More than Moose Pasture By Marin Katusa
A favorite tactic of promoters in all resource bull markets, past and present, is to stake huge land positions and then proudly point investors to the map, saying, "We're the largest landholder in such and such area."
Such land grabs are a dubious exploration strategy at best. And in the case of the Athabasca uranium-mining districts, they're downright ridiculous. Many of the basin's most significant deposits are just a few tens of meters wide and hundreds of meters long. Thus, such deposits can be entirely covered by a land parcel just a few hectares in area – a virtual postage stamp compared to many of the gargantuan claims that exist in the basin today. It's not having the most land that matters, it's having the right land.
Pre-2004, there were only a few companies working in the Athabasca. These companies took advantage of the fact that uranium was out of favor to accumulate properties that, by virtue of the exploration work done in earlier uranium rushes, were known to be the better prospects. Post-2004 the staking rush began in earnest, although it was quickly apparent that much of the land picked up late in the day was likely little more than moose pasture.
So the first question you need to ask about Athabasca-based uranium companies you own is exactly when they acquired their land. If it was at any point after 2004, then some (fairly high) level of skepticism is warranted.
You can further narrow down the likely discoverer by looking at management and their experience with using modern technology to explore for uranium at depth. Advanced technologies like electromagnetic (EM) geophysics are tools the big players didn't have back in the days when they passed over "uneconomic" sections of the basin.
EM geophysical methods were what originally identified graphite in the basement fault structure at McArthur River, helping guide a drill program that eventually located the main ore zone. Such high-tech prospecting in unclaimed areas toward the center of the basin could potentially unearth new discoveries.
To come up with a find, would-be discoverers will need drilling – and lots of it. As we've noted above, the Athabasca Basin is not an easy place in which to zero in on uranium deposits. A quick example: Cogema's Midwest Lake uranium deposit in the northeastern Basin was discovered in the late 1970s only after nine years of field work at a cost of $4.35 million (roughly $13.4 million in 2007 dollars).
Outside of the majors, very few companies are currently carrying out extensive drill programs in the Basin. The others may be loathe to drill because, so far, they've been able to promote themselves on land package size and potential resource – the key words here being "so far."
The initial buzz and excitement is over and now it is time for real results.
Drilling is how properties are put to the test, and only the true contenders, the ones who know they have a shot at finding something, are willing to pull drill core from the ground. A breakdown of 2007 drill programs in the Athabasca reveals who these contenders are.
There are 59 junior uranium companies in the Athabasca Basin. The top 5 Casey Research uranium stocks are drilling 73,000 meters, the other 54 juniors are drilling a combined 64,645 meters. So, 8% of the junior uranium explorers working in the area will account for 53% of the drilling. It is these companies who are serious about making a discovery, not simply riding the uranium wave. While nothing is guaranteed, it's clear who has the best chance of claiming the Athabasca's next monster deposit.
In 2006, the rising tide of interest in uranium lifted pretty much all junior uranium stocks, including those we follow in the Casey Energy Speculator. In 2007, our stocks have taken their lumps along with the rest of the sector, although some of our picks continue to charge forward (including one that is up 74% year-to-date, and over 350% since our original recommendation). We are not concerned, because we are invested in companies we are comfortable holding for their exploration – as opposed to promotional – promise.
With many of the best uranium juniors selling at bargain prices, investors with strong contrarian instincts now have a brief window of opportunity to get in before the true frenzy begins – so long as they choose the right juniors in the right district. Choosing the right district is the easy half of the equation. For all the reasons outlined above, it's clearly the Athabasca Basin.
As for cherry picking the right companies out of the dozens that now exist, based on our analysis, you only need to buy 5 of the 59 companies drilling in the Athabasca Basin this season to gain exposure to more than half of the entire drilling programs for the whole region. That reduces the task of building a portfolio of the right stocks to an easily manageable level.
As more and more money is poured into the ground, the likelihood of a new mega-discovery grows daily. It's even possible that the 2007 drilling season will see more than one major discovery in the Athabasca, sending the companies responsible on a phenomenal rise, and in the process, lifting all those who happen to be exploring nearby to new highs.
A favorite tactic of promoters in all resource bull markets, past and present, is to stake huge land positions and then proudly point investors to the map, saying, "We're the largest landholder in such and such area."
Such land grabs are a dubious exploration strategy at best. And in the case of the Athabasca uranium-mining districts, they're downright ridiculous. Many of the basin's most significant deposits are just a few tens of meters wide and hundreds of meters long. Thus, such deposits can be entirely covered by a land parcel just a few hectares in area – a virtual postage stamp compared to many of the gargantuan claims that exist in the basin today. It's not having the most land that matters, it's having the right land.
Pre-2004, there were only a few companies working in the Athabasca. These companies took advantage of the fact that uranium was out of favor to accumulate properties that, by virtue of the exploration work done in earlier uranium rushes, were known to be the better prospects. Post-2004 the staking rush began in earnest, although it was quickly apparent that much of the land picked up late in the day was likely little more than moose pasture.
So the first question you need to ask about Athabasca-based uranium companies you own is exactly when they acquired their land. If it was at any point after 2004, then some (fairly high) level of skepticism is warranted.
You can further narrow down the likely discoverer by looking at management and their experience with using modern technology to explore for uranium at depth. Advanced technologies like electromagnetic (EM) geophysics are tools the big players didn't have back in the days when they passed over "uneconomic" sections of the basin.
EM geophysical methods were what originally identified graphite in the basement fault structure at McArthur River, helping guide a drill program that eventually located the main ore zone. Such high-tech prospecting in unclaimed areas toward the center of the basin could potentially unearth new discoveries.
To come up with a find, would-be discoverers will need drilling – and lots of it. As we've noted above, the Athabasca Basin is not an easy place in which to zero in on uranium deposits. A quick example: Cogema's Midwest Lake uranium deposit in the northeastern Basin was discovered in the late 1970s only after nine years of field work at a cost of $4.35 million (roughly $13.4 million in 2007 dollars).
Outside of the majors, very few companies are currently carrying out extensive drill programs in the Basin. The others may be loathe to drill because, so far, they've been able to promote themselves on land package size and potential resource – the key words here being "so far."
The initial buzz and excitement is over and now it is time for real results.
Drilling is how properties are put to the test, and only the true contenders, the ones who know they have a shot at finding something, are willing to pull drill core from the ground. A breakdown of 2007 drill programs in the Athabasca reveals who these contenders are.
There are 59 junior uranium companies in the Athabasca Basin. The top 5 Casey Research uranium stocks are drilling 73,000 meters, the other 54 juniors are drilling a combined 64,645 meters. So, 8% of the junior uranium explorers working in the area will account for 53% of the drilling. It is these companies who are serious about making a discovery, not simply riding the uranium wave. While nothing is guaranteed, it's clear who has the best chance of claiming the Athabasca's next monster deposit.
In 2006, the rising tide of interest in uranium lifted pretty much all junior uranium stocks, including those we follow in the Casey Energy Speculator. In 2007, our stocks have taken their lumps along with the rest of the sector, although some of our picks continue to charge forward (including one that is up 74% year-to-date, and over 350% since our original recommendation). We are not concerned, because we are invested in companies we are comfortable holding for their exploration – as opposed to promotional – promise.
With many of the best uranium juniors selling at bargain prices, investors with strong contrarian instincts now have a brief window of opportunity to get in before the true frenzy begins – so long as they choose the right juniors in the right district. Choosing the right district is the easy half of the equation. For all the reasons outlined above, it's clearly the Athabasca Basin.
As for cherry picking the right companies out of the dozens that now exist, based on our analysis, you only need to buy 5 of the 59 companies drilling in the Athabasca Basin this season to gain exposure to more than half of the entire drilling programs for the whole region. That reduces the task of building a portfolio of the right stocks to an easily manageable level.
As more and more money is poured into the ground, the likelihood of a new mega-discovery grows daily. It's even possible that the 2007 drilling season will see more than one major discovery in the Athabasca, sending the companies responsible on a phenomenal rise, and in the process, lifting all those who happen to be exploring nearby to new highs.
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