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5 "Tells" that the Stock Markets Are About to Reverse

America's Uranium Solution is In-Situ Recovery Mining

Commodities / Uranium May 31, 2007 - 03:21 PM GMT

By: Money_and_Markets

Commodities

Sean Brodrick writes: Last week, while at the U2007 Global Uranium Symposium, I visited three uranium projects. Two were on the conference agenda, one I was lucky to attend on a smaller, private tour. These tours taught me a lot about a particular type of uranium mining — one that will likely become the future face of uranium mining in the U.S.

Is there profit potential in this? You bet!

All three projects I visited use In-Situ Recovery (ISR). Basically, ISR uses water pumped under high pressure to extract uranium from rocks. At the Texas sites, the water is injected with a mix of either oxygen or carbon dioxide to dissolve the uranium from the surrounding rock.

It sounds weird, but it works. Oh, man, does it work! Using basically carbonated water, you can recover about 75% of a uranium resource and never dig a pit. Let me tell you why this technology is so important here in America …


Uncle Sam's Uranium Achilles Heel

America gets about 20% of its electricity from nuclear energy. But while U.S. civilian nuclear power reactors purchased a total of 67 million pounds of uranium oxide equivalent in 2006, U.S. mines only produced a little over four million pounds!

In other words, U.S. mines supplied about 6% of their country's uranium needs. That's even worse than our domestic supply/demand situation in crude oil, where we are at least able to produce 25% of our requirements!

America was once the world's biggest uranium miner. However, most of our deposits are in sandstone and tend to be lower grade than those of Australia and Canada. And because of the lower-grade deposits, many U.S. uranium deposits became uneconomic when the price of uranium declined sharply in the late 1970s.

Result: U.S. uranium production fell off a cliff.

And as fast and far as uranium prices have soared, until recently, it still wasn't economical to mine low-grade uranium deposits in the U.S. by conventional methods. Only when another metal was also recoverable in the deposit (vanadium, for example), was it worth it to start mining. Sometimes it still wasn't worth it!

ISR mining changes the whole equation because it's cheap — the projects I visited had production costs of under $35 per pound. Plus, the more uranium they mine, the more those costs-per-pound go down.

What's more, many of the sandstone deposits containing uranium in the U.S. are confined between impermeable geologic layers — mud, stone, shale or some type of clay. This makes them perfect for ISR projects.

Reason: ISR works best when there is clay above and below the sand-bearing ore body. Sandstone is very porous, so the clay layers help seal in the water you are pumping through the sand to suck out the uranium.

Let me break down ISR step-by-step …

First, you put a row of high-pressure water pumps into the sandstone …

Then, you inject the sandstone with oxygen or carbon dioxide to loosen the uranium from the rock …

You have a row of pumps on the other side to recover the resulting solution.

So, the clay layers above and below keep the uranium-rich water from bleeding off into the surrounding aquifer.

The more water pressure you can use, the more oxygen you can put in the solution, and the faster you can dissolve the uranium off the sandstone.

Now, About the Three Mines I Visited …

States including Wyoming and Texas have the right geology to be ground zero for America's ISR nuclear renaissance. And that's why I was able to visit three ISR projects within driving distance of Corpus Christi, Texas:

Mine #1: The first site I went to is under development. The company that owns the project is drilling like crazy to define its resource. It should have a new resource estimate coming out soon. But the drilling it has already done has revealed some rich finds. 

At the site, I got to look at drill core samples. The samples changed color from yellow sand to blue mud, showing that these projects do have the geology to make ISR work. Oh, and this is a public company trading at pennies on the pound!

Mine #2: This uranium producer just started up in the last year. It should produce about a million pounds this year using its main plant — which workers described as "basically a giant-sized Culligan Water Softener" — and satellite operations that recover uranium from the surrounding fields. This is another public company currently available at dirt cheap prices.

Mine #3: The third site I visited is a private operation, and was the most advanced. The company is called Mestena, and its project is Alta Mesa. Its uranium resources are so close that they don't even need satellite plants. Instead, the workers there use LO-O-O-O-NG hoses that are connected to the main water treatment plant.

As I mentioned earlier, each ISR field operation consists basically of a row of pumps pumping water in, a row of pumps pumping water out, and some big oxygen or carbon dioxide tanks to carbonate the water.

When the uranium-rich water comes out of the ground, it goes through a big vat of tiny plastic beads. The uranium attaches to the beads, forming a kind of slurry. This slurry is what is treated in the main plant.

The oxygen tanks (and everything else) are on skids resting on cement slabs. This makes it very easy to move the different pieces where they are needed and "tinker toy" them together. It also makes rehabilitation of the area very easy once the ISR operation is done.

That's basically it. Using this method, ISR operators I talked to have a 75% recovery rate, meaning they get three-quarters of the uranium resource out of the ground.

The end result is uranium oxide, which is put in large barrels. Each of the barrels contains 900 pounds of 83% pure yellowcake. In other words, each barrel is worth $93,735 at today's spot market price. I wonder what they'll be worth next week?

All in all, I learned some important things during my Texas trip. One especially useful lesson was that "pounds in the ground" aren't everything. Sure, when judging the potential of a uranium mine, it's important to know how many pounds of uranium they have in the ground. But that's just the start!

If it's going to be an ISR uranium producer, ask these three questions …

  1. Does it have plenty of water? And I don't just mean water nearby — it's important that the resource be in the water table so it is saturated with water. There are some nice resources around North America that are too far above the water table. The higher above water your resource is, the more expensive it is to get the metal out.
  2. How permeable is the aquifer? In other words, how readily can you move water through the formation? The more water you can pump, the more uranium you can get out.
  3. What is your ISR mining rate going to be? Two things determine this — the concentration of the uranium in the water coming out of the recovery wells and the flow rate. You multiply the flow rate by the concentration, also known as head grade, to find out what the mining rate will be. The higher the mining rate, the less the cost per pound.

Also, keep in mind that the small-cap miners are where you'll find the real values these days, especially because we've seen a wave of profit-taking. Hot money has rushed out of the sector recently on the perception that these stocks have gotten ahead of themselves. The hot money will be back. And smart investors who take positions ahead in advance will reap the rewards.

Of course, small-cap stocks can be extremely volatile. If you don't have the stomach for that, check out the Uranium Participation Corp. , a Canadian fund (run by Denison Mines) that holds physical uranium. The symbol on the Toronto Stock Exchange is U . In the U.S., the symbol is URPTF on the Pink Sheets. (On Yahoo, that would be URPTF.PK.)

Yours for trading profits,

By Sean Brodrick

P.S. If you're looking for my top uranium picks, check out my newest uranium report,
The Small Uranium Wonders . It highlights six great mining stocks to jump on right away. I'll also send you four updates throughout the year. In fact, I'm close to sending out an update, and I'm looking at a SEVENTH stock with an eye toward making it my NEWEST uranium pick. Just call us at 800-400-6916 and say you want "The Small Uranium Wonders" report or order online at my secure website .

This investment news is brought to you by Money and Markets . Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com .


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Comments

David Vitch
04 Jun 07, 12:13
Uranium

Watch as uranium is the commodity of the year. I have done very well with some uranium and I am looking for more juniors. Any ideas?

Thank you


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