Lake Maitland Update

ERIC ZAUNSCHERB, Canaccord Genuity (07/14/2009)
"Last week Mega reported a resource update for the Lake Maitland uranium deposit in Western Australia. At a100 ppm cut-off grade, contained uranium increased by 6.3% from the June 2006 estimate to 25.2 million pounds U3O8 at an average grade of 369 ppm U3O8. Considerable drilling has taken place since the June 2006 estimate, including 794 aircore holes (11,676 metres) and 42 sonic core holes (618 metres). The resource has been significantly upgraded such that 91% of the pounds are now in the indicated category. Mineralization occurs in a single layer 1 to 3 metres thick, lying 1 to 2 metres from surface (Figure 14). Uranium mineralization is calcrete-hosted like Paladin Energy’s (PDN : TSX : C$3.94 | BUY) Langer Heinrich mine in Namibia and will require atmospheric alkaline leach processing. Preliminary metallurgical studies suggest a recovery rate in excess of 90% on this basis. A larger scale test is in progress, the success of which is expected to trigger the next payment from Mega's project partners. Management targets completion of a definitive feasibility study in Q1/10 followed by a production decision. Full permitting is anticipated in early 2011 with production at 1.65 million pounds per annum ramping up in late 2011.

At the end of February Mega agreed to sell a 35% interest in the Lake Maitland uranium project in Western Australia to a consortium of Japanese utilities and ITOCHU Corporation, the world's second-largest uranium trading house. The Japanese utility group comprises the Kansai, Kyushu and Shikoku electric power companies. The utilities will access uranium for their own use, while ITOCHU will be able to participate in incremental uranium offtake. The 35% interest may be earned through staged payments amounting to US$49 million. Final documentation was completed in June.

Mega closed the week trading at C$5.50 EV/lb, taking into account the consortium payment, as compared with the peer mean of C$2.36 EV/lb (less outliers). The relative premium is somewhat justified by Lake Maitland's extremely low mining cost and low sovereign risk."

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