Namibia (Further names to watch in Namibia include Xemplar, and West Australian Metals)

Namibia: uranium's new haven. Hot sector, hot stories.

Deep Yellow's INCA project in Namibia continues to turn out world class drill grades.

Author: Barry Sergeant
Posted: Thursday , 21 May 2009

JOHANNESBURG -

Australia- and Namibia-listed Deep Yellow has announced further high grade drill results from its INCA project in Namibia, following a big upgrade to the project's status on 13 May, which followed in turn the 23 April release of very high grade results from six deeper drill samples from INCA. Deep Yellow took a chance of drilling below 200m on a targeted part of INCA, and it seems that the chance is working out.

The latest results include a finding of 1,938 parts per million (ppm), or 0.194%, uranium oxide, over 16 meters. This can be compared to the nearby Rössing mine, to the north, 69% held by Rio Tinto, and known to uranium specialists as the "grand old lady" of the Namibian uranium industry. Rössing lays claim to 140m pounds of historical production over 30 years, with current production running close to 10% of global uranium oxide output. Rössing boasted an initial resource of 373m tons grading 0.03% to 0.05% uranium oxide; remaining resources of 250m tons are around 0.025% uranium oxide, contained in a monster 5km long, 500m wide and 350m deep open pit.

In recent years, a good number of solid pay finds have been made in the uranium field in Namibia, startlingly highlighted by the August 2007 purchase by French transnational Areva for USD 2.5bn of Uramin, formed just two years previously to acquire and develop mineral properties, predominantly uranium, in Namibia, the Central African Republic and South Africa. The grade at Trekkopje, the property Areva acquired in Namibia, is at 0.11%; mine commissioning is anticipated during 2010.

At Paladin's now in-production Langer Heinrich, east of INCA, the resource is 164m pounds at a grade of 0.06%. Langer Heinrich commissioned in 2007 on time and on budget, and continues with the process of ramping production to what could amount to 6m pounds of uranium a year, at a cash cost of USD 25/lb by the second half of 2010. Uranium spot prices are currently around USD 51.00/lb; term prices sit around USD 60/lb. Paladin holds close to 20% of Deep Yellow.

The Rössing South discovery, north east of INCA, recently described by owner Extract Resources as "the highest grade granite hosted uranium deposit in Namibia and potentially one of the largest uranium deposits in the world" has outlined a resource of 108m pounds of uranium oxide at a grade of 430ppm (0.043%). Forsys meanwhile is far advanced at the Valencia mine, where measured and indicated resources are at 61m pounds of uranium oxide, with a grade of 130ppm (0.013%), plus an inferred resource of 20m pounds at 0.012%. Forsys may be acquired by George Forrest International Afrique S.P.R.L. for CAD 579m. At Bannerman's Etango, immediately to the north of INCA, the resource is 127m pounds at 0.02%.

The style of mineralisation at INCA is unusual, being classified by Deep Yellow as a metasomatic - magnetite skarn type. This is distinct and different from the known lower grade alaskite hosted uranium mineralisation well known in Namibia. It remains relatively early days at INCA, but sample grades out in April included 10m of 7,293ppm (0.729%). Seen a little more broadly, Deep Yellow has chosen to say that INCA, east of Swakopmund, "has returned wide intersections of uranium mineralisation of around one pound (450 ppm) uranium oxide or better at ±200 meter depth including exceptionally high grades of up to 3.2% uranium oxide over two meters in hole INCR15".

While the host at INCA - iron ore - is highly unusual in Namibia, Deep Yellow also differs from its peer group seeking uranium in the country. Deep Yellow already holds multiple projects, with aggregated resources already easily topping 100m pounds of uranium. The Reptile Project holds 100% of four contiguous exclusive prospecting licences (EPLs), covering 2,681 km2 that contains historical discoveries of gypcrete, calcrete and sand hosted secondary uranium mineralization. Projects within projects within Deep Yellow include INCA, Tumas, Oryx, Aussinanis and Ripnes. At INCA, the uranium oxide is a primary, and not secondary, type deposit.

Seen as a global mining subsector, uranium stocks have been in very good relative demand over the past while. Extract's stock price has done exceptionally well, and has seen a 16% equity buy in from Rio Tinto. Kalahari Minerals, which holds 38.85% of Extract Resources, has also seen its stock price soar; Rio Tinto has also acquired a 15% stake in Kalahari Minerals. Further beneficiaries of this action include NWT Uranium, which holds 34.06% of Niger Uranium, which in turn owns 15.06% of Kalahari Minerals. Polo Resources last month announced a holding of 5.7% in Extract. Further names to watch in Namibia include Xemplar, and West Australian Metals.