Toronto-based Montero Mining and Exploration (CVE:MON) has signed an arm's length, non-binding term sheet with a strategic investor, for project equity funding for the mineral explorer's Wigu Hill rare earth element (REE) mine and refinery in Tanzania.
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 said, the results of which are subject to approval by the executive management and the party's board of director.
“The potential business case will be directed at developing an integrated Rare Earth Refining company," said Montero president and CEO, Dr. Tony Harwood.
"Use of proceeds from the proposed funding shall include proving up further Rare Earth Element resources at Montero’s high-grade Wigu Hill Rare Earth Element project in Tanzania in conjunction with the development of a rare earth refinery subject to feasibility work."
Montero's Wigu Hill project is a light rare earth element deposit and a large carbonite complex with bastnaesite mineralization located in Tanzania. It covers a 142 square kilometre area and grab samples have yielded results as high as 27.25% total rare earth oxides.
The asset is considered a "look-a-like" to Molycorp's (NYSE:MCP) Mountain Pass project in the U.S. as the REEs at the deposit are hosted in the mineral bastnaesite, found in carbonatite dikes.
REEs 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.
The company continues to de-risk its main project as part of its fast-track to production strategy.
Earlier this year, through hydro-metallurgical test work with consultants Mintek, Montero said that it produced the first samples of concentrated rare earth chemical grade products from its Wigu Hill project, 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 accomplishment indeed proved beneficial, as these samples were instrumental in a non-binding off-take agreement signed with India's Star Earth Minerals in April, for the supply of light rare earths from its Wigu Hill project, with discussions for more off-take deals ongoing.
In the first phase of production from Wigu Hill, Montero is targeting output of 5,000 tonnes of mixed rare earth product per year.
In 2011, 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 in 2013, while drilling on the remainder of the property and proving up a greater resource.
Last month, Montero said that it submitted the environmental and social impact assessment report (ESIA), including a non-technical executive summary for the potential to mine REEs, to the National Environment Management Council (NEMC) in Tanzania - a cruical step in securing an environmental permit required to mine a portion of Wigu Hill once feasibility work is finished.
Montero also has uranium assets in Tanzania and Quebec, and phosphate assets in South Africa.
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