PRETORIA, South Africa () -- The outlook for Brinkley Mining [AIM:BRM] has grown clearer and brighter with the July 11 announcement that a previously announced Memorandum of Understanding with the Democratic Republic of Congo's atomic energy commission, the Commissariat General a l'Energie Atomique (CGEA), is moving forward.
Brinkley and the CGEA have inked an agreement that sets out the terms and conditions of a 75-25 joint venture partnership that will explore for and develop uranium ore prospects in the DRC. The JV will focus on five priority targets with proven high grade uranium ore deposits. These include the historically significant Shinkolobwe Mine, which yielded an estimated 26,433 dry tonnes of uranium oxide grading between 10%-65% between 1921 and 1936, and approximately 65 million pounds of ore from 1944-1960 when the mine was shut down, according to Brinkley.
Brinkley on July 16 announced initial results of a diamond drilling programme on its Waterval Project in South Africa's Karoo region. Testing on the first of three drill targets identified 11 radiometric anomalies and a down-hole radiometric survey of 50 of a total 450 historical holes going on since April has revealed two paleochannel horizons between 0.30 and two metres thick and some 30 metres wide extending 1,000 metres and open to the northeast with an estimated average of approximately 1,500 parts per million (ppm) U308.
Drilling in the Karoo
A sedimentary sandstone-type deposit typical of the Karoo, previous exploration of the Waterval prospect carried out in the 1970s by Union Carbide and the Essex Mineral Co. and in the early 1980s by South Africa's Geological Survey identified two uraniferous cliff-forming outcrops between four and 24 metres thick.
The results of some 150 holes drilled across a 100x100 metre grid intersected uranium mineralisation an average 1.04 metres thick as shallow as 8-13 metres with an average grade between 1,690-1,820 ppm uranium oxide and 910 ppm molybdenum.
Brinkley on Feb. 13 confirmed that South Africa's Department of Minerals and Energy had officially granted its Western Uranium Pty. Ltd., along with its Black Empowerment program partner Blue Nightingale 709, prospecting rights for four uranium prospects in the Karoo region, including two on the former Waterval farm property and another at neighbouring Rietkull, prospects that are "hugely important to Brinkley," said a spokesperson for the company.
Western Uranium with Blue Nightingale 709 in total have applied for prospecting rights over five farm properties in the Karoo made up of 22 portions which are considered to host significant uranium resources (see Feb. 11 story).
In a competent persons report included in Brinkley's AIM admission document of May 31, 2006 SRK Consulting stated total in-sit mineralization that for Brinkley's exploration targets in the area is likely to fall within a range of 11 and 21 million pounds of U3O8 and between 5 million and 11 million pounds of Mo. SRK's estimate was based on the assumption that between 5-10% of the area underlain by uraniferous sandstone may be mineralised at grades historically typical for Waterval.
Latest Drilling Results
Initial results from Brinkley's latest drilling programme on the Waterval property have revealed two uraniferous palaeochannel horizons, according to a July 16 media release.
Lying some 35-45 metres below the surface, the first comprises four palaeochannels between 0.30 and 2 metres thick and approximately 30 metres wide that extend 1,000 metres with the deposit open to the northeast.
Scintolometer readings from the down-the-hole radiometric survey and the diamond drill programme varied between 500-6,000 counts per second, which correlates to 500 and 6,000 ppm with an average of approximately 1,500 ppm of U3O8, according to the company. The second horizon was intersected between 9 and 13 metres below surface. Sample scintolometer readings of 2,000 counts per second correlate to approximately 2,000 ppm of U3O8.
Management reported exploration is progressing rapidly and that Brinkley directors anticipate drilling a further 6,000-7,000 metres over coming months with the objective of providing a resource statement by the end of September.
High Potential Rewards, and Risk, in the DRC
Brinkley's joint venture agreement with the DRC government puts it in a unique and exclusive position to develop uranium prospects and a secure system for the mining and processing of uranium ores throughout the DRC, a country which has in the past been one of the world's leading producers of uranium oxide.
Brinkley and the CGEA have identified Shinkolobwe, Mindigi, Kalongwe, Kasompi and Samboa as their five priority targets, each of which lie in the southern Katanga province in an area that has historically yielded large, high-grade uranium oxide deposits. The agreement still has to be signed by the DRC Congress and new president to go into effect officially.
In return for its 75% stake in the joint venture, Brinkley has agreed to provide a maximum US$1.7 million and assist the CGEA and Ministry for Scientific Research to refurbish the country's TRIGA MARK II type nuclear reactor in accordance with the DRC's agreement with the International Atomic Energy Agency.
In order to acquire the 75% stake, Brinkley has agreed terms to acquire the remaining 30% interest in Brinkley Africa Ltd. through a wholly-owned subsidiary for approximately GBP8.8 million (US$17.855 million) that is to be met by issuing 40 million new ordinary Brinkley Mining shares and GBP500,000 (US$1.014 million) in cash.
Arbuthnot Securities' analysts Tim Dudley and John McGloin raised their target price for Brinkley Mining's shares to 40 pence (US$0.81) following news of the signing of the JV framework agreement with the CGEA.
The analysts estimate conservatively that the DRC resources are worth at least GBP51 million (USD103.478 million) to the company, "though this is just the tip of the iceberg in such an under-explored and uranium rich region," they wrote in a July 11 research report.
"This framework opens access to more than 11 million pounds of known historical uranium resources in a prospective region that has been significantly under-explored...Taking a value of US$12/lb. of uranium oxide (Areva paid $18/lb for UraMin), the resources are worth at least GBP 51 million to Brinkley Mining, providing a new target price of 40 pence (from 35 pence), representing c. 60% upside potential."
Uranium market fundamentals remain distinctly positive despite the recent pullback in prices that followed an extraordinary 14x rise in U3O8 prices since 2001 and an approximate 200% increase in the last year. Brinkley's shares, by contrast, have risen 10% in the past year, they noted.
"There is a shortage of long-term sources of supply at the same time as demand is increasing from the number of nuclear power plants waiting to be constructed. Price risks over the long term can be protected by selecting uranium companies with high-grade deposits which will provide low operating costs over the long term.
"South Africa and the DRC both contain some risk due to uncertainty over the future government direction regarding long-term mining resource ownership. This is in addition to the specific risks to Brinkley if it fails to gain presidential approval for the agreement in the DRC or does not secure the outstanding rights in South Africa. However, we believe that the upside potential offers sufficient reward for these risks," they wrote.