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  • Experts' Guide To Getting The Most Out Of Company Presentations

    What can you really learn from the fuzzy project diagrams, site photos and columns of numbers often shown in dark rooms at conferences? A lot, if you know what you are looking for, according to the experts. Beyond the warnings about forward-looking statements, corporate presentations often contain the details that could make or break a project's economics. And many companies time the release of important information to coincide with events like the Sprott-Stansberry Natural Resource Symposium, going on now in Vancouver. For those who weren't able to make the trip or are doing their homework in a hotel room somewhere, The Gold Report asks veteran investors what they look for in a corporate presentation when evaluating a possible opportunity. As a bonus, we included links to several company presentations shown in Vancouver so you can practice your analyzing skills.

    Trust, But Verify: Jayant Bhandari, a fund adviser, recently published a guide called "High Risk, High Reward: Disciplined Junior Mining Investing" that suggests comparing company presentations to the annual reports usually available on the company website or at sedar.com. "It is not illegal for companies to fail to provide you full information in these presentations," he cautions. For example, a company might show in the presentation that it has $5 million [$5M] in cash, but might not mention that it also has $50M in long-term debt. Or a presentation might feature a project without telling you that the company doesn't currently own it. "As you dig deeper, the incongruities that you discover between what they show in the presentation and what they actually have tell you a lot about their integrity, who they think they work for, and what respect they hold for you, the owners of the company," Bhandari says. He suggests looking out for the following red flags. "If they try to get you to value them based on how much each ounce of gold they have in the ground must be worth-a ridiculous way to value a project-they might be telling you that their project lacks economics, and hence must be promoted using flawed metrics. If they give you a net present value that is not explicitly shown as pre-tax, it might be worth asking if tax is really voluntary in their area."

    In Rick Rule's A Guide to Natural Resource Investing, he outlines the 10 fundamentals of junior resource stock analysis. The corporate presentation is a great starting point for a lot of those exercises.

    Value Investing: One important measure of a company's true worth is the comparison of liquidation value to market capitalization, Rule says. "A company is only worth what it owns." The first step might be to turn to the financial statements in the corporate presentation or the annual report. He suggests adding up all the current assets [such as cash], subtracting liabilities, and adding the liquidation value of the company's projects. Compare that to the market value [outstanding shares multiplied by the current market price]. If the market cap is more than the value the company would bring if it were auctioned off, that raises more questions. This is how you differentiate between price and value.

    People Power: Relevant experience of the management and board can be the difference between success and bankruptcy regardless of the resource. Rule says, "While deposits are discovered, a mine must be built and it takes technical prowess to turn a mineral deposit into a producing mine." It also takes financing, permitting and managing costs. A company needs the skills to raise money, deal with local governments and work with diverse constituencies, including neighbors, politicians and investors. That is why one of the first things Rule looks for is an experienced team for the project type and location.

    The quality of the shareholders matters, too, Rule says. Have the major shareholders ridden previous projects to successful conclusions for all involved? Are senior managers major shareholders and at what price did they buy shares [not options]?

    Insider Trend Spotting: Ted Dixon, cofounder and CEO of INK Research, which tracks legally reported stock buying and selling by public company executives and institutional investors, cautions stock watchers to look for the reasons behind insider trading. "If a stock is going up and there's a lot of insider buying, that could mean insiders are buying into the news. On the other hand, if the stock has fallen and there's a lot of insider buying, that could signal a value opportunity, that the market has overreacted."

    Other questions can often be answered in the distribution of share ownership column of the company presentation. What is the ratio of institutions to retail shareholders? Do any of the majors have a substantial stake in the company? That can say a lot about possible future partnerships and acquisitions. These questions get to the issue of the confidence level of management in the future success of the company and ensuring that their interests are aligned with investors.

    The Bottom Line: The capital structure portion of the presentation can give a glimpse into how many shares are outstanding, the volatility in the 52-week high and low and the average daily volume. This can clue investors in on how liquid the stock may be when it comes time to sell. It can also speak to how well the company is telling its story and letting potential investors know about the growing value of the stock.

    Matt Badiali, editor of S&A Resource Report, pays close attention to the cash position and the company burn rate. "I need to know how much money a company is going to spend this year," he says. That answer is immediately followed by "How much money do you have in the bank?"

    "Companies are notorious for having $2M in the bank and a $6M burn rate. Often the plan is to make up the difference by selling a bunch more shares. That is when I turn on my heel and walk away. I would rather buy after the company has diluted the current investors," he says.

    Technical Issues: Geologist and Exploration Insights Editor Brent Cook has some tips for where to look for inconsistencies when doing due diligence. "One of the most common problems I see in these reports relates to the resource estimates. A large number of those turned out to be inaccurate, making the financial models based on them wrong," he warns. He suggests paying close attention to the cutoff grade used in estimating the tonnes and grade of a deposit. "In theory, that cutoff grade should be what a company or resource estimator projects is the breakeven point between making money and losing money. If the cutoff grade is, say, 0.5 grams per tonne [0.5 g/t], then I like to see an average grade that is at least twice that, say, over 1 g/t, because above that is where you really make the money."

    Cook points to metallurgy as the most important aspect of any deposit, but that's difficult to discern from a corporate presentation or even a feasibility study, which can be very technical. "All that the retail investor can do is guestimate if the grade and tonnes are sufficient to cover the probable capital and mining costs," he warns.

    One good metric is the internal rate of return [IRR], especially if it is after taxes. Cook looks for about 20% IRR after tax, although it depends on where the project is located and on the exploration upside.

    Cook also advises checking out the rest of a company's website. "Be wary of a company that puts out a news release with no maps, no sections and no data. Watch for news releases that report high grades smeared over long intervals, and always search for historical data from the property being promoted. Most properties have a history that gives you some insight into possible tonnes and grade."

    Reach Out: The last slide in a presentation is often the contact information for management at the company. Take this as an invitation to make a phone call or at least send an email asking follow up questions-lots of follow up questions. Management is almost always happy to talk about the project. In fact, for The Agletter Editor Tom Wallace, the enthusiasm of the CEO or investor relations person is one of the tests. "People love talking about success, so if the company has nothing to say for itself, it's probably best to move on to the next one," he says.

    When Rick Rule talks to a company, he has one query he likes to ask management to get to the heart of the project. "Please distill for me the most important unanswered question right now. What's the thing that you can do that will deliver me the quantum increase in value that is required to induce me to take the risk to invest in your shares?" That leads to the question, "How long will it take to get an answer to that question and how much money will be required to answer the question?" Then as an investor, you can decide if the reward associated with a yes answer is worth the risk that you are being asked to bear.

    Rule also wants to know the timing for profit for the company and the investor. That can help to reassure a potential investor that the company does have a plan, the schedule of possible catalysts and a benchmark to determine whether the company is delivering according to plan.

    Taking the time to really examine a company presentation and do some homework before making a phone call can lead to a much more meaningful conversation-and possibly a more profitable portfolio-than one arrived at by throwing darts in the dark.

    This interview was conducted b JT Long of The Gold Report.

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    DISCLOSURE:
    1) JT Long wrote this article for Streetwise Reports LLC, publisher of The Gold Report, The Energy Report and The Life Sciences Report, and provides services to Streetwise Reports as an employee. She owns, or her family owns, shares of the following companies mentioned in this article: None.
    2) The following companies mentioned in the article are sponsors of Streetwise Reports: None. Streetwise Reports does not accept stock in exchange for its services.
    3) Streetwise Reports does not make editorial comments or change experts' statements without their consent.
    4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer.

    5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their families are prohibited from making purchases and/or sales of those securities in the open market or otherwise during the up-to-four-week interval from the time of the interview until after it publishes.

    Streetwise - The Gold Report is Copyright © 2014 by Streetwise Reports LLC. All rights are reserved. Streetwise Reports LLC hereby grants an unrestricted license to use or disseminate this copyrighted material (NYSE:I) only in whole (and always including this disclaimer), but (ii) never in part.

    Streetwise Reports LLC does not guarantee the accuracy or thoroughness of the information reported.

    Streetwise Reports LLC receives a fee from companies that are listed on the home page in the In This Issue section. Their sponsor pages may be considered advertising for the purposes of 18 U.S.C. 1734.

    Participating companies provide the logos used in The Gold Report. These logos are trademarks and are the property of the individual companies.

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    Jul 28 2:40 PM | Link | Comment!
  • Six Miners Dundee's Joseph Fazzini Believes Will Weather The Storm

    With ongoing volatility expected in the gold space, mostly owing to global economic weakness, investors should focus on quality gold names with three key attributes to weather the current metal price environment, explains Joseph Fazzini, vice president and senior analyst with Toronto-based Dundee Capital Markets. Fazzini says those attributes are low-cost, long-life assets; defensive balance sheets; and responsible management teams. In this interview with The Gold Report, Fazzini lists six Buy-rated names with those key attributes and more.

    The Gold Report: Many of the people we interview have a theory about why gold is performing poorly this summer despite so much global uncertainty, especially in China and Greece. What's your theory?

    Joseph Fazzini: Gold typically plays numerous roles, including being a hedge against inflation, devaluation and economic turmoil, but it's still a commodity. Most commodities typically come under pressure in a recessionary environment. Right now, the global economic landscape isn't all that promising, inflation remains minimal and investors prefer other safe-haven investments [i.e., U.S. dollar]. As a result, we expect gold to continue performing in-line with most other commodities and remain under pressure.

    TGR: How low can gold go?

    JF: Recent events have shown that the price of gold can move without rhyme or reason. While some have suggested that opportunistic investors have conspired to drive down the price of gold, weakened investor sentiment has also played an important role. Rather than try to hedge inflation or economic uncertainty with gold, investors from around the world have sought refuge in safety assets like the strengthening U.S. dollar, which moves inversely with gold. With Chinese, European and North American equity markets on precarious financial footing, gold remains out of favor and the bottom is tough to call.

    TGR: What about sub-$1000/ounce [sub-$1,000/oz] gold?

    JF: With the price of gold recently declining to a five-year low of US$1,088/oz, sub-$1,000 is certainly a near-term possibility. While we hope for the best, we continue to advise caution.

    TGR: Is it Dundee Capital Markets' view that gold could rebound in 2016 or possibly 2017?

    JF: We have a constructive long-term view of gold, but in the near term we still see a lot of risk. We're not ready to call a gold rebound. We would need to see some serious developments in the global economy that would support a rebound in gold.

    TGR: What would some supportive measures be?

    JF: Further quantitative easing would be probably the most encouraging thing we could see for the gold price. As this scenario would entail more money being pumped into the global economy, we expect this could drive investors out of fiat currencies and into hard assets, including gold, which can't be printed. With indications of U.S. interest rates rising in the coming quarters, it's clear that the U.S. is unlikely to pursue that route, but we could see it happen in Europe and China. In addition, a weakening of the U.S. dollar would inherently be positive for gold as it would become more affordable for foreign nations, most notably China and India, which have been major buyers of bullion.

    TGR: We have the situation in Europe with Greece and stock market weakness in China. Which is more likely to affect the gold price?

    JF: In our opinion we consider the recent events in China to be of greater significance. Apart from China having one of the largest global economies, the Chinese also represented roughly 25% of global gold demand in Q1/15. If things were to materially worsen in China, we think that would have a far more pronounced effect on the price of gold than anything happening with Greece.

    TGR: With such uncertainty surrounding the marketplace, what are three things that become more important in gold equities, especially the micro- and small-cap stocks?

    JF: With continued volatility expected in the gold space, we consider the three prerequisites for investment to be ownership of quality low-cost assets, defensive balance sheets and responsible management teams.

    You want to look for low-cost operations that continue to generate cash despite gold price fluctuations. Next, you want companies with defensive balance sheets. For the most part higher leverage will result in significantly higher risk, and so you want companies with good cash balances and limited debt. Those names are going to be better positioned to weather prolonged market weakness. Lastly, having a responsible, experienced management team is key. You really want to be in a position where the company is being responsibly managed in tough market conditions. Whether that means laying people off, shutting down an operation or selling the company you need to have the people willing to make the best decisions for shareholders.

    TGR: Should investors expect mergers and acquisitions [M&A] activity to gain momentum throughout the remainder of 2015 and into 2016?

    JF: I think so. As I said, access to capital will remain limited. The consolidation of juniors and mergers among larger players are, in our opinion, essential to longer-term survival in this industry. When companies join together, we see potential for significant synergies through economies of scale and streamlined management structures. If we continue to see a challenging metal price environment, M&A is inevitable. Companies will have little choice but to get together or they simply won't survive.

    TGR: Would you talk about some of the companies that you cover?

    JF: Continental Gold Inc. (OTCQX:CGOOF) is one that I cover. The company just announced an updated mineral resource on its flagship Buriticá project; the new resource provides a basis for the company's upcoming Feasibility study in 2016. With significant conversion of Inferred resources into Measured and Indicated, the new resource also provides a greater degree of confidence in the deposit.

    The next catalyst is obviously the permit. A lot of people are waiting to see Continental get its final operating permit. The permit would allow the company to build-out and expand Buriticá from its current small-scale production. Recognizing the importance of the permit from a derisking perspective, our expectation is that Continental will receive the permit in the coming months. The Feasibility study will also play a key role as it will provide a better indication of potential project parameters and economics.

    TGR: What does Buriticá look like to you at this stage?

    JF: It's quite clear this is a high-grade underground mining scenario. The question is how big will it be? And what will it cost to develop Buriticá? The preliminary economic assessment [PEA] gives us a rough sense of what that project will look like, but the differences between the PEA and the Feasibility will be significant due to the additional amount of drilling and technical studies that will be completed.

    TGR: If Continental receives its final operating permit, do you see it as a takeover target?

    JF: Yes. Given the size of the deposit, the likelihood of an extensive mine life and the potential for potent project economics, we think Buriticá is a project that a lot of companies would be interested in.

    TGR: What is your target on Continental?

    JF: My target is $4.75, with a Buy, Speculative risk rating.

    TGR: What are some companies you cover with low-cost assets, strong balance and responsible management teams?

    JF: Among the names that we like, B2Gold Corp. (NYSEMKT:BTG) remains a favorite. It offers the combination of production growth, attractive cash costs, a defensive balance sheet and a compelling valuation. The company recently commissioned the Otjikoto gold mine in Namibia and it's performing well. The mine has further improved B2Gold's cash cost profile, and it should help the company drive consolidated production well in excess of 500,000 ounces [500 Koz] this year. The company still has further growth ahead with the Fekola gold project in Mali, which is expected to start production in 2018.

    TGR: B2Gold is thumping its chest about Fekola. Should investors buy the hype?

    JF: We think so. We like the project. It offers both high grade in an open pit and the potential for robust project economics once it is up and running. Given the limited amount of exploration in the past, we see potential for the deposit to get bigger through extension along strike and at depth.

    TGR: What's your target on B2Gold?

    JF: $2.75 and a Buy rating.

    TGR: What are some other companies that you like?

    JF: Kirkland Lake Gold Inc. (OTCPK:KGILF) [KGI:TSX] is another one that we like. The company has been a strong performer through the past 12 months on the back of an operational turnaround at its Macassa mine in northern Ontario. It has a very high-grade ore body with extensive mine life and a vastly improved balance sheet. Given the operational results we've seen, Kirkland is well positioned to continue generating robust cash flows through growing production over the next few years.

    TGR: Kirkland Lake reported earnings of $19.8 million [$19.8M] in fiscal 2015 versus a loss of $11.08M in 2014. Was that in line with your estimates?

    JF: Indeed. Production was pre-released so there weren't really any surprises. There has been such a big difference in that company over the past 12 months, predominantly due to management changes and a focus on mining higher grades rather than moving marginal tonnes.

    TGR: What's the next catalyst for Kirkland?

    JF: The next quarter's results. The operational results are going to be a key catalyst, along with ongoing exploration work.

    TGR: What is your target there?

    JF: $7.75 with a Buy rating.

    TGR: What company did you recently initiate coverage on?

    JF: SEMAFO Inc. (OTCPK:SEMFF) [SMF:TSX; SMF:OMX]. The company is another name that we really like for a variety of reasons, but predominantly because it has a track record of under-promising and over-delivering. It has delivered on its guidance six out of the past seven years, which is excellent. In addition, it has a meaningful production profile, with almost 250 Koz a year coming from its Mana mine in Burkina Faso. Mana is a low-cost mine with good grades and an extensive mine life ahead of it. The other attraction is the Natougou project that SEMAFO is advancing in Burkina Faso. A Feasibility study is expected in 2016 and Natougou has all the indications of a world-class mine.

    TGR: About 16 analysts cover SEMAFO. They seem mostly torn between Buy and Hold. What's your view?

    JF: I think the disparity between the different views is that some people look at the valuation and think that SEMAFO is expensive. We believe the company deserves a premium given the quality of its assets, the track record of its management team and the growth profile that the company offers. All those things together suggest that this is a company worth owning in a portfolio.

    TGR: What's your target on SEMAFO?

    JF: $5 with a Buy rating.

    TGR: What's your advice to retail gold investors during this summer of global economic discontent?

    JF: Everything comes back to quality. Investors should focus on quality. Don't buy the high-risk names in the hopes of outsized returns. Buy companies with strong balance sheets, solid production assets and responsible management teams.

    TGR: Thank you for talking with us today, Joe.

    This interview was conducted by Brian Sylvester of The Gold Report and can be read in its entirety here.

    Joe Fazzini is a senior mining analyst with Dundee Capital Markets in Toronto. Joe's research is predominantly focused on junior mining companies in both the production and preproduction stage. Prior to joining Dundee, Joe articled at PricewaterhouseCoopers LLP in the firm's global metals and mining assurance practice. He is a registered Chartered Accountant [CA] as well as a CFA charter holder. Joe holds a Bachelor of Commerce degree, majoring in economics and finance from the University of Toronto.

    Want to read more Gold Report interviews like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Interviews page.Top of Form

    Bottom of Form

    DISCLOSURE:
    1) Brian Sylvester conducted this interview for Streetwise Reports LLC, publisher of The Gold Report, The Energy Report and The Life Sciences Report, and provides services to Streetwise Reports as an independent contractor. He owns, or his family owns, shares of the following companies mentioned in this interview: None.
    2) The following companies mentioned in the interview are sponsors of Streetwise Reports: Continental Gold Ltd. The companies mentioned in this interview were not involved in any aspect of the interview preparation or post-interview editing so the expert could speak independently about the sector. Streetwise Reports does not accept stock in exchange for its services.
    3) Joseph Fazzini: I own, or my family owns, shares of the following companies mentioned in this interview: SEMAFO Inc. I personally am, or my family is, paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: None I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I determined and had final say over which companies would be included in the interview based on my research, understanding of the sector and interview theme. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
    4) Interviews are edited for clarity. Streetwise Reports does not make editorial comments or change experts' statements without their consent.
    5) The interview does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer.

    6) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their families are prohibited from making purchases and/or sales of those securities in the open market or otherwise during the up-to-four-week interval from the time of the interview until after it publishes.

    Streetwise - The Gold Report is Copyright © 2014 by Streetwise Reports LLC. All rights are reserved. Streetwise Reports LLC hereby grants an unrestricted license to use or disseminate this copyrighted material (NYSE:I) only in whole (and always including this disclaimer), but (ii) never in part.

    Streetwise Reports LLC does not guarantee the accuracy or thoroughness of the information reported.

    Streetwise Reports LLC receives a fee from companies that are listed on the home page in the In This Issue section. Their sponsor pages may be considered advertising for the purposes of 18 U.S.C. 1734.

    Participating companies provide the logos used in The Gold Report. These logos are trademarks and are the property of the individual companies.

    101 Second St., Suite 110
    Petaluma, CA 94952

    Tel.: (707) 981-8999
    Fax: (707) 981-8998

    Email: jluther@streetwisereports.com

    Jul 27 2:08 PM | Link | Comment!
  • Luisa Moreno Explains Why Metallurgy Is So Important In Critical Metals Projects

    Luisa Moreno, managing partner and analyst with Toronto-based Tahuti Global, says there are many things investors must pay attention to when it comes to critical metals projects, but nothing should trump metallurgy. That's because no two deposits are precisely the same, and having a clear understanding of how to economically recover those metals and get them into end-users' hands is usually the difference between higher share prices and failure. In this interview with The Gold Report, Moreno discusses several plays in developing critical metals deposits with established metallurgy and other attributes that put them on the path to success.

    The Gold Report: With development capital still at a premium, are companies with critical metals projects getting financed? What typically gets financed and what doesn't?

    Luisa Moreno: The financing environment for the mining space is still difficult, and that is no different for the critical metals equities. Nowadays, the mining and related processing projects that are more likely to get financed are those that are close to production, have relatively low capital requirements, have competitive production costs, have offtake agreements or will be selling into metals markets that have seen prices stabilize and have solid demand.

    TGR: In July 2011, you produced a tantalum and niobium primer for Jacob Securities Inc. Reading through that report again, little has changed. What makes these metals newsworthy now?

    LM: Tantalum has major applications in electronics that are used in nearly all devices that we have in our homes. Niobium is a major metal in the production of high-performance steel. Tantalum mine production fell by more than 50% in late-2008 and 2009 affected in part by the recession, and it never recovered. More than 90% of the world's niobium is produced in Brazil, and although Brazil is not considered a hostile jurisdiction for mining, niobium was listed by the European Union as a critical metal given its geographic risk profile. To mitigate potential risk, end users are eager to find stable niobium supplies in stable countries. Both tantalum and niobium are highly strategic, critical and relevant. It's important to continue to develop new projects.

    TGR: The gorilla in the niobium market is Companhia Brasileira de Metalurgia e Mineração [CBMM]. How does it affect smaller niobium players? Is it likely to play the role of acquirer?

    LM: CBMM's production accounts for more than 85% of niobium supply. The company is the lowest-cost producer; its grades are generally above 2% Nb2O5, whereas most other projects are at about 0.6-0.7% Nb2O5. I don't see CBMM playing a role as an acquirer because it has over 200 years of mine life left and its costs are the lowest. It will continue having the leading position that it has in the market for a long time, I think. There is, as I mentioned, a need for new players in order to attain geographic diversification that end users would like to see.

    TGR: Please provide us with an overview of the tantalum market.

    LM: Tantalum witnessed a significant increase in demand in the late 1990s and into 2000. That was driven by a substantial increase in technology associated with the dot-com boom and the proliferation of mobile devices. Prices spiked during that period. Demand collapsed with the onset of the 2001 recession but then gradually went up again. After the 2008-2009 recession, prices fell but found the $140-150/kilogram [$140-150/kg] level again in 2010-2011. At the end of 2011 and in early 2012, we saw again a slowdown in commodity prices and demand, including many strategic metals. Currently, tantalum prices have stabilized at about $80-90/kg. Tantalum demand obviously moves with the ebbs and flows of the global economy, but it tends to be influenced by developments in the technology space. Niobium has been less volatile, but that has been sort of the pattern for some critical metals.

    TGR: From the few publicly traded companies that are developing tantalum and niobium projects, what do you want to see in a development-stage tantalum-niobium project?

    LM: Brian, I appreciate the companies that are following an unconventional mining development path by focusing strongly on reaching, in as short a period of time as possible, production and revenues at the lowest possible costs, by building strong management and technical teams and establishing contacts and partnerships with end users as early as possible in project development. Defining a resource is important as the company grows, and the grade and the surrounding infrastructure are important too, of course, but, ultimately, if a company doesn't have the appropriate metallurgy program, that could become a major hurdle.

    For projects that are still being developed and require some form of hydrometallurgy, it's really about optimizing the chemical process and achieving sustainable operating costs, thus a strong technical team matters. Another important aspect, as I mentioned, is agreements with end users. Tantalum and niobium are strategic materials with stable markets at the moment, so as long as a company can produce them economically and to end-users' specifications, there is a good chance of project success.

    TGR: In metallurgy, what are the common host minerals that are most amenable to known processing technology?

    LM: The most common tantalum and niobium minerals are the columbite-tantalite [also known as coltan] group minerals. Technically when tantalum outweighs niobium the mineral is called tantalite; when niobium outweighs tantalum the mineral is columbite. Another important mineral source for tantalum is wodginite and for niobium is the pyrochlore mineral. Those are common minerals, but ultimately it's about the ability to extract these elements economically. Companies will use different chemical processes depending on the type of ore and mineralogy. It's not a linear situation. It must take into consideration the deleterious elements also. Some deposits have high concentrations of thorium and uranium, which could be a nuisance to separate and dispose. Recovery rates are very important, too. When there are equal distributions of tantalum and niobium it could be complicated to separate the tantalum from the niobium, in some cases, because their respective chemical properties are very similar.

    TGR: Is metallurgy as important with vanadium development projects?

    LM: Metallurgy is generally an important aspect for many strategic materials. It will always be important for most metal processes, but the vanadium production process is not one that requires major new developments such as what we are seeing in the REE and titanium dioxide space.

    TGR: You also cover the titanium market, a growing market and perhaps one of the most complex markets for investors to grasp. Please give us the essentials.

    LM: Titanium metal is used primarily in the aerospace and chemical processing industries. Titanium metal is most useful in corrosion-resistance applications. It has a high strength-to-weight ratio-the highest of any metal. Titanium is as strong as some steels, but almost 50% lighter. It should be noted, however, that only 5% of titanium is used in metal applications; 95% is used for the manufacturing of titanium dioxide. Titanium dioxide is most commonly used as a white pigment in a variety of applications, including paints and coatings, which account for about 60% of the market, and plastics, which account for 20%. The remaining applications are paper, inks, fibers, cosmetics, etc. It's a diverse market.

    TGR: Where is the growth coming from?

    LM: Titanium dioxide is the most significant market for the element, which strongly correlates with gross domestic product growth. If we see a recovery in the world economy in the next two or three years, we should see an increase in demand for titanium dioxide.

    TGR: How would you convince skeptical investors that they can still make money in the REE space?

    LM: It's important for investors to remember the reasons why folks got interested in REEs in the first place, back in 2010. It was in part because China was restricting exports, but ultimately the incident between China and Japan, where essentially China threatened not to sell any more REEs to Japan over territorial disputes, led to a market frenzy for these elements. China controlled and still controls most of the supply, close to 100% for some elements. The other reason was that we realized the importance of REEs in the green agenda that continues to move ahead in Europe and North America. But nothing has changed. We still don't have REE production outside Asia and the green agenda continues to take hold. Will the West always depend on China and the rest of Asia as a source for the most strategic rare earths elements?

    TGR: Thank you for your insights, Luisa.

    This interview was conducted by Brian Sylvester of The Gold Report and can be read in its entirety here.

    Luisa Moreno is managing partner and analyst with Toronto-based Tahuti Global. She covers industry metals with a major focus on technology and energy metal companies. She has been a guest speaker on television and at international conferences. Moreno has published reports on rare earths and other critical metals and has been quoted in newspapers and industry blogs. She holds a bachelor's degree and a master's degree in physics engineering, as well as a Ph.D. in materials and mechanics from Imperial College, London.

    Want to read more Gold Report interviews like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Interviews page.

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