Wednesday, September 06, 2006

CanAlaska Ventures (CVE:CVV) Volume + Price Spike

An announcement by CanAlaska Ventures today resulted in nearly a 20-fold increase in trading volume and a healthy 19% gain to pace the uranium juniors.

The impetus that sparked this particular spike was the unfurling of a JV agreement between CanAlaska and a subsidiary of Japanese-owned Mitsubishi Corp., in which Mitsubishi Development Pty (MDP) can acquire a 50 per cent stake in the CanAlaska-owned West McArthur uranium project by spending $11 million over the next 3 1/2 years.

West McArthur uranium project

CanAlaska's flagship McArthur uranium project is located in Saskatchewan, within kilometers of Cameco Corporation's (TSE:CCO NYSE:CCJ) world-class McArthur River mine.

At the end of May, CanAlaska announced the presence of uranium in the four holes it had drilled on the McArthur property, the best of them containing 0.28% of uranium oxide over 0.2 meters at about a kilometer deep. Continued drilling was deemed to be the next logical step.

In mid-June, the company began its summer exploration program, with four crews, fifty staff, and a $6.5 million budget to further delineate the McArthur property, among other endeavors (CanAlaska has 18 uranium projects in the Athabasca basin alone). A hole 100 meters away from its promising 0.28% U3O8 neighbour was beginning to be drilled late-June.

The Deal

Mitsubishi Development Pty (MDP) is the ferrous raw materials division of its famous parent company. As expected from its Australian roots, its strength lies in coal and MDP has a stake in some 10 coal mines. It is interesting but not necessarily surprising to witness an Australian coal producer committing to a Canadian uranium venture. This deal serves to highlight the escalating interest in uranium worldwide, with the logical progression in the uranium sector now being increasing M&A activity and JVs.

Case in point, as Japan readies new nuclear reactors in the future, several Japanese companies have been actively seeking out stakes in future uranium production. If my readers can remember, Sumitomo Corp. and Kansai Electric Power Co., Japan's third-largest trading firm and second-ranked utility, negotiated a JV with Kazakhstan's state-run KazAtomProm to develop uranium deposit in Kazakhstan.

As for CanAlaska, today's agreement represents a real coup. $11 million dollars is substantial, not to mention the credibility of having a multinational behemoth getting your back; I know of no other uranium junior with a market cap under $50 million who has successfully signed a JV of this size, let alone with a partner like MDP. Still, continued drilling needs to be done and further good results would go a long way in furthering CanAlaska's uranium ambitions.


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