Virginia Energy Resources Inc.
TSX VENTURE : VAE

Virginia Energy Resources Inc.

November 09, 2010 08:45 ET

Sprott Resource Corp. Agrees to Join Virginia Energy as Strategic Partners in Coles Hill Uranium Project

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Nov. 9, 2010) - Virginia Energy Resources Inc. (TSX VENTURE:VAE) ("Virginia Energy") is pleased to announce that Sprott Resource Corp. (TSX:SCP) ("SRC") has agreed, subject to the execution of definitive agreements, board and regulatory approval, to acquire a 19.9% stake in VA Uranium Holdings Inc. ("VAUH") to become a new strategic partner in the Coles Hill Uranium Project. Virginia Energy waived its right of first refusal on financings, thus allowing SRC to invest directly into VAUH. However, Virginia Energy has 90 days to exercise a preemptive right to invest into VAUH on the same terms as SRC so as to maintain its current 28.5% ownership position in the Coles Hill uranium project through VAUH. 

SRC is investing approximately C$6 million of new funding into the project. In addition, certain shareholders in VA Uranium Holdings Inc. have committed to exchanging shares of VAUH for shares in SRC such that SRC will attain a 19.9% participation level in VAUH.

VA Uranium Holdings Inc. is the owner/operator of the Coles Hill uranium project. Based on a US$75 per pound long term selling price for uranium, the project provides an Internal Rate of Return (IRR) of 47.7%; and at a 7% discount rate the Net Present Value (NPV) of the project is US$594 million. 

Coles Hill Uranium Project NPV Matrix (US$000's)
  Discount Rate
Uranium US$/lb   5%   7%   8%   10%
$55 $ 278,041 $ 213,962 $ 187,573 $ 143,560
$65 $ 511,797 $ 404,133 $ 360,549 $ 288,763
$75 $ 745,553 $ 594,304 $ 533,525 $ 433,966
$85 $ 979,308 $ 784,475 $ 706,501 $ 579,169

SRC agrees to purchase 16,752,523 VAUH shares from treasury at a price of C$0.358155 per share. In addition, certain VAUH shareholders intend to exchange 16,154,319 shares of VAUH for 1,327,007 shares of SRC. The exchange ratio equates to one SRC share being issued for every 12.1735 VAUH shares transferred to SRC. Following the completion of the transaction, VAUH would have 165,707,411 shares outstanding.

Kevin Bambrough, CEO of Sprott Resource Corp., commented, "This is an exciting project – one of only a handful of very large undeveloped uranium projects with compelling economics. The world needs more uranium production and a resource of this size is simply too important from a geopolitical perspective to remain idle. We look forward to providing the financial and strategic support necessary to see this project through to success."

Virginia Energy's CEO and President, Walter Coles Jr. commented, "We are delighted to have Sprott Resource Corp. as a partner in the project. The Sprott organization is recognized globally as one of the most astute investors in the natural resource space. Their investment is a tremendous vote of confidence in the project management team, as well as the positive fundamental outlook for the industry."

Mr. Coles Jr. added, "Annual uranium production in the United States is less than 4 million pounds per year, compared to annual domestic uranium consumption of approximately 55 million pounds per year. The United States remains critically dependent on foreign uranium supplies to fuel its fleet of nuclear power plants. As China rapidly builds out its nuclear power infrastructure, the global competition for uranium resources will intensify. The Coles Hill uranium project offers the potential for significant local job creation and energy security for America. Modern techniques for uranium mining emphasize safety and environmental sustainability - the same will hold true for the Coles Hill project."

Virginia Energy fully anticipates that it will exercise its pre-emptive right during the next 90 days to invest approximately C$2 million into VAUH under the same terms as SRC, so as to maintain its 28.5% pro rata ownership stake in the project. 

The Commonwealth of Virginia currently has as a moratorium on uranium mining until such time that mining regulations for uranium are enacted into law. The moratorium dates back to 1982 when the deposit was discovered and the state began a process toward the enactment of regulations. However a decline in uranium prices in the mid 1980's left that process unfinished. The state legislature has since reengaged on the issue and awaits a National Academy of Sciences (NAS) study on the risks and mitigations for uranium mining in Virginia. The results of the NAS study are due by December 1, 2011, after which the state legislature would be in a position to consider lifting the moratorium. 

Sprott Resource Corp. is a Canadian based company, the primary purpose of which is to invest and operate in natural resources, including oil and gas, uranium, agriculture and agricultural nutrients as well as a large position in physical gold bullion. SRC seeks to provide its shareholders with capital appreciation and real wealth preservation. SRC draws upon the considerable experience and expertise of both its Board of Directors and Sprott Consulting Limited Partnership (SCLP), of which Sprott Inc. is the sole limited partner. Sprott Resource Corp. stock trades on the Toronto Stock Exchange under the symbol SCP.

Virginia Energy Resources Inc. is a uranium development and exploration company. The company holds a 28.5% stake in the advanced stage Coles Hill uranium project in Virginia. Additionally, the company is pursuing active exploration programs in the Athabasca Basin on its Murphy River and Hatchet River uranium properties, which are held in a 50-50 Joint Venture with Denison Mines Ltd., and its 100% owned uranium properties in the Otish Basin of Quebec. The company is also a 32.7% shareholder of Boss Power Corporation. Virginia Energy Resources Inc. trades on the Toronto Venture Stock Exchange under the symbol VAE.

Below is the summary of the 43-101 compliant resources estimate calculated by Behre Dolbear & Company, Inc., Marshall Miller & Associates and PAC Consulting that provided the basis for the Preliminary Economic Assessment (PEA) completed by Lyntek Inc. and BRS Inc. as independent engineering consultants to VAE and VAUH. (See Virginia Energy's PEA news release dated October 18, 2010.)

43-101 Compliant Resource Estimates - June 30, 2008
(Millions of Tons and Pounds In-Place)
Cutoff
%U
3O8
Measured1 Indicated1 Total1
Tons2 %
U
3O83
Pounds
U
3O8
Tons2 %
U
3O83
Pounds
U
3O8
Tons2 %
U
3O83
Pounds
U
3O8
Coles Hill Uranium Project Total (North Coles Hill and South Coles Hill Deposits)
0.200 0.397 0.301 2.39 2.87 0.274 15.7 3.26 0.278 18.1
0.150 0.562 0.264 2.97 5.41 0.227 24.6 5.97 0.231 27.6
0.125 0.654 0.246 3.22 6.17 0.216 26.7 6.82 0.219 29.9
0.100 0.755 0.228 3.45 6.27 0.215 26.9 7.03 0.216 30.4
0.075 1.35 0.164 4.44 24.0 0.116 55.9 25.4 0.119 60.4
0.050 2.28 0.124 5.65 35.4 0.101 71.7 37.7 0.103 77.4
0.025 6.62 0.064 8.42 92.1 0.060 111.0 98.7 0.060 119.0
1Total tonnage above cutoff grade and average weight % U3O8 of that tonnage
2Short tons based on a rock density of 2.56 g/cc
3Weight %
4Mineral resources that are not mineral reserves do not have demonstrated economic viability

The technical information contained in this press release is reported and verified by Norm Reynolds, P.Geo., Virginia Energy Resources' Director and a Qualified Person as defined by National Instrument 43-101. 

On Behalf of the Board of Directors of Virginia Energy Resources Inc.

Walter Coles Jr., President & CEO

This news release includes certain "forward-looking statements" under applicable Canadian securities legislation. All statements other than statements of historical fact included in this release, including, without limitation, statements regarding future plans and objectives of the Company are forward-looking statements that involve various risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future results, events and objectives could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from the Company's expectations include exploration and other risks detailed from time to time in the filings made by the Company with securities regulators.

Neither TSX Venture Exchange nor the Investment Industry Regulatory Organization of Canada accepts responsibility for the adequacy or accuracy of this release.

Contact Information

  • Virginia Energy Resources Inc.
    Walter Coles, Jr.
    President/CEO
    (604) 669-4799
    or
    Virginia Energy Resources Inc.
    Tony Perri
    Investor Relations, Manager
    (604) 669-4799
    www.virginiaenergyresources.com