Why Does a Company s Uranium Resource Calculations Double
Below is a MRR and PLR article in category Finance -> subcategory Investing.
Why Companies' Uranium Resource Calculations Can Double
Summary:
Shifts in uranium mining techniques and resource calculation methods are causing significant increases in uranium estimates, often leading to dramatic rises in share prices for uranium companies.
Introduction:
Have you ever wondered why a uranium company’s resource calculation might suddenly double? This question led me to discuss with industry experts, including William Boberg of UR-Energy and David Miller of Strathmore Minerals. One example is Strathmore Minerals’ Church Rock property, where differences in mining methods?"conventional versus in-situ solution mining?"resulted in larger estimated resources.
National Instrument 43-101
Canadian mining companies must file a National Instrument 43-101 (NI 43-101) to announce uranium resource estimates. This regulation, established after the Bre-X Minerals scandal, requires an independent evaluation of the property, ensuring investor protection.
Mining Methods and Resource Estimates
Differences in mining techniques significantly impact resource estimates. Traditional methods, like underground mining, use specific cutoff grades and thicknesses. For example, Kerr-McGee employed a “Circle Tangent” method with a 6-foot true thickness and a 0.1 percent grade cutoff in the 1970s and 1980s.
In contrast, in-situ recovery (ISL) uses different parameters, allowing for a lower cutoff grade, which can significantly alter resource estimates. When Strathmore revised its Church Rock estimate, they used a 0.03 percent cutoff, demonstrating how ISL affected the calculations.
Geometrical Approaches to Estimations
Calculating uranium resources involves complex geometrical methods. Companies originally used block models to estimate reserves. Kerr-McGee, for example, used blocks defined by specific distance measurements and lithologic consistency.
The polygonal method, employed by other companies like Pathfinder Mines and Strathmore, is considered more accurate for certain deposits. This involves creating “areas of influence” (AOI) polygons around drill holes to determine the resource size.
Impact on Share Prices
When companies announce increases in their resource estimates, it often leads to a rise in stock prices. For instance, Strathmore's share price rose by about 10 percent after they updated their uranium estimates. As uranium prices remain strong, companies may continuously refine and increase their reported resources.
Conclusion
Changes in mining methodology and advancements in calculation techniques can lead to significant adjustments in reported uranium resources. As uranium prices fluctuate, we can expect companies to revise their estimates, with potential benefits for investors.
Acknowledgment:
Special thanks to Terrence Osier, Senior Geologist at Strathmore Minerals, for providing valuable insights.
References:
- Parker, H.M., 1990, Reserve Estimation of Uranium Deposits, Society for Mining and Metallurgy, and Exploration, Inc.
- Popoff, C.C., 1966, Computing Reserves of Mineral Deposits, U.S. Bureau of Mines.
- Sandefur, R.L., and Grant, D.C., 1976, Preliminary Evaluation of Uranium Deposits, International Atomic Energy Agency Symposium.
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