An in-depth Analysis of Pitchstone Exploration with Ted
Trueman, President and Chief Executive Officer
Sunday, January 28, 2007
On a recent Sunday we had the chance to sit down with one
of the most respected Exploration Geologists in the uranium industry. Ted
Trueman sat down with us and discussed his company, Pitchstone Exploration,
along with what he sees as the industry evolves from the ashes of the last boom
and bust cycle.
Mr. Trueman established Pitchstone with a small group to
stake the most promising land in the Athabasca Basin when there was literally no
competition. Due to their foresight, as well as the long downturn in the uranium
market in the years before, they were able to claim the most promising projects
before others even thought of staking the land for themselves. Some four years
later this foresight is paying off as the company has successfully joint
ventured many of their projects, and are ahead of many peers in the drilling
phase. Expertise seemed to be a recurring theme in our conversation with Mr.
Trueman and Pitchstone has many knowledgeable people associated with the
company. This is going to be very important going forward as projects become
harder to come by and companies will need to have people capable of decided
whether a property is promising as well as managing all aspects of the mining
This past year saw many milestones reached by Pitchstone as positive drilling
results were reported and new properties added to the portfolio. Can you give us
your perspective on the year to come?
Ted Trueman: We will have a very aggressive 2007. We have
budgeted for approximately 16,000 meters in the Athabasca Basin, in part with JV
partner sxrUraniumOne We have eight projects in the Athabasca Basin with three
100% owned by Pitchstone and the other five 50-50 with sxrUraniumOne. The budget
for the SXR JV Properties is approximately C$4.5 million which for the most part
will be diamond drilling. In the Hornby Bay Basin we are Joint Ventured with
Triex Minerals on five projects in the general Great Bear Lake area. We will
have approximately 5,000 meters of diamond drilling for 2007 on these projects,
including a few holes to test one portion of the already partially delineated
Mountain Lake Deposit, which has an Inferred Resource estimated to contain a
little over 8 million lbs. of uranium. In Gabon, where we and Cameco are earning
an interest from Motapa Diamonds, we have contracted for an airborne survey, but
have not formally adopted a 2007 program. We will however be meeting with Cameco
and Motapa shortly in that regard. We are still in the due diligence process for
the three Namibian projects at this time.
Pitchstone is involved in many exploration stage projects around the world,
where do you expect to make the most progress this year?
Ted Trueman: We started in the Athabasca Basin and that is
really the roots of Pitchstone. It has always been our roots, due to acquiring
great properties early on, and this has always been our number one focus and
will continue to be our main focus going forward. We have a lot of targets, and
although we have a very aggressive exploration program in 2007, that will not
come close to testing all of our targets in the Athabasca Basin. The Athabasca
Basin is our reason for existing and we will be there for a long time. We will
also be conducting a significant drilling program in the Hornby Bay Basin to
test a number of targets.
A few months ago we spoke to your Investor Relations Department and they felt
that the stock was undervalued vs. its peers. After an amazing run, how do you
perceive Pitchstoneís valuation in relation to its peers?
Ted Trueman: I think the share price has behaved like many
other junior uranium companiesí. It was down through the late summer and early
fall, and then late October our share price and many others companies’
turned around and gained appreciably. So we have gained appreciably since late
October until now. I donít think we spiked up so much as recovered from being
beaten up from last summer. We also forced our IPO warrants last August to clear
them out of the way and we anticipated that would not help the stock price and
it didnít. So we havenít really spiked up recently as much as recovered from
last year. For the peer group, if you look at our properties and expertise and
our current market cap, we are undervalued, or they are overvalued. We are not
quite in-sync with many other junior uranium companies, so in that context I
think there is plenty of room for Pitchstone to move.
Darby-Candle appears to be your most advanced early stage exploration property.
To date you have encountered uranium mineralization around the unconformity, but
can you explain the process going forward of locating ďThe
Ted Trueman: Yes. First, investors should appreciate that
this process does not happen overnight. These are very high grade deposits we
are exploring for, which due to the high grade are very compact. You have to
gradually zero in on them due to the small size of the deposits. So first you
conduct ground surveys, and then drill to test the anomalies. Although these
deposits are quite small, they generally have a larger alteration footprint and
the alteration helps us zero in on the mineralization. In general the process
entails geophysical surveys, several phases of drilling and often additional
geophysical surveys. I would not hazard to guess as to when we might find
somewhat more significant uranium, but itís quite a slow process in terms of
building up the picture.
Is Pitchstone actively seeking JV partners for the Fisher, Fireweed and Gumboot
Projects, or will the company forgo that route and keep them in-house through
the exploration process?
Ted Trueman: Good question. We have been approached by a
number of companies, some very well established companies, to JV some of our
projects. Weíre taking the view that we would like to upgrade these projects,
get our data together better, and know a little more in what we have and what we
are dealing with before we JV them. So the answer is yes we would look at JV
partners on these projects, just not right at this time. We are committed by the
flow through financing we did last year to fund them 100% in 2007. So further
joint ventures wonít likely happen this year. I think if we can upgrade them we
can command better terms for any deals we do.
Pitchstoneís Mountain Lake JV with
Minerals has 8.2 million lbs. and your 20 hole drill program in Ď06 increased
the known mineralization. What do you believe is the potential for this property
Ted Trueman: Well first it is important to understand that
an updated estimate of the resource has not been completed. We drilled a few
holes in the deposit area to make sure that what we thought was there actually
was. That was phase one, and all holes drilled in the resource area did in fact
encounter uranium mineralization. The second thing we did was drill some holes
under a small lake on the edge of the resource which had not been tested before,
a lake called Fran Lake. That was successful in finding previously unknown
mineralization. The third component of that initial drill program was to test
another target called Jenny Lake. We did that and got anomalous mineralization,
low grade uranium, but an area that needs more work. We think our best hope in
adding to the Hornby Bay Project is to further test various other targets. We
need to add more lbs. before we can really seriously look at a commercial
operation, however, there are numerous very good targets so the potential of
finding additional mineralization is very good.
How large of a resource do you estimate is needed in order to proceed with
constructing a mill and mining the Mountain Lake deposit?
Ted Trueman: Thatís a good question and one that I cannot
answer, because we have not even done a scoping study on the project to know
what that number would be. My gut tells me that it would probably have to be a
couple times the size of Mountain Lake to make it fly, but thatís just a wild
It seems Pitchstone acquired their properties in Canada early before prices for
good parcels rose dramatically. Is this same blueprint being used on the African
Ted Trueman: Itís certainly been the primary reason for
our success I believe. We were early in the Athabasca Basin, the Hornby Basin,
and more recently the Franceville Basin in Gabon. In Gabon we made the deal with
Motapa and invited Cameco in and to my knowledge no other junior company was
exploring for uranium in Gabon at the time. I think we have been able to do this
because, and this goes back to one of the key fundamental elements for juniors,
expertise. Our expertise helps us bring in top notch companies to our projects,
such as SXR and Cameco. It is important to understand that we are not acquiring
someone elseís low priority projects, but rather bringing these companies into
In Gabon Pitchstone has acquired a very large land position in the
Basin through their JV with
Diamonds, can you explain the exploration that has taken place, what will take
place this year, and a timetable on drilling?
Ted Trueman: Only in a general sense. It is not a JV yet,
because Cameco and ourselves are still at the earn-in stage. Again, this is
early stage exploration work and we have initiated some work, primarily engaging
a South African company to do airborne surveys. Currently, plans for this year
have not been formalized, but we hope to do some drilling early on, perhaps in
2007. These holes would be designed to help us better understand the geology.
Pitchstone recently entered into an agreement to engage in uranium exploration
in Namibia where there are currently two mines in production with a third
planned. Can you tell us where the property is located in regards to the
producing mines and give us any property history?
Ted Trueman: There is not a lot of history, and these
projects are best considered conceptual. They are actually three separate
properties with one in the south, one in the northwest, and the last in the west
about 70 km from Rossing. I canít say a lot about these projects because it is
early on in the exploration process. The western project is a Rossing type
Moving on to finances, how will Pitchstone go about funding their projects once
has earned their interest and your current cash balance begins to dwindle (issue
shares, or lower % in projects)?
Ted Trueman: Well a couple of points in that regard, SXR
has earned their interest in the five Athabasca Projects and starting in 2007 we
will begin financing our share of the projects. In terms of financing we
currently have a bank balance in excess of C$10 million and at current burn
rates that is approximately two years. Going forward there are two options, the
one that you brought up earlier with joint venturing some of our other
properties and the second being a treasury issue of shares.
Going forward, will Pitchstone achieve its growth targets through organic growth
or be an acquirer or seller of assets?
Ted Trueman: There are certainly opportunities to add more
projects and we have to evaluate them as they develop. Success usually comes
from the amount of work you do in terms, specifically in our business, of
drilling. We are doing a lot of drilling, probably more than, and Iím guessing
here, probably 90-95% of the uranium juniors. Itís impossible to speculate where
we will be in a year or two, but certainly there has been huge changes in the
past year and I see no reason why that will be any different going forward.
You said earlier that Pitchstone has been approached by companies willing to
form potential JV partnerships, but has Pitchstone been approached by anyone
willing to buy the company?
Ted Trueman: Thatís a very sensitive issue and not
something I really want to discuss.
Every investor who is in some part involved in the uranium sector is wondering
what is going on with Camecoís
Cigar Lake Mine since the flooding on October 23, 2006. Could you lend us your
opinion on the situation?
Ted Trueman: Will they get it under control, I think they
will. They seem to be making progress and are pouring concrete at this time and
attempting to seal off the flow. If they can get the drill holes in the right
place and plug up the drift that did collapse, then they should be able to pump
out the mine. I think itís a delay rather than the end of Cigar Lake. Some have
suggested that the mine is lost, but with the value and importance of this asset
I believe that they will continue to move it forward.
Finally, should you find an ore body resembling McArthur River or Cigar Lake,
are you or any of your JV partners equipped with the personnel and expertise to
undertake such a project?
Ted Trueman: Well we are growing fast, but that would be a
quantum leap to get to a production level. However it would be gradual over time
a long time as the deposit was built up, which would allow Pitchstone to grow
with it. We have an excellent relationship with majors in the Athabasca area and
if we found anything in their backyard we would probably be talking to them
fairly early on.
Alright Mr. Trueman,
is there anything else you would like to add?
Ted Trueman: I think that the key to Pitchstoneís success
is that when we started there were only perhaps a dozen or fourteen companies
exploring Canada for uranium, including the likes of AREVA and Cameco. Now,
world-wide, I am told that there are about 450 organizations searching for
uranium. I think that it is really difficult for any individual investor to look
at this large number and decide which companies really have their acts together.
This all goes back to the significance of uranium expertise, which is the most
important component. Expertise leads you to the second most important item,
which is the acquisition of well located properties. So if you donít have that
expertise, you wouldnít likely have acquired quality projects early, and once
you got the projects it would be difficult to know how to logically explore
them. Investors should take the time to ask if a company has expertise and if
so, inquire as to where, when and with which companies the individuals obtained
that expertise. Next they should look at when the company was acquiring
properties because it if was early on, prior to the rush starting in
August-September 2004, they probably know what they are doing.
Well thank you for joining us today Mr.
Ted Trueman: My pleasure.