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Spec Value Hunter Comment - December 2, 2009: Quest's Misery Lake is a major new grassroots rare earth discovery
 Quest Uranium Corp announced on November 19, 2009 that it had discovered a major new rare earth mineralized alkali intrusive complex at Misery Lake in Quebec 120 km south of its Strange Lake project. Although the Misery Lake project is still early stage, and may not be ready for a serious drill program until 2011, the range of initial grab sample values and the scale of the complex suggests that Misery Lake has potential to be a world class host of various rare metals. Because Quest's BZone discovery at Strange Lake is already exhibiting world class potential, and will have a 43-101 resource estimate out during Q2 of 2010 that will become the focus of advanced metallurgical studies, Misery Lake will be a sideshow that contributes little to the market's valuation of Quest. It does, however, demonstrate that this part of northern Quebec and Labrador has significant rare earth exploration potential, and will give hope to other juniors such as Midland Exploration Inc (MD-V) which have staked claims based on lake sediment data. Furthermore, in light of the large number of juniors that have jumped onto the rare earth bandwagon with early stage projects that are hard to get excited about (See our KBFO Theme Report: Early Stage Rare Earth Projects), Misery Lake is the sort of story that would merit attention if it showed up in a cheap junior. I should point out that I have been on the Misery Lake property; during my field trip to Strange Lake in late August we made a side trip to the Misery Lake showings during a rainstorm that certainly earned the project its name.
The Misery Lake grassroots discovery was made in August 2007 when prospecting crews collected bedrock grab samples from an area characterized by a concentric magnetic feature that yielded high REO values. The initial Misery Lake claim block was staked in September 2007, but Quest did not conduct further work until the spring of 2009 when it flew a 585 line-km airborne radiometric and magnetic survey in the general area which has since led Quest to expand the project to 66,000 hectares.
The survey revealed a 6 km wide magnetically zoned ring feature that bears some similarity to the considerably larger Lovozero Alkaline Massif on Russia's Kola Peninsula which was the primary source of rare earth metals for the Soviet Union during the Cold War. The geometry of the Misery Lake alkali intrusive involves an inward progression of ultramafic to felsic intrusive rocks, with the magnetic ring, which has a circumference of about 20 km, being the primary target for elevated rare earth mineralization.
Quest collected 73 grab samples from portions of the ring structure where it was able to find bedrock or frost-heaved boulders. Although difficult to see in the above diagram, the red dots represent anomalous REO values while the green dots represent the best 29 values published by Quest. These values ranged from 0.97% to 8.56% TREO (including yttrium) from syenite and pyroxenite rocks, with enrichment generally associated with "magnetite-rich magmatic segregation layers and zones of iron enrichment". The percentage of the TREO represented by heavy earths ranged 12-19%, though in the case of a couple samples it spiked over 40%. I have averaged the individual sample grades in order to get a feel for the relative distribution of the rare earth oxides and was surprised to see a strong similarity with the Basal Zone at Avalon's Nechalacho (Thor Lake) project in the Northwest Territories.
The average grade of 2.85% TREO with a rock value of US $355/t using the four year price average as of February 2009 compares favorably with the 2.14% grade and US $318/t rock value for the Basal Zone, but we do have to keep in mind that the Basal Zone values are based on a 43-101 resource estimate using a 1.6% TREO cutoff, while the Misery Lake values are an average of the top 29 grab samples. The main purpose of the comparison is to demonstrate that Misery Lake is yielding high TREO values with a relative distribution similar to Avalon's Basal Zone. Quest plans to conduct further work in 2010 that will include airborne geophysics, prospecting, mapping and geochemical sampling designed to identify sizable targets that merit drilling, possibly late during the 2010 season.
At this stage it is not clear to what extent REE enriched mineralization will hang together to constitute significant tonnage, but in making a comparison with the Lovozero Complex in Russia Quest is pointing out the latter's enormous tonnage potential. However, apart from the geometry, Lovozero is a poor analogy in that its rare earth mineralization is dominated by the mineral loparite, which has a light rare earth element distribution (note that the grade used in the Lovozero pie chart above is an arbitrary number used to illustrate the published REO distribution - I have not been able to find any production grade values for the former Lovozersky mining operation). A better analogy might be the Kvanefjeld project of Greenland Minerals & Energy Ltd (GGG-ASX) which covers the northern half of the Ilimaussaq Complex in southern Greenland and whose REE distribution is similar to that of Misery Lake and the Basal Zone. Kvanefjeld hosts a very large but low grade rare earth resource which unfortunately has an elevated uranium grade that puts the project at odds with Greenland's ban on uranium mining, be it as the primary mineral or as a by-product mineral. In any case, uranium values at Misery Lake are about a tenth of its thorium grade, which ranged from 0.023% to 0.0271%, whereas at Kvanefjeld 0.025% U3O8 was the cutoff grade used to estimate a JORC compliant 250 million tonne resource.
With regard to Quest's Strange Lake project we are awaiting the final holes from the BZone later this month, following which we will attempt back of the napkin tonnage projections for the portion of the BZone radiometric anomaly Quest did drill. We are also expecting results for the western edge of the Strange Lake Main Zone which Quest drilled during the summer. While those results are inconsequential for the economic potential of the Strange Lake project, it will provide a baseline for assessing the value potential of the Main Zone deposit if and when Labrador makes it available for public tender. In my view Quest would be wise not to publish its Main Zone results, at least not in detailed form, because this information could shed additional light on the Main Zone not evident in the historic database which could present Quest with a competitive bidding advantage once the Main Zone does become available. The stock has rebounded nicely since completion of the $2.30 financing, and has not encountered any selling pressure from the $0.22 and $0.35 private placements done in June and now free trading. The stock price remains below the Good Relative Spec Value Buy at $3.14 recommendation we made on September 23, 2009, but with an implied project value of only $136 million, and no short term financing pressure, Quest continues to represent Good Relative Spec Value at current prices. With regard to the bottom-fish buy recommendation made at $0.10 on May 4, 2009 and which is up 2,720%, we are maintaining a Spec Cycle Hold 100% recommendation for now, but will start issuing partial sells in 2010 to gradually close out the bottom-fish cycle. For those of you who are new to Kaiser Bottom-Fish Online, I would like to point out that bottom-fish recommendations are distinct from spec value hunter recommendations in that bottom-fish recommendations involve a very high risk probability based strategy where the objective is to achieve 500% gains during the bottom-fish cycle by selling some too soon and some too late, whereas Spec Value Hunter recommendations involve specific price targets linked to fundamental developments. It is thus possible that we could simultaneously issue Bottom-Fish Sells and Spec Value Hunter Buys.
*JK owns shares in Quest Uranium Corp
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