The past three weeks have been a testing time for local uranium junior Deep Yellow as it comes to grips with a drilling assay discrepancy that has left investors questioning the strength of its principal Napperby site in the Northern Territory.
The past three weeks have been a testing time for local uranium junior Deep Yellow as it comes to grips with a drilling assay discrepancy that has left investors questioning the strength of its principal Napperby site in the Northern Territory.
After being suspended in mid November, trading in Deep Yellow shares was not likely to resume for at least the next two months, pending a green light from the Australian Stock Exchange, the explorer's directors said this week. However, an ASX backflip has led to the reinstatement of the shares.
Deep Yellow executive chairman Leon Pretorius told a lively annual general meeting this week that the whole assay process would have to be audited to determine the correct drill results.
The junior had been spending more than $91,000 a month trying to shore up 4,000 tonnes of the previously estimated 6,000t uranium oxide resource in order to get the project off the ground.
Deep Yellow’s dilemma surfaced on November 15 when laboratory results returned by reputable mineral resource evaluation specialists Hellman and Schofield turned out to be of a lower grade than information supplied by previous owner, Paladin Resources, had indicated.
Hellman and Schofield reported the samples as containing 37 parts per million of uranium oxide, not 258ppm as indicated by an earlier sample, taken by uranium miner Uranerz between 1977 and 1981.
To verify the results, Deep Yellow submitted a sample purchased from the Australian Nuclear Science and Technology Organisation, which maintains historical drill samples, to Hellman and Schofield. That sample returned a reading of 37ppm.
Paladin sold the ground to Deep Yellow just more than 12 months ago for a combination of $100,000 cash and Deep Yellow scrip, based on results gathered from three different drilling campaigns at the site, and a pre-feasibility study carried out by Uranerz between 1977 and 1981.
But after being promoted from non-executive director as part of a board reshuffle just three weeks prior to the issues at Napperby, Mr Pretorius found himself in a difficult position.
“Three weeks into the job and I was taking all these calls from angry shareholders,” he told WA Business News.
Mr Pretorius is also a former director of Paladin and owns 15 million shares in Deep Yellow.
At first, he said, he hoped the results were simply a lab error, telling the market that the samples would be re-tested by another lab.
Mr Pretorius’ worst fears were realised, however, when Deep Yellow received confirmation eight days later that the initial results reported by Hellman and Schofield were correct.
Ahead of Deep Yellow’s revelation to the ASX, shares in the company were suspended from trading at its request, after losing more than 11 per cent of their value in one day, closing at 11.5 cents on November 14.
According to Hartleys resources analyst Andrew Rowell, the average value of shares traded in the week leading up to the announcement was $200,000 a day.
On the basis of the new information on Napperby, Deep Yellow also withdrew a share purchase plan, potentially worth $22 million to the company, returning shareholder funds it had already received.
Taking questions from shareholders, Deep Yellow non-executive director and Paladin company secretary Gillian Swaby said the ASX had taken the view that the company’s shares should remain suspended until it could verify the quality of the resource, which was expected to require further drilling.
“Realistically, it won’t be less than two months,” she said.
The wet season in the Northern Territory and a shortage of available drilling equipment is expected to hamper further drilling efforts at the site.
Also addressing the AGM, Paladin managing director John Borshoff said his company had “offered [Deep Yellow] something that had a resource based on three drilling campaigns”.
But it was “something that becomes viable at $US50 a pound”.
“It’s not that you have a Yeelerie here,” Mr Borshoff said.
However, Mr Borshoff said he “seriously believed Deep Yellow is the best prepared uranium junior in Australia”, and the “sooner it was released from trading suspension the better off it would be”.
Deep Yellow is one of about 10 uranium juniors to have surged this year with the higher price of the metal, which is now nearing $US35 a pound.
