Beautiful young trophy prospect seeks wealthy established senior partner. Yes, but maybe not quite what you may be thinking. Mike Kachanovsky reports on junior mining stock projects. He recently told Investor’s Digest of Canada subscribers about an alluring rare earth mining stock that just may have the seductive assets to attract a big cheque from an established senior partner.
Several years ago, exploration for rare earth elements (REEs) emerged from the backburner to become a full-fledged mania. Eventually this settled down to a handful of promising discoveries as investors awaited the opportunity to cash in.
Despite all of this potential however, development has been painfully slow. Most of the worldwide production of REEs comes from China, and the supply has been managed to distort pricing in what was already an opaque market. However the challenges related to complex metallurgical issues were largely to blame for the lack of new rare earth elements properties.
Even a high-grade deposit will not be developed unless a method can be proven to economically extract a payable concentrate. During an environment of weak commodity prices, and with access to funding severely restrained, most of the activity in this tiny sub-sector has ground to a halt.
Most REE production leaves toxic tailings
The demand for rare earth elements has never gone away. In fact, with the push to adopt lithium battery technology for the rollout of electric vehicles, the demand for REEs is expected to rapidly increase. And while these electric cars are considered to be clean technologies with minimal environmental impacts, the truth is that most REE production is furnished by processing of tailings that are extremely toxic and a source of serious pollution where they are produced.
The Chinese supply of these critical ‘green’ elements is not nearly as environmentally friendly as the industry would have us believe. However, one exceptional project has emerged as the ideal development candidate to establish a production source for REEs that is not controlled by China.
In the near north of Quebec, Commerce Resources Corp. (TSXV─CCE; OTCQX─CMRZF) is an exploration stage company that has advanced its wholly owned Ashram project since the discovery stage in 2010 through to where it now stands as a late stage, large tonnage, high-grade REE deposit on the cusp of development.
One of the aspects that makes Ashram attractive is that the deposit is hosted within carbonatite rock. This represents the optimal setting for a REE deposit, as if offers the most favorable metallurgical characteristics. And this is even more attractive given the enormous size of the deposit, and the presence of a ‘hot spot’ at surface with enriched grades that may serve as a starter pit.
The Ashram project has one other key advantage over Chinese REE supply. It will generate abundant supply of these rare earth elements without the huge environmental liability. The tailings from the processing loop are relatively inert and this is one project that need not leave a legacy of toxic pollution as a consequence of its operations.
Quebec is an exploration stage company supporter
It is worth noting that the province of Quebec is ranked among the best jurisdictions for mine development. This comes down to the endowment of high grade mineral deposits that have been outlined in the province, but also due to the strong level of support provided by government to assist companies to move a project towards production. For example, Quebec provides a financial incentive for exploration by reimbursing companies for a large chunk of their exploration expenses.
In effect, this means that every dollar goes further and the policy enables junior mining companies the luxury to continue working even when the market conditions are difficult to raise funding.
Commerce Resources was able to remain active even while many other explorers had to conserve money and curtail work in the field. As a result, they eventually proved up an enormous resource amounting to 1.6 million tonnes measured, 27.7 million tonnes indicated, and a further 219.8 million tonnes in the inferred category – enough to support large-scale mining for decades.
The potential economics for the deposit are improved due to the enriched distribution of ‘magnet feed’, the high value combination of neodymium, praseodymium, terbium, and dysprosium, which are used in fabrication of magnets.
These magnets are essential for any electric motor, and may be used to power electric cars. The company has been able to prove a viable metallurgical recovery circuit to process run of mine material and yield a rich concentrate of elements.
There are many large industrial consumers that covet a secure, long term supply arrangement for rare earth elements that are not sourced from China. Commerce Resources has been in touch with many of them, and is working to close a deal for at least one of these players to step up and write a cheque to move the project to the next level.
This could take the form of an off take agreement, or a joint venture arrangement. The capital expenditure for a mine development in the near north of Quebec is projected to run into the hundreds of millions of dollars.
Demonstration of economic merits is key
Therefore it is that much more important for a junior mining stock to demonstrate the economic merits of a project, and attract the interest of a larger partner that can contribute the clout to advance through to mine development.
Ashram is a stand out, with arguably the most positive economic factors of all of the late stage REE deposits. The next objective is to secure another round of funding to complete production of sample material and work directly with potential end users to demonstrate the mine production will be of acceptable quantity and quality.
The company hopes to attract a partner to invest in the project and enable the completion of a bankable feasibility study. This would be the last hurdle to document the rigorous economic considerations and sift though the variables in order to prove that a successful long-term mine can be established at Ashram.
No other company has been able to deliver the combination of favorable deposit parameters, a successful and proven metallurgical processing loop for production of all the critical REEs, and the opportunity for robust economics that can sustain many years of profitable mine operations.
Add in the support from the local and provincial government agencies, and the economic boost for the entire region that would be afforded with the infrastructure development for Ashram, and there is a very real chance for Commerce Resources to attract a senior partner necessary to commence development.
Investor’s Digest of Canada, MPL Communications Inc.
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