Tuesday, 1 May 2012

Montero Mining differentiates itself with “fast track strategy” to production at Wigu Hill

Montero Mining and Exploration (CVE:MON) has what it believes to be a giant rare earths deposit in Tanzania, and in the span of 15 months since it listed, has delineated an initial resource and produced actual samples of saleable rare earth products - a first for a junior in its space.

The company continues to de-risk its main project as part of its fast-track to production strategy.

Its flagship Wigu Hill property was first identified in the 1950’s as a high grade rare earth deposit recorded by the USGS, 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 in the US as the rare earth elements at the deposit are hosted in the mineral bastnaesite, found in carbonatite dikes.

The dikes are around 10-20 metres wide and occur in swarms, with the challenge being to determine where the rare earth-bearing dikes are most concentrated and best mineralized, says president and CEO Dr. Tony Harwood in a recent interview with Proactive Investors.

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 and X-ray machines, mobile devices and other computing equipment.

With China producing over 95 percent of the world's rare earths, and the country constantly cutting back on exports, the metals are set to be in high demand in the near future. Hence the explosion in the rare earths space, as an increasing amount of junior rare earth companies emerge seeking to take their projects to production.

Harwood says that what differentiates Montero from the others is the company's strategy to "fast track" the project to production.

"While drilling out what we believe to be a giant deposit, we are focused on getting a portion of the project to a mining and refining stage," Harwood says.

"We also, unlike any other juniors out there, have actually produced saleable rare earth products for marketing to potential off take deals."

Indeed, through hydro-metallurgical test work with consultants Mintek, Montero said in March that it produced the first samples of concentrated rare earth chemical grade products from its Wigu Hill project in Tanzania, with a tested process route now in place.

The making of not only Mixed Rare Earth, but also Cerium chemical products was a major milestone for the company, as it allows Montero to show indicative product when in discussions with potential off-take partners.

"The samples of saleable rare earth products are pretty significant. The step has allowed us to engage around 30 groups with these materials," Harwood says.

"We have de-risked the project significantly with our metallurgy work and have gotten to the stage where we can attract, in a meaningful way, end users of rare earths materials."

The accomplishment indeed proved beneficial, as these samples were instrumental in a non-binding off-take agreement signed with Star Earth Minerals last month, for the supply of light rare earths from its Wigu Hill project.

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.

In the first phase of production from Wigu Hill, Montero is targeting output of 5,000 tonnes of mixed rare earth product per year, with Star Earth having the appetite for around 1,000 to 3,000 tonnes, Harwood says.

The company is planning to secure more off-take agreements in order to fund the development of its project and sell its materials to refineries, with at least three firm deals targeted.

Last September, the company released a 3.3 million tonne inferred resource based on 2,225m of shallow drilling on only a fraction of the Wigu Hill complex. Only the Tembo and Twiga zones 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) with a higher grade portion of 510,000 tonnes at 4.4% LREO.

The company is initially targeting cash flow from a small mining operation at the Twiga Zone by 2013, while drilling on the remainder of the property and proving up a greater resource.

An updated NI 43-101 compliant resource estimate is on track, which will look to boost inferred resources to the measured and indicated category. A preliminary economic assessment will then follow, along with a feasibility study later in the year.

The latest drill results from the project hail from the Nyati target, where 5,000 metres of drilling is planned for 2012.

Harwood says the company is drilling consistently high grades, evident in the latest results from the Nyati zone, where 73.2 metres at 3.13% total rare earth oxides (TREO) was intersected, including 24.3 metres at 4.92% TREO.

Since listing in February 2011, the company has made huge strides, with an eventual goal of building a refining facility as part of its second stage, which Harwood estimates will only require capital of $60 million - a number he considers to be low compared to the capital other potential rare earth producers are indicating.

Harwood says there are about two dozen refineries in the world that would take its mixed rare earth product, in Asia, Europe and the US, with Montero hoping to be one of the first African refineries of rare earths.

"We have done a lot of work on the metallurgical side since listing in February 2011. With rare earths having an increasing strategic role, there has to be something to differentiate a junior rare earth miner.

"Low operating and capital costs, good margins, and most importantly, the ability to produce and sell the materials through a simple, proven route is critical."

"We have really got a winner at Wigu Hill as we have saleable products that we can show the market, placing us way ahead of the game," Harwood adds.

The at-surface project also boasts high grades, fresh rock and has low uranium and thorium levels, with a radioactive dose equivalent of Wigu Hill representative sample certified by Mintek to be less than 1 microsievert.

This is important, as many rare earth miners have been hampered by radiation and permitting issues, something Montero has proven it doesn't have to worry about.

The project, which is located 170 kilometres from seaport Dar es Salaam, and 12 kilometres from a rail siding on the Tazara railway, is seen by the company to have the potential for a 20,000 tonne per year rare earth-producing mine.

Raising $9.8 million in its IPO and private placement last year, the company is looking to bolster its treasury by offloading its portfolio of phosphate assets in South Africa, and has already hired an advisor for the process.

Harwood, as an economic geologist with 30 years of international exploration and mining experience, says he is convinced there is a big resource at Wigu Hill, and expects to get a "reasonable amount" of cash from the sale of its phosphate assets to help develop the Tanzania project.

Aside from the company’s president and CEO, Montero is also armed with other experienced team members - non-executive director Michael Wolley is the former COO of Lynas Corp (ASX:LYC), and technology development manager Richard Amata is the former chief chemist for Molycorp.

The company's stock is currently changing hands at 14.5 cents on the TSX Venture Exchange, giving it plenty of upside potential given the upcoming resource update and PEA anticipated this year.

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