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Can you think of a commodity that has is not produced in NA?
Can you think of a commodity that has is not produced in NA?
64 Reads | 1 Comment | Posted on June 8, 2010
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Can you think of a commodity that has not one producing mine in North America?
Whether it's gold, oil, copper, coal, diamonds, molybdenum, you name it, North America has it. We are rich in commodities, except one... rare earth elements.
There is not one rare earth element producing mine on our continent.
It's almost unbelievable when you think about just how many mines there are in North America and that not one produces rare earths. It's no wonder this commodity is known as RARE earths!
All kidding aside, the fact that North America has no rare earth producing mines leaves our continent vulnerable to security issues along with staying competitive in the alternative energy sector. As we mentioned in our report on rare earth elements last week, this commodity is not one with simple supply and demand imbalances, but is at the very core of an energy revolution. The renewable energy industry (wind, electric cars and solar) is exploding and it cannot exist without rare earth elements. It relies heavily, and solely in many cases, on the availability of rare earth elements. Just as fossil fuels have been central to our economies and industries over the past two hundred years, renewable energy will be for the next two hundred years. This energy shift has driven rare earth element prices straight up and caused China to slap heavy exporting taxes on the commodity in order to keep its supply at home, for domestic consumption. The problem for the rest of the world is that China controls 97% of the world's supply. So where does that leave the rest of the world?
Desperate to find a source.
Jack Lifton, the leading authority on the sourcing and uses of rare & strategic metals advises some of the world's largest institutional investors on the commodity. He stated "They listed 11 materials which would shut down the US economy if their supply were interrupted. The second item on that list was rare earth metals."
The US Department of Defense is very concerned as Chinese made magnets (made from rare earth elements) are currently present in every weapons guidance system, every fighter jet, not to mention every modern day communication device. As the United States falls deeper into debt with China, the lack of supply of these rare earth elements becomes more of a delicate and troublesome situation.
Due to a global supply crunch (to put it mildly), the rush of watching a stock price skyrocket in value on drill results alone has hit the rare earth sector in a big way. Rare earth companies are much different than gold or base metal companies when it comes to how their share prices react on news. We've seen share values triple or quadruple and even increase up to ten times in a matter of weeks after good drill results were released from some rare earth companies. This is what happens when a communist nation controls 97% of the world's supply and North America has zero producing mines and a tiny list of viable prospects. Good rare earth element drill results and new discoveries on their own can make early-bird investors significant wealth almost overnight. This sector is becoming white hot and huge institutional money is knocking on the door as they are waking up to this impending crisis. There is no commodity space quite like the rare earths and there hasn't been for a long time.
Our team at Pinnacle has found our early-bird opportunity in the rare earth element sector.
Our new Featured Company is
Cache Exploration (CAY:TSXV)
This is a company with historical results on its
flagship Welsford REE Property representing concentrations that compare favourably with those found in the richest heavy rare earth element deposits in the world.
When we say 'early-bird opportunity' we are referring to the fact that Cache Exploration is still unknown to the investing public as it has only been listed on the TSX-Venture since March of this year. Cache has an incredibly tight capital structure of only 10.8 million shares outstanding (a tiny market cap of just over $3 million) - by far the leanest capital structure we have ever featured. On top of that, the original 3 directors of Cache Exploration own close to 30% of the entire shares outstanding.
The management team at Cache understands the value in running a tight ship and minimizing shareholder dilution. We've all been witness to highly diluted share structures that have eventually crippled many junior miners in the past. What must be noted is, even with such a tight capital structure, Cache is well financed to carry out their exploration programs on the Welsford REE (rare earth element) Property - so we can expect consistent development from the company immediately. It is going to be a very busy summer for Cache Exploration as its management knows there has never been a better, more urgent time to define a rare earth deposit.
Before we get into Cache's flagship Welsford REE Property and the advantages it has, we must introduce Cache's head REE technical director. He is a geologist and one of the most respected names in the country when it comes to the rare earth sector. By introducing him first, it will better explain how Cache managed to secure the Welsford asset before another company could.
Dr. David Lentz is a director of Cache Exploration and is the head REE Geologist on its Technical Committee. He has extensive experience working with a variety of uranium and rare earth element bearing deposits...his specialty, to say the least. He provided exploration strategy for Quest Rare Minerals on Strange Lake and helped design part of a research program around that deposit. In case you aren't aware, Strange Lake has been responsible for taking Quest Rare Minerals from a nickel per share, junior miner to one that now trades well over $2 per share. We will expand upon this later in the article. Dr. Lentz has also been oriented on Thor Lake back in 1989, before it was known as Canada's premier rare earth deposit.
Dr. Lentz received the GAC Harvey Gross Young Scientist Award in 1999, the 2007 Geological Association of Canada (GAC) Distinguished Service Award, the Canadian Institute of Mining and Petroleum Distinguished Lecturer Award for 2007- 08, and the CIM Boldy Award in 2009. He is associate editor for several economic geology journals and has written several scientific papers pertaining to the rare earth sector.
Dr. Lentz is a professor on the Fredericton campus of University of New Brunswick (UNB) and holds the UNB Economic Geology Chair - an industry endowed chair. Before he started at UNB, Dr. Lentz worked as a researcher with the Geological Survey of Canada and the New Brunswick Department of Natural Resources.
At this year's PDAC (Prospectors and Developers Conference), held annually in Toronto (it is also the biggest mining conference in the world), Dr. Lentz and Tony Mariano, another rare earth element guru, stole the show with what has now been referred to as a highlight of the conference. They spoke on ranking and evaluating rare earth deposits, which is what Dr. Lentz does best. According to Mining Markets (an investor resource publication) "delegates flocked to this talk first thing in the morning on the last day of the convention."
When Dr. Lentz speaks on the rare earth sector, people listen. He knows exactly what to look for when searching out world class deposits. Furthermore, he knows how to break the highly scientific element of this commodity, and the deposits in the rare earth sector, down into layman's terms- as we discovered in our hour-long conference call with Dr. Lentz. This is a key reason he was able to captivate investors at PDAC and should be able to efficiently explain Cache's development to institutions and investors not overly familiar with the rare earth sector.
Let's get right into Cache's flagship asset and why Dr. Lentz was compelled to work on this very unique rare earth project.
Cache Exploration's Welsford REE Property (aka Welsford Intrusive Complex) is 20km north of Saint John, New Brunswick. This is the same province in which Dr. Lentz is a professor at UNB and holds the Economic Geology Chair - an industry endowed chair. It was also in New Brunswick where Dr. Lentz worked as a researcher with the Geological Survey of Canada and the New Brunswick Department of Natural Resources. It is safe to say he knows the geology of this province and the Welsford area extremely well.
When we spoke to him on a conference call, we bluntly asked him, "Why did you choose to work on the Welsford Property?" as we knew this was a man who does not need the work.
His response... "From a rare earth scientific point of view, Welsford is very compelling. The results obtained at Welsford have extremely high value. The key ingredient to Welsford is the fact that to get dykes like this it is very unique. To find a complex with such a unique system made it so important for me as I felt it made Welsford a discovery within itself from a scientific standpoint."
A statement like that, coming from Dr. Lentz, carries a lot of weight. The geology at Welsford really jumped out at him because it was so unique compared to deposits he has examined in the past. And he's examined some of the best rare earth deposits the world has to offer.
The Welsford REE Properties consist of the Outer Welsford REE Property on 124 claims that cover most of the Welsford Peralkaline Intrusion and the additional 6 claims referred to as the Inner Welsford REE Property. Combined, this grants Cache control over the entire Intrusive Complex.
What must be noted about the Welsford Property is that it is a very well known peralkaline intrusive complex. What does that mean?
Because Welsford is a peralkaline intrusive complex, it contains the rarest of the rare earth elements - the heavy rare earths, which are by far the most expensive. Although light rare earths are also in high demand, they are much cheaper and much more abundant than the heavy rare earth elements. Welsford's overall grade is mainly enriched in middle and heavy rare earth elements. This is a critical component to Cache's primary goal of outlining a rare earth mineral deposit and developing it towards production as quickly as possible to meet the increasing world demand.
Historic geological mapping and sampling at Welsford by Uranerz Exploration Ltd. for uranium in 1980, which was followed by trenching and drilling in the early 2000's, revealed significant Zirconium(Zr), Niobium(Nb), Yttrium(Y), Rare Earth Elements(REE) and Tantalum(Ta) mineralization. These were hosted within a peralkalic pegmatite-aplite dyke swarm that intruded the Welsford Peralkaline Intrusion. A great deal of early investment and heavy lifting was completed and led Cache to the Welsford Property.
Cache Exploration recognized immediately the potential for REE mineralization within the Welsford Intrusive Complex, knowing claims held the Zr-Nb-Y-REE bearing pegmatite-aplite dykes. In 2009, Cache completed a Phase 1 ground exploration program consisting of geochemical soil sampling (analysed by INAA at ACTLABS) and scintillometer prospecting over the entire property. The analysis of 300 soil samples by Instrumental Neutron Activation Analysis (at ACTLABS) revealed locally higher concentrations of light rare-earth elements (LREE) and heavy rare-earth elements (HREE) (see Fig. 3).
Petrogeochemical studies were conducted on 22 random grab samples from the McKeel Lake dikes that will be a priority target on the Welsford REE property. Of these samples, seven were from outcrops, seven were from drill hole No. 1 core, and eight were from drill hole No. 2 core. The samples were categorized as follows: 13 were mineralized aplite I, two were aplite II and seven were host granites. The 13 samples categorized as mineralized aplite I included all seven outcrop samples and six of the 15 drill core samples. Grab samples can be selective in nature and may not reflect the average grade on the property. However, these high values represent concentrations comparable to those found in the richest heavy REE deposits in the world.
The following historical Instrumental Neutron Activation Analyses (INAA) results were reported from the 13 mineralised aplite I samples:
In the fall of 2009, Dr. David Lentz coordinated and oversaw the surficial B horizon soil sampling and analytical program over the Welsford property. The instrumental neutron activation analytical results of this program revealed many highly anomalous soil samples with high levels of the following elements:
- massive quantities of lanthanum are required for the production of hybrid automobiles
- used in television glass plates, catalytic converters to reduce CO, permanent magnets
- used to make the strongest permanent magnets. Most importantly, because of its high magnetic-flux capacity, it is heavily used in the electric motors of hybrid automobiles and in the electricity generators of commercial wind turbine generators
- used in lasers, as a neutron absorber in nuclear reactors and in optical glass to absorb infrared light
- used as a red phosphor in television sets and fluorescent lamps, as an activator for yttrium-based phosphors and in computer screens
- used in alloys and in the production of thousands of electronic devices Ytterbium- used in several different types of lasers
- used in cell phones, computers and automotive electronics
Dr. Lentz stated "A review of the historical exploration data, our results from the Fall 2009 soil and ground (surficial) sampling and scintillometer survey, and our current ongoing soil and ground sampling and scintillometer survey points to the potential of the presence of a cupola of rare earth mineralization at depth within the Welsford Igneous Complex"
Photograph of a polished slab from the McKeel Lake pegmatite-aplite REE+Y-rich dyke, grab sample, (Inner Welsford REE Property) showing aplite (right) in contact with pegmatite (left). Note the rhythmic texture of the pegmatite-aplite and its long needles of riebeckite (see Siedler et al., 2005).
Perhaps the most important point Dr. Lentz brought up during our conversation was when he stated, "The McKeel Lake peralkalic dyke swarm that are associated with the Welsford Igneous Complex have heavy REE and Y concentrations that are comparable to other extremely fractionated (rich) peralkalic silicate systems like Strange Lake in Labrador and Quebec, Thor Lake in North West Territories, and Bokan Mountain in Alaska."
What is the significance of Cache's Welsford property having heavy REE concentrations that are comparable to other extremely fractionated (rich) peralkalic silicate systems such as Strange Lake, Thor Lake, and Bokan Mountain?
Let us explain..
The Deposits at Strange Lake, Thor Lake and Bokan Mountain are 'company making deposits'. These are some of the most, if not the most, respected rare earth deposits in North America.
The Strange Lake deposit referred to in Dr. Lentz's quote is owned by Quest Rare Minerals, formerly known as Quest Uranium. After Quest released a statement announcing it would be changing focus and pursuing a rare earths deposit in the Strange Lake area, its $.05 stock (at the time) began its ascent. Within a matter of months Quest's stock hit a high of $4.20 after drilling up its Strange Lake asset. In fact, the Strange Lake asset has become so significant for Quest, it recently changed its name from Quest Uranium to Quest Rare Minerals to better correspond with its new focus. The Strange Lake asset is the main reason Quest Rare Minerals has gone from a dime a dozen junior explorer to a $100 million dollar market cap company. This is just one example of the types of returns a significant discovery in the rare earth sector can do for a stock price. And don't forget, Cache's head geologist, Dr. Lentz, helped design part of a geological research program and the exploration strategy for Strange Lake.
Peter Koven of The Financial Post commented on Quest Rare Minerals in an article titled, "Rare earth metals explode into the mainstream".
"Quest was a total unknown until it made a very well-timed foray into the rare earth business in April. Since then, it has acquired land in Quebec and made a discovery, and the stock has gone on an astounding run, up more than 5,000%."
The Bokan Mountain deposit in Alaska, which Dr. Lentz was referring to, is owned by Ucore Uranium. It is known to be one of the largest combined heavy & light rare earth deposits in North America. This deposit was responsible for returning shareholders of Ucore amazing returns on investment upon announcing results from the property. Beginning in April of 2009, after Ucore released very early stage development news of mineralogical studies of uranium and rare earth element ("REE") mineralization from the Bokan Mountain, Alaska and the Lost Pond, Newfoundland properties, the stock began its ascent from roughly
.10 per share.
The detailed studies at Bokan Mountain, completed by SGS Lakefield Research Limited, were commissioned to simply obtain a more comprehensive understanding of the mineralogy and liberation characteristics of the rare earth minerals at each property. After that release, Ucore had one announcement that it had identified significant concentrations of heavy rare earth elements at its Bokan Mountain property. By September of 2009 the stock had hit $1.00 per share and the company was flirting with a $100 million market cap. This is what we meant when we stated that rare earth companies are much different than gold or base metal companies when it comes to how their share prices react on early stage news.
The Thor Lake deposit referred to in Dr. Lentz's quote is owned by Avalon Ventures, referred by many, as the leader in rare earths for Canadian explorers and the receiver of much media attention. This deposit has been worked on by Avalon for nearly 30 years, long before rare earths were so crucial in our everyday uses and energy needs. Chris Peterson, Senior Geologist of Avalon Rare Metals has looked at 50 kilometres of drill core at this property and referred to it as having the exact ratios of heavy rare earths and Yttrium that makes a metallurgist's dream come true. This rare earth asset has been referred to by the CBC as a "sleeping giant."
The results returned from Thor Lake have made some early-bird Avalon shareholders extremely wealthy. Starting in 2006, when rare earths began to make their way into the limelight for the first time, Avalon shareholders saw their wealth increase systematically as the company's shares increased from
.25 to a high of $4.24 recently - and they can thank that massive share price appreciation on the results returned from Thor Lake. Avalon's current market cap is just over $185 million. Keep in mind, Dr. Lentz was oriented on Thor Lake back in 1989 and he knows this deposit extremely well.
Cache Exploration's current market cap is just over $3 million
A few critical points to note about Strange Lake and Thor Lake:
Strange Lake and Thor Lake have very minimal infrastructure, which can increase both exploration and production costs tremendously
. At Strange Lake there is literally no infrastructure for hundreds of kilometers as everything must be flown in. This can make drilling at the property extremely expensive as the use of helicopters can cost upwards of $1500 per hour. If the project is to be taken into production, the capital costs associated with building the necessary infrastructure can increase by the multi-millions. Thor Lake has many of the same issues and this is viewed by many as the premier rare earth deposit in Canada. In addition, the Thor Lake property is situated in an area known as the Akaitcho Territory which is subject to a comprehensive land claim negotiation between four communities of the Dene First Nations and the federal government. Currently, there is an interim measures agreement in place. Under this agreement an interim land withdrawal was implemented in 2007, precluding new mineral title from being granted by the Crown in the Akaitcho territory for a period of up to five years while a land-use planning process is completed.
There are no main roads leading to either the Strange Lake or Thor Lake rare earth deposits.
To give you some perspective, it cost Agnico Eagle $100 million to build a 100 kilometre road for its recent mine which is now coming under construction. That's $1 million for every kilometre of road built - an important fact when considering that Cache Exploration's Welsford REE Property does not require a road to be built.
The economics of establishing a property- ie roads, power, water etc.- are crucial in determining the success and profitability of a future producing mine.
The infrastructure at Cache's Welsford REE Property is top notch for rare earth exploration targets.
Drilling costs are significantly less given that the property is only 20 kilometers from Saint John, which is a major industrial zone. The costs to evaluate this property are the lowest in Canada. Workers are able to drive from Saint John and by using pre-established logging roads, are able to access the property directly, as well as navigate through the extensive property itself.
A power line runs right over the mineralized dykes at Welsford and over the entire length of the property.
Roads, power and labor is all accessible at Welsford given its location and proximity to an industrialized centre. As an added bonus, near the west end of the property lies one of the larger sand and gravel quarry operations in New Brunswick. This is used for a variety of industrial purposes.
There are no First Nation claims or issues at Welsford as the land is forestry land and thus is not impacted by First Nation land claims.
The last point to address on the infrastructure and regional issues is how supportive the provincial government is of mining and exploration. The New Brunswick Provincial Government encourages mining and exploration within its province; so much so that it has established the New Brunswick Junior Mining Assistance Program (NBJMAP). The NBJMAP program is a financial assistance program for private-sector Junior companies, and provides up to 50% of eligible costs, within defined limits, for mineral exploration projects. The program is intended to increase the probability of finding economically viable mineral resources in New Brunswick. Cache Exploration has already submitted an application under this program and has received positive feedback on its application and expects to have confirmation soon.
When we mentioned that Welsford had blatant advantages, this is, in part, what we meant.
We have invested in
Cache Exploration (CAY:TSXV)
by purchasing restricted shares above the current market price, and have chosen to work with and feature this company for several reasons; none more important than the fact that Dr. Lentz, one of the most respected names in the rare earth industry, has chosen to lead Cache on its Welsford REE Project - a project with historical results representing concentrations that compare favourably with those found in the richest heavy rare earth element deposits in the world. It's not very often we come across a newly listed TSX-Venture company, with less than 11 million shares outstanding, a market cap of barely $3 million dollars and a seasoned technical crew in control of an asset like the Welsford REE Property. The abundant infrastructure surrounding Welsford and the willingness of the New Brunswick government to promote mining and economic activity in its province solidified our decision to feature Cache Exploration. We believe Dr. Lentz's favorable position in the Province and with the University of New Brunswick will aid significantly in the development of Welsford.
All the best with your investments
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Good article. Very informative.
July 24, 2010
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