Resource World Magazine

18 www.resourceworld.com f e b r u a r y / m a r c h 2 0 1 6 i n s i g h t s & i n v e s t m e n t s B a r r y M u i r W e've been mining gold, silver and base metals for centuries while commercial markets for most rare earth elements (REEs) have arisen in only the past 50 years. Typically used in small amounts, REEs allow magnetic, electrical and chemical processes to occur at significantly lower energy levels resulting in increased efficiency and smaller scale products. They have become a vital component in mobile electronics, electric vehicles and other products in the shift to energy efficiency. The current overall market for REEs is less than 200,000 tonnes of total rare earth oxides (TREO) per year with 97% of all pro- duction coming from China. The Chinese Ministry of Land and Resources recently suspended applications for new mining and exploration projects, with exception to its larger producers, for rare earth elements over the next three years in an effort to con- solidate the rare earths sector in China. Prices for REEs declined in 2015 along with other resources but with the recent constraints and new technological innovation, a focus on REEs is expected to continue for the foreseeable future. Rare earth elements, 16 in total, are perhaps not as rare as the name implies. Cerium, the most abundant REE, comprises more of the earth's crust than copper or lead. Many REEs are more com- mon than tin and molybdenum and all are more common than silver or mercury. However, only those REE deposits found to be significantly economic are dependent on the host rock being carbonatites and on its mineralogy – in particular, those deposits containing the minerals monazite, bastnasite, and xenotime that are all eas- ily broken down. All three minerals are found on commerce resource's [CCE-TSXV; CMRZF-OTXQX; D7H-FSE] Ashram rare earth deposit in mining friendly northern Québec. Commerce discovered the Ashram deposit, that sits within its Eldor carbonatite property in 2009, after airborne geophysics and soil sampling led them to a mineralized outcrop with over 3% TREO. In 2010, drilling returned 1.72% TREO over 215.30 metres in hole EC10-027, now referred to as the discovery hole. The Ashram deposit has since had over $30 million spent on explora- tion and deposit definition, giving it the potential to be one of the largest and longest operating rare earth element producers in the world. In May 2012, the company reported robust economics from a Preliminary Economic Assessment (PEA) for Ashram. The study showed a strong positive cash flow from a 4,000 tonne per day open-pit operation with a 25-year mine life, a pre-tax and pre- finance Net Present Value (NPV) of $2.32 billion and an Internal Rate of Return (IRR) of 44% with a payback period of 2.25 years. Using a cut-off grade of 1.25% TREO, the estimate provided a measured resource of 1.6 million tonnes at 1.77%, an indicated resource of 28 million tonnes at 1.90% and an inferred resource of 219.8 million tonnes averaging 1.88% TREO. What separates Commerce's Ashram deposit from various other advanced stage REE deposits is its simple mineralogy com- bined with high-grade mineral concentrates of greater than 40% TREO. Mineralization starts at surface with minimal overburden allowing for a low cost open pit operation. The deposit contains high demand, short supply REEs in significant amounts with a balanced distribution of the critical and magnet feed REEs. The Ashram Project has capital expenditures (CAPEX) of $773 million. However, that is relatively low considering the 2.25-year payback and the +25-year mine life. Perhaps most important, are its low operating expenditures (OPEX) of $95.20/tonne of ore treated. After all, like any mine, it's not how much ore can be produced but how much profit can be generated from each tonne of ore mined. In this, the Ashram deposit scores high along with its favorable jurisdiction and experienced management team. Commerce has been cognizant of changes in the market over the past few years. While a Pre-feasibility study has been ongo- ing, the company is exploring different mining scenarios along with economic trade-off studies to adjust to an ever-changing market landscape. For example, by reducing annual production suggested in their existing PEA, they could reduce CAPEX allow- ing the company to move to production quicker. Commerce Resources: making sense of rare earth elements From left to right, Peter Duncan, Chief Pilot for Nunavik Rotors (helicopter company based out of Kuujjuaq), Chris Grove, President Commerce Resources, Patrick Muzzi, Director, Société du Plan Nord, Jerome Nadeau, Project Manager, Investissement Québec, Denis Williams, Director General, Investissement Québec, Darren Smith, Ashram Project Manager, Alain Dorval, Manager, Mining and Mineral Processing, Norda Stelo (formerly Roche Ltd), and Chris Berry, House Mountain Partners/ Zimtu Capital Corp. The group is standing in front of the original outcrop that was sampled in 2009. Photo courtesy Commerce Resources Corp.

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