Junior Dickies

Junior Dickies

Fresh from successful financing, Quantum Rare Earth ready to shift Nebraska niobium project into high gear

 

Booth # 2819 • quantumrareearth.com • 604.669.9330

Peter Dickie
President & CEO

Quantum Rare Earth (TSXV: QRE) is finding itself in the middle of a perfect storm: demand for niobium is on the rise; only three mines address the global demand; and the United States, which imports 100% of its supply of this strategic metal, is keen to see the development of a domestic source such as what Quantum Rare Earth potentially has in its hands. "The US market is keenly aware of the fact that right now their niobium supplies are being controlled outside of their country so they are certainly paying keen attention to the domestic sources that are being developed," said company president and CEO, Peter Dickie. In this interview, Mr Dickie discusses how the company's core asset, Elk Creek Carbonatite in Nebraska, is positioned to tap opportunities in this highly profitable industry.

Resource Intelligence: You're about to announce your new 43-101 resource estimate on the Elk Creek Niobium Deposit. What information can investors expect?

Peter Dickie: Our new 43-101 compliant resource estimate is scheduled for delivery during this quarter, which will detail in current terms exactly what we're sitting on at the Nebraska project and also determine our final drilling plans for 2011. It's going to have historic information from Molycorp as well as updated assay information that we're processing at the moment. Molycorp did extensive work – over 150,000 feet of drilling – on the project in the 1970s and 1980s and they actually came up with a resource estimate. We're having a lot of that core re-assayed now and we're also in the process of digitizing all of their historic data. Back in the 1980s, when the Molycorp resource calculation was performed, it wasn't done to 43-101 standards as they are today. This new report will detail in measured, indicated, and inferred terms what we have in the way of our core niobium zone resource and once we have a look at those numbers we'll be able to determine how much drilling we have to do in order to bring the resource into a suitable category that would allow us to step into a pre-feasibility or even a full feasibility study on the project.

RI: What opportunities do you see coming up in the niobium market and how is Quantum positioned to capitalize on those opportunities?

PD: The supply side is primarily handled through the three primary niobium mines: one in Quebec and two in Brazil. CBMM, which owns the Brazilian mines, recently announced that they would be increasing production by 10% in the coming year in order to match increased demand. This demonstrates the fact that production from these mines is largely demand-driven, which helps maintain price stability and aids in the long-term growth and stability of the niobium market. When end-users see the ability of the producers to increase production to meet demand without any real or artificial restrictions, they are comfortable in using niobium in their products and they won't feel that they would face an undesirable situation of either skyrocketing prices and/or restricted supplies. Right now, the market is growing by roughly 10% per year and there is certainly room for additional players in the field. There are currently very few primary niobium mines that are being discussed and developed worldwide. The potential ones that are being discussed in North America are of lower grade than what we believe we have in Nebraska. There is an added factor in here in that the US is a fairly substantial user of niobium and they currently have zero production in the US for niobium. It is 100% imported. So for the US market, it's a home-grown solution to a high-demand strategic metal product that they require.

RI: Your stock chart shows a spike in price during the first week of January 2011. What got investors excited?

PD: I think there was a little bit of spillover effect from the news that came out at the end of December regarding China's additional cutbacks to their exports of rare earths. We have the words "rare earths" in our corporate name and we do have two projects, one of which is the Elk Creek project in Nebraska which is primarily a niobium project but also has very extensive rare earths zones. We also have the Archie Lake project in northern Saskatchewan, which is strictly a rare earth project, on which we've done a fair amount of work over the past two years. We're preparing to drill that as soon as weather allows.

RI: Quantum enjoys the support of the local community where it's located. How important is that for the project?

PD: Corporately we believe the success of any project lies in part with participation, cooperation and support of local residents, businesses, and government. Any development that we would look at should not only be for the benefit of Quantum and our investors but also for the local communities in a state, without whose cooperation we'd be hard-pressed to move forward. It's a situation where it's a potential win-win for all players involved particularly when we get broad support as we are receiving now.

RI: How is the company doing financially?

PD: We raised a total of $6.5 million in late fall 2010. A substantial portion of that money is earmarked for Elk Creek. Our new 43-101 that's due out this quarter will largely determine our monetary needs whether we require extensive drilling or if we are able to go straight into a feasibility study. Certainly, there is funding on hand to complete a fair amount of drilling and begin work on a feasibility study if that's what the 43-101 dictates.

RI: What other features does the project have that investors should look at when evaluating it?

PD: Molycorp did a lot of drilling on the Nebraska project that revealed three potential products on the upside of this one property alone. They concentrated on one particular area that had a substantial amount of high-grade niobium but they also did some widespread drilling throughout a large portion of the property. They came up with some very significant intercepts of rare earth elements which we will also be focusing on. As a third added bonus, they also came up with substantial intercepts of phosphate, which is used in producing fertilizer, and this is right in the heart of the farming belt for the US.

RI: Investors also want to know the team behind the company. Could you briefly discuss the team's expertise?

PD: I have been around the business for more than 20 years, both in private and public companies. I've held a number of senior management positions in those companies and I currently sit on the board of several companies in a fiscal management advisory capacity. Our team is fairly lean, but consists of six or seven professionals with a range of backgrounds in geology, engineering, and finance. Many of us played senior management roles in both junior and major exploration and mining companies. The expertise is certainly coming into the project and as the project becomes more and more developed and more widespread in terms of the investment and the geological and engineering fields, I believe that we are going to be able to attract additional talent from larger companies with a fair degree of ease.

RI: How heavily invested is management in the company?

PD: Currently management owns approximately 20% of the stock, which means that the interests of our investors are also our interests. Speaking personally, I've invested a substantial amount of money in the company.

RI: What are your priorities this year?

PD: The priority is the Nebraska project. The exact extent and amount of work that gets completed down there and the direction of that work will largely be determined by the 43-101 report. We do plan on doing an extensive amount of drilling this year on it and hopefully we will be in a position to start work on either a pre-feasibility or a full feasibility study. In addition, we have the Archie Lake rare earth project on which we've done a fair amount of surface work. It's a property that has never been drilled but is definitely drill-ready. We ran into weather issues in the fall but as soon as those weather issues clear up this spring we'll be in there drilling as well.

RI: Is there any other information that you think investors should know?

PD: Investors should note two things when considering Quantum Rare Earth: first is our recent financing which raised about $6.5 million. The vast majority of the amount, almost 90%, was by about seven institutional investors keen on seeing the further development of the Nebraska project. So that bodes well for future financing abilities on the project. The other thing is to focus on the fact that niobium is a strategic metal in the US. It's very integral to the automotive, the steel industry and any pipeline construction industry and it is also a very integral part of the aerospace and military industries. The outlook in general is very rosy but the outlook in the US is particularly rosy because of the fact that niobium is a strategic metal and is imported 100%. The US market is keenly aware of the fact that right now their niobium supplies are being controlled outside of their country so they are certainly paying keen attention to the domestic sources that are being developed. They realize the need for home-grown niobium supply, from both an economic and security point of view, for their future needs.

Investor Highlights:

• Stage: Completing re-assaying and 43-101 resource calculation on niobium deposit, exploratory drilling on additional projects
• Market cap: $39 million as of February 1, 2011
• Share price: up 38% in 12 months; 525% in 24 months
• Share price: $0.50 as of February 1, 2011
• Commodity: Niobium and rare earth elements
• Production planned: T.B.D.
• Mine life: T.B.D.
• Cash: $4 million as of February 1, 2011

Highlights:

• Huge interest in the company's flagship Elk Creek project from institutional investors bodes well for the project's future financing
• Aside from high-grade niobium, Elk Creek has potential for rare earth elements and phosphate resources
• Lack of domestic source for niobium in the US brings keen interest to local players

About the Author

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