Niobium project developer "even more optimistic" for Nebraska mine prospects

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January 9, 2012 - 6:00pm

Excitement about the potential for jobs and lucrative payments for mineral rights were the talk of Johnson County, Neb. early last year. A Canadian company, Quantum Rare Earth Developments, bought up rights to explore the size and quality of the Niobium discovered under the farmland 25 years earlier. Another company had walked away from the project, but Quantum believed that a growing market for Niobium might make it economically worthwhile to open a mine in Nebraska.

Niobium is used by steel mills to harden their product while keeping it thin and flexible for use in electronics and jet engines. There are currently no Niobium mines in the United States, meaning American companies must rely on supplies from foreign countries like China, Brazil and Canada.

Click on the image above to see a Google map of the area.

In spring of 2011, new drilling rigs were brought into select locations near Elk Creek to get fresh samples of the rock, located more than 1,500 feet below. Those samples were sent to a lab to test the quality of the mineral. An airplane with sophisticated sensing equipment crisscrossed the area and collected measurements to help determine the width and depth of the deposits. Reports released to Quantum were increasingly optimistic.

By fall, however, activity had slowed to a crawl. Capital investment needed by Quantum had all but dried up as investors became uneasy during the downturn in the world economy.

NET News producer Bill Kelly spoke with the president of Quantum, Peter Dickie, about the future of the Elk Creek Project.

Bill Kelly: Well, Peter Dickie, it's been nearly a year since we talked last and a great deal has happened in related to the deposits of niobium and rare earth elements around Elk Creek, Nebraska. Are you still as optimistic as you were at the beginning of 2011?

Peter Dickie: Very much so and in fact, maybe even more optimistic. We went through a tough period in the summer and fall where worldwide economic factors slowed our development plans, but the results that we encountered from our work done during 2011 and the work that's ongoing right now, the preliminary results that have us more encouraged than ever.

KELLY: What did those results show that make you encouraged?

DICKIE: In April, we started a first ever, for us, drill program, basically the first drilling that occurred in over 25 years down on the site. And the siting of the drill work was was done in conjunction with our geologists and the engineering, independent engineering firm to in essence, reconfirm and also to fill in a few gaps where previous drilling had left a couple of question marks. And the results that we encountered which we released over the summer months were better than we anticipated.

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Scenes from the niobium drilling near Elk Creek, Nebraska

KELLY: What did those tests reveal about the quality of the minerals that you were not aware of previously?

DICKIE: We certainly are very confident that our deposit is larger than we have already reported. As far as the overall grade is concerned, we believe that will also show some improvement in our next resource report. The next stage, with mineral discovery, one of the factors that you face is finding the material. The second and perhaps most important is the metallurgical properties of the deposit, whereby you need to be able to economically extract that material. From a preliminary standpoint, things look quite positive. We won't have the final report on that till likely the end of January.

KELLY: The testing that you've done showed there was a good deal more niobium down there covering a wider area than had been previously known. In layman's terms, how much more do these tests indicate is underground at Elk Creek?

DICKIE: What the data is showing us at this point in time is that this is a truly a very significant-sized deposit. We believe it's of world-class nature as far as the combination of tonnage and grade is concerned. We aren't aware of very many, if any, other deposits out there that are under development that have anything close to the combination of tonnage and grade that we have. We also aren't aware of any other deposits in the continental US that even come close to this.

KELLY: Does that greatly increase the probability that there will be an actual mining operation on that site now?

DICKIE: It certainly is a large contributing factor to that. I have to stress that the metallurgy test that we're doing right now is a key factor on this type of deposit. It will be a key determinant. Once that result is out, then our next step in the process is compiling the first external independent economic report on the project and this is a sort of a first glance. It's not a full feasibility study, which is something that we'll have to do prior to making a production decision. But it is the first indications of whether a third party, an independent third party, believes that this can be turned into an economically viable mining situation.

KELLY: The metallurgy tests tell you just how easily this can be extracted underground.

DICKIE: Exactly. Certain minerals that people are more familiar with such as gold and copper, they're oftentimes very amenable to metallurgical processes. In other words if you're host rock contains a half an ounce of gold per ton, you can often extract, economically extract almost all of it. Other materials are notoriously difficult for extracting. Niobium is not known to be very easy from a metallurgical standpoint and certainly the evidence out there based on existing mines that are in production, (the one in Quebec and the one in Brazil) certain attest to the fact that it is a difficult process to extract niobium from the host rock. Now having said that, our host rock is of similar material to those other mines that I mentioned and so we're quite encourage and quite optimistic that we'll be able to come up with a process that will certainly allow us to extract what we believe will be economic numbers and then following that, the testing results will fit into the preliminary economic assessment report. We're in the process of commissioning that at the moment and we expect to have it produced in the next three to four months.

KELLY: While most of the focus continues to be on the niobium deposits, there are also what's known as rare earth elements associated with the Elk Creek area as well. What do the geological tests show about the rare earth elements and the type and amount of deposits under Elk Creek?

DICKIE: Well, we did do a couple of drill holes into different rare earth zones that are separate from the niobium zone. And that's something that I have to keep stressing to people that it is two entirely different deposits. They're located approximately two miles apart. It is two separate mineral deposits that we're looking at there. The majority of the work historically was done concentrated on the niobium zone, which is what we are following up on.

Aside from that, the one primary rare earth zone we did put a drill hole into that one this summer as well. We came up with results that far exceeded our expectations on this. There aren't enough drill holes into that particular deposit at this point in time for us to come up with a resource estimate on it, but it is something that we will develop in the future.

It will follow the development of the niobium deposit and there are a couple reasons for that. The first as I just mentioned that the majority of work and the historically what we've done since has been on the niobium zone, so we've got a big head start on developing that. And the second is that it takes a lot of capitol to develop a mineral deposit and right now, there are a large number of companies out there that are in the process of looking at developing rare earth deposits, so the amount of capital available for that sort of development is spread out over a lot of companies.

On the niobium front, there are very few companies trying to develop niobium deposits, so the capitol that's available for that is much more suited and much, I won't say easier to obtain, but much more attainable for our deposit than it would be for the rare earth deposit.

KELLY: Because niobium is so important in the production of high-grade steel and the amount of steel being produced around the world has jumped, that means the demand for niobium has continued to grow. Are you optimistic that the demand will be there by the time this project is complete, if it goes ahead?

DICKIE: Yes. Yes. We're very optimistic on that front. A lot of people have consistently told me that I'm an overly optimistic character as a personal trait, but I refer to outside sources and their thoughts and beliefs on the growth of the niobium market and the steel industry over the coming decades and certainly when you get executives from to the owners and operators of the Niobec Niobium Mining Quebec, when they're predicting that the market will grow in excess of ten per cent per year for the next decade or more, and you also get spokespeople from CBMM, which are the world's largest producers of niobium, forecasting similar types of growth, I certainly can't argue with their thought process and foresee that there is a very robust growth pattern that's been occurring for the last decade and by all indicators, certainly looks like it's going to continue growing in that vein.

KELLY: You know the people around Elk Creek are asking when will we know something on the business side? What can you tell them?

DICKIE: Well, there are a lot of discussions that we've carried on over the past 12 months with a variety of different companies. I guess if you want to lump them all into one category, you could refer to them all as potential strategic partners. These would range from steel companies right to mining companies. These are either currently operating mining companies with healthy financial facilities or they are potential end users of the product that are looking for the product themselves and have the ability to help us finance to put the project into production. Nothing concrete has come about. There have been some rumors that have circulated over the year and it's been reflected in the stock price both up and down.

As soon as we do secure a strategic partner as such, we'll certainly have the community involved and aware of what's going on there as we, as a public company, we have to disclose these things in a timely manner. We won't be keeping any secrets in that vein.

KELLY: Will there be any activity on site drilling or excavation work?

DICKIE: We will likely commence a drill program in the late spring. It will be somewhat finance-dependent. We had hoped to get back in there in the fall and continue with our drilling that we'd done in the late spring and summer of last year. But as I mentioned earlier, the economic situation was a little bit tough and in particular, for smaller companies such as ourselves, it created a bit of a problem, whereby capitol as not too free flowing. We're hoping that with the turn of the calendar here that sort of a new day has come upon us and that capitol will start flowing to these types of projects a little more freely.

KELLY: I think when people heard that part of the reason the drilling had been set aside was because of capitol because of money issues, there was some concern that this might go away again.

DICKIE: Well, (chuckles) of course, you never plan for something like that and we have taken steps over the course of the last year to essentially reduce our financial commitments to other projects. Corporately, we have several other projects, one of which we dropped, walked away from. Two other projects that we've actually joint-ventured out, which will create some cash flow coming in for us and also eliminate our future obligations on those projects. And these are all meant to with the design that it will allow us to concentrate more fully both financially and from a time point of view on the Elk Creek project.

From a capitol point of view, we've certainly taken those steps to minimize our outside exposure, allowing us to concentrate on Elk Creek and from a fiscal point of view, we did do a small capitol raise in December and certainly our bank accounts are, while they're not sufficient to put the project into production at this point in time, they're certainly sufficient for us to carry on with some work down there and maintain the forward focus of the overall project.

KELLY: A year ago, we sat in the front seat of your rental car outside the volunteer fire department in Elk Creek and talked about how high the expectations were in that county and that it would be very difficult to keep those expectations realistic since they'd seen the promise of a niobium mining operation vanish 20 years ago. With all that's gone on and the expectations maybe even a little higher now, should Elk Creek still be cautious about all this?

DICKIE: Mining is a very tough venture and the number of factors that go into successfully developing a mine are very broad and can come at you from a variety of different angles. This past six months of economic activity and outside of our project and I'm referring to the banking crisis in Europe and a variety of factors such as that have a strong effect on the availability of capital to develop projects such as this. We are very optimistic that we're going to be able to prove this up as an economically viable operation and either ourselves or with a strategic partner to put this into production, the exact timing on when it happens will certainly be affected by outside sources.

If we had enough capital available to us right at this point in time, we could be moving forward with multiple drill rigs and also engineering firms developing mine plans, etcetera, on this project right now. But the outside economic factors are a little bit limiting at this point in time, so from our perspective we certainly foresee this project moving forward. Outside factors will come into play of course and we're fairly confident that while we're in a short-term tough economic situation at this point in time, that the banking situation in Europe etcetera will be resolved and that the the economy world-wide will move forward as it invariably does and that we'll be able to access the capitol necessary to move this project into production.




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