Uranium is one of only a handful of minerals that are being produced at an annual deficit to demand. The shortfall in uranium production relative to demand, primarily for nuclear reactors, is drawn from existing uranium stockpiles. Given ever-increasing demand for carbon-free electricity and the number or nuclear reactors planned or under construction worldwide, expectations are for uranium supply to remain in increasing high demand for the foreseeable future. Most recently, the COVID-19 pandemic has caused international supply chain disruptions through shuttering of key uranium production centers in Canada and Kazakhstan, Canadian producer Cameco has indicated that it will keep existing production shuttered to force market price increases. Uncovered future demand is already over 1,500 M lbs U3O8, against annual supply of 140 M lbs U3O8 highlighting the need for new sources of uranium to be identified and new mines developed.
Historically, the lion’s share of uranium (~43%) production comes from Kazakhstan, where annual output in 2019 of 22,800 tU more than tripled production from Canada, the next biggest producer at 6,938 tU. State-owned uranium powerhouse Kaztomprom said it is following its plan to “flex down” production in Kazakhstan, calling for output to remain flat in 2020 compared to 2019, meaning there is potential opportunity for competition in the future to secure market-share in the supply shortfall.
This supply/demand scenario bodes well for higher uranium prices and for CanAlaska Uranium Ltd. (TSX-Venture:CVV) (OTCQB:CVVUF), a company focused for the last 15 years on uranium in the prolific Athabasca Basin in central Canada. In fact, the company now holds one of the largest uranium exploration portfolios in the region, all strategically located close to existing infrastructure and uranium processing facilities with diminishing supply, and strategic partnerships with Denison Mines and Cameco Corporation.
It’s what CanAlaska President and CEO Peter Dasler calls “a billion-dollar bonus for infrastructure.”
Several CanAlaska projects are being advanced simultaneously, with the most advanced being the West McArthur project, a joint venture with Cameco (TSX:CCO) (NYSE:CCJ), the #2 uranium producer in the world behind Kaztomprom and owner of the nearby McArthur River mine and Key Lake mill. Previously, Mitsubishi invested $17 million in developing and testing targets on the West McArthur project before CanAlaska bought-out their interest in 2016 and immediately formed an option and joint venture arrangement with Cameco.
The first exploration program completed by the new joint venture, in one of the eight target areas identified by the Mitsubishi investment, resulted in a new high-grade discovery with several holes containing 5% uranium grades near the unconformity. This wasn’t by any means a shot in the dark; West McArthur is immediately adjacent to, and on geologic trend from, Cameco and Orano’s newly-discovered Fox Lake uranium deposit, host to 68 million pounds of high-grade mineralization (7.99% U3O8) only two kilometers from the property boundary, and just 12 kilometers from the McArthur River uranium mine.
Subsequent to a $5 million earn-in program completed by Cameco, CanAlaska took over as operator on the project in late 2018. Continued drilling by CanAlaska has further defined a large mineralized system similar to other Tier-1 deposits in the area with uranium intersections up to 8% U3O8 which remains open in all directions.
By all measures, the mineralized zone is significant, since the current target extends at least 300 meters along strike and 150 meters in width with the halo of uranium, base metals and clay enrichment reaching surface, 750 meters above the target horizon. This is a giant mineralizing event like those encountered at Tier 1 deposits such as McArthur River and Cigar Lake in the Athabasca Basin.
As a project generator, CanAlaska management has a keen mindset to work with joint venture partners to move projects forward. At its nearby Moon project with joint venture operator Denison Mines (TSX:DML) (NYSE American:DNN), a 126 kilometer Stepwise Moving Loop (SWML) electromagnetic survey was undertaken this winter to better understand a 5 kilometer corridor of interest. Three distinct target areas were identified for future drilling programs, one of which is spatially associated with weak uranium mineralization. Denison has now earned a 75% interest in the project that is located adjacent to its Crawford Lake property near the Phoenix and Gryphon uranium deposits.
To the southeast of West McArthur, and on trend with other mines and projects in Saskatchewan, the company is actively seeking joint venture partners for its promising Cree East property and its 11 outlined uranium-rich zones. Zones A and B show the most promise for early discovery and are drill-ready. More than $20 million has been invested in Cree East’s target development through joint venture partnerships with Korean entities, KEPCO and KORES. CanAlaska bought out the Korean partners interest during the low uranium market and now owns 100% of the Cree East project.
Recently, CanAlaska staked four additional properties northeast of Cameco’s Eagle Point mine, all of which are deemed to be highly prospective for basement-hosted uranium mineralization like Eagle Point or NexGen’s Arrow deposit. This area northeast of Eagle Point is very under-explored for basement uranium deposit potential. Along trend, CanAlaska’s NW Manitoba project, a joint venture with Northern Uranium, intersected in drill holes evidence for deep basement alteration systems associated with strong clay development and uranium enrichment. The Athabasca Basin is believed to have covered this area during the time of uranium deposit formation so the presence of this deep alteration in association with uranium is a significant sign-post for discovery. The company seeks joint venture partners to advance these projects.