November 5, 2009

Deep Yellow & Rio Tinto To Possibly Enter Iron Ore Deal


Uranium play Deep Yellow could potentially enter into an off take agreement with the Rio Tinto-backed Rossing Uranium to supply iron from its INCA deposit to the Namibian uranium operation.

Subiaco-based Deep Yellow said it has signed an agreement with Rossing
Uranium, which is majority owned by Rio Tinto, to investigate the potential of supplying ferric iron to the Rossing uranium operation and enter into a commercial offtake agreement.

Portions of the INCA deposit in Namibia contain massive iron oxide that is either uranium poor or totally unmineralised and could be supplied to Rossing, which it will use in its processing plant, Deep Yellow said.

"If the iron product is suitable, early indications are that it is, then exploiting
it will serve a number of purposes while detailed investigations into a uranium processing plant at INCA continue in conjunction with the required Stage Two environmental and other studies," the company said.

Deep Yellow has also applied for a mining licence for its Omahola project, 
which contains the INCA and the Tubas Red Sand uranium deposits, despite not having completed a definitive or bankable feasibility study.

Deep Yellow said it had presented a case for exemption to Namibia's Ministry of Mines and Energy based on a two stage environmental clearance procedure where no chemical processing would initially occur on site.

It said high-grade uranium bearing mineralised sand from Tubas Red Sand could be trucked to nearby uranium producers, like Rossing Uranium, for treatment.

INCA Project

Mineralisation at INCA, which is located 30 km inland from the coastal towns of Swakopmund and Walvis Bay has characteristics of both metasomatic and magnetite (calc-silicate) skarn types which is distinct and different from the known lower grade alaskite hosted uranium mineralisation being mined at Rossing and on the projects controlled by other companies in the district and also the higher grade Rossing South discovery of Extract Resources which in part exhibits some similarities to the INCA mineralisation.

Although discovered by Reptile in December 2007, the initial drilling returned 115 metre at 229 ppm eU3O8 from 14 metre in diamond drill hole ADM 02 which is typical of the wide intersections of around 200 ppm as commonly found in alaskites.

Reptile’s technical team had determined that a grade closer to 400 ppm is required for a viable hardrock mining operation and therefore did not pursue this project until later when it was recognised that uranium mineralisation may well be controlled by later alteration systems and not necessarily only with the granites. RC drilling was then undertaken over an approximate 2 by 2 km area on a nominally 100 metre square grid to a vertical depth of 100 metre.

This drilling delineated an area of 300 by 500 metre within which a number
of holes contained 400 ppm U3O8 or better close to the surface and which was deemed prospective and have potential for an open-cut mining operation.

Reptile then set about drilling out this potential pit area on a 50 by 50 metre grid in order to delineate resources down to a nominal depth of 100 metre. While this programme was underway it was decided to deepen two holes in the northern portion of the grid to test an airborne electromagnetic (AEM) anomaly at depth. This drilling led to the discovery of the INCA Deeps mineralisation with hole INCR139 returning 1,734 ppm U3O8 over 20 metre from 206 metre associated with massive magnetite. This hole ended in mineralisation due to excessive amounts of water curtailing the RC drilling but testing of the AEM anomaly had successfully discovered a zone of mineralisation towards the north that is tens of metre thick located approximately 200 metre below surface.

The mineralisation appears to be at least partly structurally controlled and occurs within a partly overturned fold or syncline. There is a 20 to 70 metre thick crystalline marble unit within the metamorphic package which, for all intent, is totally unaffected by the alteration associated with the uranium and iron mineralisation and occurs below the mineralisation. This marble unit is being used as a footwall marker and all previously drilled holes that finished above the marble marker are being deepened to intersect it. Where the mineralisation has not been intersected in the 50 metre spaced holes on the southern and western margins of the deposit, the hole spacing is being reduced to 25 metre.

Along with the drilling programme, metallurgical and other scoping studies have continued and a shortlist of consultants, who will undertake the detailed investigations leading to a Definitive Feasibility Study (DFS), is almost complete. It is anticipated that an announcement with respect to the successful group will be made during October 2009.

The conceptual/initial mine and production scenario that DYL has modelled is to combine ore from the Tubas Red Sand project with that from INCA to produce around 1,000 to 1,500 tonne per annum of U3O8 at a feed grade of +400 ppm. It is estimated that an initial resource of 8,000 to 10,000 tonne will suffice to fund this development while drilling will continue with a view to increasing the resource as regional holes indicate a much larger zone of alteration and mineralisation is present at INCA.

Heap leach trials have also been carried out in columns using a blend of 20% Tubas Red Sand and 80% INCA uraniferous magnetite which was acid cured and then agglomerated. The agglomerate essentially remained intact after 17 days of leaching and washing. All testwork has been completed on unscreened and uncrushed RC drill chips with excellent recoveries of above 80%. This would appear to indicate that milling, which is an extremely energy intensive and expensive step, may not be required.

Consistent drilling results are being returned above 400 ppm U3O8 grade that is required by in-house modelling to support an open-pit mining operation at INCA. 

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