Nuclear Power and the Rise of Patterson Lake - dummies

Nuclear Power and the Rise of Patterson Lake

By Nick Hodge, Jeff Siegel, Christian DeHaemer, Keith Kohl

A new discovery in northern Saskatchewan, Canada could quickly become one of the top ten uranium deposits in the world. MacArthur River, also located in Saskatchewan, is widely agreed to be the largest deposit, containing high grades of uranium totaling about 324 million pounds.

This new discovery, called Patterson Lake South, has only had a few holes drilled and is already shown to contain around 50 million pounds of uranium at high grade. Given that high grade, and the fact that uranium mineralization was found in each of the first four zones, analysts are already expecting there to be 100 million pounds of uranium, or more.

The discovery was made via a joint venture between the companies Alpha Minerals (TSX-V: AMW) and Fission Uranium (TSX-V: FCU). It contains the largest uranium boulder field in the Athabascan Basin, and radioactivity readings for samples from the first four zones were reported as “off the chart.”

Once a potential deposit reaches reserve estimates totaling 50 million pounds or more, the major drilling companies, like Cameco, Denison, Areva, and others, start to get interested in acquiring it. These uranium majors will soon start sniffing around the Patterson Lake project, if they haven’t already.

Current valuation estimates show the Patterson Lake deposit, even at only 50 million pounds of uranium, could fetch a buyout price between $500 million and $750 million. Since it’s a 50-50 joint venture, that equates to between $250 million and $375 million for both Alpha Minerals and Fission Uranium.

As an investor, you should keep your eye on the Patterson Lake deposit and those two companies. Each have market capitalizations well below $200 million, meaning impressive upside for each if a buyout offer ever happens.