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Wednesday, 28 November 2012
Montero Mining generates heat from Mintek and strategic investor deals
With potential rare earth refining cost-savings from a technical deal and a possible strategic investor emerging for its rare earth production aspirations, news flow has certainly quickened for Montero Mining and Exploration (CVE:MON).
Montero is engaged in the development of its flagship rare earth element (REE) project at Wigu Hill, Tanzania.
Wigu Hill is a high-grade, undeveloped light REE deposit, where the current focus is a fast-track strategy to advance a portion of the large deposit to the mining and production stage. It covers a 142 square kilometre area and grab samples have yielded results as high as 27.25% total rare earth oxides, with up to 16.68% from drilling.
The company also has four phosphate assets in South Africa and uranium assets in Tanzania and Quebec, Canada.
"We're potentially looking at a technological breakthrough in terms of extracting rare earths to reduce capital and operating costs," Montero Mining CEO Dr. Tony Harwood tells Proactive Investors.
Last month, Montero and Mintek, South Africa's national mineral research organization with over 25 years of experience in REE extraction, agreed to collaborate to "further develop and optimize" the Montero leaching process.
Mintek will continue Montero's bulk leach test program to optimize the leaching process and conduct a rare earth extraction process at pilot plant scale. In return, Montero will provide Mintek with a bulk sample from the Wigu Hill Deposit to be used as part of Mintek's program to develop its independent, proprietary refining technology.
"Mintek are a world leader in mineral extraction - we have been working with them for nearly 2 years. They have some interesting ideas they want to test," Montero's Harwood says.
In terms of progress at Wigu Hill, Harwood comments: "We still continue our exploration of the rare earth deposit and have progressed our EIA application because we're targeting a mining license application next year as we try to bring a small portion of the project to a mining stage."
In late summer, Montero started two pivotal environmental studies at Wigu - an environmental impact assessment (EIA) and an environmental and social impact assessment (ESIA) - both of which are part of the process for getting a mining licence.
Montero also acquired a two-year extension to its prospecting license in Tanzania until June 30, 2014.
"We want to try to get to the mining stage as soon as possible," Harwood adds.
The company is also considering the possible sale or a joint venture deal for its phosphate exploration projects in South Africa.
Indeed, Harwood spoke to Proactive Investors while in South Africa, after having shown a group of potential investors around the assets.
The company's CEO says he has seen "considerable interest" for the assets, one of the projects has a Preliminary Economic Assessment (PEA) completed earlier this year which carry a net present value of C$126.1 million at a discount rate of 10% and an internal rate of return of 38.14%.
Regarding near-term catalysts, Harwood highlights the "exciting" recent news on the signing of an arm's length, non-binding term sheet with a strategic investor for funding the rare earth company with a mine to refined rare earth for sale strategy.
"We have been looking for a year for an strategic investor or off take partner to help us build, not just a mine, but also a rare earth refinery."
The indicative term sheet sets out the terms and conditions of a potential agreement. Due diligence is still to be undertaken by the investor, Montero has said, the results of which are subject to approval by the executive management and the party's board of director.
"The investment will be at the asset level and therefore our shareholders will not suffer any appreciable dilution," Harwood said.
"We have managed to secure a potential partner who wants to go with us the full way, who wants to mine and refine rare earth for sale.
"In 6 months' time we should have a fully-fledged partner who is going to help fund Montero, for an equity position in the rare earth company at an asset level.”
Earlier this year, the company also signed a non-binding off-take agreement with India's Star Earth Minerals, for the supply of light rare earths from its Wigu Hill project, with discussions for more off-take deals ongoing. This followed the company's success in producing the first samples of saleable concentrated rare earth chemical grade products from its project.
The asset is considered a "look-a-like" to Molycorp's (NYSE:MCP) Mountain Pass project in the U.S. as the REEs are hosted in the mineral bastnaesite, found in carbonatite dikes at Wigu Hill.