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Quantum Rare Earth Developments - a USA niobium project

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Harry: I’m talking with Peter Dickie, President and CEO of Quantum Rare Earth Developments. Listed on the TSX Venture Exchange in the basic materials sector. Stock ticker QRE, share price 15 cents Canadian, market capitalisation 12.95 million dollars Canadian. Quantum Rare Earth Developments is also listed on the OTCQX in the USA. Web address quantumrareearth.com. 

Peter: Thank you very much for having me.

 

Harry: Why Niobium, why now? 

 

Peter: Well Niobium is primarily used in producing high strength, low alloy steel, or HSLA steel. The properties of which make it particularly suitable in use in oil and gas pipelines, steel megaprojects and automotive industry and in creation of super alloys, in particular in the aerospace industry. 

The reason why it is so attractive is the addition of Ferro Niobium to steel in the production process creates a much stronger, much lighter steel. Automotive industry in particular is growing more and more the demand for Niobium strengthened steel because of the weight reduction, which of course will result in fuel savings. 

Steel megaprojects such as bridges etc, there’s significant cost savings available if Niobium hardened steel is used because of savings in weight and in transportation and in construction costs. 

Our deposit in Elk Creek, Nebraska, of course got a significant Niobium deposit on it. It is the only one in the United States and it’s one of only three that’s under development in the world right now. So we are particularly encouraged by the growth in the Niobium market overall and the fact that we have an extremely unique deposit in an area in a country that does not produce any Niobium and hasn’t for decades. 

 

Harry: Please would you give investors a brief introduction to Quantum Rare Earth Developments, the company’s focus and the company’s business development strategy.

 

Peter: Quantum has been around for several years now. Essentially we began with a rare earth project in Northern Saskatchewan. At the same time we were made aware of a project in Nebraska called the Elk Creek Carbonatite. The Elk Creek project was something that Molycorp owned in the 1970s and 80s and did extensive development on this, discovering in particular a high grade Niobium deposit on the property. 

Fortunately for us they decided in the late 80s, early 90s to walk away from the project and focus on their Mountain Pass, California rare earth deposit,  which they put into production at that time. We were able to acquire this project, and also we’ve been able to acquire the data and drill core from all of the historic Molycorp work. 

So it’s a significant project, which we’ve actually been able to acquire and also benefit from that historic work which has saved us literally tens of millions of dollars in exploration expenditures. 

 

Harry: Please would you talk us through the history of the Elk Creek project and any work completed before Quantum Rare Earth acquired the project. 

 

Peter: Certainly. The Elk Creek project as I mentioned was owned by Molycorp from the 1970s and 80s. They drilled approximately 110 drill holes throughout the structure. There was roughly 150,000 feet of core obtained from that which is all residing at the University of Nebraska right now, along with all of the data. 

Because we were able to access the core and the historic data, we were actually able to come up with a resource estimate on our Niobium deposit almost at the same time as we acquired it. 

 

Harry: In April this year you published an updated NI43101 resource estimate for the Elk Creek project. Please would you talk us through the resources at Elk Creek? 

 

Peter: We were able to have produced for us an updated resource estimate which carries an indicated deposit of approximately 129 million kilograms of Niobium and also an inferred Niobium content of 524 million kilograms. Now to put that into perspective, the current price for Ferro Niobium is in the 40 to 42 dollar per kilogram range, so doing the math this is an extremely valuable, very sizable deposit. 

Of particular note it’s also open to expansion in three directions. The deepest drill holes that have been performed are about 2000 vertical feet which [bottomed in ore 0:04:38] and it’s also open both the north west and to the south east as well. So we feel there is significant room to increase the overall size of the deposit with additional drilling. 

 

Harry: What can you tell us about the metallurgy at Elk Creek, Peter?

 

Peter: We began preliminary metallurgical studies on the deposit back in the spring of this year. We’ve since been in discussions with a couple of different lab facilities and individuals who are sort of world renowned experts in the Niobium extraction business. We anticipate that in the next month or two we will likely be able to solidify contracts with these outfits to carry on full scale testing of the deposit, and so we’re hopeful to have that question answered early in 2013.

 

Harry: Quantum Rare Earth recently agreed a joint venture for an Australian rare earth property with a deal which included a payment of 100,000 dollars US to Quantum. Please will you talk us through Quantum’s capital structure and financial situation going forward? 

 

Peter: We were able to secure the joint venture agreement which calls for us to receive back our expenditures on the project. We will also be receiving a substantial share position in the company that will be doing the development and we still retain a 20% carried to production interest in the project. The reason for doing it that way as opposed to our development, it allows us to focus entirely on the Elk Creek project in Nebraska. 

As far as the balance of our capital structure is concerned, we have about 86 million shares outstanding right now. We have been in extensive discussions with potential partners on the Elk Creek deposit for the past eight or nine months. Since the end of summer the level of discussions and the urgency attached to the discussions has shown an increase. We are fairly confident that within the next month or two we will have a significant partner on board, that will provide not only the funding to develop the Elk Creek project, but will also be providing some capital for Quantum as well. 

 

Harry: What are the plans for Quantum Rare Earth over the next 12 to 18 months, Peter?

 

Peter: Well over the next 12 to 18 months we certainly see completion of all the metallurgical aspects of the Elk Creek deposit. We also believe that within that timeframe we will have significant development there with a strategic partner. Of course this is all contingent upon successful conclusion of discussions that we currently have with potential partners. Coinciding with that the structure of any particular deal that we would do with a partner, as far as the amount of capital is concerned. 

This will largely determine the amount of drilling that we’re able to carry out, although the numbers that are being tossed around right now would allow us to do a fairly significant amount of drilling to increase the deposit in overall size and also to increase categorically up into the measured and indicated category. 

Following that of course and receipt of our metallurgical testing results we anticipate moving into a feasibility or pre-feasibility stage, hopefully towards the end of the 18 months timeframe. 

 

Harry: What does it mean in practical terms that Niobium is considered to be a strategic metal in the United States, Peter?

 

Peter: Well there’s two aspects to that that affect us. The first of course is as a strategic metal there is strong consideration being given to creating national stockpiles which from our perspective would provide yet another potential end user and buyer of the product, encouraging us to develop it. The other aspect is, with it being classified as a strategic metal, there is emphasis on fast tracking or reduction of redundancies as far as mine permitting is concerned. So we believe that the permitting process which is fairly lean in Nebraska at any rate may be simplified even more as far as this operation is concerned. 

 

Harry: Who are the competition for Quantum Rare Earth and the Elk Creek project, Peter?

 

Peter: There are three producers in the world right now. In Quebec we have the Niobec mine which is owned by Iamgold. In Brazil there is a mine owned by Anglo which is the Catalao mine. But the largest of the three is the CBMM mine called the Araxa mine which produces about 85% of the world’s supply right now. 

At the moment there is essentially three major projects under development in the world, including ours. There is a deposit in British Columbia called the Aley deposit which has had a lot of money and effort put into it. It is a fairly large deposit, although the grade is significantly lower than ours and from an infrastructure point of view compared to ours it’s significantly more remote. 

Another deposit is in Kanyika in Africa which was recently acquired by a company called Pacific Wildcat, where they hold a 70% interest in that project now. It is currently a similar size and grade to our deposit but of course as I mentioned they own 70% of it as opposed to the 100% that we own of the Elk Creek deposit. Kanyika of course, from an infrastructure point of view, does not quite have the same level of benefits that we do in Nebraska. 

 

Harry: Remember Proactive Investors is not an investment advice service. Make sure you register at proactiveinvestors.com or proactiveinvestors.co.uk for our weekly newsletter which will keep you informed about our articles, events and interviews. 

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