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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

Outcome Visualization Project as of Jul 20, 2022: Canalaska:- West McArthur as McArthur River Clone
Project:West McArthurLocation:CanadaStage:3-Discovery Delineation
Net Interest:77.1% WIUncapped NSR:8.3%Target Metals:Uranium
OV Project ID:1000009OVP Posted:5/17/2016OVP Retired:
Current OV ID:1000035Current OV Confirmed:5/17/2016Visualizer:JK
Canalaska Uranium Ltd (CVV-V)
ProfileSearchWeb SiteTreeForumSEDARQuoteIPV
Working Capital
Key People: Cory Belyk (CEO), Thomas Jr Graham (Chair), Peter G. Dasler (Pres), Harry Chan (CFO), Dianne M. Szigety (Sec),
As of
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):$15,604Recoverable Rock Value:$15,401Payable Rock Value:$15,308
LOM CapEx & Sustaining Cost:$2,092,536,619LOM Operating Cost:$5,960,108,502AISC per tonne:$7,581.10
LOM Net Payable Revenue (USD):$14,918,265,389LOM PT Cash Flow (USD):$8,406,616,440LOM AT Cash Flow (USD):$5,527,808,973
USD Pre-Tax NPV:$2,412,586,954Pre-Tax IRR:36.9%Pre-Tax Payback:2.7
USD After-Tax NPV:$1,105,020,357After-Tax IRR:23.3%After-Tax Payback:4.1
CAD Fair Spec Value Low:$35,592,706CAD Fair Spec Value High:$71,185,411CAD 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 AverageLife 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$16,259,689,79899.4% of Recoverable Revenue
   Royalties:($92,189,778)($1,341,424,408)8.3% of Gross Payable Revenue
Net Payable Revenue:$1,025,262,073$14,918,265,38991.2% 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$8,406,616,44056% 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
After-Tax Cash Flow:$380,548,970$5,527,808,97337% 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 yearsStartupNPV 5%NPV 10%NPV 15%
Annual Avg NSR:$10,252,621Now$99,240,777$69,890,410$51,638,900
LOM NSR:$149,182,6542022$99,240,777$69,890,410$51,638,900
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 NPVCAD OV NPVExch RateDilutedNet Interest
Project StageUncertainty RangeCAD FSV RangeCAD FSV per Share RangeCAD MSV per Share Range
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
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 1Metal 2Metal 3Metal 4


Spot:$46.00 /lb U3O8

OV Assigned:$43.00 /lb U3O8

Pessimistic:$25.00 /lb U3O8

Optimistic:$50.00 /lb U3O8

Fantasy:$100.00 /lb U3O8

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

OV Assigned:$2,412,586,95436.9%$1,105,020,35723.3%4.1
Fair Speculative Value for Alternative Metal Price Scenarios
Stage: Discovery Delineation - 2.5% - 5.0%

CAD AT NPVCAD Target PriceCAD FSV RangeCAD FSV per Share RangeCAD 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 1Metal 2Metal 3Metal 4





Concentrate Grade:100.0%VS
Price:$43.00 /lb U3O8SU

Price Type:Custom

Annual Payable:26,145,662 lb U3O8

LOM Payable:380,437,294 lb U3O8

Metal 1 Price Note: Long term contract price as of May 2016.
Mining Scenario
Tonnage:1,062,200SSStrip Rate:0.0VU
Operating Rate (tpd):200SSMining Type:UndergroundVS
Mine Life (years):14.6
Tax Treatment:SLM Straight Line DepreciationSUTax Rate:42.0%SS
Tax Rate Note: 15% federal, 12% provincial, and 15% "upper tier "profit royalty".
Cost Scenario

CurrencyUSD CostExchange Rate
Sustaining Capital:$700,000,000VUCAD$542,509,4941.290
Mining Cost ($/t rock):$3,623.00SUCAD$2,807.871.290
Mining Cost ($/t ore):$3,623.00
Processing Cost ($/t):$3,157.00SUCAD$2,446.721.290
Other Cost ($/t):$460.00SSCAD$356.511.290
Total OpEx ($/t):$7,240.00
Uranium Concentrate Cost ($/t con):$740.00
Risk Factors - Risk-Adjusted Discount Rate: 10.5%

Risk LevelRisk WeightConfidenceNote
Environmental Permitting:Very Low0.5SSProtocols for permitting underground mines in theAthabasca Basin well established.
Social License:Low1.0SUMultiple groups need to be dealt with, but familiar with existing mining regime.
Title:Very Low0.5SS
Tax:Very Low0.5SSAlready 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 Low1.0VS
Infrastructure:Very Low0.5SSNot far from McArthur River.
Technical:High4.0SUIf ore is at unconformity will have to deal with water flow problems as at Cigar Lake.
Financing:Low1.0SSCanalaska is not carried to production, though in uranium mining the junior's interest is usually bought out before production.
Risk Factor Weight Table

Very LowLowHighVery High
Environmental Permitting:
Social License:
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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