Matamec: metallurgy fine at Kipawa

SITE VISIT

NORTH BAY, ONT. –When at least one hundred companies in Canada claim to have some rare earth element (REE) showings on their properties and about five or six of them are serious contenders for making it into production, the difficulty becomes figuring out which ones will get to the finish line first.

Matamec Explorations (MAT-V) believes it will be first past the post with the Kipawa rare earths-yttrium- zirconium deposit on its Zeus property in western Quebec, about 350 km northwest of Montreal, and reckons it will be in production about four years from now.

That’s partly because the rare earths at Kipawa — 33% of which are the more valuable, heavy rare earth elements (HREEs) plus yttrium — occur in the coarse-grained mineral eudialyte, which the junior’s management believes will make the rare earths easier and cheaper to process.

“The unique thing about Kipawa is that the REE minerals crystallized early here, which caused coarse grains, and that is a real ad- vantage,” explains Alex Knox, Matamec’s geologist for the Kipawa project, noting that the coarse-grained nature of the eudialyte was the happy coincidence of two significant heating events.

“Some other rare earth deposits have crystallized when conditions were cooler and that makes them fine grained,” he says.

The solubility and coarseness of the REE-bearing grains of eudialyte was evident on a trip earlier this month to the site, where the rock containing the pink eudialyte minerals, which host the REEs, crumbled easily between ones fingertips.

“I have no doubt at all that we can get the REEs out of the eudialyte at the pilot plant stage,” Knox says. “We’ve already proven we can get it out by a non-aggressive attack or without the need of a strong acid solution at high temperatures.”

Knox was referring to recent testwork at SGS Lakefield Research on concentrates from Kipawa that resulted in an average 89% recovery rate for rare earths and yttrium.

Rock material from the eudialyte zone yielded rare earth leach recoveries of 89.2% and the heavy rare earth yield was 85.6%

The values were achieved in a proprietary process the company has developed that reduces the formation of silica gel. (Only 0.9% of the silica present went into solution during the test, resulting in an easily filtered material and the company is confident that a low-cost processing solution has been found.)

Matamec’s leading metallurgist, Les Heymann, has confirmed that the deposit is a potential source of HREEs plus yttrium that could one day compete with the South China clay deposits (0.03% TREOs).

“We wondered how we were going to recover the rare earths from the eudialyte but a year and a half later, we have,” says André Gauthier, Matamec’s president. “We have shown we can use conventional processes.”

Knox notes that the physical separation and ease of breaking down the eudialyte means the company can make a physical concentrate and submit 10-20% of the rock to the REE recovery process.

The question now is to decide which physical separation method is best, whether it be flotation/gravity, an electromagnetic process, or something else.

Kipawa, about 90 km northeast of North Bay, Ont., is also 500 metres from a logging road that runs 60 km west to Temiscaming, Que., — making it relatively inexpensive to explore and mine. (You can also get there by flying to North Bay and then taking a 45-minute helicopter ride to the site.)

Having road access means drills can be brought in on flatbed trucks and drilling costs will be about half the cost of what they might be at other more remote rare earth projects in the country that don’t have road access, Knox argues. “You’re getting more drill holes for your dollar here than anywhere else.”

The deposit, which is open both laterally and at depth, contains a high-grade pod, about 1 km long, that outcrops at surface, and there is very little overburden. There won’t be much waste rock and the waste rock that there is — granite — is “as benign a rock as you could mine,” Knox says.

“It’s at surface and we don’t need a big operation to produce our rare earths,” adds Gauthier.

The deposit is situated on a hill and the mineralization gently dips about 25 degrees (following the contour of the hill), which also will mean a lower stripping ratio.

REE mineralization can be traced over a strike length of 1.45 km and occurs in a syenite unit that averages 52 metres thick.

Kipawa sits within a major alkalic igneous complex and the deposit is characterized by an overall enrichment in zirconium (zirconium is not a REE mineral), and three spatially distinct zones of HREEs and yttrium mineralization.

An updated resource estimate is due in December 2010 or January 2011, and a preliminary economic assessment may be finished by the spring. Knox concedes the new resource won’t double the existing one, “but there will be significant increases.”

One of the best results from Matamec’s summer 2010 drill program (20 holes totaling more than 2,115 metres in the central and eastern part of the deposit), for instance, yielded 0.954% TREOs with 38% heavy rare earths plus yttrium over 16.5 metres.

Currently, Kipawa has a National Instrumental 43-101 resource (at a cutoff grade of 0.10% yttrium oxide) of 3.35 million tonnes grading 0.58% total rare earth oxides (TREOs) with 0.885% zirconium in the indicated category, and inferred resources of 6.48 million tonnes grading 0.60% TREO with 0.99% zirconium.

The ratio of heavy rare earths plus yttrium is 33% in the indicated resource and 34% in the inferred resource, with heavy rare earths defined as terbium to lutetium.

Kipawa’s ratio of HREOs plus yttrium to TREOs would be higher at around 40% if the company included a few other REEs (europium and gadolinium) that aren’t technically considered heavies, but which are included in some other companies’ classification of HREEs, Knox points out.

He also notes that Matamec’s Kipawa deposit has about twice the proportion of heavy rare earth elements as Avalon Rare Metals’ (AVL-T) Nechalacho project, and just one-tenth Avalon’s market capitalization.

Nechalacho, in the Northwest Territories near Thor Lake, has 20.45 million tonnes grading 1.75% TREOs; 23% of which are HREOs, in the indicated category and 182.56 million tonnes grading 1.4% TREOs; 14.7% of which are HREOs, in the inferred.

Knox drilled Kipawa in 1988-90 while working for Unocal. The deposit was discovered in 1958 by a radiometric survey. Unocal owned Molycorp (MCP-N) at the time, which later identified Kipawa (in the mid-1980s) as a potential source of yttrium.

Unocal and Molycorp walked away from the project, however, after doing only limited exploration.

Matamec picked up the property in 2003 and managed to buy airborne radiometric data and other unpublished exploration results from Unocal worth about US$100,000, for US$10,000.

Knox is excited because he has a 35-km complex to work with and believes he has just “scratched the surface.”

“Kipawa is not going to be 50-60- 80 million tonnes, nor is it going to be high grade as some of the other HREE-rich deposits, but I think we’re going to be the first producer on the block,” he says. “Some of the other guys coming behind us are going to have to fight for market share and the only way they can do that is by cutting their price.”

At presstime in Toronto, the Montreal-based junior was trading at 38¢ per share and over the last year has traded in a band of 11¢-50¢.

Matamec has 98.4 million shares outstanding and a market capitalization of about $36.5 million. The company has $1.5 million in cash and no debt.

On Nov. 18, the junior announced a $5-million private placement at 40¢ per unit and 50¢ per flow-through share. Each unit consists of one share and a half warrant. (Each full warrant will give the holder the right to buy a share for 18 months at
50¢.)

About $3 million of the $5 million will be spent on advancing the metallurgical testwork at Kipawa.