Top-tier Team Doubles Low-Cost Uranium Resource

Richard Reinhard has a good nose for value and people, and understands that success often breeds success. So he points us to the team that took Bema Gold through to a US$3.3-billion buyout by Kinross Gold back in 2007. Now teamed up with well-known mining venture capitalists Endeavour Financial, Uracan Resources (URC-TSX Venture) is rapidly moving them towards their objective to develop large, open pit uranium mines in “the world’s most friendly mining jurisdiction”. Richard compares Uracan’s “market cap per pound in the ground” to help bring to light the overlooked value.

Resource Upgrade doubles NI 43-101 compliant resource to 40.7M lbs U3O8

Uracan announced today that it has significantly increased near-surface National Instrument 43-101-compliant inferred resources within their 100%-owned 1,000-square-kilometre North Shore uranium property in Quebec, to a total of 40.7 million pounds of uranium.

In July 2008 Uracan announced a NI 43-101 compliant inferred resource of 74.2 million tonnes at an average grade of 0.012% U3O8, containing 9 million kilograms (19.96 million pounds) of uranium at the Double S Zone. This inferred resource estimate was based on diamond drilling completed during 2007.

Today’s release covers the TJ and Middle Zones’ inferred resources based on drilling completed during 2008.
At TJ Zone, a total of 28.66 million tonnes averaging 0.011% U3O8 containing approximately 3.21 million kilograms (7.0 million pounds) of U3O8 has been outlined. At Middle Zone (MZ), 52.03 million tonnes averaging 0.012% U3O8 containing 6.2 million kilograms (13.7 million pounds) of U3O8 has been outlined.

These two mineralized zones’ combined resource hosts 80.7 million tonnes at an average grade of 0.012% U3O8 containing 9.4 million kilograms (20.7 million pounds) of U3O8 using a 0.009% cutoff, and fall into the inferred mineral resource category under NI 43-101 reporting requirements.

During 2008 Uracan focussed its exploration efforts on defining additional areas of uranium mineralization within the overall Double S trend, which is a 6 km radiometric anomaly hosting the existing Double S resource. Detailed mapping, sampling, ground geophysics and diamond drilling along this trend defined two significant zones of mineralization, the TJ and Middle Zones. The TJ Zone is approximately 3 km northwest of the Double S Zone, and the Middle Zone is 1.3 km west of the Double S Zone. Both TJ and MZ are open along strike and at depth as well as up dip from the currently defined resource outlined in today’s news release.

The combined resource estimate for these two new zones outlines the initial inferred resource as defined by diamond drilling completed between January and September 2008. A total of 33 diamond drill holes totaling 6,791 meters at TJ and 33 diamond drill holes totaling 7,071.5 meters at MZ were used to create the models used in the resource calculations.

Combining all three zones (Double S, MZ and TJ) produces a total inferred resource estimate of 154.9 million tonnes at an average grade of 0.012% U3O8 containing 18.48 million kilograms (40.73 million pounds) of uranium using a 0.009% cutoff.

Uracan has now restarted its exploration program on the North Shore Property, with crews mobilized to the property, and an initial 3,000-metre drill program on the existing Double S zone resource area slated to start at the end of this month.

The table above compares Uracan’s Market Cap per pound of uranium to companies that have recently undergone a takeover or similar transaction (M&A), and other quasi-peer group comparables. Uracan appears to be significantly undervalued with only $0.40 per pound of Market Capitalization, reflecting the early stage, inferred resource nature of its resource, providing significant upside potential as the asset is expanded and in-filled. Canaccord’s recent research states that the industry average is $2/lb, and when you eliminate the assets that are in relatively poor political jurisdictions (Mongolia, Australia, Labrador) that average is more like $3/lb.

Conclusion
Uracan closed a $4.8 million financing at $0.25 per share last October, to fund ongoing exploration. While they will likely need to raise additional equity over the next six months, operating in “the world’s most friendly mining jurisdiction” has its benefits, in the form of a Quebec government rebate program that results in a 35% rebate of mining exploration expenditures – expected to result in a $3.5 million cash infusion 2Q 2009 based on 2008 qualifying expenditures of about $10 million.

Uracan has now outlined a 43-101 compliant inferred resource of 40.7 million pounds U3O8 at its North Shore project. The Double S deposit is located 8 km north of the St. Lawrence Seaway, with power and a major provincial highway running through the property. This is a potential low-cost open-pitable resource that outcrops at surface, and is open at depth and along strike.

Uracan’s management is teamed up with well-known M&A and mining venture capitalists Endeavour Financial, with the objective to develop large, open pit uranium mines in Canada. Their targets have inexpensive exploration costs, and should enjoy low operating costs once developed.

Management is well respected in the industry, and has extensive open pit mining experience from their time running the former Bema Gold. Bema was a huge success, bought out for US$3.3-billion by Kinross Gold in February 2007.

In 2008 Uracan made a second uranium discovery at surface at its 100% owned Pipewrench Lake property in Saskatchewan, located about 120 km south of the Athabasca Basin. Drilling in 2008 intersected 1 to 3 pounds U3O8 per ton over widths up to 19.5 metres. Pipewrench Lake is hosted in the same Wollaston domain geology that forms the basement rock to many of the rich underground uranium mines in the Athabasca Basin, but here the domain is at surface.

Drilling at the North Shore property continues year round and remains open along strike in both directions. The TJ zone is 3 km northwest of the Double S zone and 1.4 km northwest of the Middle zone.