Cameco acquires advanced Australian uranium exploration project

A joint venture comprised of Cameco (70%) and Mitsubishi Development (30%) has purchased the Kintyre uranium project in Western Australia from Rio Tinto for $495 million through a bidding process. Cameco will operate the project and is funding its share of the purchase price through existing credit facilities. The transaction is expected to close in August subject to ministerial approval in Western Australia and execution of certain agreements with the Martu people who are the traditional owners of the land. Kintyre is an advanced exploration project located about 1,250 km northeast of Perth.

Based upon Cameco’s due diligence, it is estimated that the Kintyre project may host potential mineral deposits ranging from 62 to 80 Mlb U3O8 in total, with an average grade between 0.3% and 0.4% U3O8. These estimates are conceptual in nature. The basis for these conceptual estimates includes 355 historical diamond drill holes totalling 70,279 m. There has been insufficient exploration, however, to define a resource at the Kintyre project in compliance with NI 43-101 resource reporting standards. Cameco will be undertaking an exploration program with the objective of estimating a resource for the deposits.

Uranium was first discovered in the area in 1985 and followed up with extensive exploration that identified eight deposits. The project was placed in care and maintenance in 1988 when uranium prices declined below $12/lb. The sale process was initiated by Rio Tinto in 2007.

“The Kintyre project is an ideal fit with Cameco’s strategy to expand our base of quality uranium assets,” said Cameco’s president and CEO Jerry Grandey. “It adds potential for low-cost open pit production and further diversifies our uranium business geographically.”

Upon closing, the joint venture will begin working toward a mine development agreement with the Martu. Cameco has experience working with traditional owners in Australia, including the Martu, through its ongoing exploration programs.

Development of the Kintyre deposits is subject to state government approval. The current Labor government in Western Australia permits uranium exploration, but continues to oppose new uranium mine development. However, Australian governments and political parties generally are becoming more supportive of uranium development. In 2007, the federal Australian Labor Party abandoned a long-standing policy opposing development of new uranium mines. Since forming the national government, the party has become supportive of uranium mining generally in Australia.

Cameco has been actively exploring in Australia since 1997 and has exploration licences for more than 795,000 ha of land in Western Australia (some proximate to the Kintyre deposits), South Australia and the Northern Territory. In February 2008, Cameco secured rights to the Angela-Pamela deposits in the Northern Territory through a joint venture with Paladin Energy. Cameco has offices in Darwin and Alice Springs in the Northern Territory.

Mitsubishi Development is a wholly owned subsidiary of Mitsubishi Corp and is based in Sydney, Australia. The company owns investments in coal and iron ore in Australia, including a 50% share of BHP Billiton Mitsubishi Alliance, the world’s largest metallurgical coal producer. Cameco, with its head office in Saskatoon, Saskatchewan, is the world’s largest uranium producer.