We hold an extensive property position in the Churchrock district, the western-most part of the Grants mineral belt. The Churchrock / Mancos project is situated on about 3,458 gross and net acres approximately 13 miles northeast of the town of Gallup and 110 miles west-northwest of the city of Albuquerque. The landform of the project area is best described as an open, slightly sloping canyon surrounded to the north, east, and west by talus slopes grading to table land or mesa. We hold granted water rights for the Section 8 deposit, and electrical power is available within the immediate vicinity of our property holdings.
The Churchrock project encompasses about 3,458 gross and net acres. The properties are located in McKinley County, New Mexico and consist of three parcels, known as Section 8, Section 17 and Mancos. None of these parcels lies within the area generally recognized as constituting the Navajo Reservation.
The Churchrock Section 8 Uranium property is about 10 miles northeast of Gallup, NM. It is located north of Highway 40 on NM Highway 566. The land is best described as an open, slightly sloping canyon surrounded to the north, east, and west by talus slopes grading to table land or mesa.
We hold an NRC license for and own the mineral estate in fee for the 200 acres located in NE 1⁄4 and the SW 1⁄4 of the NW 1⁄4 of Section 17, T16N, R16W. The balance of the 440 acres of mineral Section 17, T16N,R16W is also held in fee. In Section 8, T16N, R16W, we own the SE 1⁄4 in fee and are licensed by the NRC. We hold the minerals in the rest of the section with 26 unpatented federal claims (UNC1A thru UNC 26). For the Mancos Property, we own the minerals in Section 13, T16N, R17W, in fee, the minerals in the NW 1⁄4 of Section 7, T16N, R16W, in fee and hold the minerals in the E 1⁄2 of Section 12, T16N, R17W, with 20 unpatented federal claims (KP1A thru KP5A, KP19, KP36, 121617-14A thru 121617-18A, 121617-20A thru 121617-23A and 121617-32A thru 121617-35A). The federal unpatented claims are all held through the payment of a $140.00 assessment fee each year on each claim.
The Company’s access to Section 8 is expected to be by the proposed construction of a highway turnout from Highway 566. Due to our planned increases in construction and operational traffic, this turnout will provide safe access to the Project. This proposal requires approval of rights-of-way for the turnout by the Land Office, Navajo Nation and Department of the Interior. Construction of the turnout will begin after the appropriate approvals are obtained. If this approval is not obtained, the Company will explore alternative means of access. Access to the Mancos project is via 4-wheel drive ranch roads west of State Highway 566.
Mineralization occurs in the Westwater Member of the Morrison Formation at depths of 800 to 1700 feet. The surface estate on Section 17, Mancos Section 13 and Mancos Section 7 is owned by the United States Government and held in trust for the Navajo Nation. On those sections we have royalty obligations ranging from 5% to 61⁄4% and a 2% overriding royalty obligation to the Navajo Nation for surface use agreements. The total royalties on Section 8 depend on the sales’ price of uranium. Aggregate royalties are potentially as much as 39.25% at the current price of uranium.
In December, 2012 an independent engineering and consulting firm completed a feasibility study on the potential development of the Section 8 mineralized area. We anticipate that Churchrock will be the first of our New Mexico properties we will develop. We spent about $2.8 million, $59,000 and $139,000 in 2012, 2011 and 2010, respectively, for permitting activities and land holding costs.
The New Mexico State Engineer approved our water rights application in October 1999 and granted us sufficient water rights for the life of Churchrock.
We have the radioactive material license for Section 8. With respect to the UIC permits. We do not plan to pursue permits for Mancos at this time.