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Index Member Comment - June 3, 2010: Matamac delivers initial 43-101 resource estimate for Kipawa rare earth project
 Matamec Explorations Inc delivered an initial resource estimate on June 3, 2010 for the Kipawa rare earth project in Quebec which provides the first comprehensive view of the distribution of rare earths and zirconium within this peralkaline intrusive complex that Unocal investigated during the eighties. Historical estimates included only mineralization from the western and eastern portions of the 1,450 m long zone which has a thickness of 50 metres and has been traced downdip only 140 metres (the zone dips 30 degrees and strikes along a ridge that parallels a river 800-1,200 metres to the southwest). Because the old estimates were focused on zirconium and yttrium Unocal did not include grades for all the rare earth oxides. The Kipawa deposit is a nepheline syenite layer cake of three rare earth mineralized horizons consisting of eudialyte, mosandrite and britholite interspersed by horizons of the zirconium mineral vlasovite with which lower rare earth grades are associated. Matamac has presented several resource scenarios using a 0.5% TREO cutoff grade, a 0.1% Y2O3 cutoff, and 0.5% ZrO2 cutoff. The first two scenarios treat Kipawa as a rare earth deposit with a zirconium by-product, and the third treats it as a zirconium deposit with a rare earth by-product. The first two scenarios yielded combined indicated and inferred tonnages of 7,240,000 tonnes of 0.63%-0.66% TREO and 9,830,000 tonnes of 0.58%-0.6% TREO with ZrO2 grades ranging 0.88%-0.99%. The zirconium scenario offers 39,060,000 tonnes of 0.99%-1.01% ZrO2 with 0.23%-0.34% TREO indicated plus inferred. The first two scenarios would involve selectively mining and processing the rare earth enriched horizons while the zirconium scenario would process the entire zone. I do not have the experience to evaluate a zirconium deposit, nor for that matter does Matamec management at this stage, so I am only focusing on the TREO enriched resource as defined by the 0.5% TREO cutoff presented below.
| Resource Category | Tonnage | Total
Rock Value | Metal | Grade | Recovery | Contained Metal | % of GMV |
| Indicated Resources | 2,510,000 | $113/t | Rare Earth Metals | 0.630% | 100.0% | 34,861,111 lb | 100% |
| Inferred Mineral Resources | 4,735,000 | $119/t | Rare Earth Metals | 0.660% | 100.0% | 68,895,503 lb | 100% |
| All Categories Spot | 7,245,000 | $117/t | Rare Earth Metals | 0.650% |
| 103,756,614 lb | 100% |
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| Spot Gross Metal Value | Market Cap as % of Net GMV | Spot Prices Used |
| $845,616,402 | 1.9% | Rare Earth Metals $8.15/lb |
The TREO enriched Kipawa resource has an in situ value of US $846 million and a rock value of $117 per tonne using the four year average prices for rare earth oxides as of February 2009, jumping to $168 per tonne using April 2010 prices. The rare earth content of the significantly larger zirconium scenario resource clocks in at $2 billion in situ, but the average rock value is only $51 per tonne. No value is assigned to the zirconium content of either scenario, but given the consistent 1% ZrO2 grade a zirconium by-product will ultimately be part of the economics of developing Kipawa. Meanwhile Matamec must concentrate on solving the metallurgical problems associated with a key mineral, eudialyte, a rare earth bearing mineral which dissolves readily in acid but generates a silica gel containing the rare earths. Matamec is conducting laboratory tests on Kipawa eudialyte samples under the supervision of metallurgical engineer Les Heymann in the hope that he can develop a way to process the mineral without creating the silica gel from which the extraction of the rare earths is deemed technically hopeless. According to Andre Gauthier the company believes it is onto a solution to this problem and hopes to be in a position to make a report at the end of June. Assuming the metallurgical news is positive Matamec will recover 1-2 tonnes in July to conduct bench scale tests whose outcome would be expected in September 2010. During mid June Matamec plans to start a 5,000 m drill program estimated to cost up to $1 million which will include some infill holes in the current resource area, but which will mainly involve stepout holes on 50 metre centers starting in the western part of the "central" zone where the best intersections were obtained at the downdip limit. Assuming the zone maintains its 30 degree dip Matamec will delineate it a maximum 500-600 metres downdip which will still leave the zone a reasonable distance from the Kipawa River. Should the grade and thickness be preserved or improved down dip, it would boost the tonnage footprint 2-3 times. While this would not impact the potential net present value of the project, evidence that a resource with a very long mine life is present is key to attracting up front development risk capital from end-users eager to establish rare earth security of supply. Because the rare earth enriched horizons are readily recognizable in drill core, we should learn from Matamec during the summer how the thickness and downdip extent of the Kipawa deposit behaves. Unocal never troubled to delineate the system during the eighties because it was mainly focused on identifying a small and easy to mine resource at the top of the ridge. Demonstrating that the Kipawa system has substantial tonnage scale for the REO enriched horizons will be a major milestone for the junior.
The two sets of value and percentage distribution pie charts above are intended to demonstrate that the higher grade but smaller tonnage TREO enriched resource and the lower grade but larger tonnage zirconium based resource differ only in TREO grade. This is because the grades of the individual rare earth oxides are the average of the eudialyte, mosandrite and britholite minerals which occur as discrete horizons within the Kipawa stratigraphy. The lower TREO grade of the zirconium based resource is due to the fact that the rare earth grade drops off sharply within the zirconium rich vlasovite horizons whose ZrO2 grade often spikes above the 2% detection limit of the assay lab which requires special assaying. Although Kipawa has a lower grade than other zirconium enriched peralkaline intrusives such as Strange Lake, its location in southern Quebec close to infrastructure offers development cost savings. This location advantage coupled with higher rare earth prices, particularly the heavy rare earths, makes Kipawa interesting despite the low overall grade. It is important to note that in mid May China's Ministry of Industry and Information Technology (MIIT) published a draft of new minimum operating thresholds for rare earth producers and processors as the start of a campaign to consolidate the rare earth industry and boost rare earth prices. Recently the World Trade Organization complained about China's raw material export taxes, arguing that this forces Chinese producers to sell the raw materials domestically at depressed prices which indirectly subsidizes the cost structure of Chinese manufacturered goods destined for export markets. Rare earths were not mentioned by the WTO, but they are a clear example of such a startegy. China in turn is getting very cranky about what it perceives as "cost dumping" by the rest of the world as it relies on low cost Chinese goods made possible by China's own sad environmental record. The push to clean up the very polluting rare earth sector will eliminate at least 20% of existing capacity and possibly create a temporary supply slowdown as bigger operations are forced to implement emission controls. The prospect of higher long term rare earth prices bodes well for Kipawa. The key for Kipawa will be for Matamec to demonstrate that it has a feasible process for recovering rare earths from the eudialyte. This would be a major R&D breakthrough whose details Matamec will have to keep secret because there are a number of heavy rare earth enriched eudialyte deposits in the world. The heavy rare earths represent 35%-37% of the total rare earth content. Matamec presently has about $200,000 working capital so it will need to conduct a financing shortly, but this will be less difficult following the March 31, 2010 deal which saw Matamec transfer the Montclerg gold project to a private company in exchange for the cancellation of the $1.4 million debt owed to broker Don Ross. The neutralization of the balance sheet coupled with a rare earth focused 43-101 resource estimate puts Matamec on its feet as a contender in the race to bring non-Chinese rare earth supply on stream.
| Upcoming Milestone Timeline |
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| Timeline | Project | Milestone |
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| 2010 Q2 Late June | Kipawa | Results of lab scale metallurgical study on eudialyte recovery process that avoids silica gel problem. |
| 2010 Q3 | Kipawa | 5,000 m stepout drilling program to delineate the downdip extent of the Kipawa complex, should result in periodic updates involving visuals of the stratigraphy and thicknesses. Goal is to boost the tonnage footprint 2-3 times. |
| 2010 Q3 July | Kipawa | Initiate bench scale metallurgical study using 1-2 tonnes of eudialyte, contingent on Heymann report in late June. |
| 2011 Q1 | Kipawa | Updated Kipawa resource estimate based on summer 2010 drilling. |
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