This could get very interesting given that the total Cameco reserves in the US are around 5.8 million pounds at Smith/Highland and around 5 million pounds at Crow Butte.
Exploration Acquisition/Merger Approach Cameco's approach to future resource replacement is to combine its own exploration activities with partnerships, joint ventures, or equity holdings in other companies with assets that meet the company's investment criteria. The recovery of the world uranium market, and corresponding higher prices for uranium particularly between 2004 and 2007, resulted in the creation of more than 400 uranium exploration companies listed on stock exchanges worldwide, with most of these companies actively funding new exploration programs in Canada and other regions.
Cameco maintains an ongoing dialogue with numerous companies, with the objective of positioning the company for future participation in areas with promising results and leveraging Cameco's position in the sustainable development of uranium resources worldwide. We will continue to use Cameco's industry leadership position and specifically our exploration expertise to leverage investments as the partner of choice in the junior sector and with larger players.
We also intend to create a portfolio of future options for Cameco through the structure of the strategic alliances we are developing, and with our high quality exploration and development projects. Our strategic alliances with junior exploration companies typically involve investments in publicly listed or private companies, which themselves hold exploration land in which Cameco wishes to participate. In return for these investments, Cameco typically obtains the right to own a majority in and develop a successful discovery, resulting from exploration on the junior companies' lands. The lower uranium prices of 2008, and reduced availability of financing and credit worldwide, are expected to reduce the uranium expenditures of most junior uranium companies, potentially opening up new growth opportunities for Cameco.
Junior Exploration Companies At December 31, 2008, Cameco owned interests in the following junior exploration companies:
Investment Location of Assets Interest Dec. 31, 2008 % UEX Corporation Athabasca Basin, SK 21.3 UNOR Inc. Nunavut, Canada 18.7 MINERGIA SAC Peru 25.0 Western Uranium Corporation Nevada, US and Nunavut 9.4 Cue Resources Ltd. Paraguay 10.9 GoviEx Uranium Inc. Niger 10.9
2008 Exploration Program Brownfield Exploration Brownfield exploration refers to uranium exploration activity undertaken near existing operations and on advanced projects. In 2008, Cameco invested $13 million on our brownfield exploration program, all in Saskatchewan, with the largest programs being on McArthur River and Rabbit Lake. We continue drilling programs intended to add mineral resources at both operations, intending to extend their mine lives.
The diamond drilling program evaluating the P2 trend north of the McArthur River mine continued in 2008. The P2 structure has now been tested at approximately 200-metre intervals for a distance of 4.3 kilometres north of the mine. Results continue to be encouraging and will require follow-up drilling.
We have been successful at extending the mine life at Rabbit Lake by finding incremental mineral reserves. The underground drilling reserve replacement program has been extended to include drilling throughout 2009. Surface drilling was undertaken both in support of the Eagle Point operation as well as to test more regional targets. Encouraging results were obtained east and north-east of the mine that will be tested in the first quarter of 2009.
On the Dawn Lake project, the Tamarack deposit program to define the deposit at 25-metre drill spacings is on target for completion in 2009. Pre-feasibility activities and an environmental baseline study were initiated in 2008 and will continue in 2009.
At the Millennium deposit and surrounding area, drilling was completed targeting key sections of the deposit, and replacing some of the drill core destroyed by a forest fire in 2007. Feasibility work continued during the year with additional testing of two potential shaft pilot holes which were drilled in 2007. Preliminary results of the detailed 3-D seismic survey have been obtained, and will likely be valuable in identifying and mitigating problematic structures in the planned development area.
Studies required to collect the necessary baseline data to support the preparation of the environmental impact statement were conducted through the year in support of the Millennium project. Work continued on a slower pace on the feasibility study pending resolution of a number of issues including the impact and status of a Treaty Land Entitlement (TLE) claim filed by the English River First Nation on the lands overlaying the Millennium deposit, the availability of tailing storage space at Key Lake and the structure of the Millennium project for the purposes of the environmental assessment process. The filing of the project description for the environmental assessment process was not done pending resolution of these issues. For more information on the TLE, refer to the section titled "Business Risks – Aboriginal Title and Consultation Issues" in this MD&A.
Regional Exploration During 2008, Cameco's exploration investment on regional exploration programs, along with support costs, was about $44 million. Australia was the largest single region, followed by Saskatchewan, northern Canada and the rest of the global program.
Testing of regional targets on the Read Lake project has led to the discovery of a new zone of uranium mineralization intersected on a three hole fence drilled at Fox Lake located approximately nine kilometres west of the McArthur River mine. The uranium mineralization discovered to date is entirely located in the sandstone, between 90 and 150 metres above the unconformity. Exploration in 2009 will attempt to discover the unconformity or basement-hosted expression of this mineralization. Cameco has a 78.24% interest and is the project operator while AREVA holds the remaining interest.
In 2008, exploration activities were conducted on 65 projects worldwide including Nunavut, the Northwest Territories, Quebec, Northern Territory (Australia), Western Australia, South Australia and Mongolia.
New Investments and Acquisitions in 2008 Kintyre (Western Australia) In August, Cameco acquired a 70% interest in the Kintyre project located in Western Australia (WA). Development of this project is subject to state government approval and reaching an agreement with the traditional land owners. Mitsubishi Development Pty. owns the remaining 30% interest.
On November 17, 2008, the government of WA officially lifted the state ban on uranium mining in WA, giving companies the ability to obtain exploration licences and mine and export uranium. The lifting of the ban removes a potential obstacle for the development of the Kintyre project should the exploration and development programs over the next several years lead to a decision to mine the deposit.
Logistical preparations related to the Kintyre project were underway by year end with the objective of commencing exploration activities in the second quarter of 2009. Cameco is opening a regional office in Perth, WA, to manage the large investment in this advanced exploration project over the coming years.
Angela Property (Northern Territory, Australia) On February 20, 2008, the Northern Territory government awarded Cameco Australia Ltd. and Paladin Energy Ltd. joint venture (Cameco-Paladin) the Angela uranium property located near Alice Springs.
On October 3, 2008, the Northern Territory Government issued Cameco-Paladin an exploration licence, paving the way for exploration work to commence. Provided that all necessary permits are received, exploration activities are expected to commence late in the first quarter of 2009.
Goviex (Niger) On August 22, 2008, Cameco formed a strategic alliance with GoviEx Uranium Inc. (GoviEx) and acquired an approximate 11% interest in the company for $28 million (US).
Under the strategic alliance, Cameco can acquire another approximate 10% interest in GoviEx for $31 million (US) following completion of a due diligence review. The arrangement stipulates the vast majority of the proceeds received from Cameco will be used for uranium exploration.
If we increase our ownership in GoviEx after completion of due diligence, we secure additional ownership and governance rights. These include the right to increase our ownership interest up to a maximum of approximately 48%. The cost to Cameco of increasing our ownership to 48% would be between $145 million (US) and $212 million (US), depending upon the timing of the purchase, which is subject to various technical milestones being met. GoviEx is the operator of its projects.
GoviEx is a closely held exploration company formed in 2006, with uranium exploration assets in Niger, Africa.
GoviEx holds about 2,300 square kilometres of exploration property in the region around Arlit, and 2,400 square kilometers of property around Agadez.
GoviEx field teams are analyzing historical data and have begun a drilling program to confirm and expand historical resource estimates in the Arlit area to provide data that conforms to the Canadian Securities Administrators' National Instrument 43-101 (NI 43-101) standards.
2009 Exploration Program Cameco plans to invest approximately $50 million to $55 million on uranium exploration during 2009 as part of our long-term strategy.
Brownfield Exploration Approximately 36% of the uranium exploration budget will be for brownfield exploration projects in the Athabasca Basin and Australia. We plan to invest about $20 million on eight advanced projects. The largest proposed investment will be at Kintyre, with $7.7 million to be used to advance the deposit towards a NI 43-101 compliant resource estimate.
Approximately $2.5 million will be invested in the Angela project to define the resource of the existing deposits. The company also plans to continue with the P2 structure exploration program aimed at identifying mineralization in the vicinity of the McArthur River mine and will invest $2.4 million towards that goal.
The Dawn Lake Joint Venture plans to continue delineation work on the Tamarack deposit. Environmental studies will continue while more engineering-related geotechnical work will be initiated, albeit at a slower pace in 2009. Work on the Millennium deposit feasibility study will also continue at a slower pace in 2009.
Regional Exploration The remaining exploration expenditures in 2009 are expected to be allocated among 63 projects worldwide, the majority of which are at drill target stage. Among the larger investments planned are a $2 million program on the Virgin River project in Saskatchewan, $3.6 million on two adjacent projects in Nunavut, and a $1.6 million investment on the Wellington Range project in Northern Territory, Australia.
In 2009, exploration by Cameco or by partner companies will also take place in the US, Mongolia, and South America. Cameco continues to evaluate other regions and projects globally, and we will add to our land position as new prospects are confirmed.
(20min delay)