Montero Mining and Exploration (CVE:MON) said Tuesday it has inked a non-binding agreement with Star Earth Minerals for the supply of light rare earths from its Wigu Hill rare earth element project in Tanzania - a move that significantly de-risks the property.
The news sent Montero's stock up more than 21 percent Tuesday morning, to trade at 17 cents as of 10:47am ET.
Star Earth Minerals is a manufacturer of light rare earth compounds
based in Mumbai, India, and is seeking a consistent supply of light rare
earths for its customers in the glass, ceramic and catalyst industries,
located mainly in South East Asia and Japan.
Rare earths elements refer to a group of 17 specific elements used for everything from smartphones to guided missiles.
While some rare earths are relatively common, they are dispersed in a
way that makes it difficult to find deposits with high enough ore
grades to economically exploit. Demand for the metals is expected to
continue to grow steadily as China, which produces 97 percent of the
world’s rare earths, has cut exports by more than half of 2004 levels to
30,000 tons in 2010.
The memorandum of understanding agreement signed between Montero and
Star Earth outlines the basis of cooperation between the two parties,
with the objective of signing an off-take agreement for Star to purchase
mixed rare earth and cerium carbonate from Montero.
The non-binding deal also contemplates the sharing of technical
information related to rare earth process technology for the development
of a refinery to further beneficiate material from Wigu Hill.
Through hydro-metallurgical testwork with consultancy Mintek, Montero
has produced samples of saleable rare earth products, which were
instrumental in concluding discussions with Star, Montero said.
"The signing of an MoU off-take agreement between Montero and Star is
the first step in de-risking the Wigu Hill Project while securing end
user distribution channels ultimately designed to generate REE sales
revenue for Montero," said president and CEO, Dr. Tony Harwood.
"Star is a producer of rare earth chemicals to the Asian market with
considerable expertise in rare earth refining which also compliments
Montero’s fast-track to market strategy.”
The Wigu Hill property was first identified in the 1950s as a high
grade deposit, with a large carbonatite complex measuring 6.4 by 3.2
kilometres. The asset has bastnaesite mineralization and is considered a
"look-a-like" to Molycorp's (NYSE:MCP)
Mountain Pass project. The rare earth elements at the deposit are
hosted in the mineral bastnaesite found in carbonatite dikes, making it
similar to Molycorp's Mountain Pass deposit in the USA.
Rare earth elements are critical in the development of emerging green
technologies and high-tech applications, from electric and hybrid
vehicles and wind and hydro power turbines, to LCD screens, MRI, X-ray
machines, mobile devices and other computing equipment.
Montero is working to update the initial NI 43-101 compliant resource
estimate for its Wigu Hill project this quarter, and is targeting cash
flow from a small mining operation at the Twiga Zone.
Last September, the company released a 3.3 million tonne inferred
resource on only a fraction of the Wigu Hill complex. Only the Tembo and
Twiga deposits on the eastern side were estimated to contain an
inferred resource of 3.3 million tonnes at a grade of 2.6% light rare
earth oxide (LREO5).
Results from the in-fill drilling completed at the Twiga Zone will be
used to update the existing NI 43-101 resource estimate, which is
expected during the second quarter.
Under the terms of the memorandum of understanding, within three
months of entering into the agreement, Star and Montero will sign an
off-take agreement for 1,000 to 3,000 tonnes per year of mixed rare
earth and cerium, subject to price and product specifications.
In addition, should Star and Montero confirm their interest in the
development of a rare earth refinery project, the two parties will
discuss future funding options, they said.
Montero said the non-binding deal will remain in effect for 12 months, and either party can terminate the agreement at any time.
The rare earth explorer also said it believes that the mineralized
material at Wigu Hill is sufficient to support the proposed off-take
deal with Star.
A scoping study is underway at Wigu Hill, which will lead into a
preliminary economic assessment for the project - anticipated for
completion in the second quarter.
Last month, the company said that rare earth dike mineralization from
its flagship property was proven to be amenable to upgrading by X-Ray
sorting, with over 80 percent recovery.
Hydrometallurgical testwork also continues to advance with Mintek,
including further optimization tests and development work to enhance the
work to date and generate high purity rare earth products for sale.