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  • Peak Resources Ltd. (PKRLY) Is “One To Watch” 0 comments
    Feb 21, 2013 10:37 AM | about stocks: PKRLY

    February 21st, 2013 Peak Resources, headquartered in Perth, Australia, has exploration offices in the mineral-rich and politically stable East African country of Tanzania (United Republic of Tanzania), proximal to the site of their flagship rare earth Ngualla project (or "bald head" in Swahili after the way the main hill looks) on the edge of the massive East African Rift Valley. The company has put together a very simple shareholder return equation focusing on development of the exceptional mineralization at Ngualla, which also happens to be very low uranium/thorium (21ppm and 35ppm respectively) and which lends itself naturally to low-risk, relatively cheap recovery logistics.

    We have a very thick blanket of material here with the highest grades right at surface, granting Peak a perfect opportunity to implement open pit mining with a low stripping profile in order to get at the current mineral resource of some 3.8M tons of REO (rare earth oxides) at a 1% cut-off (1.6M tons at a 3% cut-off in just the weathered near-surface zone). We are talking a roughly 25-year projected mine life here ($1.57B NPV) at hearty output rates, and with 2.5 to 7% REO in the weathered bastnaesite top material (1.5 to 2.5% REO in the carbonatite rock below), Peak has an immediately accessible and recoverable resource on their hands with sweet recovery metrics.

    The potential for additional large niobium-tantalum mineralization at Ngualla, which would constitute a strong secondary pipeline of commodities, is also important to take note of. With some 44.6k feet of reverse-circ and diamond core drilled in 2012 alone (over 132k feet total since the first hole was put in during August 2010), Peak is on track for a March 2013 resource update and we should see some serious production trajectories as well. Open pittable high-grade resources of course are only half the story here because of the nature of the mineralization itself, which enables wet magnetic separation and flotation to accomplish most of the heavy lifting. A simple three-stage metallurgical process for recovery, fully tested using a proven sulphuric acid leach, makes Ngualla extremely appealing as the substantially lower CAPEX/OPEX ($400M and $10.09/kg REO respectively, Jan 24 quarterly update) translates directly into bottom-line growth for the shareholders. The test work looks solid too, with around 86% rare earth recovery via a simple to implement methodology that will also reduce overall production time.

    Alongside the most recent drill update at Ngualla (Jan 22), the company announced entry into strategic agreements with two key groups from the rare earth hungry Asian market to help fund the project's development. Should be easy sailing for Peak with all the various, highly-attractive aspects to this project, which is the 5th largest rare earth deposit outside China and which has the highest grade of the world's seven largest of such deposits. The company will be capturing four high-purity oxide product streams (yttrium-group Heavy Rare Earth Oxides, Praseodymium-Neodymium, Cerium, and Lanthanum) from the process and with sulphuric acid being generated on-site, reduced reagent requirements, and only time-tested simple hardware like tanks, pumps, and filters required to execute, Peak is sitting on a real profitability story. Cheap and easy to do beneficiation with a simple metallurgical backend makes Ngualla a real rising star of the rare earth sector, and Peak has already commissioned the solvent extraction plant, with product evaluation by the company's partners looking like middle of this year.

    With the majority of operating outlays at Ngualla going into the leach plant (62%, remainder is separation-related), the upcoming PFS (pre-feasibility study) will look to not only improve the economics of both processing facilities, but pay particular emphasis to shoring up overall leach dynamics. Three distinct zones at Ngualla contained within a roughly 2.36-mile diameter area (associated with a Proterozoic volcanic pipe) characterized by three types of mineralization, iron-rich gravels from 1 to 4% REO, the weathered carbonatite in the 2.5 to 7% REO range, and the fresh rock below that is 1.5 to 2.5% REO, with rich alluvial deposits around the central carbonatite hills, is a very strong profile lead for niobium-tantalum, with the Northern Zone in particular being highly prospective. Some returns from drilling show solid intercepts like 78.7 feet at 1.12% Nb2O5 (226ppm Ta2O5) from 13 feet and 390 feet at 0.71% Nb2O5 (162ppm Ta2O5) from surface. This is some heavily-mineralized ground and investors will be keen to take a look at the Ngualla development roadmap, as production start up is well within striking distance.

    The vast mineral wealth of Tanzania affords a broader acquisition horizon for the company and their early-stage exploration Lake Victoria Goldfields project is just the tip of the iceberg when it comes to Peak's designs for the region. The company is looking to put together a network of mineral interests in this prolific, established gold mining region through aggressive acquisitive, JV, and option arrangements, with the emphasis being on some of the more choice, largely underexplored acreages.

    The stampede into this rapidly emerging gold region of Eastern Africa by major players like African Barrick, AngloGold Ashanti Limited, and Resolute Mining Limited, each of which has already established a significance presence in the region, is a clear tell to investors looking to double down on the dynamics of Tanzania's burgeoning resource sector. World Bank efforts helped bring in the Mining Act of 1998 in Tanzania (amended in 2010), which guarantees security of tenure to investors and offers a shield of verifiable transparency when it comes to issuance and administration of mineral rights.

    The transformative effect of mining jobs on the population of some 40M, 80% of whom live in rural areas, is profound, and Peak is seriously dedicated to helping grow communities, as well as the industry's future. The company has even helped build a new classroom, as well as upgrading four of the existing classrooms, at the local Ngualla Primary School, putting in new floors and new desks for the students. This kind of hands-on engagement with the local community extends to offerings of training and further employment at the company's operations. Peak even fixed the main Ngualla village water system and this kind of warm reputation with the locals enjoyed by the company is a fundamental key to their successful resource development strategy, representing a key aspect of the business model that investors should never overlook.

    If you would like more information on Peak Resources, visit PeakResources.com.au

    Please see disclaimer on the QualityStocks website: disclaimer.qualitystocks.net

    Stocks: PKRLY
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