Seeking Alpha

ResourceClips'  Instablog

ResourceClips
Send Message
ResourceClips provides original and independent market news on mineral exploration and mining. For more information on ResourceClips visit http://www.resourceclips.com
My company:
ResourceClips
My blog:
ResourceClips
View ResourceClips' Instablogs on:
  • Favorable Mineralogy Helps Commerce Resources Move Its Quebec Rare Earth Project Towards Pre-Feasibility

    Commerce Resources Corp. Ashram Rare Earth Deposit

    On schedule and under budget, winter-spring drilling at Commerce Resources' (OTCPK:CMRZF) Ashram deposit in northern Quebec wrapped up last week, bringing one of the world's largest rare earth projects closer to pre-feasibility. Ashram advances at a time when China's "costs of producing 'cheap' rare earths are becoming increasingly unsustainable in terms of the environment, the availability of reserves, the health of its communities and the political ramifications," according to a 28-page report by Secutor Capital Management. The study adds that China "is beginning to worry about its own domestic supply, as China is its own biggest customer."

    That puts an interesting perspective on Commerce, "one of the most advanced REE juniors in regards to metallurgy which, in the REE space, is everything," Secutor analysts Arie Papernick and Lilliana Paoletti stated. "The Ashram project hosts a substantial resource with a well-balanced rare earth oxide (REO) distribution. The deposit is enriched in light and heavy rare earths, including all five of the critical elements. The mineralogy is simple due to the presence of the minerals monazite, bastnaesite and xenotime, which currently dominate commercial processing. Unlike many of its competitors, Commerce is able to produce a 43.6% total rare earth oxide (TREO) mineral concentrate due to the deposit's simple mineralogy, allowing significant cost reductions."

    According to Ashram's 2012 preliminary economic assessment, the extent of those critical elements-neodymium, europium, terbium, dysprosium and yttrium-is "unusual in carbonatite deposits and especially those of such tonnage and grade."

    That resource used a cutoff of 1.25% total rare earth oxide to estimate a measured and indicated 29.3 million tonnes averaging 1.9% TREO, and an inferred 219.8 million tonnes averaging 1.88% TREO.

    As the Secutor report emphasized, "REE mineralization is virtually completely contained within the minerals monazite, bastnaesite and xenotime, allowing Commerce Resources to use standard processing techniques. In the REE industry, the ability to use conventional metallurgy and processing is rather unique. Only four REE-bearing minerals out of over 200 have ever supplied the market in a material fashion. These four minerals currently, and historically, dominate commercial REE processing and are host to the REEs at Ashram."

    The 43.6% TREO concentrate, at a recovery of 70.7%, comprises "one of the highest-grade REE mineral concentrates which we are aware of produced by a junior mining company globally."

    It's considerably higher than that of Ashram's 2012 PEA, which anticipated reaching a target of 20% TREO at a recovery of 60% to 70% "through an established and commercially proven technology." Yet the PEA's base case considered a concentrate grading 10% TREO at 70% recovery.

    The study used a 10% discount rate to project Ashram's pre-tax, pre-finance net present value at $2.32 billion and a 44% internal rate of return. The capex, including contingency, came to $763 million with payback in 2.25 years. The PEA envisioned a 4,000-tonne-per-day open pit operating for 25 years-based on just 15% of the total resource.

    And although rare earth prices have dropped since 2012, "the project remains robust," Secutor maintains.

    The higher-grade concentrate, with its capex and opex ramifications, is just one of the reasons analysts Papernick and Paoletti see a potentially more impressive pre-feas. Ashram's infrastructure costs might benefit from proximity to the Lac Otelnuk iron project, 80 kilometres south. A joint venture of Adriana Resources (OTC:ANARF) and WISCO International Resources Development & Investment, it's the "largest iron ore deposit in Canada with the potential of becoming one of the largest in the world," according to Adriana. The project's 2011 PEA calculated a $12.9-billion capex which included power and, via the link at Schefferville 165 kilometres southeast, railway to the deep sea port of Sept-Iles. Since then the Quebec government has indicated it will only permit a multi-user rail service.

    Lac Otelnuk has full feasibility scheduled for completion by year-end.

    Plan Nord might offer additional potential. Stalled for nearly two years by Quebec's former Parti Quebecois government, the northern infrastructure program formed an important part of the new Liberal government's election platform.

    Another possibility not considered in the PEA was a potential byproduct in fluorite, which "comprises the tailings of the final REE mineral concentrate and therefore follows the exact same flow sheet, requiring no additional processing to produce," the Secutor study noted.

    While the PEA considered an on-site hydrometallurgical plant, "a recently completed trade-off study indicated that a location off-site will be more economic due to better access to skilled personnel and consumables," Papernick and Paoletti stated. Commerce's pre-feas will consider a more convenient location along the St. Lawrence seaway, they added.

    The pre-feas will also evaluate a lower-cost road-building plan. "The optimized route is easier to build, reducing construction costs, and requires shorter water crossings," the analysts stated.

    Additionally, Commerce states that infill drilling since 2012 shows potential for a lower strip ratio than considered by the PEA. Nearly 2,700 metres were sunk this year and last, finding impressive grades and widths almost at surface. Some of the best results from 2013 showed:

    - 1.94% TREO over 144.57 metres, starting at 7.98 metres in downhole depth (including 2.15% over 61.4 metres) (and including 1.62% over 20.55 metres)
    - 2.28% over 57.36 metres, starting at 4.39 metres
    - 2.06% over 92.3 metres, starting at 5.18 metres
    - 1.86% over 153.63 metres, starting at 7 metres (including 1.51% over 30.64 metres)
    - 2% over 129.05 metres, starting at 4.15 metres

    True widths weren't provided. The results expanded the deposit to the northwest and showed surface mineralization within the pit, where waste rock had been modelled in the PEA, Commerce stated.

    Assays are pending for the most recent program but the company said all nine holes found mineralization over their entire length, with each ending in mineralization below the base of the currently proposed pit. Initial interpretation of several holes strongly indicates they intersected the deposit's MHREO (middle and heavy rare earth element oxide) zone over significant widths, Commerce added.

    Although Ashram's obviously the focal point of the company's 19,006-hectare Eldor property, a boulder sampling program over the Miranna area last year found some of the world's highest tantalum grades, Commerce reported. The assays surpassed those of mining operations where grades above 300 parts per million tantalum pentoxide (Ta2O5) are considered high. The samples also showed niobium pentoxide (Nb2O5) and phosphorus pentoxide (P2O5), as well as rare earths.

    Starting at locations roughly 775 metres east of the Ashram pit, selected results showed:

    - 1,220 ppm Ta2O5, 15,700 ppm Nb2O5, 10.6% P2O5 and 0.46% TREO
    - 580 ppm Ta2O5, 6,160 ppm Nb2O5, 9.1% P2O5 and 0.4% TREO
    - 790 ppm Ta2O5, 9,640 ppm Nb2O5, 9.9% P2O5 and 0.45% TREO
    - 380 ppm Ta2O5, 19,390 ppm Nb2O5, 9.9% P2O5 and 0.4% TREO

    But as Ashram progresses towards pre-feasibility, "its main focus will be to continue to advance the metallurgy and to secure a joint venture partner," the Secutor analysts stated. "Commerce is almost at the stage where it can begin to focus on the hydrometallurgy and on the evaluation of end products."

    Commerce also holds the Blue River project in southeastern British Columbia. Its Upper Fir deposit reached PEA in 2011, which the company said made it "a potential large-scale, low-cost producer of conflict-free tantalum, as well as significant niobium." A June 2013 resource update marked a 33% jump in the indicated and an 18% boost in the inferred categories. Metallurgical advances, meanwhile, continue the project's progress.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Additional disclosure: Commerce Resources Corp is a client of OnPage Media Corp, the publisher of ResourceClips.com.

    May 22 2:30 PM | Link | Comment!
  • The Fukushima Effect: Nuclear Expert Thomas Drolet Discusses The Disaster, The Aftermath And The Outlook For Uranium

    Thomas DroletPaladin Energy (OTCPK:PALAF) had no sooner consigned its Kayelekera mine in Malawi to care and maintenance when Cameco Corp. (NYSE:CCJ) scrapped its 2018 production target of 36 million pounds U3O8. Both companies attributed their gloomy February 7 announcements to uranium's pathetic price. Discouraged producers, however, contrast sharply with optimistic explorers. With that in mind nuclear energy expert Thomas Drolet granted ResourceClips.com a wide-ranging interview covering several aspects of the uranium space. Part one focuses on Japan.

    With a "big electrical utility background," the chemical engineer's CV shows an impressive 42-year list of qualifications, positions and achievements. "About half my career has been spent in nuclear energy," he says. "I also have a background in natural gas, combined cycle gas turbines, coal-fired generation, hydro-electric and geothermal….. I've covered the whole area of energy."

    Among other career highlights, he served as president/CEO of Ontario Hydro International, where he gained considerable insight into nuclear's global picture. His work has taken him around the world, including Chernobyl, Three Mile Island and Fukushima. A sought-after consultant and public speaker, he also serves on the advisory board of Lakeland Resources (OTCQX:LRESF).

    Not surprisingly, Drolet attributes uranium's current price woes "almost entirely" to the Fukushima Daiichi disaster. "Some 20% of the world's major large reactors are lost to production," he points out. All 55 Japanese reactors have been shut down, six permanently. "That caused a huge inventory of unused fuel and contractually committed fuel for long-term supply with nowhere to go. They can repackage that, and some has been repackaged and used elsewhere. But excess inventory caused by Japan is the number one reason for low uranium prices."

    Related to that is "the absolute pause that happened in the world after March 2011. There was a gigantic pause button pushed in China, in India, and to some limited degree in Russia. That meant a lot of the long-term supply contracts were leading to excess inventories in other countries."

    Drolet's first-hand experience emphasized to him the "truly catastrophic" nature of Fukushima Daiichi. "The design and configuration was woefully wanting," he says. The seawall couldn't block the wall of water, even though a tsunami of that height had already been predicted as a potential hazard. The emergency power system, located below the seawall, crapped out. Backup power failed too. Battery power sustained some systems, but only for a few hours. Meltdowns and explosions caused enormous destruction.

    Japan

    Drolet maintains "that particular location" was the wrong place for that particular model, a Mark I BWR (boiling water reactor) of 1960s vintage. Japan has about a dozen similar models "but none of them are in risky locations like Fukushima." The United States has several more "but they're well inland and have undergone major NRC regulatory-demanded design changes," he adds.

    The Mark I was a Generation II reactor. The 1990s and early 2000s saw strong improvements with Generation III models in China and elsewhere, Drolet explains. Now Generation III-plus features passive safety shutdown systems that don't require electricity or even operators to continue cooling if an accident causes a shutdown.

    Still, past mistakes have left Japan with a cleanup task nothing short of astonishing. "It will take 12 to 15 years to totally bring Fukushima Daiichi back to a brownfield condition. Of the government and TEPCO cost estimates, the biggest I've seen in print is about $60 billion. My opinion? Double that."

    Yet he's convinced the country will return to nuclear energy, although not as quickly as some predict. "My experience in Japan suggests there's a gigantic tug of war happening," Drolet says. "At one end is the Abe government and its ministries, which are determined to try to bring the reactors back. Why? Because of the sheer cost of replacement fuels, of having to build LNG plants, coal-fired power plants and to some limited degree renewable power plants. All of that means they want to bring back viable power sites."

    On the other side is "a newly revised regulatory authority that's far more independent and far better staffed than before. They're being very cautious and in my opinion rightly so. Joined with them are the public."

    Back in the 1960s, with the devastation of WWII in especially stark memory, "the Japanese public had to be talked into nuclear power because of a lack of home-grown energy fuels. They import 90% or 95% of the fossil fuels that they burn. They had to be convinced. Fukushima Daiichi has exacerbated that sort of concern. From my experience the vast majority of Japanese are still against it, despite the recent Tokyo election."

    A February 9 election for governor of Tokyo brought victory for nuclear advocate Yoichi Masuzoe. That might suggest some ambiguity in a city that Drolet characterizes as preoccupied with radiation. "I was invited for Friday night dinner at the home of a Japanese nuclear worker. His wife greeted us at the door with a Geiger counter," he says. "You see shoppers in food stores running Geiger counters along the produce and other products. But it's not that prevalent outside Tokyo. Other centres are much farther away from the disaster."

    Although he's convinced Japan will return to nuclear energy, "I don't believe predictions that most of the 49 reactors will come back," he contends. "My prediction is that about half of that, about 25, will eventually come back, gradually and carefully over the next five years. The basic rationale for that is some of the reactors, the Mark I BWR, may never get re-permitted in Japan. Secondly, some local governments just don't want them."

    "On the other hand, the country is in trouble anyway. If you consider factors like Japan's demographics, the highest debt-to-GDP ratio in the industrialized world, there are a number of reasons why government and industry want to have some of those reactors back. Replacement power costs are horrendous. They have to replace a total of 25,000 megawatts. They have to do something."

    Would 25 re-starts over five years be enough to stimulate uranium prices? "The very fact that the first reactors start to come back online will create a media-driven message that nuclear power is safe again," he responds. "That will, in my opinion, cause the price to move up gradually."

    But looking beyond Japan, he sees more important price significance "in China, in Russia, in the Middle East, in places where all these 60 new reactors will be coming online for the first time in the later part of this decade. Uranium consumers buy approximately three and a half years before they use the fuel. So if you look at all those 60 reactors coming online by the year 2020, there will be a massive amount of long-term U3O8 buying. So I see in the latter half of 2015, early 2016 a lot of long-term contracting between suppliers and users. That will cause the long-term price to start to move up substantially, up from this bottom of $50 long-term somewhere to the mid-60s or perhaps the early 70s."

    Optimistic as he is, Drolet's careful not to overstate the case. "That will be a gradual move as all of those contracts are closed," he emphasizes.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Business relationship disclosure: Lakeland Resources Inc is a client of OnPage Media Corp, the publisher of ResourceClips.com.

    Tags: commodities
    Feb 19 10:20 AM | Link | Comment!
  • Purepoint Uranium Drilling At Hook Lake Joint Venture

    A $2.5-million, two-rig, 5,000-metre campaign has begun at Purepoint Uranium's (OTC:PUMGF) Hook Lake project. Of three prospective corridors on the 28,683-hectare property, drilling will focus on the same electromagnetic trend that hosts the PLS discovery five kilometres southwest, the company stated on January 30.

    With a 21% interest in Hook Lake, Purepoint acts as project operator in joint venture with Cameco and AREVA Resources Canada, which hold 39.5% each.

    On January 30 Purepoint also announced 2.51 million options to insiders at $0.075 for five years. The following day the company stated 1.94 million options granted last April would be repriced from $0.10 to $0.07.

    In November Purepoint announced winter drilling plans for Red Willow, a 25,612-hectare project on the Basin's eastern rim. Rio Tinto (NYSE:RIO) acts as operator under an option to earn 51% by spending $5 million before the end of 2015.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Tags: RIO, PUMGF, Uranium, Mining
    Feb 03 1:27 AM | Link | Comment!
Full index of posts »
Latest Followers

StockTalks

More »

Latest Comments


Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.