MDN is more than just a gold play (December 08, 2010)

MDN (MDN-T) may be best known for its 30% interest in the producing Tulawaka gold mine in Tanzania operated by Barrick Gold (ABX-T, ABX-N) and a portfolio of exploration projects in the surrounding Lake Victoria gold district. But some investors are probably just as interested in the junior’s 67.5 % stake in Crevier Minerals, a private company in Quebec with a large tantalum and niobium resource.

Iamgold (IMG-T) owns the remaining 32.5 % stake in Crevier Minerals (Les Mineraux Crevier), whose project  50 km north of Girardville in the Lac Saint-Jean region of Quebec, has NI 43-101 measured and indicated resources of 25.4 million tonnes grading 0.196% niobium oxide and 234 parts per million tantalum oxide.

Inferred resources add 15.42 million tonnes grading 0.17% niobium oxide and 252 ppm  tantalum oxide. The cut-off grade used was 0.1% niobium.

The resource estimate was calculated after 6,480 metres of drilling in the second half of 2009 and is the basis of a feasibility study that is expected out by June 2011.

A scoping study in 2009 estimated an 18-year mine life at 4,000 tonnes per day with annual production of 1.7 million kilograms of niobium oxide and 178,000 kilograms of tantalum oxide at a cash cost of $47 per tonne ore.

At US$51 per kg of niobium oxide and US$150 kg of tantalum oxide, average annual cash flow would be about $57.5 million with a net present value at a 5% discount of $272 million pre-tax and a pre-tax internal rate of return of 13.9%.

In a corporate presentation in November, MDN said it expects the project to be in production by the second half of 2013. About 75% of the metallurgical test work has been completed and the company is about 70% through an environmental baseline study.

As of Sept. 30, MDN held $12.9 million in working capital and no debt.

Niobium is most often used as an alloying element in steels and in superalloys for things like jet engine components, rocket sub-assemblies, and heat-resisting and combustion equipment. Tantalum — highly resistant to corrosion by acids and a good conductor of heat and electricity with a high melting point – is used in electronic components including cell phones, pagers, flat-screen TVs, personal computers, and automotive electronics. Alloyed with other metals, tantalum is also used in making carbide tools for metalworking equipment and in the production of superalloys for jet engine components.

Crevier Minerals’ property covers 83 contiguous concessions over a total of 4,645 hectares and was discovered in 1975 by Soquem, which conducted several exploratory phases. Soquen transferred the property to Cambior in 1986 when its assets were privatized. 

Iamgold acquired the property in 2006 and Crevier Minerals became sole owner in April 2008.

MDN has an option to boost its equity participation in the company to a maximum of 87.5%.

The property is made up of a nepheline syenite dyke exhibiting pegmatitic texture that stretches more than three kilometres.

According to the Tantalum Niobium International Study Center in Belgium, the world’s main tantalum mining operations currently are in Brazil, Ethiopia and China, with additional quantities originating in central Africa, Russia and Southeast Asia.

The single-largest operating tantalum mine according to the non-profit study center is the Mibra operation of Companhia Industrial Fluminense in Nazareno in Brazil. The mine has the capacity to produce 300,000 pounds of tantalum oxide a year, or about 20% of the world’s production.

Other operating mines include the Kenticha mine in Ethiopia, the Lovozero mine in Russia, the Yichun mine in China and the Pitinga mine (Paranapanema), also in Brazil. Additional quantities are available from Brazil and central Africa through collection from small alluvial and soft rock deposits by prospectors.

The United States does not have a niobium or tantalum mining industry because resources are of low grade, and the U.S. must import all of its niobium and tantalum source materials for processing, according to the US Geological Survey’s website. 

Currently MDN is trading at about 46.5¢ per share in Toronto. The junior has traded in a range of 32¢-58¢ per share over the last year and has about 98.7 million shares outstanding.