RARE EARTH STOCK
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With The Demand for Niobium Used for Steel in The Construction, Automobile and Aerospace Industries Being Great and No Production Coming from The United States, Quantum Rare Earth Development Corp. has The Rare Opportunity of Exploring and Developing Their Elk Creek Carbonatite Project in Nebraska
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Rare Earth and Niobium
CEOCFO: Mr. Dickie, how long have you been with Quantum Rare Earth and what is the vision?
Mr. Dickie: I have been the president and CEO of Quantum for approaching two years. We were put in the enviable position of having a couple of very interesting projects put before us about a year and a half ago, one was the Archie Lake Rare Earth project, which is in northern Saskatchewan Canada. It is a relatively grassroots project, although there was some government work done on it years ago. We followed that up with some additional work, which has given us some excellent surface samples of rare earth and we plan on drilling that in the next three or four months as soon as weather permits. We are anticipating that we might have a fairly substantial rare earth deposit there. At roughly the same time we were presented with an opportunity in Nebraska and that is the Elk Creek Carbonatite, which is just southeast of Lincoln. It is a previously worked Molycorp project, who worked on it extensively in the 1970’s and 1980’s. They completed in excess of 150,000 feet of drilling and in one particular area of the project they came up with a resource calculation where they determined that there are roughly 39 million tonnes of .82 percent niobium, which is considered quite high-grade. In addition, there is also various pods, for lack of a better term, of rare earths on the property, with substantial intercepts of quite high-grade rare earths in excess of 1% and in some case in excess of 3%. However, they didn’t do enough drilling in those areas to come up with a resource calculation. But all in all it is a tremendously exciting project because of the blue sky nature of it and the possibility of expanding on both the high-grade niobium and rare earth zones.
CEOCFO: Will you explain ‘blue sky’ to our readers?
Mr. Dickie: Blue sky is essentially meaning that a deposit has not been drilled out. In other words, they have not found the limits of the deposit as yet. In particular, the niobium deposit that is in internal memos from Molycorp, they refer to it as being open to the north, to the west and at depth. Meaning a lot of the drill holes that they put in there bottomed out in ore.
CEOCFO: You are in Nebraska as well as Saskatchewan; was this by design and through acquisitions, and what do you like about both of those areas?
Mr. Dickie: Both transactions were through acquisitions. The Saskatchewan project was a direct acquisition and the Elk Creek project was acquired through the acquisition of another company that was essentially put together to accumulate the land package down in Nebraska. One of the reasons that we like both projects is their location in politically stable countries and their proximity to markets. The Nebraska project has us particularly excited because the primary focus down there will be on the niobium, which is considered a strategic metal in the United States. Currently, the U.S. imports 100% of their niobium with no other known potential production of the magnitude of Elk Creek.
CEOCFO: Is niobium the main element that you are looking at in Nebraska and what is it used for?
Mr. Dickie: The primary use for niobium is for the creation of high-strength low-alloy steel or HSLA steel as it is referred to and that is extensively used in the construction industry, and in the automotive industry. By adding very small amounts of niobium to steel in the production process, it increases the strength dramatically on it. The other use for niobium is in the creation of super alloys, which are used in the aerospace industry. They are also used a lot in green technologies and in the creation of super conduction magnets such as in MRI machines. Certainly, there is competition out there in the high strength low-alloy steel business and that would be through either molybdynem or vanadium, but in a lot of circumstances niobium is the only material that can be used to create these metals. With niobium you actually get a smaller molecular size to the steel, so you get a stronger steel in a thinner metal that can be used in certain applications and it is also more resistant to heat and pressure. So in cases like production of high-pressure gas pipelines, niobium is the material that you have to use in that.
CEOCFO: So it is a very necessary element!
Mr. Dickie: It is a very necessary element! There are 8 to 10 thousand tonnes per year imported into the U.S. right now and there is zero production in the U.S.
CEOCFO: Which of your projects is closer to production?
Mr. Dickie: The Elk Creek project has seen the majority of work. The Saskatchewan Archie Lake project is yet to be drilled whereas the Elk Creek project had in excess of 110 drill holes, 150,000 feet of drilling done by Molycorp. We are in the process of re-analyzing the data that is available to us including re-assaying a lot of the core, which we will be incorporating into a new resource report with a 43-101 by the end of the 1st Quarter of 2011. That will determine to a large extent exactly how much more drilling is required before we can get to a position where we would want to do a feasibility study and a production decision.
CEOCFO: Do you own your properties 100%?
Mr. Dickie: They are 100% both of them.
CEOCFO: What about getting staffing and equipment into these areas?
Mr. Dickie: The deposit in Nebraska is situated about 200 meters below ground, so initially we are looking at a drilling situation, which we will be commencing very shortly. There will be some confirmation drilling and may also include some resource expansion drilling. The new resource calculation report with the new 43-101 by the end of the 1st Quarter will determine where the rest of our drilling takes place on the property. However, we do plan on drilling the entire project extensively and there is certainly equipment available to us.
CEOCFO: Are you happy with the infrastructure that is in place, and are there any legislations or government or local area problems that you see?
Mr. Dickie: I will speak primarily about Elk Creek at this point, because it is the one that is the closest of the two to a production situation. There is rail very close to the property so that of course is a big factor when you are shipping commodities like that. There is certainly a work force within reasonable distance. We are less than an hour away from Lincoln and as far as government support and infrastructure is concerned, based on early discussions we anticipate a lot of support from both local and state government. Nebraska is not terribly well known for mining. As a matter of fact, there is only one primary mine in Nebraska at this point in time and that is in the northwest section of the state. We are not anticipating that we will run in to any roadblocks as far as putting a niobium mine into production, primarily because it is a relatively inert process as far as mines go.
CEOCFO: You mentioned that there is no other niobium mines in the U.S.; is that correct?
Mr. Dickie: That is correct. Essentially, there are three mines now in the world that are primary producers of niobium. Two of them are situated in Brazil and between those two mines they have produced somewhere in the 80% 85% of the world market for niobium. The third mine is a producing mine in Quebec, is owned by IamGold and is called the Niobec Mine. That mine has been in production for about twenty years now and it has been a very profitable venture. They are currently selling their niobium for somewhere in the low to mid-$30 per kilo range or about $15 per lb. and are showing an operating profit of roughly $20 per kilo or about $8 or $9 per lb. out of that. So it has been a very profitable venture for them. The Niobec mine is a similar type of carbonatite structure to Elk Creek. Theirs is about 4 kilometers or about 3 miles across, ours is about 7 kilometers or about 5 miles across. Their operating grade is about 0.6 percent niobium and as I mentioned, Molycorp calculated a grade of 0.82 percent. Therefore, we are anticipating the potential of a very profitable operation once we can confirm the exact resource there and confirm the suitability and mineralogy of processing the ore.
CEOCFO: Do you do much investor outreach, such as road shows?
Mr. Dickie: We certainly do; we attend a lot of investor trade shows. We certainly try and let the public know as far as getting ourselves in front of a press with respect to minerals. We think this is a very highly sought after mineral that a lot of people simply don’t know about at this point in time. It is a two-pronged effort that we have to make, one to educate people to the use and needs for niobium, in particular in the U.S, and two, to garner an interest and following to enable us to fund the project as far as we can.
CEOCFO: In closing, why should potential investors consider Quantum Rare Earth?
The primary thing for investors to remember here is that there are very few
sources of niobium out there. It is a strategic metal, it is very necessary
for the aerospace industry, which is a very big industry in the U.S. right
now and will be going forward. It is a 100% imported commodity in the U.S.
We are the only near term potential source of niobium in the U.S. at the
moment, and there are very few outside of the U.S. The stability of the
market for niobium has been growing and the confidence from end users has
been growing because of the fact that the largest producers in the world do
not discourage additional production as a wider end-user base will only help
stabilize and grow the market for the mineral. It is not like the rare earth
situation, which is currently controlled almost entirely by the Chinese
production, where export and import decisions are largely made for political
purposes. This is a profit-driven business, and although the largest
producers are out of Brazil right now through a private company there, their
production is not motivated by political reasons, rather by business and
profit. Overall, indications are that there is encouragement to have
additional producers on line, which would give more comfort and allow
expansion of use by end users who wouldn’t feel that they would be
potentially held hostage for pricing or supply by politically motivated
sellers of the commodity.
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The primary thing for investors to remember here is that there are very few sources of niobium out there. It is a strategic metal, it is very necessary for the aerospace industry, which is a very big industry in the U.S. right now and will be going forward. It is a 100% imported commodity in the U.S. We are the only near term potential source of niobium in the U.S. at the moment, and there are very few outside of the U.S. The stability of the market for niobium has been growing and the confidence from end users has been growing because of the fact that the largest producers in the world do not discourage additional production as a wider end-user base will only help stabilize and grow the market for the mineral. - Peter Dickie
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