URU Metals Ltd., a base metals and uranium explorer with interests in Africa and South America, is making a bold foray into Canada in 2013 to investigate the potential of the Nueltin Lake gold-uranium project held by Cameco Corp., one of the world's largest uranium producers.

URU has signed an option with Cameco to earn a majority interest in the project, which is located in the Kivalliq region of southern Nunavut about 10 kilometers (six miles) north of the Manitoba border.

The Nueltin Lake granite terrane straddles the Nunavut-Manitoba border and lies within the Southern Hearne Domain of the Western Churchill Province. Geological Survey of Canada geologists exploring the area report two anomalous occurrences of primary uranium, thorium and rare earth elements in the Nueltin Lake area are associated with an aplite dyke (56.8 parts per million uranium and 770 ppm thorium) and a pegmatitic seam (610 ppm uranium, 8,839 ppm thorium and 86,153 ppm rare earth elements) within the Nueltin granitic suite. Parallel-trending trace element patterns indicate that the anomalies most likely represent late-stage, highly fractionated melts from the Nueltin granite.

The Nueltin Lake project consists of 34 mineral claims and 1 mineral lease covering a combined area of about 27,279 hectares (67,406 acres) that hosts the Sandybeach gold-uranium zone, a bedrock gold-uranium discovery made by Cameco in 2008 where the explorer encountered previously unknown mineralization at depths less than 100 meters from surface in drill core with assay grades up to 8.95 g/t gold over 5.95 meters, 3.27 g/t gold over 7.25 meters, and 0.23 percent U3O8 over 1.25 meters.

Cameco's 15-hole, 1,553-meter diamond drill program, the first and only drill campaign ever conducted on the project, was designed to test for the presence of the bedrock source associated with three clusters of multiple gold-uranium mineralized boulders located over a 1.5-kilometer by 0.5-kilometer area that were discovered in the 1970s. Intermittent prospecting by various project operators between 1984 and 2008 encountered several high-grade polymetallic (uranium, gold, molybdenum, copper, tungsten, cobalt, and nickel) boulders believed to be proximal to their bedrock source, the most significant assaying up to 13.68 percent U3O8 and 2,080 g/t gold.

Mineralization was intersected by Cameco in three of the 11 drill holes collared to test geophysical targets in the vicinity of the boulder clusters. The mineralization that was encountered remains open in both directions along strike and at depth and has never been followed-up by any subsequent drilling program.

Mineralization at the Nueltin Lake project appears to be imaged by the induced polarization geophysical technique. The Sandybeach area on the project contains several IP anomalies that remain untested by drilling. The IP anomalies directly associated with the three mineralized drill holes extend several hundred meters along strike and have not yet been tested by drilling.

URU said it is eagerly anticipating the commencement of its first drilling program this summer to follow-up Cameco's discovery.

The Nueltin Lake project is located on lands that are currently subject to a land treaty negotiation between the Government of Canada and the Sayisi Dene and Northlands Denesuline First Nations that, if successfully completed, would give the First Nations ownership of surface and mineral rights on the project. If the land claim is successful, URU said it and Cameco would likely have to negotiate cooperative agreements with the First Nations under which the rights of all parties, including the mineral rights of Cameco and URU on the project, would be respected.

Option agreement

Under the terms of the option agreement, URU must spend C$2.5 million on exploration over the next three years (C$550,000 in 2013, C$1 million in 2014 and C$1 million in 2015) to earn a 51 percent stake in the project. On completion of this first option, URU can spend a further C$8 million on exploration over a four-year period to earn an additional 19 percent interest in the project.

On successful completion of both options, the junior would have earned a 70 percent interest in the project by spending C$10.5 million on exploration over seven years. URU will be the project operator over the option earn-in period.

After URU completes its earn-in requirement under the option agreement, the parties agreed to enter into a standard joint venture agreement, the form of which has already been agreed to and appended to the option agreement.

Upon satisfaction of the requirement to spend C$550,000 by Dec. 31, 2013, URU will have the right to terminate the option agreement at any time by providing 30 days written notice to Cameco.

Until URU exercises the first option, title over the project will remain in Cameco's name. Upon exercise of the first option and if completed, the second option, title as tenant-in-common would be transferred to URU 51 percent and 70 percent, respectively.

Under the joint venture, should Cameco retain a 20 percent interest in the project, they will have the right, but not the obligation, to market the company's share of uranium product from the project. Should URU retain at least a 50 percent interest in the project, the company will have the right, but not the obligation, to market Cameco's share of all mineral products except uranium derived from the project.

Should a mineral discovery be made on the project, a bankable feasibility study be completed, and a decision to mine approved, the joint venture, and if Cameco retains a 20 per cent interest in the project, Cameco, will have a one-time option to purchase 100 percent of any uranium produced in yellowcake concentrate form from the joint venture property at the greater of 90 percent of the monthly average of the daily Ux Consulting Company Broker Average Price in which the concentrate is produced, or the monthly average daily Ux Consulting Broker Average Price should that price be lower than US$35.00 per pound U3O8.

The project is also subject to an existing combined 3 percent net smelter royalty payable to two geologists who initially brought the project to Cameco's attention. The NSR does have buy-out provisions exercisable at the sole option of the joint venture.

Win-win opportunity

"We are delighted to be able to announce our option over the Nueltin Lake gold-uranium project, which is an exciting new project for the company, located in a great mining jurisdiction," URU Metals CEO Roger Lemaitre said in February.

"Nueltin Lake represents a rare opportunity to become involved on the ground floor of a new polymetallic mineral discovery, where the high technical and financial risks associated with making a discovery on a grassroots project have already been satisfied. We get to go to work defining the ultimate size of the potential resource," explained Lemaitre, who became familiar with the project when he ran Cameco's global exploration operations before leaving to help found URU Metals in 2008.

"What interested me about the project is it has a fairly lengthy, but limited exploration history," he said.

After Cameco made the Sandybeach uranium-gold discovery at Nueltin Lake in 2008, the company decided to cut back on exploration in 2009 during the global recession.

"They couldn't do everything they wanted. Since 2009, the project has sat idle. Last year, Cameco decided they would like to find a partner for the project. Since I was intimately familiar with the project, we decided we would like to become Cameco's partner," said Lemaitre during a recent interview.

LeMaitre said the most interesting thing about the property for URU is that the mineralization encountered so far is pretty much open in every direction for several hundred meters. It also fits the junior's strategy of identifying, investing and developing the next generation of accretive mineral project opportunities.

"So it's a pretty rare opportunity for a junior company like (us) to get into basically a brand new discovery at this early stage, where hopefully the definitions and economies of the mineralization will grow as we drill more holes," he observed.

Because Cameco is most interested in having someone work on the property, the major is not asking URU for any significant compensation for the option.

"We don't have any cash changing hands and no shares changing hands, so we can fund the program out of our cash reserves right now, which is fantastic for us," Lemaitre enthused. "One of the sweeteners for Cameco is that they have the right to market any uranium found on the property, and that works out for us because we're not a uranium marketing agency. Also, they are all about increasing their production, their doubling strategy, so on completion of a bankable feasibility study and subject to the joint venture agreement, Cameco has got the option to purchase 100 percent of the uranium produced, providing us with an end user for the uranium.

"So it is a great opportunity for them to augment their production with very little risk and a great opportunity for us to get an exploration property at a very reasonable price," Lemaitre added.