with Mark Brown, CFO and Director of Rare Element Resources
April 11, 2011
This interview took place prior to the recent release of
drilling results on the rare earth project and resource calculation for the
gold project. Those releases can be found here for an up-to-date picture on
the company’s exploration work:
Rare Element Reports Inferred Mineral Resource
Estimate for Sundance Gold Project
Rare Element Reports Final REE Assay Results from
2010 Drilling at the Bull Hill SW and Bull Hill NW Resource Areas
theinvestar.com: Hello Mark. I would like to first
thank you for taking the time to talk with us today about Rare Element
Mr. Brown: Thank you for taking the time to contact
us. Don, Jim and I are happy to discuss Rare Element’s projects with writers
and only a few of them actually take the time to contact us directly.
theinvestar.com: Before we focus on Rare Element Resources,
can you give investors a little background on the industry itself, and what
attracted you to this sector of the resource market?
Mr. Brown: I’m one of the founders of Rare Element
and we started the company over 10 years ago. Our basic premise back then was
that the Bear Lodge REE deposit had a lot of potential to be a Rare Earth mine
and we were focused on how much rare earths were to be used in hybrid cars in
the batteries and the electric motors. We also knew that the world supply was
dominated by production from China – particularly that about 50% of the world’s
REE production comes from the Bayan Obo Mine and that another 45% of the world’s
supply comes from other mines in China.
The REE market today has done what we thought it might do,
perhaps even a lot more – REEs are more in demand than ever and there are very
few sources of REEs worldwide despite many people who are currently exploring
for REEs in many areas. The big market rare earths – Lanthanum, Cerium,
Neodymium and Praseodymium have seen large demand growth trends while the small
market but high value rare earths such a terbium, dysprosium and europium have
been experiencing supply shortage issues. All of this is due to a combination
of demand growth and the world production effectively not increasing, and, of
course, China keeping more of their rare earths for their own use in
theinvestar.com: So when did Rare Element Resources
start looking at Bear Lodge?
Mr. Brown: Rare Element began looking at Bear Lodge
in 2001 and completed the acquisition of the project in 2003. It was one of our
Directors who lives in Wyoming, Mr. Norman Burmeister, that introduced me to the
project. Phelps Dodge had the Bear Lodge project exploring for gold before us
and they retained a royalty on the project which we bought back 2 years ago so
we own 100% of the project. During the early years it was very difficult to
raise money for the project and while we did exploration work every year, they
were small programs. We kept costs to a minimum by using contractors only as
needed, doing a lot of the work ourselves, and keeping administrative
expenditures as low as possible.
theinvestar.com: Can you fill us in on the history of
Bear Lodge (past exploration, etc.)?
Mr. Brown: Prospectors looking for uranium first
found thorium and rare earths (identified by the US Geological Survey) at Bear
Lodge in 1949. There were searches all over the world for uranium and several
deposits were found to contain low levels of thorium and high levels of rare
earths. This is one reason that most significant deposits of rare earths are
already known today and there have been very few actual new discoveries of rare
earths around the world. Chapter 6 of our National Instrument 43-101 compliant
preliminary economic assessment report gives a full history of exploration
carried out at Bear Lodge after that time. In short, Duval Corporation did some
work looking for base metals from 1972 to 1977 and found more rare earths in
their drill holes. They brought in the original Molycorp to the project as a
joint venture partner in 1978 and they explored for rare earths until 1980.
From 1986 to 1991, Hecla Mining Company consolidated the land position to
explore for rare earths and also gold. Hecla drilled 12 holes for rare earths
and discovered some of the high-grade mineralization that Rare Element has
expanded. With China overproducing rare earths and an economic recession, Hecla
then dropped the claims in the early 1990s. It was Phelps Dodge (now Freeport
McMoran) who staked claims in the current claim block, including most of the
rare earths, in 1994 to explore for rare earths and subsequently gold but the
gold price was dropping and they optioned it to our subsidiary, Paso Rico, in
2000. When we arranged the financing for Paso Rico and its public listing on
the TSX Venture Exchange in 2002, we amended the terms of that option to reduce
our expenditures commitments and our focus was on the exploration of the rare
earths deposit of which others had only scratched the surface.
Several of these companies did trenching work, geochemical
analysis and most of them also did small drill programs. We compiled that data
as much as we could and used it to help us explore for higher grade rare
earths. Jim Clark, our VP of Exploration, worked for Hecla when they were on
the project in the mid 1980s.
Some significant early REE exploration work was actually
carried out by the US Bureau of Mines. They completed a drill program of ten
shallow holes and estimated the first resources of low-grade rare earths at the
site, west and northwest of our current resource. The current resource is
focused on the high-grade rare earths.
In the early 2000’s our exploration was very limited due to
our budget but we did hit several high grade areas of rare earths in some of
our drill holes, which offset some of Hecla’s high grade holes. The work that
was done at that time really helped us to understand the potential shape of the
deposit and is probably one of the reasons that our current drill program hit
rare earths in almost all of our 61 holes that we drilled in 2010.
theinvestar.com: Regarding the fact that companies
have worked on the property in the past, can you explain to our readers how the
mining industry works?
Mr. Brown: Sure. I should also note that our
shareholder base is now largely American. I’ve had a couple calls lately asking
if we are a Canadian company, and, yes, we are incorporated in Canada and our
subsidiary which owns the deposit, is an American company, but our shareholders
are from all over the world with a significant number being US investors and US
investment funds. Our exploration team, including Don Ranta and Jim Clark, is actually
almost entirely Americans as are several of our Board of Directors members.
Many mineral deposits are found by studying outcrops of
mineralization at the surface and then drilling around them to understand the
shape, size and grade of the deposit. At Bear Lodge, there is very little
outcropping rock and there is generally a 2-3 meter thick layer of soil or
colluvium that covers the mineralization that may otherwise be easy to find. As
a result, explorers take surface soil, rock and trench samples to target their
more expensive drilling but drilling programs are generally limited to a
certain amount of holes and the targets can be small.
In the case of Bear Lodge, several of the previous explorers
were looking for gold or base metals so the rare earths were of no interest to
them. When Molycorp was on the project, their exploration was cut short due to
not finding the higher grade rare earths mineralization and the takeover by
Hecla Mining Company did do some very good work at Bear
Lodge but their budgets and staying power were limited, and they found only the
Many exploration properties go through having several
companies exploring them before the geology is understood and an economic
deposit is found. Another example last year was a major gold discovery in
Mexico that was found by a junior exploration company after three major mining
companies had previously optioned and explored the project and all three had
walked away from it. The junior explorer hit approximately 300 meters of
approximately 1 gram per ton gold in their first drill hole.
theinvestar.com: So at the time you were looking at
Bear Lodge, you guys did not have a lot of competition in regards to claiming
these REE deposits correct?
Mr. Brown: Not only did we not have competition, it
was hard to get anyone to even look at the project at that time. Most of the
calls we made to generate interest in the project and to get financing started
with a 30 minute explanation about rare earth elements and that their uses were
growing in many of the new technologies out there. We had to educate each
At one point in the early 2000’s we dropped some of our
claims to save paying the annual claim fees but we re-staked these a few years
theinvestar.com: So Rare Element Resources was an
early mover in the industry with your pick of the available deposits?
Mr. Brown: We were really focused on the Bear Lodge
project in the early 2000s but we have always kept files on many of the
deposits around the world. Jim Clark and Tony Mariano, one of our consultants,
have been to many of the rare earths deposits and occurrences around the world
and advise us on what makes sense. We have had a hard time finding any projects
that we would want to acquire but have a short list of projects if they come
available. The other problem in the early days was that even if we knew of a
good project, it was very difficult to get funding to acquire it or to explore
it. In the beginning, there was really just the original Rare Earth Metals
Inc., which is now VMS Ventures, Great Western, Lynas, Avalon and Rare Element
theinvestar.com: Ok, so fast forward to today. There
is a lot of competition for deposits and the attention of the market. Looking
at the industry as a whole where does Rare Element Resources stand?
Mr. Brown: There is a lot of competition among the
rare earth companies out there but our belief is that action speaks louder than
words so we are just working hard to advance our project towards our stated
goal of producing rare earths by 2015. Molycorp and Lynas are well ahead of us
in advancing their projects to production. There are a few Australian companies
and Canadian companies that are close to where we are (Prefeasibility Stage)
and several of us have the target of going into production by 2015 but my view
is that there will still be shortages of rare earths at that time. We will have
our third resource report out in the spring of 2011. We have completed our
preliminary economic assessment and are now working on a bulk sample pilot
plant test and our pre-feasibility study. The Bear Lodge deposit has the second
highest grade of any deposit in North America, and our location and
infrastructure are outstanding. The real issues for getting into production are
the permitting timeline and the metallurgical or recovery process that must be
developed to produce rare earths. We are currently advancing nicely on both
these fronts – the details of this progress are in our recent news releases.
theinvestar.com: So what is your timeline to
production? And who do you see being in production before you?
(Please be real specific on timeline if you could)
Mr. Brown: At the latest industry conferences I have
learned the following:
Lynas plans to produce 20,000 tonnes per year starting in
Molycorp is producing about 3,000 tonnes per year now and
plans to increase that to 20,000 tonnes by the end of 2012, and to a total of
40,000 tons per year at some point in the future.
Rare Element plans to produce approximately 10,000 tonnes
per year starting with about half that in 2015. We still have permitting, more
exploration, and more metallurgical studies to do, but at this point, the
project looks like it will be one of the top REE mines in the world outside of
China. Could we be delayed? - of course we could, and so could everyone –
Molycorp and Lynas have both pushed back timelines in the past year. It is
pretty normal for complicated mining projects to take a year or two longer than
plans call for. If that happens to a few of us, the market will be even more
desperate for rare earths.
Our timeline is as follows:
2011 – Complete our pilot plant test; update our resource
calculation; begin permitting processes; continue to confirm and improve our
metallurgical process; complete additional exploration and in-fill drilling;
and complete our pre-feasibility study.
2012 – Continue with many of the same items from 2011 plus
complete our full feasibility study.
2013 – Finish permitting, metallurgical testing and prepare
for financing construction. Also, complete anything that is unfinished from
2012 in case of delays.
2014 – Begin and complete construction of the mine and mill.
2015 – Begin production at the mining rate of 500 tons per
day which will produce about 5,000 tonnes of REOs in the first year. This is
50% of our planned capacity.
2016 – 2017 – Increase production to our life of mine rate
of 1,000 tons per day to produce about 10,000 tonnes per year REO. We
initially plan to produce a concentrate for sale but then after a few years
construct an extraction and separation plant to produce the individual elements
in the form of oxides (REO).
Arafura and Alkane are on a similar timeline as Rare
Element, and Arafura may be in production a year or so earlier. Alkane will be
a small REE producer. Avalon is on a similar timeline to us and so is Quest
Rare Metals. Great Western has a very small project in South Africa planned to
satisfy their manufacturing needs, but it is very high grade. India has a small
project that is supposed to be online in the next few years at a very small
production rate. There are also projects in Vietnam and the old soviet block
countries that some of the Japanese groups are working on. I understand those
will be quite small producers if they are successful.
There are other companies with good projects that are
advancing nicely and have just done resource reports such as Tasman and Hudson.
Both of their deposits are reported to be growing and they have very good
management teams, as do several of the other companies that I’ve mentioned.
Stans Energy and UCore are working on their resource reports
also I believe.
There are also some large exploration projects in Greenland
and Russia but I’m not sure if they are active, or if so, how active, at
There have been very few new discoveries of REE deposits but
we have been watching closely a few companies that are starting to report
higher grade intersections from drilling.
It just seems to me that most of these projects have been
around for some time and now are moving ahead faster, but that there are still
very few of them to meet the estimated growth in demand for all of the rare
earth elements. At least most of the companies now have more capital to move
the projects ahead – it was pretty hard to get funding for rare earth projects
I don’t think that people realize how critical the elements
are to our everyday life to ensure that there are good new sources of rare
earths being produced. Without rare earths many of our current technologies
would be much less efficient and cost much more – including gasoline refining,
wind energy production, magnets for small electric motors in many types of cars
that make them more fuel efficient by being smaller and stronger, but I’m
getting off topic.
theinvestar.com: Currently Rare Element Resources is
planning more drilling, both for the REEs and the gold which will change your
NI 43-101 reports, but will it be enough to move up the resource calculation in
terms of Indicated versus Inferred? What percentage of the drilling is infill,
exploration and drilling, if you could?
Mr. Brown: Rare Element’s geological teams drilled 61
holes on the Bear Lodge Rare Earths project, another 40 large diameter holes
for bulk sample processing tests, and another 34 holes on gold targets during
2010. We had over 25 people working on the site this year including 5 drill
crews, and the geological teams to track, log and analyze core and drill
cuttings. We now have a large warehouse in Sundance, Wyoming which is stacked
floor to ceiling with drill core.
The 61 REE holes were about two-thirds infill drilling holes
– those that were designed to upgrade the resource category to indicated with
closer spaced holes – and the other one-third were step out holes or were at
the new target called Whitetail Ridge. We spent about $5 million on the
exploration and testing work at Bear Lodge in 2010. What was very interesting
to us is that almost every hole hit rare earths and we hit higher grades in our
program this year than we have ever hit before – several of our holes had
intercepts of greater than 10% rare earth oxides. It is important that people
take the time to read the news releases with the details of those drill holes
and they are available on our website. There is also lots of low grade
materials around 1.5% in those drill holes.
I don’t know yet how much of our resource will be upgraded
into the “measured” or “indicated” category but we will know that in the second
quarter of 2011 when our updated resource estimate is done.
theinvestar.com: Also, if you can, what should
investors expect in regards to the total tonnes of REO and total ounces of
Mr. Brown: Well, our current resource is 17.5 million
tons of inferred resource with an average grade of 3.46% REO at a 1.5% REO cut
off grade, but we don’t know what kind of an increase we will get until we have
our formal report issued.
Our stated target for the gold project resource is that it
would be around 1 million ounces or more of gold, but, again, we will only know
for sure when the report is completed.
theinvestar.com: So where does Bear Lodge rank among
the projects out there in terms of the grade of your deposit and total size?
What about specifically in regards to projects in the USA?
Mr. Brown: I will give you a short list of the
projects by grade but it is really important to look at the make up of that
grade. For example, a 6% REO grade at Bear Lodge is roughly equivalent to the
8% grade at Mountain Pass because we have more of some of the high value rare
earths (terbium, dysprosium and europium) than does Mountain Pass (Molycorp).
Having said that, an 8% grade is very high. Avalon and Quest have lower grade
deposits but they talk a lot in their news releases about “heavy” rare earths.
While the atomic number does not actually mean much – you need to look at the
actual value of specific rare earths – both of those projects do contain higher
proportions of the higher value rare earths even though their overall grades
So, having said that, here is the list of project by grade
off the top of my head (please excuse any errors!):
- Lynas Corp in Australia – 9.3%
- Moly Corp in California – 8%
- Our Bear Lodge project in Wyoming and the Bayan Obo mine
in China are both around 3.5% but we do have a smaller but higher grade
resource area averaging 6% REO. I should mention that info from China is
hard to find and that we don’t know how big the Bayan Obo deposit is,
except that we believe it to be very large.
- Frontier Rare Earths (Africa) – 2.6%
- Avalon in northern Canada – 1.3% overall, but they also
have a higher grade pod with an average grade of about 2.3%.
- Quest also in northern Canada – 1%.
- I’ve left Great Western’s South Africa project off this
list as I think that the tonnage is currently only about 200,000 tons but
the grade is around 17%. If they can find more the high grade ore it could
be a very economic project. Again, these numbers are off the top of my
head so people should verify them on each company’s website – please
excuse any errors or omissions!
- There are others around 1% and two or three, I think,
around 0.6% after that.
theinvestar.com: Alright so you have the world-class
Bear Lodge Project, but what are your plans in regards to the HREEs that
everyone in the world is looking for, including China?
Mr. Brown: Well we are pretty happy with the mix of
elements that we have for two reasons:
- We have small quantities of the high value elements
terbium, europium and dysprosium in our deposit and our metallurgical
testing shows that our recoveries of these elements will be the same as
for all of our rare earth elements, and,
- We also have good quantities of the “big” market rare
earths such as lanthanum and cerium, and particularly the highest forecast
growth elements of neodymium and praseodymium used in rare earth magnets.
61% of the estimated revenue from
Bear Lodge is made up from europium, terbium, dysprosium, neodymium and
praseodymium. These are the most valuable light and heavy rare earths.
Neodymium, Praseodymium, Dysprosium, and Terbium all would be used in
high-strength magnets, which is the largest and fastest growing market for rare
As I said before, it is really
important to look at the specifics of these projects in terms of the actual
value of the individual elements and each of their growth prospects. Prices of
the elements are available at www.metal-pages.com. The capital and
operating costs are also key to any mining project and must be studied to
determine if a project will make it. The current prices of rare earths are so
high that it looks as if many projects are currently economic. Rare Element
used very low historic prices in our PEA and has a lot of focus on our input costs
so that we can make it at these low prices and if prices stay high, we will
have an extremely robust project.
theinvestar.com: So you have not done any drilling at
Eden Lake? And in regards to the grab samples, based on the field work and
assays, how large is the target area you will drill test?
Mr. Brown: The Eden Lake and Nuiklavik projects are
early stage projects that are really prospects for us. We acquired them cheaply
and our strategy with them is to option them to third parties who are interested
in spending the high risk/high reward dollars to make a discovery on them. This
was just a way of giving us a few more irons in the fire on projects that do
look very prospective.
If any drilling is done at Eden Lake, it is up to Medallion
Resources who we have optioned the project to which is lead by Dr. Bill Bird,
the past president of Rare Element and a good friend. He is a Phd. Geologist
and a very good person to have studying that project. If there are rare earths
there to be found, Bill is an excellent person to be running the exploration
theinvestar.com: Based on the geology, what kind of
target are you looking for (near-surface, etc.)?
Mr. Brown: The target at Eden Lake is an at-surface
carbonatite with minerals that contain rare earths. This is the old VMS
Ventures project that they had for years before they could no longer fund it.
theinvestar.com: More importantly what type of rock
do your models tell you it should be hosted in? (If eudialyte, does Rare
Element or Medallion have a process or any lab work giving you confidence this
could yield something economical?)
Mr. Brown: Interesting question. You seem to be aware
that no one has ever processed rare earths from eudyalite minerals, or so I’m
told. That is not the target at Eden Lake. Dr. Bird of Medallion did some
preliminary work and is shifting his focus to the potential of the area to host
a carbonatite type deposit. REE bearing minerals include apative, britholite,
and allanite. Remember, though, that is currently a prospect – there are
indications that something may be there but a discovery has not yet been made.
As for eudyalite, I’m quite sure that someone will soon come
up with an economic process to recover rare earths from it, especially if
current prices continue into the future.
theinvestar.com: The company recently raised $50
million plus. This isn’t enough to get you to production, so what is the plan
for this cash and when will you have to return to the market?
Mr. Brown: Well, we still only have 43 million shares
outstanding which many people seem to forget. We don’t like to issue a lot of
stock, and have a tighter capital structure compared to most of our peer group.
Today, we have roughly $70 million in the bank. Our budget
is $15 million for 2011, another $15 million for 2012, another $10 million for
2013, and we should have about $25 to $30 million left when we finance for
construction. Our initial capital costs at Bear Lodge are estimated in our PEA
at $87 million for a concentration plant, and if we then choose to construct a
separation plant, we would also need another $150 to $200 million. We would
likely finance some of the $87 million in 2014 by way of equity, but debt
financing for a portion of it would also make a lot of sense because it would
avoid further shareholder dilution and potentially be more tax effective for
theinvestar.com: Your stock really took off after the
Preliminary Economic Assessment, many were apparently surprised by the
numbers. Can you explain to investors what the PEA indicated?
Mr. Brown: Any investor should really read the
Preliminary Economic Assessment and I strongly encourage them to do so, or at
least read the summary section. The PEA was based on open pit mining from the
top portion of the deposit about 5 million tons of oxide ore over a 15 year
period. The revenues were based on a pricing basis of $5.51 per kilogram of REO
concentrate (three year historic average to August, 2010) with a grade of 42%
to 45% REO. The capital costs to build the mine and mill were estimated at $87
million and the sustaining capital which comes from the profits of the project,
is estimated at another $87 million. Our operating costs were $213 per ton of
ore which is high. We expect to be able to reduce this as we do further optimization
work and have already made some progress on this.
The net present value (at 10% discount rate) of the after
tax cash flows were $213 million in our model, and the internal rate of return
was estimated at 40%. The payback of capital was estimated to take about 3.1
years with a three-year scaling up to full production. We were conservative in
all the assumptions used in the PEA.
The biggest factor that we were very conservative on is the
price of the rare earths. Firstly, if we do go to the stage of producing
refined rare earth oxides, the prices are generally 35% higher than for
concentrates, but we will also have another $150 to $200 million in capital
needed. Secondly, the current price of concentrates is $38 per kilogram versus
the $5.51 we used in our PEA.
theinvestar.com: Now the pricing models used in the
assessment, can you explain how those prices were arrived at?
Mr. Brown: We took an average of the last three years
prices for rare earth carbonate concentrate containing 42% to 45% REO from the
data provided by Metal-pages.com. This included 2008 and 2009 which had very
low prices for all metals.
theinvestar.com: So these prices were conservative.
How do the numbers in your report compare to others in the industry in their
Mr. Brown: I’ve only looked at two other PEAs and
they used much higher, projected prices to arrive at their NPVs, and some used
REO prices when their studies indicated they would produce concentrate. In
fact, they may be right and we are in great shape if the actual prices we get
for our products are closer to what they used. I won’t quote the prices because
you cannot compare them directly without first looking at the mix of elements
in each project.
theinvestar.com: So looking forward, where is Rare
Element Resources planning for prices to settle at? Lower, around the current
level, or higher?
Mr. Brown: I can see prices continuing to increase for
some time but I also expect a pull back for some of the elements at some point.
Cerium will likely be in oversupply after Molycorp and Lynas are in full
production. Other elements that may have softer prices include samarium and
possibly lanthanum, gadolinium and yttrium. The question is where will prices
settle, and I’m not sure of the answer. My best guess is that they will be
about 3 times to 4 times the historic prices that we used.
theinvestar.com: Among the REE experts there is a bit
of a debate raging about companies bringing production online and how far down
the value chain they need to go to be successful in the business. Rare Element
Resource’s plans are currently to focus on mining the ore and making REO
Mr. Brown: That is what we modeled in our PEA but we
do plan to also construct a separation plant at some time. We have a history of
delivering on our promises and targets, good news or bad, and we would not want
to promise to be a mine to magnets company unless we were 100% sure we could
become that. A mining company is typically a mining company and leaves the more
detailed processing to others, up the next step of the value chain. At this
point we have no plans to become a specialty product company and we are keen to
take samples of our product from our pilot plant test this summer and begin to
talk to potential customers for our concentrates.
theinvestar.com: Is the magnet, alloy or specialty
product sectors something you will look at entering sometime down the road?
Mr. Brown: We are not looking at that at this time.
There is a big difference in the skill need to be a mining company and the
skills needed to be a specialty products company and our group is made up of
Phd. Geologists, metallurgists, and mining engineers.
theinvestar.com: What is management’s ownership in
Mr. Brown: Management and the Board own about 2.5
million shares in the Company or about 5.8%.
theinvestar.com: What is the current share count
after your financing?
Mr. Brown: After the financing our fully diluted
common shares outstanding is about 46.6 million shares and we currently have
about 43.2 million shares issued.
theinvestar.com: So over the next 5 years, where do
you see Rare Element Resources and the industry? Who is in production?
Mr. Brown: We see us in production or very close to
it; likely Molycorp and Lynas, and hopefully 2 or 3 others, maybe Arafura,
maybe Quest and/or Avalon and one other Australian company, on top of small
production from India, Africa, and maybe Vietnam.
theinvestar.com: We really haven’t seen any
consolidation in the industry, when do you think companies start filling their
strategic needs by acquisition? Or do you think it will be via the joint
venture of projects?
Mr. Brown: I think that there won’t be a lot of
consolidation in the industry for a while yet. The potential buyers can just
wait to see who can actually deliver, and the mining companies generally have
their hands full just trying to evaluate their projects and get them into
production. Consolidation is inevitable and we see it more as the large
multinational companies looking to secure supply that do the buying, instead of
the mining companies buying each other.
theinvestar.com: How will this affect Rare Element
Resources? Will you be consolidators, stay as you are, or be a seller?
Mr. Brown: Right now we are near the top tier among
our peer group of the mining companies but we are still a pretty small fish for
the large chemical or manufacturing companies, so we could be either, or neither.
Is that vague enough?
theinvestar.com: At current prices, how do you feel
your shares are valued? Fairly valued, undervalued or overvalued?
Mr. Brown: We calculated the net present value of our
cash flows on a portion (about half) of our deposit in our Preliminary Economic
Assessment and we did that calculation using historic prices of a mineral
concentrate of rare earths. The historic price was $5.51 per kilogram of rare
earths concentrate and the current prices are about 7 times higher at $38.00 per
kilogram. While our estimated capital costs may be a little higher as we update
our reports, we do expect that our historic three year average price will be
quite a bit higher. Our NPV in the PEA was $213 million but even if you just
increase it to $11.00 per Kilogram our NPV increases by a lot – and this is
with last year’s resource which we expect to increase from our 61 hole drill
program that we finished in 2010. It is also possible that our operating costs
could be reduced as we continue our tests for processing our minerals. It will
definitely be exciting for us to get our next resource report done, expand the
deposit with additional drilling, and complete our preliminary feasibility
study by the end of the year.
In terms of our share price, we noted that we only have 43.2
million shares outstanding and our market cap it much less than Avalon’s and a
fraction of Molycorp’s so I still see a lot of room to build the value of our
company for our shareholders.
theinvestar.com: Mark, once again thanks for taking
the time to tell your company’s story to our readers.
Mr. Brown: Matthew – thanks for taking the time to
look at the fundamentals of the company. I hope that this is useful for your