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| | Thu Jul 21, 2022
Tracker: Outcome Visualization Canalaska: West McArthur as McArthur River Clone
Publisher: Kaiser Research Online
Author: Copyright 2022 John A. Kaiser
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| Outcome Visualization Project as of Jul 20, 2022: Canalaska:- West McArthur as McArthur River Clone |
| Project: | West McArthur | Location: | Canada | Stage: | 3-Discovery Delineation |
| Net Interest: | 77.1% WI | Uncapped NSR: | 8.3% | Target Metals: | Uranium |
| OV Project ID: | 1000009 | OVP Posted: | 5/17/2016 | OVP Retired: |
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| Current OV ID: | 1000035 | Current OV Confirmed: | 5/17/2016 | Visualizer: | JK |
Issued
101,876,000 |
Price
$0.490 |
Working Capital
$13,309,000 |
Key People: Cory Belyk (CEO), Thomas Jr Graham (Chair), Peter G. Dasler (Pres), Harry Chan (CFO), Dianne M. Szigety (Sec), |
Diluted
143,645,000 |
Insiders
2.5% |
As of
4/30/2022 |
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| Visualized Outcome: Canalaska - West McArthur as McArthur River Clone |
| Canalaska Uranium Ltd in 2016 optioned its West McArthur project in the Athabasca Basin to Cameco which can earn 60% by spending CAD $11,275,000 over 6 years. The project was held 50:50 with Mitsubishi which spent nearly $17 million on the project, mostly in the Grid 1 area in the northwest where Cameco must drill two deep holes within two years. Cameco's immediate focus, however, is the Grid 5 area into which the C10 conductor that hosts its Fox Lake discovery projects. Fox Lake at 386,700 tonnes of 7.99% U3O8 is promising and Cameco has indicated it regards this discovery as a top tier development candidate. But the discovery, less than 4 km from the Canalaska boundary, needs more high grade tonnage and Cameco has drilled a hole close to the boundary about which it has said nothing. Canalaska itself drilled a few holes on the inferred C10 conductor without interesecting uranium though it encounter evidence of a major hydrothermal system. The hole closest to the boundary intersected what appears to be a highly altered thrust block of sandstone. Cameco drilled a single hole in April and results are pending. Because Cameco uses a downhole gammaprobe to generate reliable eU3O8 assays on site, it is obvious that mineralization signaling a discovery and meriting prompt disclosure was not hit. However, both Canalaska and Cameco are acting solely on the basis of geophysics; the unconformity is too deep to leave any alteration trace at surface, and indirect geochemical sampling methods such as developed by Uravan and successfully applied to the Centennial, Cigar Lake and McArthur River deposits has not been done. What we are waiting to hear from Cameco and Canalaska is whether this hole has unveiled a geological context which indicates that a deposit is nearby, and that only 4-6 holes are needed to vector in on the location. At the current exploration stage West McArthur is still just a possibility, and I have created this OV to demonstrate what a McArthur River scale discovery would look like and be worth. The deposit and cost assumptions were borrowed from Nov 2, 2012 technical report Cameco published updating the economics for the remaining 1,062,200 tonnes of 16.46% U3O8 ore left after 13 years of producing 758,700 tonnes at 13.5% at McArthur River. Cameco earned a 30% interest in 2018 after paying $725,000 and spending $5 million but declined to increase to 60%. Since then Canlaska has solely funded further work and diluted Cameco to 22.88% leaving Canlaska with 77.12%. In 2022 Canalaska undertook a $5 million program which will boost its interest to about 80%. On July 15, 2022 Canalaska reported a 6.3 m mineralized interval at 906.3 m hole depth within basement rock on a new conductor target southwest of the 42 Zone where work had concentrated. So far it looks like an "ingress" type zone where mineralizing fluids travel down a structure rather than up. This OV was based on the "egress" type that form at the unconformity as a replacement body. A second OV based on the fesaibility study costs of NexGen's ingress style Arrow deposit was created. |
| Source Note: A word of caution regarding this first attempt at an OV for a high grade underground uranium mine. The costs used in past PEAs by Hathor and Fission vary widely from the costs used by Cameco for Cigar Lake and McArthur River. Everything gets reported in $/recovered lb with no reconciliation into OpEx per tonne. For an OV to be effective one needs to know the costs associated with mining and processing a tonne of ore at different grades. As I obtain a better understanding of a deep underground high grade uranium mine with potential water flow problems I will be fine-tuning the cost side of the OV. At this stage the prupose of this OV is to illustrate what speculators should be hoping to see a junior deliver from its Athabasca Basin project. |
| Visualized Outcome Summary: Canalaska - West McArthur as McArthur River Clone |
| Deposit Scenario: 1,062,200 t @ 16.46% Uranium |
| Mining Scenario: Underground 200 tpd 14.6 yrs, CapEx $1.6 billion, SustCapEx $543.0 million, OpEx $5,611.10/t (USD), AISC $7,581.10/t (USD) |
| LOM Payable: 380.0 million lb U3O8 uranium |
| Economic Value (after-tax): IRR 23.3%, Payback 4.1 yrs, NPV at 10.5% - USD $1,105,020,357, Future Price/sh: CAD $7.64 |
| Economic Outcome - Discount Rate: 10.5% - CAD AT NPV: $1.4 billion - Poor Speculative Value |
| Gross Rock Value (USD/t): | $15,604 | Recoverable Rock Value: | $15,401 | Payable Rock Value: | $15,308 |
| LOM CapEx & Sustaining Cost: | $2,092,536,619 | LOM Operating Cost: | $5,960,108,502 | AISC per tonne: | $7,581.10 |
| LOM Net Payable Revenue (USD): | $14,918,265,389 | LOM PT Cash Flow (USD): | $8,406,616,440 | LOM AT Cash Flow (USD): | $5,527,808,973 |
| USD Pre-Tax NPV: | $2,412,586,954 | Pre-Tax IRR: | 36.9% | Pre-Tax Payback: | 2.7 |
| USD After-Tax NPV: | $1,105,020,357 | After-Tax IRR: | 23.3% | After-Tax Payback: | 4.1 |
| CAD Fair Spec Value Low: | $35,592,706 | CAD Fair Spec Value High: | $71,185,411 | CAD Implied Project Value: | $91,268,218 |
| Price Target if Visualized Outcome delivered by Expl-Dev Cycle without dilution: CAD $7.64 |
| Economic Outcome (USD): Revenue Model at OV designated Metal Prices |
| Annual Average | Life of Mine (LOM) | LOM Stats |
| Recoverable Revenue: | $1,124,263,477 | $16,358,803,633 | $15,401/t ore Recoverable Value: |
| Smelter/Transport Costs: | ($6,811,627) | ($99,113,836) | 0.6% of Recoverable Revenue |
| Gross Payable Revenue: | $1,117,451,850 | $16,259,689,798 | 99.4% of Recoverable Revenue |
| Royalties: | ($92,189,778) | ($1,341,424,408) | 8.3% of Gross Payable Revenue |
| Net Payable Revenue: | $1,025,262,073 | $14,918,265,389 | 91.2% of Recoverable Revenue |
| Mining Cost: | ($205,277,088) | ($2,986,922,229) | 46% of OpEx - $2,812.01/t ore |
| Processing Cost: | ($178,873,797) | ($2,602,736,262) | 40% of OpEx - $2,450.33/t ore |
| Other Cost: | ($26,063,334) | ($379,239,367) | 6% of OpEx - $357.03/t ore |
| Sustaining Cost: | ($36,220,635) | ($543,309,531) | 8% of OpEx - $511.49/t ore |
| Total Operating Cost: | ($446,396,476) | ($6,511,648,949) | 44% of Net Payable Revenue - OpEx - $6,130.34/t ore |
| Pre-Tax Cash Flow: | $578,865,597 | $8,406,616,440 | 56% of Net Payable Revenue - $7,914.34/t ore |
| Taxes: | ($198,316,626) | ($2,878,807,467) | 34% of Pre-Tax Cash Flow - $2,710.23/t ore
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| After-Tax Cash Flow: | $380,548,970 | $5,527,808,973 | 37% of Net Payable Revenue - $5,204.11/t ore |
| Note: Concentrate transport costs, smelter treatment costs and retention are subtracted from recoverable revenue to get gross payable revenue to which the uncapped royalty rate for the project is applied. The annual average of LOM sustaining cost is expensed as an annual operating cost. Annual average figures reflect full production years. |
| Economic Outcome (USD): Royalty Model for 1% NSR at OV designated Metal Prices |
| Mine Life: | 15 years | Startup | NPV 5% | NPV 10% | NPV 15% |
| Annual Avg NSR: | $10,252,621 | Now | $99,240,777 | $69,890,410 | $51,638,900 |
| LOM NSR: | $149,182,654 | 2022 | $99,240,777 | $69,890,410 | $51,638,900 |
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| Fair Speculative Value Stock Price Range: CAD $0.19 - $0.38 |
| MSV (Market Cycle S Curve): Market Speculative Value represents the typical market pricing pattern of a new discovery as it moves through its exploration-development cycle. The irrational pricing behavior of the yellow channel contrasts with the fair speculative value of the blue channel as defined by the rational speculation model because during the pre-economic study stages there is great uncertainty about how big the discovery will turn out. |
Fair Speculative Value Ladder
| USD OV NPV | CAD OV NPV | Exch Rate | Diluted | Net Interest |
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| $1,105,020,357 | $1,423,708,228 | 1.2884 | 143,645,000 | 77.12% |
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| Project Stage | Uncertainty Range | CAD FSV Range | CAD FSV per Share Range | CAD MSV per Share Range |
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| Grassroots |
0.5% - 1.0% |
$7,118,541 - $14,237,082 |
$0.04 - $0.08 |
$0.08 - $0.19 |
| Target Drilling |
1.0% - 2.5% |
$14,237,082 - $35,592,706 |
$0.08 - $0.19 |
$0.19 - $0.38 |
| Discovery Delineation |
2.5% - 5.0% |
$35,592,706 - $71,185,411 |
$0.19 - $0.38 |
$0.38 - $5.73 |
| Infill & Metallurgy |
5% - 10% |
$71,185,411 - $142,370,823 |
$0.38 - $0.76 |
$3.82 - $7.64 |
| PEA |
10% - 25% |
$142,370,823 - $355,927,057 |
$0.76 - $1.91 |
$1.91 - $5.73 |
| Prefeasibility |
25% - 50% |
$355,927,057 - $711,854,114 |
$1.91 - $3.82 |
$1.91 - $3.82 |
| Permitting & Feasibility |
50% - 75% |
$711,854,114 - $1,067,781,171 |
$3.82 - $5.73 |
$1.91 - $3.82 |
| Construction |
75% - 100% |
$1,067,781,171 - $1,423,708,228 |
$5.73 - $7.64 |
$3.82 - $5.73 |
| Production |
100% |
$1,423,708,228 |
$7.64 |
$7.64 - $9.55 |
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| Market Speculative Value Stock Price Range: CAD $0.38 - $5.73 |
| Warning: while the market spec value (S-Curve) and fair spec value channels presented in project value terms track the evolving expected ultimate outcome value, when presented in stock price terms the expected stock prices are subject to dilution through future equity financings or project interest farmouts. |
| Alternative Metal Price Scenarios |
| Metal 1 | Metal 2 | Metal 3 | Metal 4 |
| Uranium |
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| Spot: | $46.00 /lb U3O8 |
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| | OV Assigned: | $43.00 /lb U3O8 |
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| | Pessimistic: | $25.00 /lb U3O8 |
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| | Optimistic: | $50.00 /lb U3O8 |
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| | Fantasy: | $100.00 /lb U3O8 |
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| | Note: for Metal 1 pessimistic, optimistic and fantasy price scenarios, OV assigned prices are used for Metals 2-4 |
| Economic Outcomes with Alternative Metal Price Scenarios |
| USD PT NPV | USD PT IRR | USD AT NPV | USD AT IRR | AT Payback yrs |
| Spot: | $2,887,584,009 | 41.7% | $1,380,518,649 | 26.3% | 3.7 |
| OV Assigned: | $2,412,586,954 | 36.9% | $1,105,020,357 | 23.3% | 4.1 |
| Pessimistic: | ($437,395,380) | 4.4% | ($547,462,252) | 2.6% | 11.9 |
| Optimistic: | $3,520,913,417 | 47.9% | $1,747,849,705 | 30.1% | 3.2 |
| Fantasy: | $11,437,531,010 | 125.4% | $6,339,487,909 | 75.6% | 1.3 |
| Fair Speculative Value for Alternative Metal Price Scenarios |
| Stage: Discovery Delineation - 2.5% - 5.0% |
| CAD AT NPV | CAD Target Price | CAD FSV Range | CAD FSV per Share Range | CAD MSV per Share Range |
| Spot: | $1,778,660,227 | $9.55 | $44,466,506 - $88,933,011 | $0.24 - $0.48 | $0.48 - $7.16 |
| OV Assigned: | $1,423,708,228 | $7.64 | $35,592,706 - $71,185,411 | $0.19 - $0.38 | $0.38 - $5.73 |
| Pessimistic: | ($705,350,365) | ($3.79) | ($17,633,759) - ($35,267,518) | ($0.09) - ($0.19) | ($0.19) - ($2.84) |
| Optimistic: | $2,251,929,560 | $12.09 | $56,298,239 - $112,596,478 | $0.30 - $0.60 | $0.60 - $9.07 |
| Fantasy: | $8,167,796,222 | $43.85 | $204,194,906 - $408,389,811 | $1.10 - $2.19 | $2.19 - $32.89 |
| Detailed Visualized Outcome (KRO Members Only) |
| VU = Very Unsure |
SU = Somewhat Unsure |
SS = Somewhat Sure |
VS = Very Sure |
| The confidence indicator is intended to convey the visualizer's degree of uncertainty with regard to a particular assumption. |
| Deposit Scenario |
| Metal 1 | Metal 2 | Metal 3 | Metal 4 |
| Uranium
U |
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| Grade: | 16.46% | SS | |
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| Recovery: | 98.7% | VU |
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| Payable: | 100.0% | VS |
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| Concentrate Grade: | 100.0% | VS |
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| Price: | $43.00 /lb U3O8 | SU | |
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| Price Type: | Custom |
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| Annual Payable: | 26,145,662 lb U3O8 |
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| LOM Payable: | 380,437,294 lb U3O8 |
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| Metal 1 Price Note: Long term contract price as of May 2016. |
| Mining Scenario |
| Tonnage: | 1,062,200 | SS | Strip Rate: | 0.0 | VU |
| Operating Rate (tpd): | 200 | SS | Mining Type: | Underground | VS |
| Mine Life (years): | 14.6 |
| Startup: | 2022 | VU |
| Tax Treatment: | SLM Straight Line Depreciation | SU | Tax Rate: | 42.0% | SS |
| Tax Rate Note: 15% federal, 12% provincial, and 15% "upper tier "profit royalty". |
| Cost Scenario |
| Currency | USD Cost | Exchange Rate |
| CapEx: | $2,000,000,000 | VU | CAD | $1,550,027,125 | 1.290 |
| Sustaining Capital: | $700,000,000 | VU | CAD | $542,509,494 | 1.290 |
| Mining Cost ($/t rock): | $3,623.00 | SU | CAD | $2,807.87 | 1.290 |
| Mining Cost ($/t ore): | $3,623.00 |
| CAD | $2,807.87 | 1.290 |
| Processing Cost ($/t): | $3,157.00 | SU | CAD | $2,446.72 | 1.290 |
| Other Cost ($/t): | $460.00 | SS | CAD | $356.51 | 1.290 |
| Total OpEx ($/t): | $7,240.00 |
| CAD | $5,611.10 | 1.290 |
| Uranium Concentrate Cost ($/t con): | $740.00 |
| CAD | $573.51 | 1.290 |
| Risk Factors - Risk-Adjusted Discount Rate: 10.5% |
| Risk Level | Risk Weight | Confidence | Note |
| Environmental Permitting: | Very Low | 0.5 | SS | Protocols for permitting underground mines in theAthabasca Basin well established. |
| Social License: | Low | 1.0 | SU | Multiple groups need to be dealt with, but familiar with existing mining regime. |
| Title: | Very Low | 0.5 | SS |
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| Tax: | Very Low | 0.5 | SS | Already has 7.25% NSR to province as basic royalty, tiered profit royalty of 10%-15% and 15% federal and 12% provincial income tax. |
| GeoPolitical: | Very Low | 1.0 | VS |
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| Infrastructure: | Very Low | 0.5 | SS | Not far from McArthur River. |
| Technical: | High | 4.0 | SU | If ore is at unconformity will have to deal with water flow problems as at Cigar Lake. |
| Management: | Low | 1.5 | SU |
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| Financing: | Low | 1.0 | SS | Canalaska is not carried to production, though in uranium mining the junior's interest is usually bought out before production. |
| Risk Factor Weight Table |
| Very Low | Low | High | Very High |
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| Environmental Permitting: | 0.5 | 1.0 | 1.5 | 2.0 |
| Social License: | 0.5 | 1.0 | 1.5 | 2.0 |
| Title: | 0.5 | 1.0 | 1.5 | 2.0 |
| Tax: | 0.5 | 1.0 | 1.5 | 2.0 |
| GeoPolitical: | 0.5 | 1.0 | 1.5 | 2.0 |
| Infrastructure: | 0.5 | 1.5 | 2.5 | 4.0 |
| Technical: | 1.0 | 2.5 | 4.0 | 5.5 |
| Management: | 0.5 | 1.5 | 3.0 | 4.0 |
| Financing: | 0.5 | 1.0 | 1.5 | 2.0 |
| The risk adjusted discount rate is the sum of the weight of the risk level assigned to each risk factor. |
| Disclaimer: A visualized outcome is one of many possible outcomes for an exploration project as it moves through the 9 stages of the exploration-development cycle from grassroots to a producing mine with failure as an outcome at any point along the way. The range of possible outcomes for the physical nature of a deposit shrinks after delivery of an initial 43-101 resource estimate. While the nature of the deposit constrains the range of mining scenarios, the cost assumptions will vary as the project moves through the feasibility demonstration stages of the cycle, which affects the economic value of the final outcome. This economic value will also vary according to the prices of the metals targeted for extraction which may change during the years it takes for a project to become a mine. An outcome visualization is thus a compilation of best guess assumptions for the key variables that drive the discounted cash flow model, the basis for assigning an economic value to a mine. An OV is not intended as a prediction, but rather as a framework that allows the incorporation of new information generated by the exploration-development cycle for the project into a valuation model on an ongoing, dynamic basis. |
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