
| operation is much like a water treatment plant, | | | | example of an ISL plant operating at 5000 gallons per |
| where oxidized, or carbonated, water is pumped into | | | | minute. Running 24 hours daily, the plant would |
| a uranium orebody and uranium is flushed into a | | | | process 7.2 million gallons of water. That's more than |
| uranium-treatment plant. These are relatively | | | | 2.6 billion gallons of water processed every year. |
| inexpensive to install, possibly for as little as $10 | | | | Operating costs are based upon cost per thousand |
| million, and can be economically operated during the | | | | gallons of water. "This includes electricity, reagents |
| current uranium boom. There are pitfalls when | | | | and labor," said Anthony. On a daily basis, it would |
| investing in those companies which plan to establish | | | | cost more than $21,000 to run an ISL plant, based |
| ISL operations. During the initial phase of this bull | | | | upon Anthony's calculations of $3.03 per thousand |
| market, a common myth circulated among investors | | | | gallons of water. Using a 5,000 gallon per minute |
| had been "pounds in the ground." How many pounds | | | | scenario, a plant might produce 2360 pounds of U3O8 |
| of uranium oxide, or U3O8 for short, does a | | | | every day or 80,000 pounds monthly. The cost to |
| company have in the ground? The more pounds a | | | | produce each pound would be $8.18. Using that math, |
| company claimed, the higher its market capitalization | | | | the uranium grades would be about 44 parts per |
| ran. Bigger is always better in most cases, but | | | | million (ppm) or 0.08. Anthony said, "I like to see |
| recovering uranium through an ISL operation, like any | | | | 70ppm or higher." That comes to a uranium grade of |
| other mining operation, has its problems. Once you | | | | 0.13. Another way to evaluate a company's uranium |
| can sift through the companies with very real | | | | property is looking at each part of its development |
| prospects from those who are cheerleading their | | | | costs. In a well field pattern, Strathmore's David Miller |
| "pounds in the ground," you will have narrowed down | | | | can determine the economic viability of the ground. |
| your list of potential investment vehicles. These are | | | | "The keys to what is recoverable are: (a) how many |
| the four key questions that must be answered if you | | | | pounds are recoverable per pattern? And (b) what |
| wish to minimize your risk when investing in uranium | | | | does it cost to install a pattern?" Miller explained. "If |
| stocks: • How permeable are the ore bodies you | | | | you have 10,000 pounds in place and can recover |
| plan to mine? • What is your average grade? • | | | | 8000 pounds, your well field development cost can |
| Over what area does your rollfront extend? • | | | | be $8/pound, if it costs you $80,000 to install that |
| What is the depth of your ore body? One of the | | | | pattern. Add your operating cost, capital amortization |
| most important factors to consider, once you believe | | | | and restoration cost, and you would have a total |
| there may be a uranium-mineralized orebody on the | | | | cost." |
| company's property, is the permeability of the | | | | Finally, the cost to install a pattern also depends over |
| sandstone, from which the uranium will be mined. | | | | how much territory your uranium deposits run. "Ten |
| Permeability is the flow rate of the liquids through the | | | | million pounds over an area of one-half mile will cost |
| porous sandstone. Knowing what the permeability of | | | | less than those same pounds over an area of two to |
| the orebody will let you know how much water you | | | | four miles," remarked Terrence Osier, senior geologist |
| can get through the sandstone formation. Uranium | | | | for Strathmore Minerals. "That means more injection |
| Energy Corporation Chief Operating Officer Harry | | | | wells and more production wells." Depth of the wells |
| Anthony, an internationally recognized ISL expert, | | | | influences its installation cost, as mentioned |
| noted, "You need higher grade ore for tight | | | | previously, and impacts its daily operating cost. |
| formations. With high permeability, you can space | | | | "When uranium costs were very low, a few years |
| your wells further apart." | | | | ago, a company needed 70,000 pounds per pattern," |
| The make-break point for a formation's permeability | | | | Harry Anthony commented. "Now a company might |
| is its Darcy rating. How high is the Darcy? A typical | | | | only need 20,000 pounds per pattern to make it |
| Darcy can range from minus 1000 to plus 3. The | | | | economic." There are many variables within the |
| higher the Darcy, the more permeable the formation. | | | | above advices provided by these experts. However, |
| This helps determine how economic the orebody is. | | | | the important point to realize is the time of hyperbole |
| An acceptable range would be one-half to one Darcy. | | | | and hoopla over "pounds in the ground" has passed. |
| What is a Darcy? Uranerz Energy Chief Executive | | | | As more uranium development companies move |
| Glenn Catchpole, who is also a hydrologist, said, "It is | | | | closer to establishing an ISL operation, the go/no-go |
| gallons per day over feet squared." He added a pure | | | | consideration, as UR-Energy Chief Executive William |
| hydrologist would calculate the feet per day or | | | | Boberg aptly described it, will come down to |
| centimeters per second to get a more accurate | | | | permeability. After that, the economics of a project |
| permeability assessment. However, the Darcy is a | | | | will either make it viable or not. Using the criteria |
| widely accepted measuring unit in the industry. With | | | | we've provided, you can avoid the hysteria by |
| low permeability in a tight formation, you may need | | | | speculating with the odds stacked more in your |
| to space more wells in a typical well field pattern. | | | | favor. |