Chad Ulansky cut his teeth on Ekati, Canada’s first diamond discovery, but it’s uranium that he’s hunting for now in Canada’s frozen North.
The Kelowna geologist is president and CEO of Northern Uranium (TSXV:UNO), which is exploring in northwestern Manitoba just beyond the eastern edge of the prolific Athabasca Basin.
Ulansky got his start as a geologist with Chuck Fipke’s Dia Met Minerals, which discovered Ekati, Canada’s first diamond mine, at Lac de Gras in 1991. The discovery by Fipke and Dia Met partner Stu Blusson, which came after years of systematic exploration, rocked the global diamond industry and sparked the biggest staking rush since the discovery of gold in the Klondike.
The Ekati discovery also kick-started the Canadian diamond industry and upset the De Beers cartel. Canada is now the world’s third largest producer of diamonds by value, with four mines and another two under construction.
Last year, Fipke sold his 10% interest in Ekati for $67 million US to Dominion Diamond Corp., which owns 89% of the mine (Blusson retains a 10% interest).
The Fipke-Ulansky partnership began when Ulansky was just a teenager. An avid outdoorsman from a young age, Ulansky met Fipke when the geologist attended a presentation Ulansky gave to a Kelowna scout troop, and the two hit it off. Fipke told him he would call him at the end of the school year.
Sure enough, Fipke phoned in June and offered Ulansky a summer job, a gig that turned into a continuing, decades-long partnership.
Ulansky continued working for Dia Met until its purchase by BHP in 2001.
Along the way, he obtained a bachelor’s degree in geology at the University of Cape Town in South Africa, where he studied under renowned diamond geologist Dr. John Gurney.
Ulansky retained his love of the outdoors while living in Cape Town. In 2001, he set a record for the Three Peaks Challenge, a 50-km mountain running trail that involves ascents of the three major peaks above Cape Town — Devil’s Peak, Table Mountain and Lion’s Head.
He’s climbing a peak of a different sort as president and CEO of Northern Uranium, which is searching for an economic uranium deposit just outside the Athabasca Basin — home to dozens of competitors.
Northern Uranium has earned a 50% option on the Maguire Lake property from CanAlaska Uranium. The property borders on Saskatchewan and is located along the extension of the Mudjatik Wollaston tectonic zone, which runs southwest-northeast near the Manitoba border. The zone hosts many of the Basin’s major uranium deposits, including Cameco’s Cigar Lake, McArthur River and Key Lake.
Cigar Lake and McArthur River both have uranium grades above 20%, and Ulansky is out to prove that high-grade uranium exists on Northern Uranium’s property as well.
His thesis is that extensive glaciation stripped off the sandstone and sediments and left basement rock exposed, hosting shallow uranium mineralization.
There is some early evidence supporting his thesis. Prospecting work done by CanAlaska uncovered a boulder that contained 66% uranium oxide, and in situ grab samples have contained grades up to 9% U308.
Finding dozens of mineralized boulders in a small area is highly uncommon, Ulansky says, and Northern Uranium is now searching for the bedrock source of that mineralization.
“What we need geologically is all that uranium in trace quantities across huge volumes of rocks to be picked up and brought to one spot and concentrated there,” Ulansky says, talking about geological changes that occur over millions of years. “The mechanism for that is percolating fluids, waters that circulate through bedrock. When these fluids are slightly oxidizing, they scavenge uranium, they move thru cracks, fissures and preferentially strip out the uranium and carry it with them. The fluids migrate through rocks, when they get to a fault zone that’s permeable, they’ll rise to the surface and cool. Solubility drops and over millions of years, fluids will circulate and uranium will start to precipitate out.”
Northern Uranium has expanded on CanAlaska’s program using various methods — including electromagnetic, magnetic, ground gravity and radon surveys — to narrow down drill targets for a “focused” $1.5-million exploration program.
Airborne magnetics has identified faults that could provide an important pathway for mineralizing fluids, while electromagnetics has identified a 35-kilometre conductor path where precipitation of uranium mineralization is more likely.
RADON RESULTS STELLAR
Radon surveys — which are not being used by all early-stage uranium explorers in the Basin — are among the most useful tools in the hunt for uranium mineralization, Ulansky says.
Just as Fipke used diamond indicator minerals to find Ekati, Northern Uranium is using radon surveys to detect the presence of uranium mineralization.
“The silver bullet for uranium is radon. It’s a gas, highly mobile, very short half-life, that percolates up from uranium mineralization at depth,” Ulansky says.
“Imagine if you were exploring for gold and it uniquely gave off something called gold gas. You’d just go look for the gold gas.”
Radonex, the same company that completed radon surveys for Fission’s high-grade Patterson Lake South project did lake-based radon work for Northern Uranium, and the results were comparable to PLS’s, Ulansky says. Results from the land-based radon surveys were also strong.
However, the challenging part is that the radon signature is much larger than the uranium mineralization associated with it.
“We are very, very strong believers in the fact that there is high-grade uranium mineralization there, it’s just a matter of figuring out where it is,” Ulansky says. “I firmly believe there’s a major discovery to be found, and it’s just a matter of drill testing to find it.”
Watch: Mr. Fipke’s Canadian Mining Hall of Fame 2013 Induction Video
TARGET ZONE IDENTIFIED
Ulansky’s team has zeroed in on an area 3 kilometres wide by 10 kilometres long, centred over Maguire Lake. The target zone is northeast and up ice of the high-grade boulder discovered by CanAlaska.
“The ice direction is from northeast down to the southwest, so it certainly hasn’t come from the Athabasca, which is down-ice,” Ulansky says. “That’s telling us that up-ice there is some exceptionally rich mineralization to be found.”
During the 3 coldest months of winter, crews have been testing priority targets underneath the lake.
Early drilling has hit some uranium mineralization but not in economic quantities, Ulansky says.
Drill results are expected in the coming months, and with $500,000 in the treasury, Northern Uranium will need to raise money to fund more drilling.
Fipke is a special advisor and major shareholder.
“All the geology to date looks exceptionally promising, it’s just a matter of raising the funds to continue drilling,” Ulansky says.
Northern Uranium can earn up to an 80% interest in the project by spending an additional $8.4 million in two tranches and issuing 7.5 million shares and 3.75 million warrants over four years.
Ulansky remains a key player in Fipke’s group of companies; he’s president of Cantex Mine Development and president and CEO of Metalex Ventures. The two companies share Kelowna office space with Northern Uranium, helping keep the burn rate down to $10,000 a month.
The group of companies also own the drill rigs.
The radon and boulder indicators that Northern Uranium has are promising, but now comes the hard part: finding high-grade uranium mineralization. Ulansky compared the exploration effort to trying to break a plate at the bottom of a swimming pool blindfolded, with a pool cue. You know the plate’s there, but to smash it, you have to find it.
If you’re going for that type of swim, the partners you want are Chad Ulansky and Chuck Fipke.
To receive drilling news directly from the company, email firstname.lastname@example.org with the subject line, “Please add me to your email list.” That or call the company’s Kelowna office at 1.250.448.4110 for more information.
For those of you attending this year’s PDAC in Toronto, the world’s largest mining convention, this is your invitation to our CEO Summit on Saturday Feb. 28th at the Hilton Hotel – that’s the day before the PDAC begins.
Click here for event details and here to register now.
This exclusive event is put on by three leading mining and energy newsletter writers, Keith Schaefer of the Oil and Gas Investment Bulletin, Eric Coffin of Hard Rock Advisory, and me.
The Summit is everything the PDAC isn’t. Rather than trying to put 25,000 people in a room we’ve invited 15 of our favorite mining and energy CEOs to present and meet with a few hundred of our subscribers in an intimate setting that’s for serious investors only.
Grow your wealth. These are hand picked companies presenting chosen for their immediate investment merit. No brokerage research, SEDAR filing of press release will ever tell you as much as a CEOs body language. Additionally, get all your questions answered directly from the CEOs themselves during breakout sessions.
Grow your knowledge. The newsletter writers and CEOs themselves will share their industry and regional expertise. The knowledge will allow you to make better investment decisions.
Grow your network. You’ll be in excellent company at the CEO Summit. Many of the most influential entrepreneurs and investors in our network, from investment bankers, fund managers, and analysts, to CEOs and technical professionals, will be on hand to take in the presentations and catch up over coffee and lunch. Building networks of like-minded investors is absolutely critical to becoming a successful investor (in addition to meeting the CEO’s in person).
Presenting companies include cash cow Nevsun Resources, high grade Colombian gold juggernaut Continental Gold, sister explorer Cordoba Minerals, the latest uranium discoverer NexGen Energy, and arguably the most exciting diamond junior, North Arrow Minerals. There couldn’t be a better time to meet the CEO’s of these companies, as current markets are resulting in profound change in the sector.
“Meet our hand-picked success stories for 2015 in person—and give yourself some high conviction stocks for the rest of the year.” Keith Schaefer commented.
“These are the companies positioned to make the most of a new bull market. Do yourself a favor and be there to meet the CEOs and hear their stories.” Eric Coffin added.
Personally, I’m excited about the chance to catch up with some of the CEO.ca subscribers who make all of this worthwhile. I know I’ll learn about investment opportunities, meet some in the know people, and potentially find the next big winner.
I am very pleased to welcome Tommy Humphreys to the Resource Opportunities team.
Tommy is a bright, energetic young man with exceptional contacts in the mining industry. He earned a great deal of respect for building the website www.CEO.ca, which has become an important information source, especially with regard to people and insights in the mining industry (See Lukas Lundin, Dave Lowell and other examples of Tommy’s unprecedented interviews).
One of the most important elements in the success of Resource Opportunities over the years has been in building close relationships with influential people, and in identifying the rising stars. We learned early that the people running the company and advancing the projects are the most important element in the success of any company.
Tommy has the respect of the old guard in our industry, and is equally tied in with the new generation of younger mining executives, geologists, engineers, investment bankers and analysts.
He is committed to identifying the up-coming talent: to being the first to identify the people who the other media will report on in two or three years’ time, after they have achieved success. Tommy will also continue to gain knowledge and insights from the people who are now the most influential players in this market. His relationships (current and future) will greatly enhance our analytical abilities and help us to be the first to identify the exciting new deals that can make money for subscribers.
I am looking forward to working with Tommy on upcoming issues, and the renewed energy he brings this newsletter.
We plan to further strengthen the team in the near term, with the next target being an experienced mining engineer.
Please join me in welcoming Tommy Humphreys to the Resource Opportunities team.
Many companies in the resource sector try to sell themselves to investors as proxies for the underlying commodity. Every company in the industry that has any sort of resource works out the market value of the company divided by the ounces or pounds. The implication is that if you can buy silver in the ground for, say, fifty cents an ounce, then an investment in the company will increase at a faster pace than the price of silver.
In arriving at those measures of value per ounce, of course every company uses the approach that makes them look best against a carefully selected peer group. Some use market value per ounce. Others use enterprise value per ounce. For the number of ounces, they can use proven and probable reserves, reserves plus resources, measured and indicated resources or total resources.
And, in determining the number of ounces, some companies stick with the number of ounces of silver. Most companies with byproduct gold will convert the gold to silver equivalent. A few companies will convert the base metal credits to silver equivalent ounces. I don’t like incorporating base metals into a silver equivalent, because most investors are looking at these companies as a play on precious metals.
It is vitally important that investors recognize that every ounce of silver in the ground is different from every other ounce of silver in the ground. Comparisons against peers are useful only as rough indicators of potential value and should be carefully evaluated.
Let’s look at an example of the share price of a silver company over time compared to the price of silver. Please note that this is not a rigorous analysis. It is intended as a first pass to arrive at some broad observations.
For many years, Silver Standard was a go-to silver equity for investors wanting exposure to the silver market. As expected, the Silver Standard share price rose much faster than the silver price from 2003 to 2007. In that time, the silver price rose three-fold while the Silver Standard share price rose by nine-fold. That is, Silver Standard rose 3 times faster than the silver price.
After a really dismal year for the resource industry, there are finally signs that the market is at the bottom.
Before looking at where the markets are headed from here, let’s have a quick look at a couple of indicators of the junior resource market to show just how bad the destruction has been.
The Toronto Stock Exchange Venture Index is not a perfect measure, with junior resources roughly two thirds of the index, but is probably the best indicator available of the overall junior resource market. The VIXJ declined 66% from its high in early 2011 to the low point in late June.
News that the US Federal Reserve may begin cutting back on Quantitative Easing panicked investors around the world. The mere suggestion that the easy money might be cut back if the economy continues to improve exemplifies how dependent investors have become on what is effectively a government handout.
The sharp drop in the gold price resulting from the Fed comments had a hugely negative impact on resource stocks generally. There may be further downside for many companies as investors globally have taken a decidedly bearish stance on everything related to resources.
At some time, that sentiment will begin to reverse, as prices have fallen to irrationally low levels for many companies. In the meantime, we are looking for companies that are generating news of suitable magnitude that it might impact share values.
Following are some excerpts from a talk that I was invited to present at a conference in Australia. These comments summarize my current view of the resource markets.
The Current State of the Resource Markets
Excerpts from a presentation by Lawrence Roulston to the Africa Mining & Investment Conference, Sydney, Australia, June 24-25.
We all know that the market for junior resource companies is in a terrible state. We also know that this industry is cyclical, and no matter how bad it gets, it eventually turns around.
I have experienced a few cycles in the resource industry. In some ways, this is the worst situation that I have ever seen. But, this time is different and it is important to understand those differences to know what to do next.
In 2008, the resource industry was clobbered, along with most investments around the world. That sharp selloff was driven by external forces. Everything went down sharply, but then everything rebounded in tandem. Over the next two years, the TSX Venture index tripled.
If we look back a little further, 1999 through 2001 was considered the “nuclear winter” of the mining industry. At that time, the mining industry was still in the classic era, when high metal prices led to increased production which led to oversupply and declining prices. Several big new mines had just come on stream and demand for metals was sluggish. At that time, nobody dreamed that China and the rest of the developing world would soon begin to take off. Metal prices were down: copper, at $.60 a pound, was at the lowest price ever in real terms; gold hit a low of $252 an ounce. The producing companies were losing money.
Market commentators called mining a “sunset industry”, implying that the world’s need for metals was going to suddenly evaporate.
James Kwantes is the editor of Resource Opportunities, a subscriber supported junior mining investment publication. Mr. Kwantes has two decades of journalism experience and was the mining reporter at the Vancouver Sun. Twitter: @JamesKwantes
Founder Lawrence Roulston
Resource Opportunities (R.O.) is an investment newsletter founded by geologist Lawrence Roulston in 1998. The publication focuses on identifying early stage mining and energy companies with the potential for outsized returns, and the R.O. team has identified over 30 companies that went on to increase in value by at least 500%. Professional investors, corporate managers, brokers and retail investors subscribe to R.O. and receive a minimum of 20 issues per year. Twitter: @ResourceOpp