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Lot Rare
Rare Element Resources Plans Major REE Drilling Program at Bear Lodge
When Resource Intelligence TV last interviewed our next guest in June 2009, his company's shares were trading at about $1.50 per share. Since then the market has caught on to the potential size and grade of Rare Element Resources' (TSXV: RES) huge Bear Lodge project and have bid the price above $3.45 per share. Perhaps this is a reaction to the sizzling rare earths (REE) sector, but also reflects Rare Element's consistent high-grade results at its Bear Lodge project and the acquisition of the Nuiklavik REE Project in Labrador. Rare Element Resources' President and CEO Don Ranta is a Doctor of geology and this year led his company to the 2010 TSX Venture 50 list.
Resource Intelligence: Your stock has outperformed the market substantially in the last 12 months. So much so that Rare Element Resources was recently named to the TSX Venture 50, which is a ranking of the strongest performers listed on the Venture Exchange. What are you doing that others are failing to do?
Don Ranta: The answer has several different parts to it. First on the technical side, it all came together when we completed a 43-101 resource estimate that showed that we had about 8.9 million metric tonnes of over 4% rare earth oxide (REE) and that caught the market's interest.
Secondly, we started getting metallurgical results back, especially on the oxide, near surface mineralization, which is about half the deposit. The oxide metallurgy ended up having very attractive metallurgical characteristics. Between the report we got in July and then another in September, we keep improving on the metallurgy, especially on this oxide zone. Since then, we more than doubled the number of drill holes in the deposit with a very successful drill program in the fall and I think that has helped the stock price as well.
From the geopolitical side, China announced last spring that they might be cutting back on their REE exports and that got everybody in the western world a bit nervous about where they were going to get their REEs to continue production outside of China.
Plus a whole series of newsletter writers caught onto that before the mainstream press. Newsletter writers certainly recognize Rare Element Resources because we have the second highest grade deposit in North America and one that is perceived as better than some of the others.
RI: Explain how important metallurgy is. You mentioned that you're getting great results. Can you explain how important that is, particularly with a rare earth project like yours?
DR: The two key things with most rare earth projects are metallurgy and infrastructure. Every rare earth deposit around the earth has variable mineralogy and variable metallurgical characteristics, so every one ends up being a research and development project unto itself. That's why we got an R&D metallurgy lab to work on our material. It's some of the same people that did the initial work for Mountain Path and Molycorp years ago—two of the largest molybdenum companies in the world, until the Chinese drove them out of business in the 1990s.
The second crucial aspect of REE projects is infrastructure. There has to be quite a bit of transportation either of concentrates or of chemicals, to a common location and because of that infrastructure gets to be really important. If you have to develop your own infrastructure it gets to be very burdensome, especially on rare earth deposits because most of them aren't mined at bulk tonnage rates. It's not a huge production rate, but if you have to move a lot of concentrates or the chemicals, it ends up being a problem.
RI: What is it about your present infrastructure that ameliorates that?
DR: Our infrastructure is outstanding. The deposit itself is only about twelve miles from a major interstate highway. It's thirty five miles from a railhead. We have water nearby and there is power within two miles of the project site. There is a major mining center just a short distance to the west in Gillette, Wyoming. It's mainly coal mining, but nevertheless they have a lot of the same skilled laborers that we would need. Being in northeastern Wyoming where there is lots of infrastructure nearby, is an ideal location plus Wyoming, at least in the Fraser Institutes ranking, ranks #2 in the world.
RI: What are the grades that you are getting at Bear Lodge and what do they tell you?
DR: A lot of holes are getting grades anywhere from 3% to 8% and we obviously love to see those higher-grade holes. It's interesting that with our drilling results from this year, some of the best results were actually on the margins of our drilling, so that means that it's still open for continued expansion. We are very pleased with that. The 3% to 8% grades, with average of a little over 4% on our resource estimate, represents a very significant value per tonne. Our resource report indicated that the average rate was around 265 dollars per tonne, but since then the rare earth prices have gone up, plus if we take into account some of the elements that we did not consider before. John Kaiser has recently done a recalculation and put out a notice that the rare earth at Bear Lodge would be more like 370 dollars per tonne. That is especially in this oxide zone where we are getting good metallurgical results.
RI: What is the target size for the project that you are projecting now?
DR: We are hoping and expecting that we are going to increase the oxide resource especially. We focused on the oxide this year because that's where we're having the best metallurgical results. I anticipate that we may have as much as a doubling of the oxide resource. I'm not positive of that, but we'll just have to wait and see what comes out of our resource estimate. We should have that new resource report done sometime in the spring. I am hoping by the end of the first quarter, but it could be March or April.
RI: You are also doing a scoping study or is that the same report?
DR: The scoping study would be a follow-on report. We feel we will do the resource estimate first and we feel that the increase is going to be material to the company and we'll report that and have a separate report coming out for that and then we'll have a follow-on report, probably some time in the summer. Sometime this summer we should have that scoping study done.
RI: Those scoping studies are crucial, particularly to the investor who likes to get their hands dirty and figure out evaluations, because at that point you are going to get into the economics.
DR: Basically, in oxide we expect to double the resource or somewhere around there. I think ultimately we will double the total resource, 8.9 million metric tonnes and there is a potential that we could triple it with our continued drilling. That may be after the 2010 drilling program or it might even be in 2011. The ultimate goals are to at least double or triple the total tonnage.
RI: How much acreage does the project comprise and how much of it are you focused on?
DR: All the rare earths that we found of any significance in the Bear Lodge area are within about one square mile, which is roughly the equivalent of three sq. km. It's a relatively small area, but it's interesting that surrounding it are all these gold targets that Newmont is working on. There seems to be some kind of geological zoning there that we don't fully understand at this point, but nevertheless, that's what we've seen—rare earths centrally located, with gold targets almost completely surrounding the rare earths.
RI: These gold showings surrounding your Bear Lodge project are called the Sundance project, which is a joint venture deal with Newmont. You're working on the rare earths; they are working on the gold.
DR: Newmont is earning a 65% interest in the Sundance venture. It's basically the same property as the rare earths, but the rare earths are excluded from the Sundance venture. If Newmont found copper or silver that would be part of the deal with them. They can earn 65% in the first phase by spending $5 million over five years. They have to spend $3.5 million by June 1st and up through about the middle of winter they've spent about $2.7 million. So there is a bit of a shortfall there and it will be interesting to find out how or if they plan to go forward.
RI: What kind of results have they had?
DR: They have had some good results. They are finding lots of low-grade mineralization. Their drill hole spacing is quite broad at 100 to 200 meter spacing. They are not looking for a resource, they are looking for a Newmont sized deposit. There is a question in my mind whether or not that deposit is actually there, although we are confident that there is going to be a small deposit, maybe one to two million ounces that could be defined fairly easily.
RI: How well-funded are you?
DR: We have enough money for this year. If we ran into a market problem we would have about $5 million in the bank and that would be enough to complete a very serious program on the Bear Lodge project. We're going to raise an additional $10 million before summertime or when our major drilling program starts around June 1.
Milestones:
* New 43-101 resource estimate completed by Q2 2010
* Newmont must spend $3.5 million by June 1 (Sundance project)
* Commence major drilling
* program by June 1 (Bear Lodge)
* Preliminary Economic
* Assessment completed by
* summer 2010
* Triple resource size at Bear Lodge by end of 2011
About the Author
Is it true that here in UK there are a lot of rare sea shells collectors?
http://www.morefame.com if true who are they?
haha! Well I guess that's one way to advertise. I'll check the shells out later.
Btw, if J.P. is you...nice pic.
The Beatles - That Means A Lot [HQ] RARE HELP COLOR FOOTAGE