The Christie Lake Project is located only 9 km northeast and along strike of Cameco’s McArthur River Uranium Mine, the world’s largest uranium producer.
The P2 Fault, the controlling structure for all of the McArthur River deposits, continues to the northeast beyond the mine. UEX believes that through a series of en-echelon steps, the northeast strike extension of the P2 Fault not only crosses the Project, but also controls the two known uranium deposits on Christie Lake, the Paul Bay and Ken Pen Uranium Deposits (see Figure 2).
The Paul Bay and Ken Pen Uranium Deposits are estimated to host a combined 20.87 million pounds of U3O8 at an average grade of 3.22% U3O8 and were discovered in 1989 and 1993 respectively. (This is a historic resource estimation which does not use resource classifications consistent with NI 43-101.
The historical resource estimate was presented in an internal report titled Christie Lake Project, Geological Resource Estimate completed by PNC Tono Geoscience Center, Resource Analysis Group, dated September 12, 1997. The historical resource was calculated using a 3-D block model using block sizes of 2 m by 2 m by 2 m, and block grades interpolated using the inverse distance squared method over a circular search radius of 25 m and 1 m height. Specific gravities for each deposit were averaged from specific gravity measures of individual samples collected for assay.
UEX plans to complete additional infill drilling on the deposits during the option earn-in period to upgrade these historic resources to indicated and inferred. A qualified person has not done sufficient work to classify the historic estimate as current mineral resources or mineral reserves. UEX is not treating the historic estimate as current mineral reserves or mineral resources.)
There have been no exploration activities on the property since 1997, when for corporate reasons, PNC suspended exploration. JCU purchased this property from PNC in 2000. Unconformity depths average approximately 420 m in the Paul Bay area, which is about 120 m shallower than the unconformity depths at the McArthur River Mine.
Due to its unusual history, Christie Lake is the last significant Athabasca Basin example of a "time capsule" property, since any equivalent examples of high grade mineralization in the Basin have always generated a much higher intensity follow-up exploration programs.
In the 25 years since the discovery of the Paul Bay and Ken Pen Uranium Deposits, new styles of unconformity uranium have been recognized in the Athabasca Basin, most importantly the basement hosted uranium settings such as those that have comprised the majority of recently discovered Athabasca uranium resources at Millennium, Shea Creek, Eagle Point North Extension, Roughrider, Triple R, Arrow, and the Gryphon Zone.
The Paul Bay and Ken Pen Uranium Deposits, as presently defined by historical drilling, occur at and just below the unconformity with relatively shallow basement roots along the controlling fault structure.
Deeper down-dip continuations of these deposits following the new basement-hosted uranium deposit models have not yet been tested, as these deposit settings were not well understood 20 years ago. The Company feels there is excellent potential to significantly expand the existing resource base utilizing modern exploration techniques and thinking.
UEX president and CEO Roger Lemaitre said: "By adding the Christie Lake Project to our portfolio, UEX now has a compelling trinity of advanced exploration projects in the world’s premier uranium region for mining and development. All three of these projects, Shea Creek, Hidden Bay and Christie Lake all have substantial uranium resources and have tremendous upside potential for resource growth."
Beyond the immediate deposit areas, uranium mineralization is also found almost continuously along the unconformity over a 1.5 km long strike length extending northeast and along strike of the Paul Bay and Ken Pen mineralization.
UEX believes there is great potential to make additional uranium deposit discoveries through follow-up of these mineralized holes, as drill holes have not yet tested down-dip of the fault structure at the same locations in the basement fault where the Paul Bay and Ken Pen deposits are located. Seven high priority exploration targets have been identified along this 1.5 km long mineralized trend, which will be the focus of UEX’s initial exploration activities.
In addition to the known 1.5 km long mineralized trend, strong alteration and anomalous uranium concentrations are found in holes along the fault trend between Paul Bay and the southwestern margin of the property along the P2 Fault extension in the direction of the McArthur River Mine that warrant significant exploration effort.
The Christie Lake Project also hosts tens of kilometres of known electromagnetic conductors which lie south of the Paul Bay uranium trend that have never been drill tested.
It is extremely rare that electromagnetic conductors defined in the 1990s remain untested today by drilling in the eastern Athabasca Basin, especially so close to two world class uranium mines, Cigar Lake and McArthur River and at depths of less than 420 m to the unconformity. UEX is of the opinion that these conductors represent some of the most prospective pure grassroots exploration targets in the Athabasca Basin.
Lemaitre said: "In many ways, the Christie Lake Project is at a very similar stage of development as was the Shea Creek Joint Venture when UEX signed its option agreement with AREVA back in 2003. Christie Lake currently has two known uranium deposits with on-strike and untested basement deposit extension potential, and possess an extensive trend of uranium-in-drill-hole showings that have yet to be followed up with additional drilling."
Terms of the Agreement
The signing of the LOI grants UEX the exclusive right to negotiate a formal option agreement with JCU on the Christie Lake Project for a period of 90 days. In return for the exclusivity during the negotiations, UEX will pay $250,000 to JCU upon signing of the LOI. The option agreement will formalize the terms already agreed to in the LOI, and is expected to contain additional terms as considered normal in the industry to oversee exploration operations during the earn-in period.
UEX and JCU have agreed that UEX shall make staged payments totaling $7,000,000 to JCU (including the $250,000 payment upon signing of the LOI) between January 1, 2016 and January 1, 2020. UEX has also agreed to fund $15,000,000 in exploration expenditures on the Christie Lake Project over the same period of time.
UEX will earn an incremental interest in the project for each annual cash payment and exploration work commitment completed. Should UEX continue to meet its cash payments and exploration work comments under the schedule, UEX will earn a majority interest in the project before the end of 2018. UEX will be the operator of the Project throughout the earn-in period.
Commenting on the ability to successfully negotiate an LOI, UEX Board Chairman Colin Macdonald said: "UEX’s strengths have always included strong relationships with large uranium industry players, Cameco, AREVA, and JCU, both at the corporate and director level and through CEO Roger Lemaitre. The acquisition of Christie Lake via this option agreement is an example of leveraging such relationships in the service of continued growth in UEX’s advanced exploration assets and in shareholder value.
