Matamec signs MOU with Toyota Tsusho on Kipawa

Shares of Matamec Explorations (MAT-V) have taken off following the junior’s announcement that it signed a memorandum of understanding with the trading arm of Toyota Motor Group to fast track the development of its Kipawa rare earth deposit in Quebec.

News of the non-binding memorandum of understanding (MOU) with Toyota Tsusho sent Matamec shares up 12% to 32¢ on Dec. 12, with 1.3 million shares changing hands. 

“It’s a real game changer,” Caroline Wilson, Matamec’s director of investor relations, says of the agreement with Toyota, which was two years in the making. “We now have one of the biggest end-users and buyers of rare earths. And what is important about the MOU is that it will not just give us financial aid, but it will also give us the technical aid to fast track to production.”

Wilson notes that Toyota Tsusho has the technical ability to mine and extract rare earths through its vast supply chain – a capacity that is rare outside of China, and something Matamec needs.

“Outside of China there is very little ability to extract and separate the rare earths, so we gain huge advantage to tap into the expertise that Japan has,” Wilson explains, noting that Toyota Tsusho has a rare earth deposit in development in Vietnam and has experience in the mining, metallurgy and separation of rare earth elements (REEs).

The Kipawa deposit offers the Japanese trading company access to – among other rare earths – dysprosium, which is a heavy rare earth. “They want to secure a supply of heavy rare earths for their electric cars, and they want to get it as quickly as possible,” Wilson says. “It’s in their best interest to fast track Kipawa into production.”

Matamec plans to have completed its preliminary economic assessment of Kipawa by 2012. 

Under the MOU and after a designated period of due diligence, Toyota Tsusho has agreed to pay up to $17.5 million of the cost of completing a feasibility study. If the cost of the feasibility study exceeds $17.5 million, Toyota Tsusho will pay 49% of the additional cost. Once a production decision is made, the two companies will set up a joint venture in which Matamec will hold a 51% stake and Toyota Tshusho the remainder. 

Wilson says Matamec is aiming to put the Kipawa deposit into production before the end of 2014.

In June the company released an updated resource estimate for the deposit outlining indicated resources of 63,850 tonnes of total rare earth oxides (TREO) and 17,780 tonnes in the inferred category, at a cut-off grade of 0.3% TREOs. The heavy rare earth oxides and yttrium combine for an average of 36% TREOs, totalling 22,940 tonnes of indicated and 6,300 tonnes of inferred heavy rare earth oxides and yttrium.

Rare earths at Kipawa occur in the coarse-grained mineral eudialyte, which the junior believes will make the rare earths easier and cheaper to process. The deposit is on Matamec’s Zeus property in western Quebec, 350 km northwest of Montreal. 

In mid-2011 Matamec explored the lateral extension of the deposit through trenching and discovered an outcrop with significant eudialyte mineralization 300 metres west of the main deposit.

At presstime Matamec traded at 38.5¢ per share within a 52-week range of 20¢-70¢.