Monday, 19 August 2013

Great Western Minerals Q2: production doubles as SKK advances

Great Western Minerals Group Ltd. (CVE:GWG), announced increased revenue on production that more than doubled as the in quarterly results released aftermarket Wednesday as the as the rare earths processor advances plans to become a producer of the metals. 
For the three months ended June 30 the Saskatoon-based manufacturer and supplier of rare earth-based alloys and high purity metals posted a net loss of $9.5 million for a loss of 2.3 cents per basic and fully diluted share, compared to the year ago loss of $3.25 million for a loss of .8 of a cent per basic and fully diluted share.
Revenue was up by 25 per cent, for a total of $4.5 million in the quarter compared to the $3.6 million posted a year ago, revenue primarily attributable to the company’s production subsidiary Less Common Metals Limited.
The uptick in revenue reflects more than double production from the subsidiary on the back of with the completion of the move to the new facility and installation of two new strip cast furnaces. In the quarter just past, the company sold 69 metric tonnes of alloys compared with 33 metric tonnes of alloys for the same period in 2012. The change in volume was partially offset by lower prices, as average prices for alloys have decreased in the range of 16 per cent to 20 per cent year-over-year.
Alloy volumes are anticipated to increase during the remainder of the calendar year as a result of the added manufacturing capacity, though the ability to obtain the necessary rare earth materials at competitive pricing in order to produce alloys may be a limiting factor.
The rare earths processor, which is transitioning to a fully integrated rare earths producer, makes specialty alloys used in the magnet, battery, defence and aerospace industries from two facilities in the U.S. and U.K. Its development program at its Steenkampskraal rare earth mine in South Africa, which includes a restart of the historical mine, is central for a strong flow of feedstock for its downstream processing unit. 
The continued pursuit of raw material and the expansion of the company’s customer base were both outlined as among the company’s specific near-term objectives.
Meanwhile, at the Steenkampskraal project exploration and evaluation expenses dropped to $1.0 million from $2.4 million during the quarter, reflecting the company’s focus on moving beyond the exploration drilling work carried out a year ago to feasibility study activities including engineering and metallurgical test work.
“Work continues” on the project, said president and CEO Marc LeVier on a conference call following the release of the project update, with the plant remaining on care and maintenance to reduce cash outlays, with an expectation that exploration drilling will be completed  by year’s end with the goal of a feasibility study by the first quarter of 2014.
The CEO emphasized that the high grade of the project -- “one of the highest grades available for development” – meant that the processing plant at the project could be smaller, which, when coupled with the fact that the site is in an existing mine location would be critical in keeping development costs for the project down to below $200 million, making it “one of the least expensive [projects] to invest in out there for rare earths.
Work carried out in the quarter included a combined airborne magnetic and radiometric survey that covered more than 55 km2, which, when combined with a desk top study, field studies and sampling identified 47 radiometric anomalies that the company is continuing to review with the expectation of identifying priority target.
The company expects to complete the feasibility study, intended to further de-risk the project and improve the accuracy of capital requirements in the first quarter of next year. The plan is to include a detailed mine plan, metallurgical process development and optimization, geological models and plant design.
"We continue to make progress with our near term objectives,” said LeVier in a company statement released with the figures.
“During the quarter, we vertically integrated our production capabilities as we began the development and testing phase of making neodymium metal from oxide using an electrolytic reduction process. This is significant as it will increase our raw feed material source options as we aim to utilize our recent capacity upgrades. At SKK, we initiated work for a feasibility study which is expected to wrap up in the first quarter of 2014. Also, many compliance and restoration activities that are required prior to initiating production are taking place and being completed."
Great Western holds 100 percent equity ownership in Rare Earth Extraction Co., which controls the Steenkampskraal mine.
Shares in the company were trading down the day of the release of figures, losing 1.5 cents on the TSX Ventures Exchange to hit 13.5 cents per share as of 12.17 pm EST.

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