Seeking Alpha
Oil & gas, small-cap, commodities
Profile| Send Message| ()  

Patterson Lake Update

Fission Energy (FSSIF.PK or FIS on the TSX Venture) and Alpha Minerals (ESOFD.PK or AMW on the TSX Venture) released a joint project update on February 7th, disclosing that additional mineralization has been encountered in the first two step out holes of the winter season. This news is confirmatory in nature and reinforces the view that the Patterson Lake property has the potential to host a significant and shallow uranium deposit. The full press release can be viewed here.

Of note, hole PLS13-027 intersected a 37 meter thick interval of well-developed mineralization, including a total of 4.35 meters of "off-scale" radioactivity. Off-scale readings occur when the measurement device "pins" at its highest reading. Off-scale readings are typical of high-grade deposits.

In the prior best hole of the 2012 fall program, the longest off-scale intersections totaled 2.1 meters (versus 4.35 meters in this hole), so an initial comparison is favorable. Assay results are always needed to confirm grades, but given the descriptions given there is no reason to believe that this mineralization is any different than what was encountered before in terms of grade potential.

Both holes were drilled about 15 meters west of the prior discovery holes, and they extend the strike length by that distance. In uranium deposits, a "step-out" method like this is generally used in the delineation phase. Given that the first step outs appear to have hit similar (if not more robust) mineralization, this is a positive development. Given the shallow depth and early indications of grade in the 1% range, the market has started to perk up and take notice.

The biggest outstanding question is in regards to the size of the deposit. Only more holes will provide that information. Given the size of the boulder field, the grade of the boulders, and the geophysical and geological data I have presented in prior articles, the potential for size is there. Key Lake has been suggested as a potential deposit analogue, which is a 200 million pound deposit. I'm not saying that this is going to be 200 million pounds, but that's what is on the table in terms of "size of the prize" and is what investors have to balance when considering the risk versus reward.

In terms of upside, a $10 per pound valuation would roughly be in line with what Hathor Exploration was bought for in late 2011, so a "blue-sky" project valuation would be in the $1-2B range (50% to Alpha and 50% to Fission), depending on what is ultimately proved up through drilling at Patterson Lake. In terms of downside, no one really knows that there is anything economic there, so investors really need to consider this as risk capital. You simply cannot know the size until you have drilled the last hole. In the meantime, much like a Sherlock Holmes story, only deduction can guide current "fair value."

The more data the market gets the more accurately Patterson Lake's value will be known, but investors will "pay" (one way or another) for that information in the market. All I can say is that based on what has been seen so far, the geological model is holding up, and that's what I want to see. Results should come fairly frequently now that the drill program is underway and if FIS/AMW start to get any indications that the mineralization continues farther west and/or onto the lake, I would expect attention to grow around the story.

Always remember the risks in junior mining companies, as these are highly speculative ventures. I encourage people to read my prior article on this project to see my thesis on this project, as understanding the data is critical to making an informed decision. Given the data so far, I continue to be encouraged. The companies are drilling in an area up ice of the largest boulder field discovered in the Athabasca basin, with boulders grading up to 40% U308, with proven mineralization in the basement along the edge of a large resistivity low with coincident EM conductors with significant untested strike length. I know that's a mouthful, but it is a textbook example of what you would want to see if you were a uranium explorer, full stop.

Source: The Athabasca Basin Uranium Discovery That's Starting To Get Some (Warranted) Attention