I have followed the rare earths a long time and although we have had little focus there, mainly sticking with graphite, as a different metal we should not ignore rare earths given the way economies are developing technology wise and the importance of rare earths in that market as well as many others.
Like all the other miners the Rare Earth related stocks have plunged in price.
Today I want to make you aware of Tantalum, Niobium and some Rare Earths.
The major Rare Earth Elements (REEs) are Lanthanum, Cerium, Praseodymium, Samarium Gadolinium and the following major REEs are identified as “critical” by U.S. Dept. of Energy, Neodymium, Dysprosium, Europium, Terbium and Yttrium.
There are all kinds of these elements on Earth but it is rare to find them in concentrations that are economic to mine and the same with Niobium.
Niobium
It is estimated that out of 44,500 metric tons of niobium mined in 2006, 90% was used in the production of high-grade structural steel, followed by its use in super alloys. The use of niobium alloys for superconductors and in electronic components account only for a small share of the production.
Appreciable amounts of the element, either in its pure form or in the form of high-purity ferroniobium and nickel niobium, are used in nickel-, cobalt-, and iron-based super alloys for such applications as jet engine components, gas turbines, rocket sub assemblies, turbo charger systems, and heat resisting and combustion equipment. Niobium precipitates a hardening ?''-phase within the grain structure of the super alloy. The alloys contain up to 6.5% niobium. One example of a nickel-based niobium-containing super alloy is Inconel 718, which consists of roughly 50% nickel, 18.6% chromium, 18.5% iron, 5% niobium, 3.1%molybdenum, 0.9% titanium, and 0.4%aluminum..
These super alloys are used, for example, in advanced air frame systems such as those used in the Gemini space program. An alloy used for liquid rocket thruster nozzles, such as in the main engine of the Apollo Lunar Modules, is C103, which consists of 89% niobium, 10% hafnium and 1% titanium. Another niobium alloy was used for the nozzle of the Apollo Service Module.
The high grade steel is a solid growing base as Asia continues moving towards a larger middle class economy and the strong growth in super alloys and superconductors are adding to growing demand.
Very little of this metal is in the overall percentage of steel so its price, as it has moved much higher, has not curtailed or affected demand there and as a super alloy it is pretty much used in expensive complicated items. Jet Engines, Turbines and Spacecraft are not cheap items.
It is the rarity in concentrations economic to mine that makes niobium rare and drive price and because of this it is easy to learn where all the current production and potential lies.
Prices are 90% under negotiated contract and have been very stable over the last several years between $30 to $40 per Kg and prices are projected to be strong moving closer the $45/Kg.
Niobium is also classified as a ‘Strategic Metal’ by the U.S. and a ‘Critical Metal’ by the EU
Niobium Mines
The two largest deposits of pyrochlore were found in the 1950s in Brazil and Canada, and both countries are still the major producers of niobium mineral concentrates. The largest deposit is hosted within a carbonatite intrusion at Araxá, Minas Gerais Brazil, owned by CBMM (Companhia Brasileira de Metalurgia e Mineração); the other deposit is located in Goiás and owned by Anglo American plc, also hosted within a carbonatite intrusion. The third largest producer of niobium is the carbonatite-hosted Niobec Mine, Saint-Honoré near Chicoutimi,Quebec owned by Iamgold Corporation Ltd, which produces around 7% of world supply.
As of 2013, the Brazilian company CBMM controls 85% of the world's niobium production. The rest is produced by Anglo Brazil and IAMGOLD Quebec Canada with a small 1% with some small producers.
The United States Geological Survey estimates that the production increased from 38,700 tonnes in 2005 to 44,500 tonnes in 2006. The worldwide resources are estimated to be 4,400,000 tonnes. During the 10-year period between 1995 and 2005, the production more than doubled, starting from 17,800 tonnes in 1995. Since 2009 production is stable at around 63,000 tonnes per year.
As mentioned above Anglo is one of the producers, hence their knowledge of the Niobium deposits would be that of an expert. One deposit not yet developed that Anglo has considerable interest and spent quite a bit in exploration is the Mrima Hill Project now owned 70% by Pacific Wildcat (TSX: V.PAW) in Kenya, Central Africa.
Although Kenya is the biggest and most advanced economy in east and central Africa, Kenya is still a poor developing country by Western standards. The important agricultural sector is one of the least developed and largely inefficient, employing 75 percent of the workforce compared to less than 3 percent in the food secure developed countries.
The economy has seen much expansion, by strong performance in tourism, higher education and telecommunications, and acceptable post-drought results in agriculture, especially the vital tea sector.
Kenya's economy has posted tremendous growth in the service sector, boosted by rapid expansion in telecommunication and financial activity over the last decade, and now contributes 62 percent of GDP. Unfortunately, a massive 22 percent of GDP still comes from the unreliable agricultural sector, which employs 75 percent of the labour force. Industry and manufacturing is the smallest sector that accounts for 16 percent of the GDP.
No doubt Kenya is very keen on having new mine development and the employment it brings.
Kenya has traditionally been a liberal market with minimal government involvement (price control). New democratically elected government abides by Common Law and Mining Law based on the British system. Now back to Pacific Wildcat and their Kenya project.
Pacific Wildcat TSX: V.PAW Recent Price: $0.07
52 week trading range: $0.15 to $0.25
Shares Outstanding: 294.3 million; Fully Diluted: 346.2 million
This may seem like a lot of stock out but it is very well and strongly held.
46% with Mrima Hill Vendors
7% Mozambique Asset Vendors
12% with some strategic Funds
Management/Insiders own a chunk leaving about 30% as the public float.
Management
PAW has a very strong management team with success discovering and putting mines into production. They have some specific Tantalum experience and experience operating in Africa.
Terry Lyons– BSc (Civil Eng), MBA, Chairman & Non-Executive Director has over 30 years of extensive mining and corporate experience. He is the Past Chairman of Northgate Minerals and is non-executive director of several TSX-listed companies.
Darren P. Townsend– B.Eng (Mining-Hons) EMBA,President, CEO & Executive Director is a mining engineer with extensive mining and corporate experience. Previously Darren worked at De Grey Mining Ltd where he held the position of Managing Director from May 2006 to December 2007. Prior to that he was General Manager of Operations at Sons of Gwalia’s (Now Talison’s) Wodgina Tantalum operations, over a period of five years he led and managed the development of the mine to become the world’s largest (over 1mlbs per annum Ta2O5 production) and at the time most profitable hard rock Tantalum operation.
Christopher J. Lalor – B.Juris, LLB, Non-Executive Director is a lawyer with over 20 years mining and Tantalum industry experience. In his role as Executive Director - Legal and Commercial at Sons of Gwalia, Chris was responsible for managing all the commercial and legal matters for the company. Chris was instrumental in helping build Sons of Gwalia into the world’s largest and most profitable Tantalum Mining Company.
Rakesh Garach –BCom, CA (SA) Non-Executive Director Former Chief Operating Officer of Deutsche Bank in South Africa.
Yunis Shaik –B.Proc (UniSA) Non-Executive Director is an attorney of the High Court of South Africa and presently runs his own private practice, specialising in Labour Relations and Tax. He is also a director of Hosken Consolidated Investments & Seardel Investment Corporation.
Terese Gieselman CFO & Corporate Secretary has had 23 years experience with junior mining and exploration companies listed on the TSX, TSXV, OTCBB, NASDAQ and AMEX, in the roles of Chief Financial Officer, Treasurer, and Corporate Secretary.
Francis Donald O'Sullivan, Director is a businessman with over 40 years' experience in Mining, Medical, Hospitality, Construction and Real Estate businesses. He is a Chairman and Managing Director of a private investment company.
David Warwick Anderson Director has extensive project engineering, plant construction and resource exploration experience in Africa for the past 20 years. He has worked on projects and consulted to prominent South African companies, such as Eskom, Anglo American and De Beers Corp. David & associated companies jointly have mining interests in Kenya, Namibia and South Africa.
Projects
PAW has 2 projects, a Tantalum project near production in Mozambique and a Niobium and Rare Earths project in Kenya on the same property. The Tantalum project can provide near term cash flow but the big potential with PAW is their Niobium and a World Class Rare Earths project.
Mrima Hill Project, Kenya, Africa – Niobium and Rare Earths
PAW has a 70% interest in the project subject to a Gross Sales Value Royalty (Free on Board) of 3% for Niobium and 5% for Rare Earth Elements payable to the Government of the Republic of Kenya.
The project has excellent location and infrastructure, located 80 km SW of Mombasa in Kenya just 10 km from coast. It is adjacent to sealed highway to Mombasa and Tanzanian border, 80 km to Mombasa port and airport, the largest shipping port in East Africa.
There is an existing grid 33KVA power line runs from Mombasa past Mrima Hill (2 km) and the project is located immediately south of Base Minerals’ (BSE:ASX) Kwale Mineral Sands Project development.
Just this past March PAW was Granted a 142 hectare 21 year Special Mining License for Niobium and Associated Rare Earths.
Historic Exploration removes exploration/ drilling risks
In the 1950s Test pits were systematically dug over the hill top on a staggered 70m pattern with some four hundred 30 foot deep pits being dug plus a 305m adit excavated into the hillside together with eight up to 225m long diamond holes being drilled mainly for stratigraphical purposes. In 1957 Anglo analyzed results from this test pitting and also from taking a 14 ton bulk sample where they estimated mineralization of 50.5 million tonnes at 0.67 Nb2O5 including 5.3 million tonnes at 1.21% Nb2O5 This historic estimate is from only the top 9.14m of the weathered profile is associated with weathering and leaching of the primary carbonatite, which has been removed by weathering leaving a thick soil overburden.
At the same time Anglo commenced its exploration activities in 1955 an estimate of 32 million tonnes at 3.1% REO was internally reported upon by the Mines and Geological Department of Kenya from the area they test pitted (at least 80 pits were used in the calculation) to a maximum of 8 metres.
The next resource work was carried out in the period 1968-1971 when the French company Pechiney explored for europium but they were not interested in the other rare earths or the niobium potential and they quoted a 12,000 tonne europium trioxide mineralization at 800ppm in one area sampled. In about 1998 the U.S. Geological Survey re investigated the historical data and they estimated a higher grade area of REO and quoted 6 million tonnes at 5%.
In total some 9,000m of test shafts 3,000m of drilling and 37 tons of bulk sampling has been undertaken by previous explorers at Mrima.
Pacific Wildcat Exploration
Recently on July 7, 2011, PAW reported receipt of an NI 43-101 resource estimate report from ExplorMine Consultants of Johannesburg, South Africa that calculated a niobium resource in the Inferred category of 105.3 million tonnes at a grade of 0.65% Nb2O5 for a contained total of 1,519 million pounds. The deposit contains a high grade zone of 12 million tonnes at 1.21% Nb2O5 based on a cut-off grade of 1.0% Nb2O5 using the historical shallow test pit data from the Anglo period of exploration.
83% of the Niobium resource is from surface to a 20 meter depth.
PAW began another drill program focusing on the high grade zones. Potential development studies will focus on high grade core of 12Mt @ 1.2% Nb2O5.
In addition to the substantial Niobium deposit there is also a large Rare Earths Oxide (REO) deposit overlapping the Niobium Deposit.
They have identified 11 REOs with about 91% Light Rare Earths, 4% Heavy Rare Earths and % Y2O3. This basket of Rare Earths is priced just above $40 per Kg, putting PAW's Rare Earth project value around the middle of current REO producing mines.
PAW's first 43-101 REO estimate is expected in the 3rd qtr. 2013.
Paw is targeting a 30-40 million tonne deposit grading 4-5% TREO. If the 43-101 comes anywhere close to that it would put the deposit among the largest & highest Rare REO Deposits in the world.
After raising some more funding they are completing assays on the remaining 37 holes drilled in 2012, comprising 3,482 metres of reverse circulation drilling. These results and will be used in the 43-101 report expected in the 3rd qtr.
The main Mrima Hill mineralised zones (1,000m x 600m) outcrop at surface and are thick, weathered profile highly enriched in both Niobium & Rare Earths. There is also strong depth potential as historic drilling indicates mineralization present up to 150 metres depth.
The project will have a low strip ratio and low mining costs as it is on a hill and on surface so easy extraction. You can see this from the picture below:
Muiane Tantalum Mozambique - approx. 250 sq. km – 100% owned
The fundamentals for Tantalum are good, Inventories are very low and demand has been growing at a 5% compound annual growth rate. The price has been moving higher from around $80 per pound last year to about $130 per pound currently.
Mozambique is one of the fastest growing African countries driven by resource development such as BHPB’s Mozal Aluminum smelter, CVRD’s Moatize coal development & Rio’s Riversdale projects.
The Muiane project has an Indicated oxide NI 43-101 Resource of 1.4 million tonnes grading 250 g/t Ta2O5 to 40m depth with more hard rock and depth potential and is one of the highest grade tantalum deposits in the Alto Ligonha belt.
The deposit has a low strip ratio, processing costs, capital costs and high metallurgical recovery. PAW successfully commissioned a Tantalum Plant on 29th February 2012, with potential annual production of between 35,000 and 75,000 lbs Ta2O5. Production has been held up until adequate funding is sourced for a planned spiral circuit to complete recovery/refining. This would cost about $2 million and PAW believes they could have a financing arrangement in about 3 months time.
Financial
Last financials show $560k cash and debt of a $1.7M Convertible note due in Sept. 2013 and can be converted to shares at $0.11 per share.
The company also closed a $1.2M financing at $0.06 per share. They are also completing a $1.5M financing at $0.07.
These 2 financings will put the company in a good position to further advance their projects.
Summary
PAW has a globally significant, high grade Niobium-REO project near the coast in southern Kenya with potential of low mining costs and located near excellent infrastructure and can be fast tracked to development with a mining license already in hand.
The project is unique with potential of 2 revenue streams from Niobium and Rare Earths and has depth potential that could probably expand mining life by decades.
The historic exploration and current exploration removes most exploration risk.
The project compares very well to current Rare Earth and Niobium mines and is actually in the upper echelon of its peers.
With Niobium - their tonnage is already the 6th largest in the world and the grade is among the highest. Focusing on the high grade core as planned there is only 2 or 3 deposits that would be of higher grade, the large Araxa at 2.5%, Mabounie at 1.6% and perhaps Catalao at 1.3%.
In Rare Earths the potential is world class. PAW is targeting a 30-40 million ton deposit grading 4-5% TREO. If the 43-101 comes anywhere close to that it would put the deposit among the top 4 for size with Niobec, Nechalacho and Ngualla’ and top 3 for grade with Mountain Pass and Mt. Weld.
And if we look at just the Critical Rare Earth's PAW's potential grade is about double the comparables.
PAW's basket of Rare Earths has very good value at approx. US$40 per Kg and compares very well with all the other advanced Rare Earth deposits.
One way to better understand the value of these Rare Earths is if you compare to base metals. $40/Kg is $20 a pound compared with copper at $3.40 a pound and nickel at $6.50 a pound. While the refining and extraction is a bit more complex the price you get for the end product metal is about 5 times higher than base metals.
The major catalysts to move the stock higher this year are REO assay results, a 43-101 REO resource, Preliminary Economic Feasibility and Environmental permit. Simply an improvement in market sentiment would move the stock much higher.
In the past 2 years, Asia has bought in 3 different transactions and interests in Niobiumm projects and I am sure PAW's Mrima Hill project is on their radar screen.
Currently PAW has a small market cap of just $20.6 million.
Their Tantalum project is small but still hosts over 700,000 pounds of Tantalum with a gross value of $90 million at $130 per pound.
Their Niobium project is about 150 times larger, just looking at the high grade core, and the Rare Earths project is about 10 times the size of the Niobium project if they meet their 43-101 target.
You could slice and dice this a lot of ways, but the current market valuation might be high if they only had the Tantalum project but in no way reflects either on a stand-alone basis the Niobium Value or Rare Earths Value let along the two of them.
From the chart you can see the stock has been in a long decline, about 1 ½ years with a bottom in late February this year on historically the heaviest volume, so a selling climax. The stock actually peaked about 2 years ago, fell from the high, dropping below the 200day MA in May 2011, just off the left side of chart. In April of this year the stock reclaimed a position above the 200 day MA that should now act as support. Also we can see there has been a long - about 11 month Stage 1 Base built mostly between $0.04 and $0.11. After some mild resistance around $0.11 there should not be much until $0.20, so about triple the current price.
Both fundamentally and technically PAW appears to have little downside risk, maybe a drop to $0.05 but the upside looks like a lot of Blue Sky to me.
I currently own 22,000 shares
Pacific Wildcat Resources Corp.
110 – 2300 Carrington Road,
West Kelowna, British Columbia, Canada, V4T 2N6
Investor Relations, Terese Gieselman Company Secretary/CFO
Phone: +1 250 768 0009
Email: info@pacificwildcat.com
Website: www.pacificwildcat.com
Ron Struthers: resource@bmts.com;www.playstocks.net ; Yearly subscription $225 Cdn /year or US$225.
(c) Copyright 2013, Struther's Resource Stock Report
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