David C. Fitch, C.P.G.

Transcription

1 Geologist Technical Report on the Strathmore Church Rock Uranium Property McKinley County, New Mexico Prepared for: Suite Dolphin Avenue Kelowna, B.C. V1Y 9S4 Prepared by: P.O. Box Reno, Nevada 89570

2 Section CONTENTS Page 1.0 Summary Introduction and Terms of Reference Purpose of Report Terms of Reference Sources of Information and Data Extent of Author s Field Involvement Extent of Author s Past Involvement Disclaimer Property Description and Location Size and Location Mining Claims Nature and Extent of Issuers Title Legal Surveys Mineralized Areas, Surface Disturbance, Environmental Liability Accessibility, Climate, Local Resources, Infrastructure and Physiography Access Climate and Vegetation Topography and Elevation Surface Rights History Ownership History of the Property Exploration and Development Work Undertaken Historical Mineral Resource Estimates and Their Reliability Production History Geological Setting Regional Geology Local and Property Geology Deposit Types Mineralization Summary Geologic controls Exploration Drilling Sampling Method and Approach Gamma-ray Logs Disequilibrium Drill cuttings Page2

3 13.0 Sample Preparation, Analyses and Security Probe Truck and Calibration Core Samples Data Verification Review of Original Records Limitations on Sample Verification Adjacent Properties Mineral Processing and Metallurgical Testing Mineral Resource and Mineral Reserve Estimates Deposit Geology Pertinent to Resource Estimation Data Resources Other Relevant Data and Information Exploration Potential ISR Consideration Interpretation and Conclusions Recommendations Recommendations - Stage I Recommendations Stage II References Certificate of Qualification LIST OF TABLES Table 1-1 Resource Summary... 6 Table 6-1 Historical Resource Estimate: Cutoff of 5 ft of 0.10% (GT of 0.5) Table 6-2 Historical Resource Estimate: Cutoff of 6 ft of 0.05% (GT of 0.30) Table 11-1 Summary of Drilling Results for the Strathmore Church Rock Property Table 17-1 Summary of Mineral Resource by Class Table 17-2 Measured Resource and Indicated Resource by sand unit Table 17-3 Measured and Indicated Resource and Inferred Resource by sand unit Table 20-1 Stage I Recommendations and Costs Table 20-2 Stage II Recommendations and Costs LIST OF FIGURES Figure 4-1 Location Map Figure 4-2 Mining Claims Figure 6-1 Historic Resource Outline...18 Figure 6-2 Columnar section showing mineralized zones Figure 6-3 Cross-Section Showing Typical mineralization Figure 7-1 Geologic map Page3

4 Figure 17-1 Resource Polygons Figure 17-2 GT Contour map of the A-sand unit Figure 17-3 GT Contour map of the B-sand unit Figure 17-4 GT Contour map of the C-sand unit Figure 17-5 GT Contour map of the D-sand unit Figure 17-6 GT Contour map of the E-sand unit Figure 17-7 GT Contour map of the F-sand unit Figure 17-8 Map of Mineralization in A to F Sand Units Figure 17-9 Section Figure Section Page4

5 1.0 SUMMARY The Strathmore Church Rock uranium property consists of 36 unpatented mining claims totaling approximately 640 acres and was acquired by Strathmore Resources (US), a Nevada Corporation and a wholly-owned subsidiary of TSX-V: STM. (Strathmore) March 12, The property was acquired from Rio Algom Mining LLC (Rio Algom), as successor to Kerr-McGee Corporation (Kerr-McGee) who staked the claims in 1965 and has continuously maintained them. The property is in the Grants Mineral Belt in northwest New Mexico in Section 4, Township 16 North Range 16 West (T16N-R16W), New Mexico Principal Meridian in the main part of the Church Rock district. Kerr-McGee began drilling on the property in 1967, and made discovery of significant uranium mineralization at a depth of 1,200 feet in drill hole number 4 completed November A total of 165 drill holes have been completed to-date totaling approximately 306,000 feet (data from drill summary sheets). Most of the drilling was performed during the period 1967 through 1977, with additional drilling up to The mineralized rock occurs as uranium-humate-cemented sandstone in fluvial sandstone units in the Westwater Canyon Member of the Jurassic Morrison Formation. The deposits are irregular in shape, are roughly tabular and elongate, and range from a few feet in width and length to bodies several tens or hundreds of feet long. The historical resource estimate for the Strathmore Church Rock property was done by Kerr- McGee and updated by its successor, Rio Algom in 1995 and the measured and indicated resource totals 2,566,000 tons at an average grade of 0.11% eu 3 O 8 for a contained total of 5,502,000 pounds U 3 O 8, using a cutoff of 0.5 GT (grade in % U 3 O 8 times thickness in feet). There is an additional potential category containing 500,000 pounds U 3 O 8 for a property total of 6 million pounds U 3 O 8. Additionally, in 1979, Kerr-McGee reported a demonstrated reserve (measured and indicated resource) of 10.9 million pounds U 3 O 8 at an average grade of 0.09% U 3 O 8 using a cutoff of 6ft of 0.05% U 3 O 8. From a review of all the data it is concluded that Kerr-McGee and Rio Algom collected reliable and accurate data in their performance of exploration drilling, log interpretation, map posting and calculating the historical resources. It is also concluded that there is very good exploration potential for additional uranium mineralization. For this report, a mineral resource was calculated for mineralization in each of six sand units by the perpendicular-bisector polygon method using bisectors one-half the distance between the nearest drill hole intercept. The resulting polygons were capped at 100 x 100ft area of influence (AOI) for the measured resource class, 200 x 200ft AOI for the measured and indicated resource class and 400 x 400ft AOI for the inferred resource class. A tonnage factor of 15 cubic feet per ton was used and a cutoff of 0.03% U 3 O 8 with a minimum GT (grade in %U 3 O 8 times thickness in ft) product of 0.3. A summary of the estimated resource is tabulated in Table 1.1. Page5

6 Table 1-1 Mineral Resource Summary Measured Cutoff GT Tons Grade Pounds Thickness (%U 3 O 8 ) (U 3 O 8 ) (ft) 0.3 1,680, ,233, Indicated Cutoff GT Tons Grade Pounds Thickness (%U 3 O 8 ) (U 3 O 8 ) (ft) 0.3 4,541, ,614, Measured and Indicated Cutoff GT Tons Grade Pounds Thickness (%U 3 O 8 ) (U 3 O 8 ) (ft) 0.3 6,221, ,848, Inferred Cutoff GT Tons Grade Pounds Thickness (%U 3 O 8 ) (U 3 O 8 ) (ft) 0.3 1,950, ,525, It is recommended to perform work to determine the economic viability of the project and to convert the Mineral Resource to Canadian Institute of Mining (CIM) compliant Mineral Reserve estimates. It is recommended to perform additional geologic studies including compilation of cross sections and detailed sand unit maps to determine the detailed geometry of mineralized fronts for possible ISR (in-situ uranium recovery) operations. It is recommended to drill two core holes to obtain cores from the mineralized zones for radiometric and chemical analysis, and for porosity, permeability and metallurgical tests for possible ISR operations. The potential for ISR commercial production should be seriously evaluated. The recommended budget for Stage I of such a program is US$384,000. Once Stage I determines the economic viability, Stage II is recommended to perform ISR engineering and environmental studies to advance the project to the permitting phase for the purpose of completing a mineral reserve estimate for the project. Page6

7 2.0 INTRODUCTION AND TERMS OF REFERENCE 2.1 Purpose of Report Strathmore Resources (US), a Nevada Corporation and a wholly owned subsidiary of Strathmore Minerals Corp.TSX-V: STM. (Strathmore) requested that the author prepare a technical report for the Strathmore Church Rock Uranium Property, McKinley County, New Mexico in compliance with the requirements of Canadian National Instrument and F1. The report includes the results of resource estimation with classifications that meet Canadian Institute of Mining (CIM) standards. In addition, the purpose of this report is to examine the previous work, including the historical resources and to recommend further work to advance the project. 2.2 Terms of Reference Units of measurement unless otherwise indicated, are feet (ft), miles, acres, pounds avoirdupois (lbs), short tons (2,000 lbs). Uranium content is expressed as % U 3 0 8, the standard market unit. Values reported for historical resources and the mineral resource are % e U (equivalent U by calibrated geophysical logging unit, see Section 12.1 for further explanation). Unless otherwise indicated, all references to dollars ($) refer to the currency of the United States. Additional units of measurement are tabulated as follows: Unit Metric Equivalent 1 foot meters 1 inch 2.54 centimeters 1 pound (avdp.) kilograms 1 acre hectare 2.3 Sources of Information and Data All of the detailed factual data including drill-hole maps, gamma-ray electric logs, resource calculations and other information for this report are from original files and records of Kerr-McGee Corporation (Kerr-McGee) and Rio Algom Mining LLC (Rio Algom), their successor. This information was provided to Strathmore as part of the acquisition of the Strathmore Church Rock property. These files were researched and reviewed in detail by the author in Riverton, Wyoming October 14 and 15, 2004 and copies made by the author of the pertinent data were reviewed in October and November in Reno, Nevada. The quality of the data is excellent and was prepared by Kerr-McGee employees in the course of their normal exploration and development program. Kerr-McGee was recognized throughout the industry as a highly qualified and professional uranium operator. Kerr-McGee Corporation was the largest uranium producing company in the Grants Mineral Belt over a period of time from the mid 1950 s through the 1990 s (McLemore and Chenoweth, 1989, Saucier, 1979). 2.4 Extent of Author s Field Involvement The author visited the property in the field on October 17, 2004 and examined a number of the drill hole locations, claim posts, and US Mineral Survey monuments for MS2310. The uranium deposits lie at depths of 1,500 to 1,700 feet and exhibit no surface expression, thus no samples were taken. 2.5 Extent of Author s Past Involvement The author has 38 years of mining exploration experience, including over 17 years of uranium exploration experience in the Grants Mineral Belt, during the period 1967 to 1984, as District Geologist and subsequently as Assistant Vice-President Exploration with Ranchers Exploration Page7

8 and Development Corporation (Ranchers). In November 1968, the author managed Ranchers exploration program that discovered and subsequently drilled out the Johnny M mine in Section 7, T13N-R8W. This is located in the east part of the Ambrosia Lake District, about 40 miles east of the Church Rock District. The author was able to follow the Johnny M mine from discovery while managing the drilling program that blocked out ore reserves, and keeping abreast of the shaft sinking, development and production. The author recalls when Kerr-McGee was actively drilling on the Strathmore Church Rock project in 1970 and later. The author has also visited the underground workings of United Nuclear s (UNC) Church Rock mine in the 1970 s. Page8

9 3.0 DISCLAIMER The author has relied largely upon the unpublished company files and records of Kerr-McGee Corporation pertaining to the Strathmore Church Rock property in the possession of Strathmore. In the author s opinion, the data collected by Kerr-McGee was of high quality and was prepared by them in a reliable manner in the course of producing uranium for their company. Kerr-McGee was regarded as a leader in the uranium industry and set many standards that were followed by others in the industry. The author s experience and profession is in mining exploration, including uranium exploration but does not include detailed land, legal, and environmental work. Page9

10 4.0 PROPERTY DESCRIPTION AND LOCATION 4.1 Size and Location The Strathmore Church Rock property is located in northwestern New Mexico in the Grants Mineral Belt (Figure 4.1), in the southern part of the Church Rock District. The Strathmore Church Rock property consists of 36 unpatented mining claims, totaling approximately 640 acres located in Section 4, T16N-R16W, New Mexico Principal Meridian., McKinley County, New Mexico. The property is approximately 10 air miles northeast of Gallup, New Mexico and can be reached by traveling east 6 miles from Gallup on Interstate 40, then north 10 miles on NM State Hwy 566 (paved), then west and southwest by dirt roads to the north central part of Section 4, 16N-16W. The property is one-half mile south of the Navajo Reservation boundary. Drill roads mostly require 4-wheel drive for access. Parts of the drill roads have not been used for years, and therefore maintenance will be required. 4.2 Mining Claims The 36 unpatented mining claims are contiguous and consist of the following claim names and numbers: Ram 1-36 (NMMC ) (Figure 4.2). The claims are listed in the U.S. Bureau of Land Management Mining Claim Geographic Index Report (LR2000) with a location date of 10/06/65, and the latest assessment year is 2006 (current). A copy of a signed and notarized Affidavit of Annual Mining Claim Maintenance Fee Payment dated October 10, 2005 which was stamped as received by the McKinley County Clerks Office, October 18, 2005 was examined. The Affadavit included the Ram #s 1-36 claims. A copy of a notarized and recorded Affidavit and Notice of Intent to Hold dated August 23, 2004 on behalf of Strathmore Resources (US), Ltd for this list of claims was also examined. The Affidavit was stamped as recorded in the New Mexico Office of the Clerk of McKinley County. Also examined by the author was a Quit Claim Deed by Rio Algom Mining LLC (successor to Kerr-McGee) conveying the above listed claims to Strathmore Resources (US) Ltd. The Quit Claim Deed was dated effective March 12, 2004 and recorded with the McKinley County Clerk on March 19, 2004, Book 22, P Copies of the original Claim Location Notices were also examined. The claims were staked and recorded in 1965 in the name of Kerr-McGee Oil Industries, Inc. Correspondence in the Kerr-McGee files reports that the Strathmore Church Rock unpatented claims were in the process of being taken to Mineral Patent. Mineral Survey MS2310 of the claims was performed in 1980 by Harvey W. Smith, EM (Engineer of Mines), Mineral Surveyor and Registered Mining Engineer. Claim corners were surveyed and brass cap monuments were set. The approximate UTM boundaries of the claim block are: NW corner (E722,110, N3,947,960), NE corner (E723,710, N3,948,010), SE corner (E723,730, N3,946,510), and SW corner (E722,120, N3,946,450). UTM NAD27 Continental US, Zone 12, metric coordinates. These locations are for geographic reference only and are approximate. The precise survey locations should be recovered from the above-mentioned Mineral Survey MS2310. Page10

11 Figure 4-1 Location Map Page11

12 Strathmore Church Rock Uranium Property, McKinley County, New Mexico Figure 4-2 Mining Claims Navajo Nation Boundary T 17 N R 16 W Ram T 16 N Claim Map Ram Section 4, T16N -R16W Church Rock Property McKinley County, New Mexico Strathmore Minerals Corporation 1 Mile N Data from Kerr-McGee maps and files Page12

13 Holding costs for the unpatented mining claims include a claim maintenance fee of $ per claim payable to the Bureau of Land Management before September 1 of each calendar year (CFR 3834, July 1, 2004), and recording an affidavit and Notice of Intent to hold with the McKinley County Clerk, New Mexico. County recording fees are $9.00 for the first page and $2.00 for additional pages. The above fees will be due again before September 1, 2006, and each year thereafter, or as modified by future legislation. 4.3 Nature and Extent of Issuers Title Strathmore Resources (US) Ltd holds the Strathmore Church Rock claims listed above by Quit Claim Deed by Rio Algom Mining LLC (successor to Kerr-McGee) conveying all title to the abovelisted claims to Strathmore Resources (US) Ltd. The Strathmore Church Rock claims are listed in Schedule A of the Deed. The Quit Claim Deed was dated effective March 12, 2004 and recorded with the McKinley County Clerk on March 19, 2004, Book 22, P A signed and recorded copy of this Quit Claim Deed was examined in Strathmore Resources files. Also there exists an underlying purchase agreement leading to the Quit Claim Deed. 4.4 Legal Surveys The Strathmore Church Rock claims were surveyed as Mineral Survey MS2310 by Kerr-McGee in 1980 by Harvey W. Smith, EM, Mineral Surveyor and Registered Mining Engineer. 4.5 Mineralized Areas, Surface Disturbance, Environmental Liability The uranium deposits on the Strathmore Church Rock property are shallow dipping and lie at depths of between 1,500 to 1,700 feet from the surface. There is no surface expression of the deposits and thus all information defining the mineralization is from drill holes. There has been surface disturbance consisting of drill roads about 8 feet wide and drill pads. Where examined, the drill pits had been backfilled and leveled, the sites reclaimed, and drill holes contained a surface cement plug with 2-in steel pipe. Drill hole markings on the pipe were mostly illegible due to years of weathering. A total of 165 holes were completed on the Strathmore Church Rock property of which 151 were drilled from 1967 through 1975, and 14 holes were drilled from 1976 through In New Mexico there are also drill hole plugging requirements for all holes that encounter water. Forms describing the method of plugging and other required information must be submitted to the State Engineer Office and the State Bureau of Mines and Mineral Resources within 90 days of encountering water in the drill hole. As there has been no previous mining on the property, it is likely there are no existing significant environmental liabilities associated with this property. Page13

14 5.0 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY 5.1 Access The property is reached by traveling east approximately 6 miles from Gallup on Old Highway 66 (currently a frontage road to Interstate 40), then north approximately 10 miles on New Mexico State Hwy 566 (a paved road) to a location approximately ½ mile south of the Navajo Indian Reservation. Several potential access routes to the site from Highway 566 are available, including two that require access approval through the Navajo Reservation and two that require access agreements with other private surface landowners. Access through the Navajo Reservation is the most problematic and therefore, least desirable. The other two alternatives will require negotiation of access agreements with the surface owners on Sections 34, 35, T17N, R16W, and possibly Section 3, T16n, R16W, in one case, and Sections 8 and 9, T16N, R16W in another. An act by the Navajo Nation Council was passed and signed into law April 29, 2005 which prohibits uranium mining on Navajo territorial lands. The act states (S1303) that No person shall engage in uranium mining and uranium processing on any sites within Navajo Indian Country. The Strathmore Church Rock property is on BLM lands and not Navajo Reservation Lands, however the act may create difficulty of access across Reservation Lands, and therefore may require gaining alternate routes of access across non-reservation lands. 5.2 Climate and Vegetation The Strathmore Church Rock property is vegetated mostly by grasses, pinion pine and juniper trees and is in a semi-arid, high-desert climate. The property is approximately 15 air miles northeast of Gallup, New Mexico which receives an average of nearly 17 inches of precipitation annually. The major part of annual precipitation occurs with thunderstorms in June, July and August. An average of nearly 34.1 inches of snow falls annually, mostly during the period December through February. Gallup has an annual average temperature of 46 o degrees F, and an average high monthly temperature of 83.9 o in July, and an average low monthly temperature of 11.7 o in January. (Website, 2005). Winter snow and inclement weather conditions may interrupt operations occasionally. 5.3 Topography and Elevation The Strathmore Church Rock property has relatively moderate topography and is mostly underlain by a mesa formed by ledge-forming sandstone beds that dip 2 o to 3.5 o northeast (Figure 4.2). Elevations range from 7,040 to 7,518 feet on the property. A northeast trending canyon in the west part of Section 4 has up to 200 ft relief, and a sandstone ledge and slopes in the extreme southeast corner of Section 4 has 150 ft relief. The south-center to the east center part of the project has moderate relief of approximately 70 to 120 ft over a one-half mile distance. 5.4 Surface Rights The Strathmore Church Rock claims are on Bureau of Land Management Lands, administered by the U.S. Department of the Interior, Bureau of Land Management (BLM). Certain permits and approvals are required for use of the surface. A Notice of Intent and/or a Plan of Operations must be filed with the appropriate BLM District office and approval received prior to any new surface disturbance activities. The BLM must reply within 30 days with either an approval or requirements for more information. A Plan of Operations requires a reclamation cash bond, the amount to be set by the BLM. Regulatory authority for the BLM Plan of Operations is CFR 43, Subparts 3802 and 3809, Surface management under the general mining laws. In addition, Page14

15 exploration operations require an approved exploration permit from the New Mexico Mining and Minerals Division of Energy, Minerals and Natural Resources Department (EMNRD). The Permit Application must be submitted not less than 120 days prior to anticipated date of operations. The Permit Application requires a fee of $ and an estimate of proposed financial assurance for reclamation. The regulatory authority for New Mexico permits is the New Mexico Mining Act, Sections to , NMSA 1978 and New Mexico Mining Act Rules, NMAC. Page15

16 6.0 HISTORY 6.1 Ownership History of the Property Kerr-McGee Oil Industries, Inc staked the Ram 1-36 unpatented mining claims on October 6, 1965, and then recorded the location notices and affidavits in the McKinley County Courthouse. Kerr-McGee Oil Industries, its subsidiaries and successor in interest Rio Algom Mining Corporation have held the claims until acquired by Strathmore Resources (US), Ltd. effective March 12, Exploration and Development Work Undertaken The following description of work undertaken is based largely on my review of the drill records, including drill-hole summaries and gamma-ray logs. Kerr-McGee performed an ongoing rotary drill hole exploration program beginning in The holes were drilled to 4 ¾ in diameter with truck-mounted drills contracted by local drilling companies. Common practice used by Kerr- McGee was to drill the holes by conventional rotary using drilling mud fluids. The cuttings were typically taken at 5-foot intervals by the driller and laid out on the ground in piles for each 5 feet in rows of 20 samples or 100 feet. A geologist later logged these to record alteration and lithology. The drill holes were taken through the Westwater Canyon Member and several feet into the underlying Recapture Member or Cow Springs Formation (non-host). Upon completion of a drill hole, the hole was logged with a gamma-ray, self potential, and resistivity probe by either a contract logging company or by Kerr-McGee s company-owned logging truck. The first drill hole was completed in Section 4 in August Drill hole number 6, completed February 6, 1968, discovered significant uranium mineralization averaging 10ft of 0.06% U 3 O 8 (or a GT of 0.60% U 3 O 8 ) used as a cutoff grade. The mineralized zone was intercepted at a depth of 1,747 ft. Most of the drilling was performed from 1968 through 1975, with additional drilling Subsequently one drill hole per year was completed in , 1989, and A total of 165 holes totaling approximately 306,000 feet were completed (data from drill summary sheets). No hydrologic study has been conducted for the Strathmore Church Rock property. However Smouse (1995) reports that RAMC (Rio Algom) has not ran any ISL [in-situ leach] amenability tests for the uranium deposits in Section However, URI to south has performed pump test and permeability studies on uranium mineralization that is a southwest extension of RAMC s. Hence, it is believed that Section uranium deposits can be mined by ISL methods. Although Rio Algom did not run ISR tests, Kerr-McGee had previously run such tests as reported by Freeman (1987). Laboratory short column tests on core and ore samples indicated very leachable ore with 80 to 90% U 3 O 8 extraction in the lab. During 2005, Strathmore has performed ongoing geologic studies for the Church Rock property, including the compilation of databases, drill maps, mineralization maps, cross-sections and data review. They have prepared in-house mineral resource estimates. Strathmore has set up an office in New Mexico, which has been conducting ongoing environmental and permitting studies and activities. 6.3 Historical Mineral Resource Estimates and Their Reliability Historical Resource Estimates were prepared by Kerr-M-Gee and its successor, Rio Algom. The following two tables of Resources, Table 6.1 and 6.2 are from Smouse (1995), and Falk (1979), respectively. Smouse s estimates were based on a cutoff of 5 ft of 0.10% U 3 O 8 (GT of 0.50). Falk s estimates were based on a cutoff of 6 ft of 0.05% U 3 O 8 (GT of 0.30). Due to the shallow dip of the mineralized zones and the slight deviation from vertical of the drill holes, the intercept Page16

17 thickness (apparent thickness) essentially represents the true thickness. Any corrections to apparent thickness were much less than the error in intercept boundary determination. Historical Resource Blocks are outlined on the map shown by Figure 6.1 and tabulated in Tables 6.1, 6.2. The letter designation indicates Westwater Member sandstone units with the A unit being the upper unit and the F unit being the lower unit (Figure 6.2). Figure 6.3 is a representative section showing mineralization in the southeast part of Section 4. Table 6-1 Historical Resource Estimate: Cutoff of 5 ft of 0.10% (GT of 0.5) Grade Category Tons %U 3O 8 Pounds U 3O 8 Measured 2,532, ,426,000 Indicated 34, ,000 Total Measured & Indicated 2,564, ,502,000 Potential 500,000 Totals 6,002,000 Cutoff of 0.50 GT (grade %U 3 O 8 times thickness in ft) Average thickness: 12 ft From: D.E. Smouse, 1995 Table 6-2 Historical Resource Estimate: Cutoff of 6 ft of 0.05% (GT of 0.30) Grade Category Tons %U 3O 8 Pounds U 3O 8 Total Measured & Indicated Cutoff of 6 ft of 0.05% (0.3 GT) 6,050, ,900,000 This Report: Cutoff of 0.03% 6,221, ,848,007 ( 0.3 GT) Difference from this report 2.74% 5.80% 8.70% From: Falk (1979) Page17

18 Strathmore Church Rock Uranium Property, McKinley County, New Mexico Figure 6-1 Historic Resource Outline T 17 N R 16 W Church Rock Property Boundary A A 1 Mile T 16 N Historic Resource Outline Church Rock Property N Sec 4, T16N R16W Page18

19 Figure 6-2 Columnar section showing mineralized zones Note to Figure 6.2: Source Kerr-McGee, 2 miles north of Sec. 4. Section 4 drill depths approx. 500 feet shallower Page19

20 400 ft Strathmore Church Rock Uranium Property, McKinley County, New Mexico Figure 6-3 Cross-Section Showing Typical mineralization A Northwest Southeast A Dh 16 Dh 13 Dh ft 200 ft 6100 ft el Kd Jmb B C C A Sand B C Jmw C C C D E E F 1700 E F E E F F F 1750 G 1800 H ft el Jmr Kd Dakota Ss Jmb Brushy Basin Mbr Jmw Westwater Canyon Mbr Jmr Recapture Mbr Typical Mineralization (Thickness ft - %U 3 O 8 ) Strathmore Church Rock Project Note to Figure 6.3: Location of section shown as line A-A on map in Figure 6.1. Page20

21 Kerr-McGee s criteria for determining resource blocks was rigorous and developed from years of successful operating experience in New Mexico and Wyoming. The procedure for New Mexico is as follows (Kerr-McGee, undated): Measured category For Blocks in the measured category a circle is drawn on the map around the drill hole intercepts that meet thickness and grade of cutoff. The radius of the circle is equal to ½ the horizontal distance to the nearest drill hole intercept below cutoff, or 50 feet whichever is less. Two or more above-cutoff holes may be connected to construct a measured block by lines tangent to the circles provided that: The intercepts tie or correlate within the same lithologic unit, and at least one foot of the intercepts can be connected with each other by a horizontal line (in correlation section). There are no below-cutoff intercepts in the same unit within the block. The above-cutoff holes are no more than 300 feet apart. Where a below-cutoff hole interferes with a straight-line connection of a measured block, a 50- foot radius is applied to such hole and the straight line drawn to its radius so as to remove the below-cutoff area from the measured block. An above-cutoff intercept is considered an isolated block if it cannot be tied to another such intercept Indicated category Indicated blocks are constructed to enclose the unsampled area between measured blocks and/or isolated holes, using the same methods described above except: Above-cutoff holes are not connected if greater than 300 feet apart. Inferred category Inferred blocks are constructed to enclose the unsampled area between measured and indicated blocks and/or isolated holes, using the same methods as for measured except: Horizontal distance between cutoff holes is greater than 500 feet and less than 1,000 feet if the intercepts tie. If they do not tie, the connection can be up to 500 feet. Miscellaneous Cutoff grades (COG) and thickness for New Mexico surface holes: COG = 0.10% U 3 O 8 at a mining thickness of 6 feet (6 / 0.10 %U 3 O 8 ). Strathmore Church Rock cutoff was a GT of 0.50 (the equivalent of 5 / 0.10 % U 3 O 8 ). Calculation sheets were used by Kerr-McGee. The surface area was computed by planimeter from the map and multiplied by the thickness. This number was divided by the tonnage factor. A tonnage factor of 15 (cubic feet per ton) was used for the New Mexico calculations. Falk (1979) reports a demonstrated reserve (measured and indicated) of 10.9 million pounds U 3 O 8 at an average grade of 0.09% U 3 O 8 for Section 4, using a cutoff of 6ft. of 0.05% U 3 O 8. Freeman (1987) in a KM memo regarding chemical mining potential for Strathmore Church Rock, estimates approximately 4 million pounds U 3 O 8 recoverable from section 4. He further reports that Laboratory short column tests on core and ore samples indicated a very leachable ore with 80 to 90% U 3 O 8 extraction in the lab (Freeman, 1987). The author believes that there is a high degree of reliability of the above historical resources due to the fact that Kerr-McGee was a proficient uranium operator, with extensive experience in the Grants Mineral Belt. They operated and fed a 7,000-ton per day capacity mill (the largest in the U.S.) in Ambrosia Lake from numerous underground mines. They operated in a workmanlike and proficient manner. This author was Exploration manager for Ranchers from 1967 to 1983 after which Ranchers was purchased by Hecla Mining Company. Ranchers received significant royalties from five of Kerr-McGee s major uranium mines in the Ambrosia Lake district. Ranchers would annually hire Chapman, Wood, and Griswold, Inc., a well-recognized engineering firm, to Page21

22 perform an independent review of the uranium ore reserves of these royalty sections. Although I did not have oversight responsibility for the reserve studies, I can recall no significant discrepancies in the ore reserves reported by Kerr-McGee; they were accurate and reliable as I recall. Additionally beginning in 1980 or before, Kerr-McGee initiated the process of taking the Strathmore Church Rock claims to Mineral Patent, which requires documenting and proving to a U.S. Mineral Examiner that any mineral reserves may be profitably mined and processed. Kerr- McGee must have considered the above historical reserves commercial at that time. This process is not initiated unless there is a very high certainty of successful completion. If a company applies for patent and the claim(s) do not meet strict Federal requirements, the claim or claims in question may be challenged by the Secretary of the Interior, and subsequently be declared invalid by a court of law. Kerr-McGee completed the first step toward patenting, by having a Mineral Survey, MS2310 completed in April The uranium market and uranium prices fell dramatically just after 1980 from more than $40/lb to $20/lb in 1983 (WMC Resources Ltd, 2004), and it is likely that Kerr-McGee put the patent process on hold for that reason, awaiting a return of better uranium prices. 6.4 Production History There has been no previous production from the Strathmore Church Rock property. The Church Rock and Crownpoint districts combined produced approximately 16 million pounds U 3 O 8 at grades of 0.10 to 0.20 % U 3 O 8 (McLemore and Chenoweth, 1989) using conventional underground mining and milling methods. Nearly all of this reported production is from the Church Rock district. Page22

23 7.0 GEOLOGICAL SETTING 7.1 Regional Geology The Grants Mineral Belt, in northwest New Mexico, lies within the Colorado Plateau geologic province and on the south flank of the San Juan Basin. It extends from several miles east of Laguna to the Gallup area, a distance of 100 miles by 25 miles wide (Figure 4.1). The belt includes the Laguna, Ambrosia Lake and Church Rock districts. Principal host rocks for the uranium deposits are fluvial sandstones in the Jurassic Morrison Formation, named the Westwater Canyon Member, and the Jackpile Sandstone. Other, less important host rocks for uranium deposits are the Cretaceous Dakota Sandstone, and the Jurassic Todilto Limestone. The Morrison Formation forms outcrops along the south edge of the San Juan Basin and dips gently north into the basin. It is overlain by the Cretaceous Dakota Sandstone, Mancos Shale, and Mesaverde Group (Figure 7.1). The Morrison Formation was deposited in a continental environment and in the Grants Mineral Belt consists of four members in ascending order; the Recapture Member, mostly grayish-red siltstone and claystone, the Westwater Canyon Member, gray, light yellow-brown and reddish-brown, fine- to coarse-grained arkosic sandstone with interbeds of greenish-gray and reddish-gray claystone, the Brushy Basin Member, mostly greenish gray-gray claystone, and the Jackpile Sandstone, an informal name for the upper fluvial sandstone in the east part of the Grants Mineral Belt near Laguna, New Mexico. The Jackpile sandstone does not exist in the Church Rock or Ambrosia Lake districts. The Westwater Canyon Member, host for the uranium at the Strathmore Church Rock property, ranges to 450 feet thick in the Grants Mineral Belt and consists of fine- to coarse-grained sandstone. Page23

24 Figure 7-1 Geologic map R 16 W T 17 N T 16 N Kcg Gibson Coal Mbr 1 Mile Kmm Mulatto Tongue, Gallup Ss Kcda Dalton Ss Kcdi Dilco Coal Mbr Kgl, Kg, Kgt Gallup Ss N Km Mancos Shale From Kirk & Zech, 1987 Geologic Map Church Rock Property Section 4, T16N R16W 7.2 Local and Property Geology Ledge-forming sandstones above shale slopes, all in the Cretaceous Mesaverde Group, underlie the Strathmore Church Rock property (Fig. 7.1). The Gallup Sandstone, lowermost formation of the Mesaverde is underlain by the Mancos Shale, which is about 800 feet thick. These units are underlain by the Cretaceous Dakota Sandstone, which is about feet thick. The Dakota Sandstone unconformably overlies the Brushy Basin Member of the Jurassic Morrison Formation. The Brushy Basin Member overlies the Westwater Canyon Member, host rock for the uranium deposits. The Westwater Canyon consists of a series of fluvial quartz-rich, arkosic sandstones Page24

25 separated by thin green claystone shale beds. The Westwater is about 250 to 400 feet thick and is informally divided into 8 sandstone units, A to H from top to bottom. Only sands A to F are the significant uranium-bearing units of interest. Structure is not complex, but will require careful study for its effect on any future mining or ISR plans. There is a north-trending, shallow plunging anticline in the east half of Section 4, and a corresponding shallow plunging syncline in the west half of Section 4. The property lies on the south margin of the San Juan Basin and beds dip northeast at 2 o to 3.5 o. From a review of the drill summaries, the top of mineralized zones in the Westwater Canyon Member ranges from 1,500 to 1,700 feet below ground surface. Page25

26 8.0 DEPOSIT TYPES Deposits in the Church Rock district are sandstone-type uranium deposits. Sandstone-type uranium deposits are irregular in shape, are roughly tabular and elongate, and range from thin pods a few feet in width and length, to bodies several tens or hundreds of feet long. The deposits are roughly parallel to the enclosing beds, but may form rolls (tabular lenses) that cut across bedding. The deposits occur in more than one layer, form distinct trends, commonly parallel to depositional trends, and occur in clusters. Two sub-types of deposits occur, primary ore and post-fault ore, also termed stack or redistributed ore, derived from primary ore. Primary ore in the Grants Mineral Belt consists mostly of uranium-enriched humic matter that coats sand grains and impregnates the sandstone, imparting a dark color to the rock (Schmidt-Collerus, 1969). Primary ore is mostly tabular and subparallel to the bedding. Stack or redistributed ore differs from primary ore mostly in geometry, and stacks upward along faults and fractures. Stack ore is commonly medium gray, and lower in grade than primary ore. Uranium mineralization at the Strathmore Church Rock Project is mostly of the stack-ore, or roll front type with the mineralization forming northwest-facing fronts that transect bedding. Page26

27 9.0 MINERALIZATION 9.1 Summary The typical mineralized rock in the Church Rock district, as well as the Ambrosia Lake and Jackpile districts, occurs as uranium-humate cemented sandstone. The uranium mineralization consists largely of unidentifiable organic-uranium oxide complexes that are light gray brown to black. A direct correlation exists between uranium content and organic carbon content by weight percent in the ores (Squyres, 1970, 1980, Kendall, 1972). Although coffinite and uraninite have been identified in the Grants Mineral Belt, their abundance is not sufficient to account for the total uranium content in an ore sample. Admixed and associated with the uranium are enriched amounts of vanadium, molybdenum, copper, selenium, and arsenic in order of decreasing abundance (Falkowski, 1980). Other metals are also enriched above background amounts. Total uranium production from Jurassic Morrison sandstones within the Grants Mineral Belt was more than 340 million pounds U 3 O 8 from 1948 through 2000, including the Church Rock district, which has produced 16 million pounds (McLemore, 1989, 2002, Church Rock and Crownpoint). Based on my review of the Historic Resources, the drill data, and the correlation of mineralized zones by Kerr-McGee, the mineralization at the Strathmore Church Rock property occurs in several elongate deposits that range to 100 or 200 feet wide by 200 to more than 3,500 feet long. Thickness of mineralization ranges from 1 ft. to 42.5 ft. 9.2 Geologic controls The primary ore control is the presence of a quartz-rich, arkosic, fluviatile sandstone in the Morrison Formation. This type of sandstone is the primary host rock in the Church Rock district, although some ores were produced from Cretaceous Dakota Sandstone, a quartz-sandstone. The presence of carbonaceous matter as humate pods is important. Detrital plant fragments are less common in the Church Rock districts than in the Ambrosia Lake district. The presence of pyrite and bleaching alteration is important. Sedimentary features may exhibit control on a small scale. Alteration bleaching forms a halo that encloses mineralization, updip to the deposit. The bleaching caused by the removal of reddish ferric-iron pigmentation imparts a light-gray color to the sandstone, and a greenish rim on red-cored claystone cobbles or galls. Page27

28 10.0 EXPLORATION Exploration methods for sandstone uranium deposits differ in many respects from those for other metals. Uranium deposits in the Church Rock district have no surface expression and thus require drilling and geophysical logging for discovery. Common practice is to drill widely-spaced holes to gather geologic information, including alteration bleaching, traces of mineralization, and sandstone development. This information is used to guide the location of subsequent drill holes, with the object of intercepting mineralization as quickly as possible. Subsequent offset drilling to mineralization is modified continually as new geologic information is developed. Based on my review of drilling records, previous exploration of the Strathmore Church Rock property consisted of an on-going drilling program performed by Kerr-McGee and staged over a number of years. Most of the drilling was by Stewart Brothers Drilling, a contract drilling company and the geophysical logging was by Kerr-McGee owned and operated trucks. The data from the program is reliable as discussed in this report under Section 6.3 Historical Mineral Resource Estimates and Their Reliability. Page28

29 11.0 DRILLING Based on my review of the drilling records and my observations of drilling practices by Ranchers and Kerr-McGee at the time of drilling, previous drilling on the Strathmore Church Rock property was performed by Kerr-McGee using rotary mud drilling with truck-mounted drills contracted by local drilling companies. Common practice used by Kerr-McGee was to drill the holes with 4¾inch diameter bits by conventional rotary drill rigs circulating drilling mud. All drilling was vertical. The cuttings were typically taken at 5-foot intervals by the driller and laid out on the ground in piles for each 5 feet in rows of 20 samples or 100 feet. A geologist examines the drill cuttings in the field and records lithology and alteration on a drill log form. The drill holes were taken through the Westwater Canyon Member and a few tens of feet into the underlying Recapture Member (non-host). Upon completion of a drill hole, the hole was logged with a gamma-ray, self potential, and resistivity probe by either a contract logging company or in some cases by Kerr-McGee s company-owned logging truck. After running the log, a drift tool (film-shot) was lowered into the drill hole for survey at 50- or 100-foot intervals. Deviation from vertical in a single intercept was commonly less than 1 o to 3 o, and the dip of beds is less than 10 o, thus mineralized intercepts represent essentially true thickness. The first drill hole of the Strathmore Church Rock project was completed in August Discovery was made in drill hole number 6 completed February 6, 1968, which encountered uranium mineralization with a GT of 0.60% U 3 O 8. The mineralized zone was intercepted at a depth of 1,747 ft. Most of the drilling was performed from 1968 through 1975, with additional drilling Subsequently one drill hole per year was completed in , 1989, and A total of 165 holes totaling approximately 306,000 feet were completed (data from drill summary sheets). Based on a review of the drill summary sheets and drill hole location maps, a total of 165 drill holes have been completed of which 74 were in the ore category (according to Kerr-McGee classification), and 24 were in the strong mineralization category. Ore category holes contained intercepts with a grade x thickness of 0.60, and a minimum grade of 0.10% U 3 O 8. Strong category holes had intercepts with a grade x thickness of 0.30, and a minimum grade of 0.05% %U 3 O 8. The best intercept was drill hole No. 166 which intercepted 42.5 ft of 0.18% U 3 O 8 at a depth of ft. Table 2 summarizes the drilling results. Table 11-1 Summary of Drilling Results for the Strathmore Church Rock Property Mineralization No. Holes Total Footage *Ore Strong Other , *Ore category is Kerr-McGee classification Page29

30 12.0 SAMPLING METHOD AND APPROACH 12.1 Gamma-ray Logs All of the mineralized intercepts for the historical resource estimates were calculated by Kerr- McGee from gamma-ray logs probed for each drill hole. Each log typically consists of gammaray, resistivity, and self-potential curves plotted by depth (Figure 6.3). The resistivity and selfpotential curves provide bed boundaries and are mainly used for correlation of sandstone units and mineralized zones between drill holes. The equivalent U 3 O 8 content from the gamma logs was calculated by Kerr-McGee using essentially the industry-standard method developed originally by the U.S. Atomic Energy Commission (AEC). Kerr-McGee s method was basically as follows (Kerr-McGee manual, undated): For zones greater than 2 feet thick, first pick an upper and lower boundary by choosing a point approximately ½ height from background to peak of anomaly. Then determine the counts per second (cps) for each one-foot interval. Divide by the number of intervals for an average cps for the anomaly. Then convert the cps to %U 3 O 8 (eu 3 O 8 ) using the appropriate Kerr-McGee charts for the specific logging unit used Disequilibrium Disequilibrium is a term for the disparity in the normal ratio between uranium and its naturally occurring radioactive daughter products, which are measured by the gamma log. Generally, a check is made for disequilibrium after drilled resources reach a total of approximately 100,000 to 500,000 lbs of contained U 3 O 8 (Fitch, 1990), or when there is a change in geologic regime. A determination of the number of check intervals needed is made by an experienced geologist. In new areas disequilibrium may be checked after the first few ore holes. For large uranium producers with years of operating experience in well-known districts, such as Ambrosia Lake and Church Rock, and with extensions on-trend with mined deposits it was common to drill out most of the resource, then obtain several core hole intercepts of selected mineralized zones for assay and metallurgical checks prior to large capital expenditures such as shaft-sinking and underground development. Disequilibrium was seldom a factor for dark gray, primary ore in the Ambrosia Lake district. However there may be disequilibrium to a varying extent for redistributed or stack ore. Usually in cases where disequilibrium is identified, the uranium (low radioactivity) has been transported a short distance from its daughter products (radioactive) which have remained in their original site of deposition. The subject of disequilibrium may be confusing if not understood, especially if theoretical physics is introduced. A few items may be noted from years of experience. 1. The best evidence to allay concerns of disequilibrium is experience from identical deposits using the record trail from gamma-ray interpretations of surface drill holes, followed by ore reserve estimates, then underground gamma-ray probe from the subsequent mine, then mill-head gamma-ray probes as the truck arrives at the mill, then chemical analysis of the resultant product, termed yellowcake. 2. It is very important how disequilibrium is determined, and using core introduces other variables requiring checks. The down-hole probe sees the radioactivity of a 2.5 ft. diameter cylindrical area centered about the drill hole (Dodd and Eschliman, 1972). This should not be compared to simply the chemical assay of a 2 3/4 -inch diameter core sample. Instead, the core is sampled over the mineralized interval as determined by a hand-held Geiger counter or scintillometer to define mineralized boundaries. The core is split and sampled for the intervals selected. Each sample is crushed and pulverized, then two separate assays are made of the same pulps; a scaler-radiometric or closed can radiometric assay and a chemical assay. The disequilibrium factor, if any, is expressed Page30

31 as a ratio of chemical/radiometric. 3. It takes about 1-million years for uranium to form its radioactive daughter products and achieve equilibrium. The Morrison uranium deposits are of Jurassic age and thus are in equilibrium, unless altered by recent surface waters. 4. No mention of core holes, or core assays was seen in the drill records examined Drill cuttings Drill cuttings are useful for mapping alteration and in conjunction with the geophysical logs for lithology, but are too dilute to analyze for uranium content. Lithologic logs were not reviewed for this study, but could be studied at some future date for constructing sandstone alteration maps that may be used in detailed geologic planning and to identify future exploration targets. Page31

32 13.0 SAMPLE PREPARATION, ANALYSES AND SECURITY No chemical analyses or core holes were reported within the data searched for the Strathmore Church Rock project. Typical operating practice in the Church Rock district was to rely on calibrated gamma log interpretation of mineralized intercepts in drilling up to and including resource estimates. The practice of core sampling for chemical assay varies by operator, but was typically done for metallurgical confirmation prior to capitalizing development such as shaft sinking and mine development. Also it was typical practice to obtain core samples for chemical assay in new regions where disequilibrium (differing chemical vs. radiometric analysis) was suspected. The author knows of no significant disequilibrium effects in this part of the Church Rock district Probe Truck and Calibration Kerr-McGee files contained detailed records of probe truck equipment characteristics including truck number, probe number, crystal size, dates of use, k-factors, calibration tests and resulting factors. These are kept for each logging unit whether a company Kerr-McGee truck, or a Century Geophysical truck. Each gamma log contains a footer with a calibration run, and a header sheet with the rerun factors and probe unit number Core Samples No records of previous core samples were located for the Strathmore Church Rock property. Page32

33 14.0 DATA VERIFICATION 14.1 Review of Original Records A detailed review was made of the extensive files in Strathmore s warehouse in Riverton, Wyoming on October 14 and 15, There were over 300 boxes, file cabinets and map files in the data storage covering the Strathmore Church Rock as well as other projects. The files are quite complete with original data including gamma ray logs and maps. The specific items recovered and researched are: Original gamma ray logs, mini logs, drill hole summaries, ore reserve calculation sheets, copies of drill hole maps, ore reserve maps, reports of mine plan, survey documents, logging truck calibration records, and a few representative cross-sections. Items not recovered for this study but listed in the data list are mylar cross-sections, lithologic logs, AEC test pit logging files Limitations on Sample Verification The entire original, factual assay data are represented by the continuous gamma-logs that were made during the drilling programs as each drill hole was completed. These logs were run by Kerr-McGee operated logging trucks. The procedure is to calibrate the probe and record the plot on the log paper with a known radioactive source, and then lower the probe to the bottom of the drill hole and log coming out of the hole. When a mineralized interval is encountered the probe is pulled up through the zone to find its upper limit, lowered again and the mineralized zone is re-run at a less-sensitive scale to fit the plot on the log paper. All the information regarding scale of the re-run is noted on the log for later computation of grade (Century, undated). This radiometric probe method of assay is unique to uranium exploration and provides a continuous record of the mineralization with depth. And each logging truck periodically made logging runs of the AEC (Atomic Energy Commission) test pit, a set of shallow holes with known concentrations of uranium. In addition to the gamma curve, plots are made of the Resistivity and SP (Self-Potential). The resistivity and SP provide a continuous strip chart of the various lithologies as the probe is lifted up the drill hole. Thus, the gamma anomalies may be correlated to a specific footage, correlated with specific lithologic units, much as in core, but without the possibility of mixing core, or salting samples. The calibration of probes with the AEC (later, Department of Energy, DOE) test pit is the standard by which the uranium industry operated. This method is analogous to a system of check assays of an assay laboratory. The test pits were designed with uranium-bearing material of the type and grade common to the Grants Mineral Belt. Many thousands of drill hole intercepts in the Grants Mineral Belt were logged in this manner.. Page33

34 15.0 ADJACENT PROPERTIES The closest adjacent property is the Northeast Church Rock Mine of United Nuclear Corporation (UNC) 1.3 mi to the northeast in Section 34 and 35, T17N-R16W. The uranium ore deposits were within the same Westwater Canyon sandstone units as the upper units of the Church Rock. In the author s opinion the Strathmore Church Rock Property uranium deposits are geologically very similar to and correlate with the adjoining UNC Church Rock deposits. UNC s Old Churchrock mine is located in the northeast part of Sectioin 17, T16N-R16W, approximately 1.2 miles southwest of the Strathmore Church Rock property. The entire Church Rock district has produced 16 million pounds U 3 O 8 at grades of 0.10 to 0.20%, and up to 0.40% U 3 O 8 (McLemore and Chenowith, 1989). Page34

35 16.0 MINERAL PROCESSING AND METALLURGICAL TESTING No metallurgical test data for the Strathmore Church Rock property were recovered in the files reviewed. Smouse (1995) reported that Westwater Canyon sandstone in Churchrock area has a much higher permeability than in Ambrosia Lake. Cementation of the Westwater is also much less at Churchrock. Hence, although RAMC (Rio Algom Mining Corporation, successor to Kerr- McGee) has not ran any leach tests it is felt that ISL operations can be utilized to mine the Section deposit. Kerr-McGee did however perform metallurgical tests on ore samples and core samples from the Westwater sandstone units from their Church Rock mine located approximately 2 miles north of the Strathmore Church Rock Property. The purpose of these tests was to evaluate the potential for ISR mining of the ores. Kerr-McGee Corporation Technical Center (1982) concluded that Agitation leach tests on Church Rock ore indicate that a ph 8.3 carbonate solution, containing 0.5g/l hydrogen peroxide would be suitable for in mine solution mining of this ore. The test results yielded up to 66% recovery of U 3 O 8. Kerr-McGee further reported that regarding their uranium properties both on the Navajo Reservation and Section 4, off the reservation that: Laboratory short column tests on core and ore samples indicated very leachable ore with 80 to 90% U 3 O 8 extraction in the lab. To prepare a production cost estimate, a field recovery of 55% of the 6 /.05% U 3 O 8 resource was used and separate estimates were prepared for the onreservation and off-reservation reserves. (Freeman, 1987). Page35

36 17.0 MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES 17.1 Deposit Geology Pertinent to Resource Estimation Uranium deposits occur in six sandstone units in the Westwater Canyon Member of the Jurassic Morrison Formation. The Westwater averages 250 ft thick in the Strathmore Church Rock property. The individual sandstone units average 20 to 60 ft thick and are separated by thin (1 to 5 ft thick) mudstone interbeds. The sand units are designated A to F, from top to bottom of the sequence (Figure 6.2). The uranium deposits are tabular and range from 1.3 to 42.5 ft thick true thickness (drill hole database). In plan view, the deposits are relatively narrow (10-200ft) and are elongate along a northeast trend. Uranium mineralization in the Church Rock district occurs with medium gray humate that impregnates the sandstone. Much of the ore in the Church Rock district, including Section 4 consists of redistributed or stack ore (Peterson, 1980). The geometry of redistributed ore is similar to that of Wyoming uranium deposits, forming C-shaped roll fronts that are convex down-dip or basinward to the north. Leading tails to the front are intersected as upper and lower limbs, up-dip from the actual front that may fill the entire thickness of an individual sandstone unit. The geometry of the deposits in each of the sand units is shown by the GT contour maps (Figures 17.2 to 17.7). They trend northeast and exhibit a relatively sharp northwest boundary, possibly due to a northeast-striking fault that may be projected from Kerr-McGee s geologic studies in Section 27, T17N-R16W to the north. This projected fault is not mapped here, because no evidence was found in the drill data for its precise location. There may be faults in the Strathmore Church Rock property that will affect future resource and mineral reserve estimates Data Basic data for the resource estimate were the Kerr-McGee Drill Hole Data summaries, entered on form KM-4092, drill hole survey information together with mineralized intercept interpretations by Kerr-McGee geologists, and drill hole maps at a scale of 1 =200 prepared by Kerr-McGee. Individual gamma-ray, SP and resistivity logs were examined as a check, and the basic mineralized intercepts and sand unit correlations are considered reliable for purposes of resource estimation. Thickness is taken from drill hole intercept interval and is treated as true thickness. Drill hole deviation is less than 3 o from vertical, thus any correction from apparent to true thickness is negligible Resources The Strathmore Church Rock deposit can be reported as a mineral resource based on the fact that Kerr-McGee was proceeding to develop the deposit to follow a proposed in-situ mining pilot test in Sections 27 and 34, T17N, R16W, one to two miles north of the Strathmore Church Rock project (Freeman, 1984), just prior to collapse of the uranium market. Kerr-McGee had performed metallurgical tests (Freeman, 1987) and had prepared cost estimates for the pilot project. (Buntz, 1983, Freeman, 1984). The method of resource calculation herein used differs from that of the Kerr-McGee method described under Section 6.3 (this report) and is based on the method of polygons (polygonal method), also known as areas of equal influence (AOI), wherein polygons are constructed about each sample point (drill intercept) by using perpendicular bisectors halfway between adjoining samples. This method is discussed in detail by Popoff (1966, p ) and is a method used in computing resources in tabular deposits. It is this author s experience that the polygonal method and its variant, the general outline method were in general use for resource calculation in the Grants Mineral Belt by the U.S. A.E.C. (Department of Energy), Ranchers Exploration and Development Corporation and other companies. Page36

37 Polygons were constructed as described above and the area of equal influence (AOI) computed for each polygon. For the measured resource class, each polygonal area is capped at 10,000 ft 2 AOI (100ft x 100ft), and for the measured and indicated resource class, each polygonal area is capped at 40,000ft 2 AOI (200ft x 200ft). The inferred resource class polygons were capped at 160,000ft (400ft x 400ft), which was the area of largest polygons. The drill pattern within the resource area is on a spacing of approximately 200ft. Thickness and grade of each mineralized intercept were assigned to each polygon for computing tonnage. An assumed tonnage factor of 15 cubic feet per ton was used (Kerr-McGee, undated). This is the typical tonnage factor used by most operators in the Grants Mineral Belt for mineralized intervals in the Westwater Sandstone units. Computation of tonnage was made for each interval above a cutoff of 0.03% U 3 O 8, and with a further cutoff of GT (grade in %U 3 O 8 x thickness product) at increments of 0.1, 0.2,0.3,0.4,0.5,0.6,0.7,0.8,0.9 and 1.0 GT. A minimum thickness cutoff was not used because ISR mining does not require the 6 feet minimum thickness necessary for underground mining equipment and personnel. The resulting tonnages were summed for each sand unit by class of resource. A weighted-average thickness and a weighted-average grade was computed for the total tonnages of each sand unit. The mineral resource estimate by the polygonal method for this report, using a cutoff of 0.03% U 3 O 8 and a GT cutoff of 0.3 for the measured and indicated class of mineral resource, correlates well with the historical resource estimate by Kerr-McGee which used a cutoff of 6ft of 0.05%U 3 O 8, (a GT of 0.3) as shown by Table 6.2, this report. The polygons generated for this estimate are shown by Figure Page37

38 Figure 17-1 Resource Polygons 1,000 ft N Resource Polygon Map Sec. 4, T16N R 16W Strathmore Church Rock Property Note to Figure 17-1: Shaded polygons are the maximum area of influence (AOI) polygons for the resource estimate. Page38

39 Table 17-1 Summary of Mineral Resource by Class Measured Resource (Capped at 100ftx100ft and >=0.03%U3O8) Cutoff GT Tons Grade Pounds Thickness (%U3O8) U3O8 (ft) 0.1 2,254, ,807, ,959, ,528, ,680, ,233, ,397, ,875, ,167, ,575, ,035, ,387, , ,192, , ,024, , ,787, , ,649, Indicated Resource (Capped at 200ftx200ft) and >=0.03%U3O8 Cutoff GT Tons Grade Pounds Thickness (%U3O8) U3O8 (ft) 0.1 6,068, ,135, ,281, ,387, ,541, ,614, ,758, ,631, ,155, ,851, ,807, ,338, ,518, ,778, ,222, ,317, ,852, ,692, ,656, ,296, Measured and Indicated Resources (Capped at 200ftx200ft) and >=0.03%U3O8 Cutoff GT Tons Grade Pounds Thickness (%U3O8) U3O8 (ft) 0.1 8,323, ,942, ,241, ,916, ,221, ,848, ,155, ,506, ,322, ,427, ,843, ,725, ,454, ,970, ,047, ,341, ,542, ,479, ,278, ,946, Inferred Resource (Capped at 400ftx400ft and >=0.03%U3O8) Cutoff GT Tons Grade Pounds Thickness (%U3O8) U3O8 (ft) 0.1 2,808, ,409, ,330, ,961, ,950, ,525, ,627, ,078, ,268, ,652, ,126, ,434, ,000, ,212, , ,020, , ,849, , ,683, Page39

40 Table 17-2 Measured Resource and Indicated Resource by sand unit Measured Resource Indicated Resource (Capped at 100ftx100ft and >=0.03%U3O8) (Capped at 200ftx200ft and >=0.03%U3O8) Sand Unit Cutoff GT Tons Grade Pounds Thickness Sand Unit Cutoff GT Tons Grade Pounds Thickness (%U3O8) U3O8 (ft) (%U3O8) U3O8 (ft) A , , A , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , B , , B , ,700, , , , ,556, , , , ,392, , , , ,228, , , , ,091, , , , ,068, , , , , , , , , , , , , , , , , C , , C 0.1 1,035, ,235, , , , ,104, , , , ,992, , , , ,843, , , , ,752, , , , ,693, , , , ,592, , , , ,533, , , , ,485, , , , ,452, D , , D , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , E , , E 0.1 1,215, ,855, , , ,083, ,743, , , , ,631, , , , ,398, , , , ,194, , , , ,127, , , , ,015, , , , , , , , , , , , , F , , F 0.1 1,618, ,605, , , ,449, ,446, , , ,228, ,247, , , ,072, ,014, , , , ,754, , , , ,563, , , , ,418, , , , ,310, , , , ,019, , , , , Page40

41 Table 17-3 Measured and Indicated Resource and Inferred Resource by sand unit Measured & Indicated Resource Inferred Resource (Capped at 200ftx200ft and >=0.03%U3O8) (Capped at 400ftx400ft and >=0.03%U3O8) Sand Unit Cutoff GT Tons Grade Pounds Thickness Sand Unit Cutoff GT Tons Grade Pounds Thickness (%U3O8) U3O8 (ft) (%U3O8) U3O8 (ft) A , ,071, A , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , B 0.1 1,318, ,317, B , , ,118, ,120, , , , ,893, , , , ,673, , , , ,488, , , , ,458, , , , ,322, , , , ,179, , , , ,003, , , , , , , C 0.1 1,432, ,137, C , , ,266, ,959, , , ,120, ,803, , , , ,603, , , , ,465, , , , ,383, , , , ,249, , , , ,170, , , , ,100, , , , ,054, , , D , ,274, D , , , ,101, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , E 0.1 1,690, ,571, E , , ,506, ,414, , , ,361, ,262, , , ,093, ,941, , , , ,661, , , , ,567, , , , ,414, , , , ,347, , , , ,264, , , , ,124, , , F 0.1 2,221, ,569, F , ,273, ,984, ,349, , ,224, ,679, ,071, , ,160, ,463, ,747, , ,020, ,182, ,388, , , ,000, ,125, , , , ,930, , , , ,783, , , , ,379, , , , ,226, , , Page41

42 Grade-Thickness product (GT) contour maps for each of the six mineralized sand units are shown by Figures 17.2 thru These maps were not used in resource calculation, but are useful to display the geometry of the mineralized zones in plan view. Representative cross sections are shown by Figures 17.9 and Page42

43 Figure 17-2 GT Contour map of the A-sand unit a sand 1, 0 1,000 ft Note to Figure 17-2: Color coded by grade-times-thickness in three increments, 0.20,0.50 and 1.0 GT with the darker color being higher. Page43

44 Figure 17-3 GT Contour map of the B-sand unit b sand 1,000 ft Note to Figure 17-3: Color coded by grade-times-thickness in three increments, 0.20,0.50 and 1.0 GT with the darker color being higher. Page44

45 Figure 17-4 GT Contour map of the C-sand unit c sand 1,000 ft Note to Figure 17-4: Color coded by grade-times-thickness in three increments, 0.20,0.50 and 1.0 GT with the darker color being higher. Page45

46 Figure 17-5 GT Contour map of the D-sand unit d sand 1,000 ft Note to Figure 17-5: Color coded by grade-times-thickness in three increments, 0.20,0.50 and 1.0 GT with the darker color being higher. Page46

47 Figure 17-6 GT Contour map of the E-sand unit e sand 1,000 ft Note to Figure 17-6: Color coded by grade-times-thickness in three increments, 0.20,0.50 and 1.0 GT with the darker color being higher. Page47

48 Figure 17-7 GT Contour map of the F-sand unit f sand 1,000 ft Note to Figure 17-7: Color coded by grade-times-thickness in three increments, 0.20,0.50 and 1.0 GT with the darker color being higher. Page48

49 Figure 17-8 Map of Mineralization in A to F Sand Units A A 1,000 ft Note to Figure 17-8: Map of A to F sand units, showing location of Section A to A. Sand units are colored; A- green, B- blue, C- purple, D- yellow, E- orange, and F- gray. Page49

50 Figure 17-9 Section Note to Figure 17-9: Compiled by Strathmore Minerals Corporation. Section from E-logs as shown in Figure Page50