Commerce optimistic about finding project partners

Commerce Resources (TSXV: CCE; US-OTC: CMRZF) aims to complete prefeasibility studies for the Ashram rare earth element deposit on its Eldor project in Quebec, and the Upper Fir tantalum-niobium deposit on its Blue River project in B.C.

“It is certainly our intention to shepherd these projects to be in production … the immediate goals are finishing prefeasibility studies for both deposits,” Chris Grove, Commerce’s president, says in an interview.

The 58-year-old executive started as a shareholder in the junior’s original seed financing in 1999. By 2004, Grove, previously a professional musician, joined the investor relations department, moved to corporate communications and became the firm’s president last September. Former president David Hodge remains the CEO. Over the past decade, Grove helped Commerce raise more $70 million.

The junior will spend most of the $11 million it raised last year to advance prefeasibility on its 100%-owned Ashram deposit, while it looks for non-dilutive financings to complete the study before the end of 2015, as well as initiate a prefeasibility study on the Upper Fir deposit.

To help with its search, Commerce is using Deloitte Global Metals and Mining Group to identify and evaluate processing partnerships, joint-venture agreements and off-take opportunities.

“In terms of both of our projects, we humbly believe they are partner ready. What we are really focusing on securing are joint-venture partners for both our assets, and those partnerships will logically bring in some kind of project-level investment,” Grove says.

Two large Asian firms have expressed interest in the Ashram deposit. Commerce is hopeful that one of the firms could close a transaction by year-end. Meanwhile, a leading American electronics component manufacturer has entered a nondisclosure agreement at the Upper Fir deposit, Grove says.

“The tantalum supply market is severely constrained right now, mainly because three of the largest industrial miners all shut down in the last couple of years, and there was a huge reduction by a fourth industrial miner. So this American company certainly has an interest potentially in accessing, at some point, the supply that we could bring to the market, or hopefully being a partner with us.”

The firm’s geological team, including Grove’s nephew, hand-staked the Blue River claims in late 1999 and 2000, with management predicting tantalum would see an upswing in demand and price. While the firm worked on two deposits at Blue River, it was only in 2005 that it began drilling the Upper Fir tantalum-niobium deposit, Grove says.

A 2011 preliminary economic assessment (PEA), released by AMEC, shows $379 million in capital costs. An underground mine at Upper Fir could produce 700,000 lb. tantalum oxide and 6.3 million lb. niobium oxide a year for at least a decade.

In 2006, the firm saw a surge in the value of niobium as the world’s largest niobium producer in Brazil suffered from metallurgical issues. This piqued Commerce’s interest in acquiring a primary niobium deposit, leading it to stake the Eldor property in Quebec’s Nunavik region. The 190 sq. km property comprises 404 claims, of which Commerce staked 396 between 2007 and 2010. It bought the remaining eight claims from Virginia Mines in May 2007.

“Our focus in claiming the Quebec Eldor claims was really all about niobium, because it had gone up 400% [in value],” Grove notes. The junior initiated a drill program in 2007 and two years later discovered the high-grade Ashram rare earth element deposit.

In May 2012, the junior published a PEA on Ashram. The study, prepared by SGS Canada, envisions the deposit as a 4,000-tonne-per-day open-pit operation, producing 16,850 tonnes total rare earth oxides (TREO) a year, including 2,870 tonnes neodymium, 96 tonnes europium, 26 tonnes terbium, 106 tonnes dysprosium oxide and 440 tonnes yttrium oxide, over a 25-year mine life. Estimated capital costs are $763 million.

The deposit has a 44% pre-tax internal rate of return, and a $2.3-billion net present value at a 10% discount rate, with a 2.3-year payback.

The mine life is based on 15% of the deposit’s total resource. As of March 2012 Ashram contains 29 million measured and indicated tonnes grading 1.9% TREO and 220 million inferred tonnes grading 1.9% TREO, using a 1.3% grade cut-off. The mineralized footprint extends 700 metres along strike, over 500 metres across and to more than 600 metres deep.

This year Commerce has 4,000 metres of infill drilling planned at Ashram to support a resource update. It also started pilot plant testing on a bulk sample.

In 2014, the firm completed bench scale testing, where it confirmed a processing flowsheet that contained a grinding circuit, a flotation circuit, a weak hydrochloric acid (HCl) leach to discard carbonate, and wet high-intensity magnetic separation (WHIMS) to eliminate fluorite, Secutor analyst Maria Kalbarczyk notes.

This year it intends to run 3.5 to 4.5 tonnes of material through the flotation pilot plant circuit to produce a flotation concentrate, which will be fed to the HCl pre-leach circuit, Kalbarczyk writes, adding that the firm could kick off the WHIMS pilot-plant testing in mid-March 2015.

The pilot plant should produce several kilograms of marketable mixed rare earth concentrate by August. The data from the pilot plant will go into the prefeasibility study.

While the start-up costs and extraction rate should stay the same in the prefeasibility study, Grove notes the study will include metallurgical improvements at Ashram. The firm can now produce a 43.6% TREO mineral concentrate with mass reduction of 97%, up from a 10% TREO mineral concentrate with mass reduction of 88% in the PEA, at no additional operating costs.

Meanwhile, Grove believes the firm could benefit from the expected near-term improvements in the rare earth element space.

“Sooner than later we will see tighter supply and higher prices. I think we will also continue to see the Chinese looking more to foreign assets for feedstock for their incredible processing capacity that they’ve built up over the last decade in China,” he says.

Commerce shares recently closed at 16¢, within a 52-week range of 12.5¢ to 34.5¢.