Rose Petroleum plc

Minesite

31-January-2007

VANE Minerals Funds Uranium Exploration From Gold Production

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By Jack Hammer

This year has started well for AIM Listed VANE Minerals. Early in January the company started drilling its North Wash uranium and vanadium property in Utah. With drilling also imminent on VANE's Arizona breccia pipe targets the shares have been ticking up nicely. To weigh against that, there's been concern amongst some City fund managers that development on the Arizona prospects will somehow impinge on the state's greatest tourist attraction, the Grand Canyon, which is nearby, and that development will thus be delayed.

Matthew Idiens, VANE's director of corporate development, is keen to allay such fears. "There is precedent there for mining", he says. Mining only stopped in the 1990s, he explains, because the low uranium price made it uneconomic. And the subsequent reclamation programme was "absolutely superb", so there's no hangover or lingering dissatisfaction. Indeed one of VANE's applications - Rabbit - took only four days to go through, and its quality was commended by the relevant authorities. Of course that doesn't stop environmental activists kicking up a storm, but at least it shows VANE isn't out on a limb.

In and of themselves the Arizona breccia pipes aren't that big. But breccia pipes are the highest grading uranium deposit type in the US, and if VANE's luck holds there ought to be plenty of them on its ground. At the moment the company has 29 targets, eight of which show mineralization at surface, and four of which are confirmed pipes. The historic average for breccia pipes is 3 million lbs of uranium, and VANE's hope is to put together a portfolio of several pipes containing a ballpark 2 million lbs each. According to Mr Idiens' back-of-the-envelope calculations for the Arizona pipes, using the current uranium price, "if we get 2 million lbs at US$72 per lb, that's US$144million, and it would cost about US$50million to mine them out. It would take three years, start to finish". If the company can get more than a couple of decent pipes under its belt, the Arizona investment could shape up into a nicely profitable operation, and still allow room for manoeuvre on the uranium price.

Over at North Wash in Utah, meanwhile, VANE is currently twinning 5 holes drilled back in the late 1970s by Cotter Corporation. According to Cotter's data, which showed radiometric equivalent grades of 0.17 per cent U308 over 5.5 feet, North Wash contains the fairly paltry sum of 150,000 lbs of uranium oxide. But here, it's not the uranium that's the key, it's what goes with it. VANE is fairly confident of Cotter's uranium data, but, says Mr Idiens: "It's the vanadium grade that's the kicker", says Mr Idiens. An indicative 5:1 vanadium to uranium ratio is suggested by the Cotter numbers, rising at some points to 64:1 ratio is suggested. But back in Cotter's time radiometric equivalents weren't considered accurate in testing for vanadium, so VANE needs to put more drill holes into the ground if it wants to get North Wash to fly.

While the drill bits are turning in the US, the rest of VANE continues to tick over too. Most of the costs of the drill programme will be covered by cash flow from the company's operating Diablito gold mine in Mexico, although a sizeable chunk of capital has recently been supplied in the form of convertible loans from dedicated UK uranium fund Geiger Counter. Development at Diablito is ongoing, with work on a new mill "progressing well", according to Mr Idiens. Elsewhere in Mexico the company is looking for a partner to work up a second gold project, Guadalcazar. And down in Paraguay, where VANE holds huge exploration acreage, drilling should also start this year.

"We've got a lot of things to do," says Mr Idiens. "Our plan is to find projects, develop them, and sell them on, as it said in the prospectus". To that end the uranium properties will probably eventually be demerged and listed elsewhere, and probably in the long-term, so will the Paraguayan properties. Meanwhile, "Diablito is milling away furiously", says Mr Idiens. And that's what keeps the lights on while the company looks for bigger fish to fry.