Interview and feature article: Peter Cashin and Quest Uranium By Doug Hadfield, resourceINTELLIGENCE TV
By Doug Hadfield, resourceINTELLIGENCE TV
Of the many aspects of a rare earth deposit vital to its success, John Kaiser of Kaiser Bottom Fish Online argues that there are three deal breakers. These three things, when assessing the quality of potential resource investments in the smoking hot rare earth sector, should be meticulously scrutinized. In the order that John told them to me on our latest episode of resourceINTELLIGENCE TV, these essential attributes are rock value, tonnage footprint and distribution of metals.
Click here to watch the Resource Intelligence TV interview with Peter Cashin.
John is known as a mining maven with 25 years experience in the resource investment sector. His investments calls have over the years netted him a broad following of investors. As a result, John speaks regularly on the conference circuit, from San Fransisco to Zurich. Between now and next September, John is scheduled to speak at more than 25 conferences.
For example, John’s assessment of Quest Uranium’s (TSXV: QUC) Strange Lake project, which helped to put the company on many serious investors’ radar back in April 2009, gave “an astonishing rock value of US $304 per tonne for those samples Quest plucked from the main outcrop of the Strange Lake deposit.”
It didn’t take long for other investors to take a second look at the math: with an historic 52 million tonne resource, of which one quarter sits on 100% owned Quest property, the in-situ value of the deposit could be $16 billion. That would gross $4 billion in value to Quest Uranium, should the deposit become a mine, less costs, etc. Because the resource estimate was calculated prior to the 2002 National Instrument 43-101 one shouldn’t rely on those numbers; nevertheless the report from Mr Kaiser was enough to create the momentum required to push Quest’s market capitalization from $2 million early in the year to $80 million today.
November has been a month of discovery announcements for Quest. Peter Cashin, the company’s president and CEO, told resourceINTELLIGENCE TV at the San Fransisco Hard Assets Conference that the new “B” Zone, discovered just 3km northwest of the 52 million tonne “A” Zone, has a geologic footprint four times larger than the “A” Zone.
New drilling in this zone confirmed what Quest had seen in airborne geophysical studies and sampling: A massive new rare element zone in which every hole intersected high-grade (between 1.05% and 2.52%) rare earths over widths of 6 to 66 metres. As well, the drilling remains open to depth and along strike.
Later in November Quest announced another rare earth discovery, this time 120 km south of Strange Lake, at its Misery Lake property. So far, the company has processed 73 grab samples that range from trace to 8.56% total rare earths plus yttrium, 42.3% iron oxide (Fe2O3), 4.85% titanium oxide (TiO2), 7.12% phosphate (P2O5), 2.72% niobium oxide (Nb2O5) and 3.05% zirconium oxide (ZrO2).
Quest’s Strange Lake: Look forward to a Preliminary Resource Estimate in 2010.
Individual rare earth analyses returned up to 1.38% neodymium oxide (Nd2O3), 1.57% yttrium oxide (Y2O3), 0.41% praseodymium oxide (Pr2O3), 0.144% dysprosium oxide (Dy2O3), 0.15% gadolinium oxide (Gd2O3) and 0.24% ytterbium oxide (Yb2O3).
The complex is manifested as a 6km diameter airborne magnetic anomaly and translates into a target feature that has a potential strike length continuation of approximately 20km. Identification of additional REE targets to the south and east of the Misery Lake discovery has recently led Quest to stake 1,500 additional mining claims covering an area of approximately 66,000 hectares. John Kaiser, always on the hunt for anything new in the rare earth space, recently estimated that this new discovery has an average rock value of $355 per tonne and a relative metal distribution similar to Avalon Rare Metal’s Thor Lake project in Canada’s Northwest Territories. Better yet, the mineralization was traced over an equivalent strike length of 20 km!
Let’s return to Kaiser. We’ve already determined that the grades on the “A” Zone are “astonishing.” The size of the “A” Zone is large enough — at 52 million tonnes it is very large compared with the projects most companies are endeavoring to advance. When one adds the “B” Zone target to that, Strange Lake becomes one of the largest prospective rare earth deposits in the world.
According to a report from the Institute of Geological and Nuclear Sciences, the largest deposit in the world is the Bayan Obo in Mongolia with 48 million tonnes at approximately 6% REO. Strange Lake, with its lower grades would not be of the same magnitude of grade, but at as much as four times the size, this could well become a mine of similar value.
As Kaiser put it to me at the Hard Assets show, “You need a large prize: If you’re going to spend $10 to 15 million on pilot plants and metallurgical studies and so on, you want it to be applying to something that’s going to have $5 to $20 billion of [rare earths] in the ground.”
Simultaneously, expect additional confirmation drilling and an initial resource estimate for the “B” Zone. Whether the company will complete the drilling required to do better than the “A” Zone tonnage remains uncertain, but with the success Quest has had to date, you can bet there’s more REEs in those hills.
Check back at Resource Intelligence TV for updates.
Disclosure: No positions