TODAY'S DISCOVERY, TOMORROW'S FUTURE

Creating shareholder wealth by advancing gold projects through the exploration and mine development cycle.

Free
Message: critical math

critical math

posted on Jan 25, 2010 10:49PM

When I read that Cedar was going to the Vancouver conference I put a map and some questions together to see if he would make some inquiries and share with us the answers, which he has done in his usual excellent manner. Now that the drilling program at McTavish is about to start I thought I’d share some of the estimates I’ve come up with for possible tonnage of U3O8 and share valuations using a reasonable geologic model. At first I used Hathor’s Roughrider deposit as an example where the deposit boundary corresponds roughly to the outline of the resistivity low (which is equivalent to a conductivity high) as shown in:

http://www.hathor.ca/i/pdf/MWNE_Resistivity_2008_31April08.pdf

However, using this model and the area shown in yellows to orange in Cedar’s post:

http://agoracom.com/ir/Kodiak/forums/discussion/topics/397902-my-thoughts-from-the-vancouver-show/messages/1317862#message

produces astronomical tonnages using even very conservative thicknesses and grades. So I decided to use a geological model like the Wheeler River deposit(pages 6-9): http://www.denisonmines.com/SiteResources/data/MediaArchive/pdfs/investor_presentations/wheeler_river_april,_2009_v8.pdf

The deposits tend to be long and narrow but the total amount of U3O8 can be quite high even in a relatively small feature if the grades are high. I created a spreadsheet to allow me to change parameters as the drilling results are released (assuming we are given useful information) The purpose of this is to give me an idea of where the share price could go if the first drill hits pay dirt. Using this model I get the following results:

Length = 200 m (one quarter of strike length)

Width = 50 m (similar to Wheeler River deposit)

Thickness = 10 m (established in hole WM-09-04)

Average Grade = 5% (similar to Millenium deposit to the east)

Average density = 2937 kg/m3 (based on 5% grade by weight)

Share valuation per lb U3O8 = $ 12 (discussed below)

Kodiak working Interest = 70% (based on minimum 50 million lb resource)

Model resource estimate = 22.6 million lbs U3O8

Value per share = $ 2.17 (based on 124.6 million shares FD)

The best example I’ve seen so far for share valuations come from a post on the Hathor (HAT) hub where Canacord came up with a share price of $ 4.5 based upon a potential resource estimate of 35 million lbs. Since HAT has about 110 million shares out that gives a price per pound of about $14 to use for share valuations. I’m going to knock that down to $12 /lb to factor in the deeper depth at McTavish. That seemed to be a high number to use for share valuation but I think Portee made a good point about the value per tonne can approach $ 50,000 if the grade is high enough. The final result is around $ 2.17 of value would be added to Kodiak’s share price using conservative estimates for grade and geometry. By all means check my numbers and let me know if you get some significant differences or know of another way to calculate share values. This prospect has multiple conductor trends and any one of them could accommodate a good sized deposit. The potential is enormous but until a couple of wells are drilled we just don’t know where we stand.

Share
New Message
Please login to post a reply