Curnamona Energy is on track to be Australia’s nexturanium...

Curnamona Energy is on track to be Australia’s next
uranium producer from its Oban, insitu leach field
trial project in South Australia.
�� The company has adequate financial resources and
its management has appropriate technical
experience to undertake a field trial by 2008 and to
expand this trial operation into a 100-200 tpa U3O8
production project.
�� Strachan Corporate estimates that drilling at the
Oban project has already outlined an area with
potential to hold 2,300 tonnes of U3O8 and an insitu
value averaging approximately A$550 per square
metre. Within this area, as much as 1,000 tonnes of
U3O8 is estimated in higher grade zones where
Strachan Corporate estimates the insitu value to be
closer to A$900 per m2.
�� Curnamona’s market capitalisation is well supported by
the value of its assets at Oban. A programme of
continuous drilling is underway aimed at expanding
and further defining zones of mineralisation around
Oban, as well as along 40 km of Yarramba
palaeochannel, which has not yet been drilled.
Continuing success of this work holds potential to
significantly grow Curnamona’s market capitalisation.
Field Leach Plant Plan
Source: Curnamona Energy Ltd
BOARD
Dr Bob Johnson Chairman
Dr Christopher Giles Director
Mr Kenneth Williams Non Executive Director
OPINION
Curnamona Energy has exploration rights over
large areas of South Australia which have a
strong track record for yielding sandstone hosted
uranium oxide deposits. Unlike many jurisdictions
within Australia, it is not only possible to find,
but it is also possible to process and sell uranium
oxide in this location.
The company is self sustaining, with its own field
equipment for drilling and logging, which not only
keeps costs down but provides the company with
flexibility for planning and execution of exploration
programmes. Curnamona represents an appealing
target for the large number of local and overseas
companies trying to get a foothold in Australia’s
uranium industry.
While the company has not released resource
estimates at Oban, drilling to date enables
Strachan Corporate to estimate potential for at
least 2,300 tonnes of U3O8 within the limits of the
Oban Mineral Claim.
Peter Strachan
* No recommendation is offered for commissioned research.
CAPITAL STRUCTURE
SUBSTANTIAL SHAREHOLDERS
Shares 62.5 m.
Options 4.3 m. Av 34 cts
Unissued Equity $ 1.46 m.
Cash (est) $ 9 m.
Share Price $ 1.65
Market Cap $ 103 m.
Havilah Resources 48.0%
JP Morgan AM 5.1%
Page 1
June 19th, 2007 AFSL 259730
Strachan Corporate
CURNAMONA ENERGY LIMITED (CUY)
Australia’s next Uranium Producer
Strachan Corporate: 15 Florence St, Cottesloe, WA, Australia, 6011
SHARE PRICE
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Jun-06
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Volume: Thousands
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Share Price:$
June 19th 2007 STRACHAN CORPORATE AFSL 259730
Strachan Corporate: 15 Florence St, Cottesloe, WA, Australia, 6011 Page 2
INTRODUCTION
Curnamona Energy floated
out of Havilah Resources in
early 2005. The company
holds rights to all Tertiary
uranium deposits on more
than 8000 km2 of permits
in the east of South
Australia, close to the NSW
border. Curnamona owns
its own drilling and logging
equipment suitable for
operation in the difficult
terrain which it often
confronts. The company
has intersected several
z o n e s of u r a n i um
mineralisation along 60
kilometres of the Yarramba
palaeochannels, located
downstream from Uranium
One’s Honeymoon uranium
project, containing 2,800
tonnes of U3O8 and more
recently has expanded
zones of known uranium
mineralisation along a 2
kilometre stretch of
channel sands at the Oban
project area, where it is
now preparing to conduct a
Field, Insitu Leach Trial.
Further west at the 4 Mile
deposit, outlined by Quasar
Resources, a resource
containing 15,000 tonnes
of U3O8 has been outlined,
underlining the potential of
this region.
ROLL FRONT DEPOSITS & URANIUM ASSAYING
Curnamona Energy has access to extensive exploration licenses in South Australia’s
Curnamona Craton. This province is endowed with uranium-rich granites from which uranium
has leached into the ground water over millions of years to travel along gravel sediments in
fossil river paths (palaeochannels), below more recent clay sediments. These palaeochannels
host chemical and physical mechanisms which trap and concentrate the passing mobile
uranium. Typically, uranium is chemically entrapped in carbon-rich river sediments, which
may have been associated with ancient swampy billabongs, backwaters or physical barriers
which may have trapped logs and other organic materials from flood waters along the old
river paths. Oxidised water in these gravels keeps moving uranium “down stream” which in
the case of the Lake Frome Embayment is northwards.
Uranium, which is a very mobile metal in the environment, can be assayed by taking a
physical sample for chemical assay determination. The problem facing the company at this
location is taking a representative sample from unconsolidated, water saturated gravels,
below 70-80 metres of overlying clays. Typically, field determinations of uranium content are
made using a probe which measures gamma radiation emitted by both uranium and its
breakdown products, including lead and bismuth. This type of probe needs to be calibrated so
as to enable accurate correlation between the radiation count and uranium content. This
method of assaying assumes that uranium is in equilibrium with its breakdown products and
that the uranium has not been redissolved, leaving only the daughter products. Alternatively,
a PFN probe can be used. This probe emits pulses of radiation as it is lowered slowing down a
drill bore, receiving a signal which can be directly related to the U235 content of surrounding
sediments. Again, this type of probe needs to be calibrated and can give variable results
depending on physical and chemical conditions in the hole. Disadvantages of this technique
include the high cost of a PFN probe and the slowness of logging each hole.
Active uranium
explorer & project
developer in South
Australia’s Lake
Frome embayment
Strategic location
in highly
prospective
neighbourhood
Tertiary
palaeochannels a
proven uranium
source
Initial assay using
calibrated radiation
count.
June 19th 2007 STRACHAN CORPORATE AFSL 259730
Strachan Corporate: 15 Florence St, Cottesloe, WA, Australia, 6011 Page 3
OBAN PROJECT AREA
Uranium mineralisation was first outlined at Oban by Marathon Petroleum’s work in the
1970’s and 1980’s which was followed up by further exploration by Paladin Resources in
1998. The permits were taken up in 2003 and Curnamona Energy began its current
programme in 2006.
Source: Curnamona Energy Ltd
Uranium mineralisation occurs in a classic “roll front” deposit in coarse river gravels and
sands containing pyrite and organic lignite at depths of between 80 to 90 metres. The
palaeochannel at Oban trends NE-SW and the company has taken out a Mineral Claim along
approximately 2 kilometres of the channel, which runs below more recent clay deposits and
on top of ancient basement claystone. These wet, lignitic sands are bounded by impervious
clays, which is an ideal setting for the use of insitu leaching technology.
Drilling so far has intersected several zones of relatively high grade uranium oxide over widths of
between 1 and 10 metres. In the centre of the Mineral Claim, an area of roughly 700 by 180
metres shows grade thicknesses of between 0.05 and 0.5 metre-percent eU3O8 which Strachan
Corporate estimates will average 0.2 m% eU3O8. This is equivalent to a grade of 0.2% eU3O8 over
1 metre or 0.1% eU3O8 over 2 metres and so on. Additional high grades have been intersected to
the south and recent work about 600 metres to the northeast has outlined additional very high
grades with hole CEY097 intersecting 8.2 metres grading 0.08% eU3O8.
Curnamona following
on from work
carried out 30
years ago at Oban
Mineral Claim
covers 2 km of
channel sands
within larger
exploration permit
Higher grade
zones with an
insitu value of up
to $4000 per m2
Strachan Corporate
estimates potential
2,300 tonnes of
U3O8 within Mineral
Claim, of which
$580 million worth
might be recovered
June 19th 2007 STRACHAN CORPORATE AFSL 259730
Strachan Corporate: 15 Florence St, Cottesloe, WA, Australia, 6011 Page 4
Source: Curnamona Energy Ltd
At a uranium oxide price of US$135/lb and an AUDUSD of 0.84 cents, a zone of uranium
mineralisation grading 0.2 m% has an insitu value of A$1,275 per square metre or a
recoverable value of about A$890 per m2 if 70% product recovery is assumed. The recent
high grade-thickness intercept of 0.63 m%, translates to an insitu value of A$4,000 per
square metre. Drilling is continuing along the NE trend towards the claim boundary where
previous drilling has shown strong gamma radiation. Curnamona’s licenses extend beyond the
Mineral Claim, so the company has potential to extend known areas of uranium mineralisation
along more than 2 kilometres of channel sands over widths of up to 800 metres.
Trial ISL now
awaits final
authorisation
Low capital &
operating costs
June 19th 2007 STRACHAN CORPORATE AFSL 259730
Strachan Corporate: 15 Florence St, Cottesloe, WA, Australia, 6011 Page 5
Potential for mobile
processing plant
Exploration appeal
along 60 km of
Yarramba
palaeochannel
Strachan Corporate
estimates higher
grade zones contain
1,100 tonnes of
U3O8 with total of
up to 2,300 tonnes
LEACH TRIAL
Curnamona is preparing to undertake a trial, insitu leach (ISL) test at Oban. The trial
aims to determine the hydrological and chemical response of sediments to saturation
with acid solution and to evaluate the metallurgical performance of resin column based
uranium recovery. This path is seen as a cost effective way of achieving results which, if
successful, would lead immediately to commercial ISL operations, once export and
operational approvals have been received. Curnamona has received notification from the
Federal Government that the trial may precede as soon as final regulatory approvals
have been granted by the South Australian Government. This test involves drilling a
pattern of four injector holes on a 30 metre grid, into the uranium bearing gravels 90
metres below the surface. An acid solution, with pH of about 2.5 (only a slightly higher
acid content to that of some popular carbonated soft drinks), is then injected into each
of the four holes. Solution containing dissolved uranium is extracted from a production
bore, which has been drilled in the centre of this pattern. On the surface, the uranium
bearing solution passes through a column containing chemically active resin to which the
uranium attaches, while the stripped solution has acid added and is reinjected back into
the injector bores. Periodically, uranium is stripped from the resin column and uranium
oxide is precipitated from this concentrated solution and stored, ready for sale.
Capital costs associated with this trial are estimated to be around $1 million. The ISL
approach is very cost effective. Drilling and completing each well bore with a cemented PVC
pipe lining and a screen around its base is estimated to cost $5,000 per well. Tanks, pumps
and filters are not expensive but reagents, including acid and chelating resin for uranium
recovery will form a substantial part of initial working capital. Expansion of the plant to
commercial operation would involve extending a grid pattern of injector and extraction wells
while developing a network of pipes to deliver acid solution to the field while conveying
pregnant solution to the resin columns for uranium extraction.
Ultimately, processing plant could be mounted on a trailer so as to be mobile for access to
smaller deposits. Operating costs are low, involving power for pumping, acid and other
reagents and labour, all of which could total less than $20 per pound of oxide product.
Curnamona could reduce its capital costs by simply producing and selling a wet oxide product
at a discount to an existing producer with drying facilities, who would process and pack the
product so as to take advantage of the current spot price to enhance revenue.
YARRAMBA PALAEOCHANNEL
The Yarramba palaeochannel runs northwards across Curnamona’s licence area, downstream
from the 2,800 tonne eU3O8 Honeymoon deposit, from which uranium is thought to have been
partially remobilised, to travel northwards into Curnamona’s ground.
Curnamona has discovered several zones of anomalously high uranium grade by drilling on
tributaries and bends in the channel. The company has identified over 40 kilometres of undrilled
channel which is still to test and plans to return to known area of mineralisation to
further define grade and extent. Even a small area measuring just 600 metres by 200 metres
with grades averaging 0.2 m% eU3O8 could contain over 430 tonnes of uranium oxide with an
insitu value of over $150 million at today’s metal price.
VALUATION AND PEER COMPARISON
Selected Peer Group Data
Source: ASX reports
Strachan Corporate estimates that drilling to date suggests that Curnamona is on track to outline a
uranium oxide resource of approximately 1,100 tonnes within higher grade zones at Oban and that
the whole channel area within its current Mineral Claim might ultimately be found to contain a total
of 2,300 tonnes of uranium oxide. Clearly the company has additional potential both outside of the
Oban Mineral Claim to the NE and SW, as well as on the company’s other focus areas within the
Yarramba palaeochannel, which are still to be defined by drilling.
All of the companies chosen for comparison have sandstone or calcrete styles of deposit,
which may be higher cost to mine and process than Curnamona’s proposed ISL operation.
Nova is rated on a lower value since its project is located in Western Australia, where
development is currently blocked by the policies of that State’s government. Alliance is
slightly better funded than Energy Metals and its project is also in South Australia, some 160
kilometres to the northwest of Oban.
Company Code M/cap Resource M/Cap Cash Project
tonne mlb per lb
Alliance AGS $ 511 3750 8.3 6 2 $ 7 25% of high grade 15,000 t U3O8, 4 Mile roll front SA
Energy Metals EME $ 250 3465 7.6 3 3 $ 4 53.3% of Bigrlyi deposit NT
Nova NEL $ 233 8996 19.8 1 2 $ 16 Lake Way & Centipede in WA
June 19th 2007 STRACHAN CORPORATE AFSL 259730
Strachan Corporate: 15 Florence St, Cottesloe, WA, Australia, 6011 Page 6
Peer Group Value Comparison
Scoping out estimated cash flows for an ISL project at Oban, based only on estimated
channel sands within the current Mineral Claim, indicates that the company is priced in line
with expected discounted cash flow. Applying the market capitalisation per pound of resource
multiples, which apply to peer companies, indicates a level of upside to market value which
could be achieved if Curnamona was ultimately to outline a resource in line with the broad
estimates made by Strachan Corporate.
Peer group
companies priced
with market cap of
between $30 and
$60 per lb of U3O8
Oban project
supports CUY’s
current market cap
Exploration has
potential for share
price expansion
Peer Group Comparison
-
10
20
30
40
50
60
70
AGS EME NEL CUY (est)
M/Cap $/lb of U3O8
Source: Company Reports and Strachan Corporate Pty Ltd
Strengths
PROSPECTIVE URANIUM LICENSES: Curnamona holds a
strong permit position, covering a large swag of
prospective geology with significant strategic value in
the Curnamona Craton.
MANAGEMENT: Experienced management and Board
with a strong background in the uranium industry.
ATTRACTIVE EXPLORATION RESULTS: Drilling by
Curnamona is outlining significant uranium
mineralisation at several locations.
ACCESS TO INFRASTRUCTURE: The Curnamona region is
well serviced by road, rail with access to power and
other uranium producers.
LOW COST OPERATION: Curnamona’s Oban project will
have low capital and operating costs.
EXCELLENT GOVERNMENT RELATIONSHIPS: The
company has strong and positive relationships at all
levels of government.
Weaknesses
SMALL COMPANY: Curnamona’s bargaining position and
ability to raise funds depends on the ability of
management and the results of its trial ISL work.
TAKEOVER TARGET: CURNAMONA COULD BE VULNERABLE
SHOULD ITS 48.5% shareholder, Havilah Resources
receive a bid.
Threats
COMMODITY EXPOSURE: A fall in the uranium price
would reduce Curnamona’s appeal, but the medium
term market outlook for uranium remains strong.
METALLURGY: CURNAMONA STILL HAS TO DEMONSTRATE
THE effectiveness of resin extraction technology and
may have to resort to more expensive, solvent
extraction if this fails.
ASSAYING: Curnamona uses standard radiation
detection to “assay” for uranium content. There is a
risk that this technique may over-call uranium content
if it is not in equilibrium with its daughter products.
Opportunities
EXPLORATION: CURNAMONA HAS STRONG EXPLORATION
POTENTIAL both around known mineralisation and
along over 60 km of palaeochannels.
POTENTIAL SYNERGY WITH EXISTING PRODUCERS: The
company could reduce its capital costs by selling a wet
product for drying to one of the other producers in
South Australia.
APPLICATION OF TECHNOLOGY: Curnamona has access
to a huge suite of historical data and more recent
remote sensing and photographic information which
assist its exploration efforts.
S W O T Analysis
Company Code
Alliance AGS
Energy Metals EME
Nova NEL
Curamona CUY
June 19th 2007 STRACHAN CORPORATE AFSL 259730
Strachan Corporate: 15 Florence St, Cottesloe, WA, Australia, 6011 Page 7
Dr Bob Johnson: Chairman
Bob has a PhD in geology. He is a leading practitioner in
the application of computers to geological modelling and
mine planning. His company, Maptek Pty Ltd, is a major
supplier of technical mining software, marketing the
interactive VULCAN mining system globally. This
experience has provided a broad understanding of ore
bodies and the role of 3D geometry in structural geology.
Dr Christopher Giles: Director
Chris is an experienced geologist who has supervised
exploration programmes for a variety of organisations
globally. He has been directly involved in several
discoveries that have led to successful mine
developments, including with Newmont, North Flinders
Mines and East African Gold Mines. He founded Havilah
Resources and Curnamona Energy with Dr Bob Johnson
and has been jointly responsible for the both companies
ground acquisition and exploration strategy.
Mr Kenneth Williams: Non-Executive Director
Ken has extensive experience in mining finance,
complementing the technical skills of other directors.
He previously held roles in the treasury operations at
Qantas Airways Limited and Normandy Mining Limited,
before becoming Chief Financial Officer of Normandy.
Until March 2003, Ken was Group Executive Finance &
Business Management at Newmont Australia Limited.
Mark Randell: General Manager
Mark is a geologist who also holds a BSc (Geol) as well as
a Grad Dip of Applied Science (Mining). He has over 35
years of experience working in exploration and project
evaluation for gold, base metals and uranium. He was
formerly Geology Manager for uranium exploration
company, Southern Cross Resources and Chief Geologist
for ISL uranium producer, Heathgate Resources.
Management
Disclaimer
The information herein is believed to be reliable but the author, Strachan Corporate Pty Ltd, ABN 39 079 812
945; AFSL 259730 (“Strachan”), does not warrant its completeness or accuracy. Strachan has relied on
information which is in the public domain. Opinions and estimates constitute Strachan’s judgment and do not
necessarily reflect those of the Board and management of Curnamona Energy Limited and are subject to change
without notice. Strachan believes that any information contained in this document is accurate when issued,
however, Strachan does not warrant its accuracy or reliability. Strachan, its officers, agents and employees
exclude all liability whatsoever, in negligence or otherwise, for any loss or damage relating to this document to
the full extent permitted by law. This material is not intended as an offer or solicitation for the purchase or sale
of any financial instrument. In preparing such general advice no account was taken of the investment objectives,
financial situation and particular needs of a particular person. Therefore, before acting on the advice, you should
consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. The
investments and strategies discussed herein may not be suitable for all investors. If you have any doubts you
should contact your investment advisor. The investments discussed may fluctuate in price and changes in
commodity prices and exchange rates may have adverse effects on the value of investments. This work was
commissioned by Curnamona Energy Limited and Strachan will receive a fee for its preparation.