-- Posted Wednesday, November 29 2006 | Digg This Article |

On Monday, Energy Metals Corp announced the company would commence trading on the NYSE Arca, on November 29th, under the ticker symbol: EMU. The NYSE Arca is part of the NYSE Group, of which Cameco Corp (NYSE: CCJ) is the only other primary uranium listed company within the NYSE Group of companies. Energy Metals Corporation is among a handful of near-term U.S. uranium producers. In this interview, the company’s chief operating officer Dr. Dennis Stover discusses his company’s La Palangana project and the Hobson Central processing facility in Texas, and explains production estimates going forward.

StockInterview: We’ve heard 2008 bandied about for Energy Metals to commence operations in Texas. Can you confirm this?

Dennis Stover: At this point, 2008 remains very realistic for the Texas operations. The permitting process is well underway. Baseline environmental studies at the La Palangana project were begun on May 15th. We’re on track to submit the application for a permit to mine to the state of Texas before the end of this year. We believe it’s realistic to have that approved by the end of next year so we can put that area into production.

StockInterview: Isn’t there quite a bit of renovations the Hobson (Texas) facility requires before you can begin production?

Dennis Stover: The reclamation and renovations of the Hobson Central processing plant are well underway. The office complex has been completely renovated and put back into service. A lot of obsolete equipment has been stripped out of the processing plant, and we’ve begun the engineering design work for the renovation and revamping of that facility. We’re going to increase capacity to one million pounds per year. We’ve identified an outside engineering contractor to do the detailed work. The process and instrumentation design work is pretty much done at this point.

StockInterview: How is your progress with the ion exchange circuits, required for the uranium processing?

Dennis Stover: We’ll have the long lead equipment identified and on order early next year so we don’t anticipate delays there. Those vessels, which will be installed at La Palangana, will be set in place probably next fall, September/October time frame. Once we have the authorization or the approval for the permit to mine, only then we can begin adding chemicals and circulating fluid through the ion exchange circuits. The target is to have the ion exchange vessels and the resin, itself, in place before the end of next year, November/December.

StockInterview: Many investors may not realize uranium operations in Texas do not require direct Nuclear Regulatory Commission (NRC) approval.

Dennis Stover: Texas is an agreement state, so the NRC has delegated their authority to the Texas Department of State Health Services, the TDSHS. We deal with the state agency in Texas rather than the NRC. Everything that they do has to comply and be consistent with NRC requirements. But, the entire process is done at the state level. Utah operates under similar agreement with the NRC.

StockInterview: Does this mean the facility is pre-approved for processing?

Dennis Stover: One of the beauties of the situation with Hobson is that it is a fully licensed facility. Its state license remains in effect. We’re making some amendments to that license to reflect the fact that La Palangana will be the source of ion exchange resin that will be processed there. We’re updating a lot of the information associated with that license, but Hobson is licensed to operate at this point in time.

StockInterview: But, there have been some recent problems with uranium mining in Texas.

Dennis Stover: Our situation at La Palangana is that the leachability of the ore had been demonstrated by the fact that Union Carbide operated an ISR facility there in the late 1970s. We have their full database. We’ve been able to review and analyze – kind of do a post mortem – on their situation and understand what they did right and where they had some problems. We think we can avoid those without any great difficulty.

StockInterview: Why do you think your company can avoid similar problems?

Dennis Stover: The technologies evolved dramatically over the last 30 years. We have the advantage that we’ve put together a team of experienced people. Our chief geologist down there spent 10 years at the Smith Ranch project in Wyoming. Our senior geologist has 30 years experience solely with Texas ISR operations, such as U.S. Steel’s Burn’s Ranch, and Clay West projects, as well as a number of projects for Everest Minerals Corporation. We put together a team of people who have had not only a lot of experience doing this, but have had tremendous success in doing that and have learned, and continue to learn as they go along. Certainly, one of the things we’ve all learned over the years is that every well field is different. It’s very important to continually pay attention to detail.

StockInterview: People we’ve talked with, and others who have made comments in the media, are wary of the new uranium producers. Some have also criticized those newly embarking on In Situ Recovery mining.

Dennis Stover: Well, it’s almost the classic statement, “The devil is in the details.” It really is when you talk about in situ recovery of uranium. People come out and see these projects. The first reaction you get is, ‘My goodness, this is all there is to it.’ It has a very small, innocuous footprint on the surface but the detail of how you put these things together is very important. It’s not something the inexperienced individual walks into and immediately is successful. There is a learning process involved. A number of companies back in the 1970s learned that the hard way. There was a lot of stumbling. There are certainly very few people who have had the opportunity, been fortunate enough to stay with this business and have an opportunity to stay on the learning curve as we went through this significant, sustained downturn in the market.

StockInterview: Investors look at ISR uranium operations and think, ‘This is easy.’ But, it’s not always as easy as it appears.

Dennis Stover: There is a certain amount of naiveté by the inexperienced who look at this and think it’s a simple task. I think the geology effort that’s required to really describe and characterize these ISR deposits is more detailed and, in many ways, more demanding on the geologists than what they have to do in conventional mining because you’re dealing with a very limited amount of information from the drilling stats. You don’t have the advantage of being able to walk up to the mine face and actually touch the deposit. It makes it more difficult. It’s demanding, technically demanding on the geologists, but there are good people out there that are perfectly capable of handling the situation and handling it very well.

StockInterview: How do you deal with the obstacles found in ISR mining?

Dennis Stover: Every deposit is a new learning experience, and it’s what we do. What we’ve accomplished over the years is developed a bag of tricks or solutions to the different variations, natural variations that we see in the deposits. We’re always looking for the unexpected. The thing to keep in mind on the broad scale is the La Palangana uranium deposit is situated in the Goliad formation. The Goliad has been the most prolific ISR formation in Texas. Everest’s Mount Lucas project was Goliad, as was URI’s Kingsville and Rosita projects. The Alta Mesa project of Mestena Uranium is also exploiting uranium reserves in the Goliad formation. I had a lot of experience with it, working with Everest on the Mount Lucas project back in the mid to late 1970s. We just simply worked our way through any difficulties that came along.

StockInterview: And, in general, how do you work through the problems associated with ISR mining?

Dennis Stover: Much of it is having an experienced team and paying very close attention to the details about how you design your well fields, in terms of the location of the wells. And then how the wells are completed so that you have good continuity, hydrologic continuity between your injection and your production wells. You do everything possible to confine the flow of fluid exclusively to the ore bearing portions of the aquifer, so that you maximize contact of the oxygen and carbon dioxide through the uranium mineral and minimize the amount of fluid that’s going through barren rock.

StockInterview: What are your ramp up and production plans from 2008 forward?

Dennis Stover: The steady state production from La Palangana is targeted at one million pounds per year, but we’ll ramp up to that, I would say, over a nine-month period. What I’d like to do, and where we’ve had the most success, is that we turn on a relatively small group of wells at any point in time, between five or ten wells. Then we follow that, perhaps, a month later with another five to ten wells. So production comes up proportionate with that until we reach the full flow configuration at La Palangana, which may be as many as 50 to 60 wells operating on a sustained basis. By bringing them on a few at a time, it gives us an opportunity to get some feedback about how our well field designs are functioning or performing. If there’s a need to refine those designs, we can do it as we go forward with the next set of wells. We have, from day one, an aggressive program to get into production as quickly as possible and then to ramp that production up as quickly as possible into the range of 5 million pounds a year by 2012. We remain on track to do that.

StockInterview: Surely that production estimate must include some of you operations outside of Texas?

Dennis Stover: In parallel, we’re pushing very hard on the Wyoming properties. We have not only a regional office in Corpus Christi, but one in Casper. A parallel organization up there is focusing right now on the Moore Ranch property in Powder River Basin, which we see being our first production site there. We’ve got over 5 million pounds of measured National Instrument 43-101 resources there to work off of. The permitting is underway there in terms of baseline environmental studies. This winter, we’ll be getting the engineering work done on that, engineering designs for satellites laid out. We’ve already completed the process instrumentation drawings for the facilities there, as well as Texas. We’re trying to bring those on in parallel. It just takes longer to get things licensed in Wyoming at this point in time.

StockInterview: You’ve been in this business for several decades. How does the past year’s more than 80-percent jump in the uranium spot price impact how you view your company’s projects and properties?

Dennis Stover: I think probably as much as anything, the tremendous run-up in the price has allowed us to look at deposits that we would not have looked at, over the last twenty years, simply because we didn’t feel the quality was quite what we needed. As we expand that look, we’re now looking for ways to maximize productivity, maximize profitability of some lesser quality deposits than I would have in the past. Historically, everybody, I think, has tried to stay around an average of 1 GT (grade thickness) or better. Certainly there are a lot of deposits where the average GT may be 0.5 or 0.7. They’re certainly of interest now, and that is a significant change from what we’ve looked at for a very long time. We’re also extending ISR now into somewhat lower grade or lower GT deposits simply because we can afford to spend more money on our well field investment.

COPYRIGHT (C) 2006 by StockInterview, Inc. ALL RIGHTS RESERVED

James Finch contributes to StockInterview.com and other publications. To find out more about his recent 304-page book, entitled, "Investing in the Great Uranium Bull Market," please visit http://bookstore.stockinterview.com

-- Posted Wednesday, November 29 2006 | Digg This Article |

Investing in the Great Uranium Bull Market