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Update Hathor Exploration (HAT.V)
Hello all,
Just over a year ago, Hathor Exploration stormed the exploration scene with reports of a major uranium discovery on their 90% owned Athabasca property, now dubbed the Roughrider Zone. Hole 12 recovered 11.9 metersof 5.29% U3O8, catapulting Hathor’s share price from 50 cents to $2.54 in 6 days.
The share price peaked at $4.40, on 29th August, after further holes revealed continuity of high uranium oxide grades along a strike of over 100m. Grade assays reported since the discovery, have been over 10% U3O8 over considerable hole widths, elevating the discovery to the absolute top of the uranium finds of this millennium.
Strength of the company has been apparent in the evolution of the share price during the current downturn. HAT is one of the very few juniors we know of that has not retreated below its pre-discovery SP level. It hasn’t even come close. It has also recovered significantly from its lows in October, and has been almost the first junior to do so. The two most recent sets of assay results have negatively impacted the share price. From a discovery perspective we do not believe this downward trend to be justified, and the limits to the deposit have not been defined.
So let’s take a closer look at the continuing potential, and focus on the aspects we believe may elevate the Roughrider Zone to a major high grade uranium mine.
Location
HAT’s Roughrider Zone, is situated squarely within the most prolific high grade uranium trend in the world, the Eastern end of the Athabasca Basin, Canada. The area hosts the two highest grade deposits in the world, McArthur River and Cigar Lake. The Roughrider Zone is approximately 5 km NE of the Areva/ Ourd/ Denison Midwest Deposit (41.7 million pounds U3O8), and 2 km NE of their Mae Zone, currently holding 10.1 mil lbs in the Indicated and Inferred categories, at an average of 5.46% U3O8. Suffice to say that, in geological terms, you could hardly have a better location in the world for finding a high grade uranium mine, than Hathor’s Roughrider Zone.
Deposit model
What is interesting about the Roughrider Zone, analogous to the Mae Zone, is the nature of the deposit. The Athabasca unconformity deposits generally fall into two models: basement hosted and unconformity related deposits (sometimes referred to as sandstone hosted).
Basement hosted deposits are typically monometallic ore pods and veins and are generally steeply dipping (almost vertical), often running hundreds of metres down dip. A high grade zone is usually surrounded by a large low grade zone.
Unconformity related deposits, on the other hand, straddle the sandstone above the basement, have a more horizontal orientation, and are typified by their polymetallic nature. They are usually of higher grade, surrounded by a low grade halo, and have roots going down into the basement.
Roughrider Zone
However, a number of deposits are seen to have both monometallic and polymetallic components that form skewed T-shaped profiles. Both the Mae Zone and HAT’s Roughrider Zone appear to have these characteristics. They are both non-traditional, non-conducive targets that have no airborne electro-magnetic (EM) anomalies present, representing a new style of Athabasca target requiring innovative exploration techniques, supported by reflection seismic surveys.
Denison has made a simple graphical illustration of this model. The figure depicts the basement-hosted mineralization, the unconformity-hosted mineralization, and the higher and lower grades. The structurally controlled roots that go down into the basement are clearly visible.
The report states that: “It was noted during the drill programs that if a mineralized graphitic structure was intersected in the basement, it could be followed up into the overlying sandstone where it would always produce a zone of strong mineralization”.
Why is this important? Well, nearly all of the reported drill holes so far have tested mineralization at the basement. Senior Project Geologist, Alistair McCready, states that, because of the apparent metal geochemical results, the large scale of extremely intense alteration and the perceived long-lived uranium mineralization and significant fluid flow, this “greatly increases the potential for Hathor’s property to contain significant … mineralization at or above the unconformity”.
Well, recent drill results have indeed shown high grade cps counts at the unconformity (holes are currently being assayed), implying that the theoretical model is correct, and that another dimension has been added to the deposit. Actually, the most recent drill holes show another interesting aspect. Mineralisation has been found deeper in the basement, as well as shallower in the sandstone (above the unconformity) than previously reported. This complicates delineating the deposit, either because the structural controls are not fully understood or the model needs to be revised.
However, it also adds excitement because there is still potential for further extending the deposit. We have taken the liberty of modifying Hathor’s slide depicting the mineralisation at different levels, and added probable zones of mineralisation based on cps counts. The purple and reddish blobs indicate what we would see as areas of unconformity related mineralisation. The larger pink blob is the basement hosted mineralisation. Although this is an extremely rough visualisation, we will be happy to see both the red and purple blobs, as well as the larger pink blob grow as the drilling continues over the summer.
NB: coloured zones based on our interpretation of HAT data!
Besides our excitement about the possibility of significant additional uranium at the unconformity, a second aspect also comes into play. Although both the first and second phase drill programs in 2008 have been hugely successful, Hathor are only now approaching their primary target. This target is the intersection of the basement-hosted uranium bearing structures and the unconformity, the centre of which is believed to be approximately 90 meters ENE of the discovery hole (hole 12), and is indicated by the green line in the figure above. Mineralization is currently confirmed over a strike length of around 150m, although the gravity anomaly runs for a total length of about 300m. Almost as an afterthought, the red line in the figure above indicates hole 116, which has returned the highest cps counts encountered thus far, in rock with very high gravity. We expect major uranium percentages when results of this hole are returned from the lab.
Target size of Roughrider
Valuing a junior without official uranium reserves or resources is pretty hard, let alone attempting to do so with a unique high grade deposit such as Roughrider. Analysts judge Roughrider to contain between 20- 40 mil lbs of uranium, in the basement alone, based on the assay result so far. Looking at the market cap of around $ 170 mil, investors, characteristically blessed with a more forward looking view, see up to 34 mil lbs of U3O8 (at $ 5 per lb).
Industry risk
Not all is blue sky in Hathor’s Athabasca uranium-world. In November,
Looking forward
Hathor, however is very clear about their goals and added value. They believe their exploration methodology is their strongest asset, and they expect to reap many more future rewards with it in Athabasca. As such, they are not interested in becoming a producer at all, and state bluntly that they expect to get taken out by a major once the size of Roughrider becomes apparent. This could be immediately after the upcoming 43-101 resource estimate due in a few months, or possibly after a follow up summer drilling program.
With 60 holes still in the lab, around 8 or 9 of which we believe will be stellar, we have a lot to look forward to in the coming months. If the Roughrider Zone extends for the full 300m of the gravity anomaly, and Hathor’s model of unconformity hosted uranium on top of the basement deposit shows continuity, we can be sure the take-out price will be very interesting for investors, particularly at current share price levels.
Willem Middelkoop, April 29nd 2009
Disclaimer:
NB: I would to take this opportunity to inform you that, unlike some other discovery letters, my service has no corporate sponsors, who are being helped by promoting their stories.
Copyright 2009