Thursday, 12 April 2012

Strathmore's acquisition of Saratoga Gold expands asset base beyond uranium

Strathmore Minerals (TSE:STM)(OTCQX:STHJF) is best known for its substantial Uranium resources but a recent deal will see the company bringing its expertise to bear in the gold-copper space.

Last month the company agreed to acquire privately-held Saratoga Gold, whose primary asset is the Copper King property in Wyoming which comprises two leases totaling 1,120 acres in the state's Silver Crown Mining District.

Speaking to Proactive Investors, Strathmore's chief executive David Miller explained that while the company's main focus has always been Uranium, Strathmore is a mineral resources company and it must also be open to other opportunities in the resources space to build shareholder value.

Miller explained that the deal came about after key Saratoga executives, who had worked with Strathmore in the past, approached the company. 

"This deposit sits in one of our jurisdictional areas and the sellers had confidence we could move it down the road to production. [Saratoga] was ready to hand off the project to a group that could take it to the next level," Miller said.

Copper King has a historical, non-NI 43-101 compliant, resource estimate of 46.29 million measured and indicated tons grading 0.019 ounces of gold per ton, and 0.17% copper, for a contained resource of 866,000 ounces of gold and 153.0 million pounds of copper using a 0.010 ounce per ton gold-only cut-off.

The deposit remains open along trend and at depth, Strathmore said.

In 2007, Saratoga completed 18,288 feet of drilling in 28 holes to confirm mineralization outlined by previous historical operators, with another eight holes completed in 2008.

Strathmore plans to complete a NI 43-101 compliant technical report and resource estimate that includes Saratoga's drill results, as well as confirmation drilling later this year.

"We want to poke some deep holes in this thing to see what's at the bottom."

Miller actually reviewed Copper King 20 years ago but decided the property needed higher commodities prices in order to be developed properly. With commodity prices at current highs, the acquisition of the project comes at a good time.

Turning to Strathmore's core assets, Miller said: "Our Uranium efforts continue at the highest level in our history".

In March, Strathmore set the largest budget in its history to aggressively advance its core Uranium development projects: Roca Honda, New Mexico and Gas Hills, Wyoming.

Strathmore's 2012 capital budget will total $15.8 million, including $3 million from its partner Sumitomo for the pro-rata share of
permitting and development expenditures at Roca Honda. The Roca Honda budget totals $7.4 million.

The Gas Hills budget was set at $8 million as part of the strategic definitive agreement announced with Korea Electric Power Corp. (KEPCO), one of the largest diversified worldwide energy companies.

Gas Hills was the second largest Uranium-producing region in the U.S., having produced 100 million pounds of Uranium concentrates from 1957 to 1989.

With over 35,000 acres of mineral claims, the company regards this project as a core holding for the development of future long-term Uranium production in the U.S.

Strathmore has partnered with KEPCO to develop Gas Hills, recently raising $8 million in private placement financing and making the Korean company Strathmore's largest shareholder with an approximate 14 percent stake.

Miller said the company will continue drilling in the Main Gas Hills area, where the company has been permitting a number of open pit deposits. A new area, known as Beaver Rim, will also see exploration drilling this year. The Beaver Rim area offers the potential to add additional resources from an area that "shows similar trends to Gas Hills".

The Roca Honda property is located in the Grants Mineral District of New Mexico. It is 60 percent owned by Strathmore and 40 percent owned by Japan's Sumitomo Corp. under their jointly owned subsidiary, Roca Honda Resources.

In terms of future deals, Strathmore does have a number of other Uranium properties in Wyoming and New Mexico they would consider selling or establishing joint ventures with other players.

Indeed, it’s through such deals as non-core asset sales, as well as spinning-off its Canadian exploration properties to its shareholders - such as Fission Energy (CVE:FIS) - that Strathmore has been able to finance its development of core assets without much dilution.

"We have five properties that contain historic resources of 50 million pounds that we would consider joint venturing out."

Overall, with the post-Fukushima plunge in Uranium prices recovering somewhat, the company is in good shape to get to work on its recently-acquired Copper King Property as well as its core Uranium holdings.

"We think we're a progressive company. People will be getting a lot of bang for their buck when investing in Strathmore."

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