Saturday 3rd December 2016

Resource Clips


To compete with China

by Greg Klein

Mineralogy’s the key to Commerce Resources’ goal of low-cost rare earths production

by Greg Klein

As Molycorp’s bankruptcy leaves Lynas Corp the sole producer outside China, Core Consultants reportedly told Mining Indaba ’16 to expect more rare earth project closures. But it’s against this background of lower prices and higher supply that Commerce Resources TSXV:CCE continues to raise money and move its Ashram deposit in northern Quebec towards pre-feasibility. Clearly something distinguishes this project, which president Chris Grove is determined to develop into a low-cost producer competitive with China. That has potential customers interested.

Mineralogy’s the key to Commerce Resources’ goal of low-cost rare earths production

Metallurgical success, high grades, a near-surface deposit,
a potential byproduct and five critical REEs have Commerce
Resources optimistic about Ashram’s potential.

The key to low costs is the deposit’s relatively simple mineralogy, Grove maintains, a crucial point that sets Ashram apart from other projects. “Rare earths can be hosted by up to about 200 different minerals and several rock types, but very few have ever been commercially processed,” he explains. “Commerce realized early that we must focus on carbonatite rocks with rare earths hosted in the minerals monazite, bastnasite and xenotime, which have proven processing. Almost no one else did that.”

But even compared to other carbonatite-hosted deposits, “our gangue material is just more amenable to separation,” he emphasizes. “With REE deposits, if your grade is 2% or 3% then the rest is waste rock or gangue, and the very composition of this gangue may mean a make-or-break situation, if you can’t economically separate the gangue from the REEs.”

But for Commerce, metallurgical studies look positive for economical separation. That’s crucial to achieving low-cost processing from a project that also features high grades, a shallow deposit and a distribution of five critical rare earth elements. As a result, several major companies have asked Commerce for concentrate samples.

In October the company announced its highest-grade concentrate so far, which Commerce said compares favourably with hard-rock operations globally. Metallurgical tests by Hazen Research in Colorado produced a concentrate of total rare earth oxides grading 48.9%, with overall recovery around 63%. Additional processing achieved 45.7% TREO with about 71% recovery. Two weeks later the team boosted recovery to 76%, maintaining a high grade of 42% TREO.

Additional flowsheet simplification came in February, when the mini-pilot plant confirmed that one of two leaching steps could be eliminated, suggesting considerable cost-cutting potential while maintaining efficiency.

Tests show another potential advantage in fluorite, which the lab is currently examining as a byproduct. “There’s a significant market for fluorite byproducts that didn’t factor into our PEA at all,” Grove points out. “So we’ll be very interested to see how this might improve our economics.”

But the next big step will be to produce concentrate samples for interested parties. Some of those companies are covered by non-disclosure agreements, Grove says. Others include BASF, Mitsubishi RtM, Innovation Metals, DKK and Solvay.

The samples might be produced by Q2 this year, which could lead to another milestone in the form of a joint venture. “There are several companies interested in creating a vertically integrated, stable supply chain not connected with China,” Grove says. Should a JV take place, the partner might fund the remaining pre-feas studies and help direct the project model.

Among possible outcomes could be a reduction in output—and therefore capex—from what was considered in a preliminary economic assessment completed in 2012 and amended last year. The study used a 10% discount rate to estimate a pre-tax net present value of $2.32 billion and a 44% pre-tax internal rate of return. Capex came to $763 million with payback in 2.25 years. Operating costs came to $7.91 per kilo of rare earth oxides in a 4,000-tpd open pit with a 25-year lifespan. Production could be subject to a combined tax rate of about 32.5%.

The study used a 2012 resource with a 1.25% cutoff to show:

  • measured: 1.59 million tonnes averaging 1.77% total rare earth oxides

  • indicated: 27.67 million tonnes averaging 1.9% TREO

  • inferred: 219.8 million tonnes averaging 1.88% TREO

Shallow and at some points beginning at surface, the deposit remains open to the north, south and at depth, also holding expansion potential east and west. Middle and heavy rare earth oxides (MHREO) take up considerable proportions—9.8% of TREO in the measured category, 6.7% in indicated and 6% in inferred. Unique to Ashram, the company states, a zone of intense MHREO enrichment “extends from surface with significant tonnage and grade.” The deposit features a strong distribution of the critical elements neodymium, europium, terbium, dysprosium and yttrium.

We’ve been hitting higher grades, we’ve been hitting lower overburden than what was modelled in the PEA. We’ve been hitting higher levels of the middle and heavy rare earths, which is also to our benefit.—Chris Grove, president of Commerce Resources

Infill drilling over the last two years has Grove looking forward to an upgraded resource estimate. “We’ve been hitting higher grades, we’ve been hitting lower overburden than what was modelled in the PEA,” he says. “We’ve been hitting higher levels of the middle and heavy rare earths, which is also to our benefit. When we were drilling to find areas to locate dykes, we kept on hitting material.”

Part of Commerce’s 190-square-kilometre Eldor property, Ashram sits about 130 kilometres south of the community of Kuujjuaq. Quebec’s Société du Plan Nord has expressed interest in building a road that could connect Kuujjuaq with the railhead at Schefferville. If built, the road could potentially go by Ashram. Failing that, pre-feas studies are considering a road north to a possible docking facility, taking a shorter route than envisioned by the PEA.

Recognized as a mining-friendly jurisdiction, the province has offered Commerce tax incentives to keep its proposed hydro-metallurgical facility within Quebec, Grove says.

Community relations are good, he adds, and ongoing communication remains a priority. The company has hosted meetings and site visits for the Inuit and the Naskapi First Nation. In October Commerce won the e3 Plus Award for responsible exploration from l’Association de l’exploration minière du Québec at Xplor 2015 in Montreal.

In southeastern British Columbia Commerce also holds the Blue River project, where the Upper Fir tantalum-niobium deposit reached PEA in 2011 and a resource update in 2013. Grove sees JV potential as manufacturers become increasingly concerned about ethical sources of supply.

“The majority of tantalum produced now is probably produced by conflict means,” he says. “I know of no one who has gone far enough upstream to be able to determine that the actual production of these minerals is conflict-free. There’s no independent verification that stands up to scrutiny.”

Getting back to rare earths, Grove says companies outside China aren’t the only ones worried about future supply. “When we went there in 2012, we met with all but one of the major producers and processors of rare earth elements. They met with us because they all had concerns about their future supply.”

Determined to compete with China on costs, Grove believes Ashram’s mineralogy and metallurgy will prove his point even as other projects fail.


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