This Unpronounceable Name Could Unlock a Major Uranium Prize

A new government has been born in Africa. One that could re-light hope for one of the most interesting uranium projects that never was.

The place is Madagascar. Which voted in its first democratically elected president in nearly five years on December 20.

The east African nation-the world's fourth-largest island-has labored under a military government since a 2009 coup that ousted pro-business leader Marc Ravalomanana. But that's changed with Malagasy voters going to the polls over the last few months-amid mounting pressure from the international community for the nation to get its house in order.

Initial results in October failed to return a leader (which requires a 50% majority vote under Malagasy law). A December run-off was set between leading candidates Jean Louis Robinson and Hery Rajaonarimampianina (yes, that's the spelling).

Official counting and re-counting has now revealed Rajaonarimampianina as the winner of that vote. Pending a few judicial matters, he will be officially sworn in as national leader.

Some Hope For a Would-Be Resource Giant

This isn't the ideal outcome as far as investors are concerned. But it's a big step in the right direction.

Runner-up Jean Louis Robinson was a better bet as a pro-business leader. Being the anointed choice of the country's last president Marc Ravalomanana-a dairy businessman who opened the country to outside investment during his seven-year tenure from 2002 to 2009.

It's less clear what new president Rajaonarimampianina's views on investment will be. He is the declared choice of military coup leader Andry Rajoelina, who has run the country since 2009 with backing from family connections in the military.

But Rajaonarimampianina is economically literate, being the former finance minister. And the very fact that Madagascar once again has a legitimate government goes a long way toward improving investor confidence in the nation. Companies with operations in Madagascar such as Stratmin, Madagascar Oil, and Electricite et Eaux de Madagascar have all seen their share price rally in the wake of the election.

That's good news for miners. Before Madagascar went to the military in 2010, the nation was shaping up as one of the premier mining destinations on Earth. With a combination of excellent geology (basically, the torn-off piece between South Africa and India) and under-explored terrains-a result of decades of isolation during the 1970s and 1980s.

In fact, two of the largest mining projects recently built globally were completed here-a result of the open period under Ravalomanana. Sherritt's Ambatovy nickel-cobalt mine in the east and Rio Tinto's Port Dauphin titanium mine in the south. Both rank as super-projects amongst their peers worldwide.

The Best Opportunity in A Re-Emerging Powerhouse

The potential re-opening of Madagascar's resource sector raises several possibilities for investors. Oil firms like ExxonMobil are already moving to capitalize on offshore hydrocarbon potential-with the company reactivating licenses that had been in force majeure since 2009. Coal fields in the southwest are being developed by Thai conglomerate PTT. Gold and graphite mineral prospects are numerous across the country.

But it's another opportunity that's-quietly-the most prospective of all.

Uranium.

Madagascar's uranium potential has been largely forgotten by the investing public. But there was a time when results here were some of the most intriguing in the world.

In 2007, Canadian explorer Pan African Mining began one of the first modern uranium exploration programs in the Tranomaro and Maromby regions of southern Madagascar. Kicking things off by grabbing 40 surface samples from old French mines and prospects here. The results were excellent-16 of the 40 samples returned values greater than 0.4% U. That's high-grade compared with most other localities globally.

Initial drilling at Tranomaro confirmed the potential. The first hole intercepted 17.2 metres grading 0.43% uranium (equating to a grade of 0.51% in the more-commonly reported U308 form), from just 0.3 metres below surface. Local intercepts within the hole graded up to 8.88% uranium.

The company completed 11 drill holes in total on this target. Results from other holes were less strong-but this initial program was far from thorough. Holes were drilled only to between 70 and 130 metres below surface.

And that was as far as Pan African would get. In early 2008, the company was bought by Asia Thai Mining Company. The uranium projects were shuffled into the private sphere. Then came the coup in 2009-and the licenses haven't been heard from since.

Combining Great Geology and Unusual Metallurgy

There are a few things that make this an opportunity that should be investigated.

First, the reported grades from Pan African's initial (and apparently only) drilling program at Tranomaro. As the chart below shows, the grade of the discovery hole puts the project on a tenor not seen elsewhere outside of the Athabasca Basin of northern Canada.

Global resource grades reported. Excludes projects in the Canadian Athabasca Basin.

Add to this the massive scale of the district. At the time of the initial work, Pan African reported that the site of its drilling was one of "100 abandoned open-pit uranium mines, and radiometric and geochemical anomalies" identified by the company.

Now here's where it gets really interesting. The metallurgy of these deposits is very unique-and potentially amenable to extremely low-cost uranium production.

We know that because of analogues in South Africa. Specifically the massive Palabora copper mine.

Palabora also produced uranium for a period of its life. From the lowest-grade uranium ore ever processed globally-reportedly running 0.004% (40 ppm) U308. As the chart below shows, Palabora's grade is far skinnier than the other "low grade" uranium production centers worldwide, past or present.

Grades for historic mines as reported by the International Atomic Energy Agency. Grades for Olympic Dam and Rossing mines are global reserves grade as reported in company filings.

It seems improbable that such low-grade material could produce. But the reason is metallurgy. Uranium here is found in the form of uranothorianite. An unusual mineral that's easily concentrated by simple gravity processing. Reducing costs significantly, and allowing Palabora's owners to make money even at incredible skinny grades.

The Tranomaro mineralization is exactly the same type. These are high-grade metamorphic terrains, where heat and pressure has caused unusual uranothorianite mineralization to deposit.

The opportunity to combine uniquely easy metallurgy with grades much higher than average is a tantalizing prospect.

It Takes a Visit and a Really Big Sample

With the changing of the guard in Madagascar's government, this may be the perfect time to architect this project. Either by taking control of the Tranomaro project, or pursuing other deposits in the same region.

The project itself could well be available. The mineral licensing system in Madagascar has fallen into disarray since the 2009 coup-a site visit to government resource agency OMNIS in 2010 revealed tenure maps badly out of date, and civil servants who simply threw up their hands when asked about who owns what land.

Amid this regulatory chaos, there's a strong possibility the Pan African uranium tenements have been lost in the shuffle. As mentioned, these were dealt to Asia Thai Mining as part of the 2008 takeover. But the new owner was focused on Pan African's coal tenements-with no apparent interest in uranium.

It's thus very possible that these licenses have simply been allowed to lapse. Indeed, our site visit made it clear that extreme effort would be required to keep such concessions in good standing. It's unlikely the firm had the will for the task.

Electronic staking used to be available in Madagascar, but that system too has fallen by the wayside. A site visit to the OMNIS office in the capital Antananarivo is thus required to jumpstart the licensing process.

Concurrently with this, developers should begin bulk sampling activities in the area for metallurgical testing. Access in this southern part of the country is acceptable, and mineral exploration firms are working in the region-approximately 75 kilometres to the west near Imanombo, as well as 60 kilomtetres to the southeast near the port of Taolagnaro.

A 50-pound sample would be appropriate to analyze gravity separation processing like the kind used at the Palabora mine in South Africa. Indeed, South African metallurgical firms like MDM Engineering have ample expertise to conduct the testing.

The total cost is estimated at $20,000 to begin this program-with the goal of staking licenses covering several targets, and generating a metallurgical study that proves the amenability of these ores to low-cost gravity processing.

With these two items in hand, it is expected that a strategic investor could be attracted to the project or sufficient equity funding raised to cover resource delineation drilling and feasibility studies on the unique processing route targeted here.

The potentially low-cost production from this area is exactly what the high-cost uranium sector needs-and would differentiate the project from nearly every other exploration effort taking place globally.   

Track data on "Poaching The Uranium Cost Curve"

Significance of Mineralogy in the Development of Flowsheets for Processing Uranium Ores, International Atomic Energy Agency Technical Report Series No. 196