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Monday, 15 July 2013
Montero Mining makes big move toward grant of mining license as massive rare earth project draws investor interest
Montero Mining and Exploration (CVE:MON) recently got its hands on an environmental impact assessment (EIA) certificate, a major hurdle required before receiving its mining license for its Wigu Hill project in Tanzania, which according to CEO Dr. Tony Harwood, separates itself from other rare earth properties through its simple metallurgy and potentially low operating costs.
"At Wigu Hill, we have all the characteristics that are necessary to make a low cost mine - surface exposure, good grades, resource potential, very simple mineralogy for mineral processing and rare earth mineral upgrade," says Dr. Harwood in a recent interview with Proactive Investors.
"The simple mineralogy and low levels of thorium and uranium, separate us from most of our peer group as we don't anticipate problems other projects have with high radiation levels."
The chief executive adds that the junior explorer is also dealing with rare earth minerals in fresh, unweathered rock, and can use various physical processes to upgrade those minerals to a higher grade percentage, through methods including gravity separation and x-ray sorting.
"The mineralization currently has grades that average between 3% to 5% TREO [total rare earth oxides], and this could potentially be upgraded to up to 50% TREO in a rare earth mineral concentrate," he says. "If we can do that, we can target reducing one of our biggest costs in the rare earth extraction process using acid consumption in the leaching plant."
The rare earths explorer is coming off fresh from the receipt of its EIA certificate - part of the requirement for a mining license application. The EIA certificate from the Tanzanian government was received late June, to fulfil section 92(1) of the Environmental Management Act in the country.
"This achieves the biggest step before we apply for a mining license, an application we plan to submit this quarter," says Dr. Harwood.
"The certificate proves there were no significant environmental or social issues and gives us a green light to build a mine should we fulfil the requirements of the application. It's a massive positive for any project to reach this stage," says the chief executive, also referencing the hefty document put together for the EIA application, which included "an extensive study covering mammals, flora, fauna, the environment, community health, and interviews with the local community and its leaders".
He says the effect that mining can have on the environment and the community is not taken lightly in Tanzania, which has a "good mining code that is very well regulated from an environmental and social perspective". The company is serious about social responsibility, community and environmental issues in Tanzania, not solely for its mining purposes, as the CEO highlights a recent welfare program in which it was involved, responsible for distributing 160 wheelchairs to children in need in Tanzania.
The company is planning to submit a mining license application within the quarter, with expectations that it will receive the permit sometime in the first half of next year.
Montero's main Wigu Hill rare earth element (REE) deposit in Tanzania, which is 81 per cent owned by the company, is a steep hill that is 250 metres above sea level, 550 metres above the surrounding coastal plain, with the highest peak at 796 metres above sea level.
The project is located about 65 kilometres south of Morogoro and 200 kilometres southwest of Dar es Salaam in southeastern Tanzania. The project, which is accessed by all-weather roads and is 12km from a rail siding on the Tazara railway linking the project with the port in Dar es Salaam, covers a 142 square kilometre area. Grab samples from the site have yielded results as high as 27.25% total rare earth oxides, with up to 16.68% TREO from drilling.
The junior explorer's plan is to fast track a portion of the large deposit to the mining and production stage, but with a more comprehensive drilling program, Montero is convinced it can expand mineral resources from the current 3.3 million tonnes to well above 40 million tonnes.
Its fast track strategy and decision not to focus only on expanding resources has allowed the company to become one of the first juniors to produce samples of individual and mixed oxides for marketing purposes, making it attractive to potential funding partners and positioning it ahead of the pack.
Indeed, a due diligence process with an undisclosed "strategic investor" is currently underway, initially announced last December. The said investor has proposed to provide equity funding at project level toward the development of the project, which includes both a mine and refinery, according to the company.
"We're talking to a number of strategic investors, but the process takes time as there are not that many rare earth projects capable of being built and investors are being thorough in their due diligence," affirms Dr. Harwood.
"Rare earth projects that are capable of delivering low operating costs and development capital are reasonably complex for the uninitiated investor outside of China, as rare earth operations have been built but they are not common in the West. A strategic investor has to conduct careful analysis, particularly of the geology, mineralogy and metallurgy, as the processing of rare earths is not commonly known. It's simply not like copper or gold projects."
Montero's chief executive says that investor interest for the project has mainly come from Asia, including India, Korea, Japan and China, as well as South Africa and Russia. "The interest is definitely there. These are savvy mining investors that look at everything - the geology, mineralogy, process route, operating costs, and they have given me confidence that we are on the right track."
The next stage for the project is the pre-feasibility and feasibility studies, which are all subject to funding and the signing of definitive agreements with potential partners.
"The interested strategic investors have a vision to build a rare earth company that can mine and refine rare earths and provide good returns and also a strategic imperative," says Dr. Harwood.
The Wigu Hill rare earth asset is considered a "look-a-like" to Molycorp's (NYSE:MCP) Mountain Pass project in the U.S. as the rare earth elements are hosted in the mineral bastnaesite, found in carbonatite dikes at Wigu Hill. This carries high grades of neodymium, praseodymium, lanthanum, and cerium with a small amount of heavy rare earths in the deposit.
"There is potential for a huge resource, and we intend to do more exploration to prove this once we secure funds.
"Our team believes we have a world class resource with good metallurgical characteristics, and we have only drilled out a small part of the large deposit."
Aside from the potential strategic partnerships in its rare earth project, Montero is looking to sell or joint venture its phosphate assets in the Western Cape of South Africa, with "discussions going very well," assures Dr. Harwood.
"The phosphate assets are 30km from the deep water port of Saldanha Bay, which has export capacity. We have a PEA [preliminary economic assessment] report on one for the projects we drilled, which provided a net present value of C$126 million," he says.
The company's shares are currently trading at around 4 cents on the TSX Venture Exchange, giving it a market cap of $3 million.