Patterson Lake Update
50/50 JV partners Alpha Minerals ([[ESOFD.PK]] or AMW on the TSX
Venture) and Fission Energy ([[FSSIF.PK]] or FIS on the TSX
released an update
on Monday (March 11th) regarding step-out drilling progress on the
Patterson Lake South property. The results extended the "east zone"
15 meters to the east (now called Zone 390E) and the zone remains
open to expansion.
The reported PLS13-051 hole showed the longest continuous
off-scale interval encountered to date on the property.
These are the first step out holes drilled in the area surrounding
hole PLS13-038, which previously hit 57.5 meters of high grade
mineralization, including 10.65 meters of off-scale
The highlight hole (PLS13-051) was a 15m step-out which extends
this recently discovered zone to the northeast.
PLS13-051 showed a 53 meter interval of continuous
radioactivity, including 13.9 meters of "off-scale," the most seen
to date in any drill hole on the property.
Within that 13.9 meters, was an 11.5 meter interval of continuous
off-scale mineralization, which is again the thickest such interval
seen to date in any drill hole on the property. Two other holes
were reported around PLS13-038; one to the south (PLS13-046) which
was outside of the mineralized zone and one to the north
(PLS13-044) which appears to have hit the edge of the zone. Both
holes were drilled to help determine the orientation of the zone,
which then led to the drilling of the highly mineralized PLS13-051
Compared to hole PLS13-038, the PLS13-051 step out shows
remarkable consistency and is highly correlative. This bodes well
as it shows a "consistent and mineralized" zone, which may mean it
will be traceable over additional strike.
Figure 1: Gamma Logs of PLS13-038 (left) and PLS13-051
(click to enlarge)
In what can only be described as perplexing market action, both
Fission and Alpha are actually trading down on this news as I write
this. Trying to understand why shareholders would sell on the back
of news that is confirming the very exploration model that they
were invested in the first place is a mindbender. It could perhaps
be that investors were hoping to see a "wider" zone than what is
currently indicated based on the limited available drill data. If
that is the case, it can only mean that those investors have little
understanding of the nature of fracture/fault hosted uranium
For those looking for deeper context on such a deposit, there
are numerous resources available on the web, one of which is a
presentation on the history of the Key Lake and McClean Lake areas
. An example of a fault controlled basement deposit is shown below
(clipped from the linked presentation). The mineralization
concentrates along fault zones, which are typically narrow and
often high grade.
Figure 2: A Cross Section Through the Deilmann Deposit at Key
Lake as an Illustration of a Fault Controlled Uranium Deposit
(click to enlarge)
(source: modified from S. Harvey, 2004 and from Areva/Cogema SGS
Open House Presentation, 2005)
As an example, Denison's (
) Wheeler River deposit, from the figures in their presentation
materials, has a high grade core that appears to be in the 10-20m
width range in plan view (see my prior article
), which is comparable to what has been seen in the early holes
around PLS-13-038. Furthermore, Cameco's (
) giant McArthur River deposit is on average 12.7 meters thick (see
the McArthur River 43-101 report
). I reference Wheeler River and McArthur River simply to
illustrate what a fracture and fault controlled uranium deposit
looks like in terms of shape, width, and variability (the deposit
types may be quite different in other respects). Without
appreciating the geometry and nature of other uranium deposits,
investors are handicapping themselves in terms of interpreting
Patterson Lake data going forwards. To put it bluntly, in any
rational evaluation of the results released today (and based on any
rational expectations) today's news is at worst confirmatory in
nature, which simply may not be good enough in a junior mining
market that can only be described as brutal.
Two additional holes were also reported from regional
reconnaissance drilling on two target areas approximately 2
kilometers to the northeast. Both holes encountered significant
clay alteration, but no mineralization. Hitting mineralization on a
step out that far away on the first hole would be akin to hitting a
hole in one from the tee on a par 4, if not a par 5. The clay
alteration should not be discounted. Clay alteration is commonly
seen in regions of hydrothermal activity and may suggest proximity
to a mineralizing system. There is also a lack of sandstone cap
rock in that area, which is one of the prerequisites for the
yet-to-be-found boulder source area. Numerous targets remain to be
tested in that region and the company has stated that future
drilling is planned in the area. I find it hard to believe that
these reconnaissance drill holes could have anything to do with the
trading action after the news either.
As long as drilling continues to prove up mineralization "pounds
are being added" and the geological and exploration model is being
validated. Over-analyzing market reactions on a day-to-day basis is
typically a navel-gazing exercise, but I believe my point is clear.
The news released today is unquestionably positive and at worst
confirmatory in nature and with two rigs drilling and assay results
getting closer by the day, information is coming in quickly. A
deposit that combines high grade and shallow depth with a low strip
ratio is an ideal scenario in the mining sector and each data point
adds to the story developing at Patterson Lake. To be sure,
Patterson Lake can only be characterized as speculative by its
nature, but both partners are well-funded and the uranium macro
winds appear to be set to lift the sector beginning sometime in H2
The data continues to impress. I simply can't recall an
exploration story with results like these at depths like these in
the uranium sector in recent memory. As always, price and
information are correlated over the medium and long term in the
mining sector. The more information that is available, the more
efficiently priced an asset becomes. Assay data should start coming
in soon, but most informed investors have likely already formed
opinions on potential grade based on core descriptions given so far
in the 2013 program.
Perhaps investors are simply wanting to see more than Alpha and
Fission can deliver, after all, there is a physical limit to how
fast these companies can drill. I hate to invoke the words of a
value investor in something as speculative as mining exploration,
but as Ben Graham once said, "In the short term, the market behaves
like a voting machine, but in the long term, the market acts more
like a weighing machine." So far it looks like Patterson Lake has
some weight to it, but only time will tell.
In the meantime, the drills continue to turn, and with results
like these, investors can take comfort in the fact that the
exploration model is holding up better than anyone would have
expected at this early stage. To think that the market can "yawn"
at a second hole showing 50+ meters of uranium mineralization just
100 meters from surface should be enough to catch the attention of
even the most hardened mining investor.
I am long [[ESOFD.PK]]. I wrote this article myself, and it
expresses my own opinions. I am not receiving compensation for it.
I have no business relationship with any company whose stock is
mentioned in this article.
Yields Are Low, Get Over It