| |
Interview with Bob Bishop about his Strange Lake Property Visit
July 29, 2010
Kaiser: Bob Bishop, retired editor of the Gold Mining Stock Report, recently participated in a field trip to the Strange Lake rare earth project of Quest Rare Metals Ltd. When I visited Strange Lake nearly a year ago drilling had just begun on a target we now know as the B Zone and for which a major resource was reported earlier this year. Much has changed since my visit. Bob, what did you get out of the trip you've just returned from?
Bishop: The main reason I went on this year's trip was to get a better sense of the project, but I was especially interested in anything that might be said on the subject of metallurgy. A few months ago the company announced they were going to be taking a 50-tonne bulk sample, not the 20-tonne sample as previously announced. While a bigger sample is more likely to be representative of the deposit, I don't think this is a case of being a metallurgical Hail Mary, where a larger sample is more likely to produce a positive outcome. In short, I think the company is acting as if they have a project that they believe will make a mine, and are proceeding accordingly. Frankly, the grade, the size of the known resource, and the makeup of the deposit---a high percentage of heavy rare earths to light---suggest as much, but the news we're awaiting on metallurgy is critical to the mine-making equation. If you can't get good recoveries, it's just rock, not ore.
Kaiser: Was metallurgy much discussed on this trip, and if so, did you have a takeaway on this subject?
Bishop: Quest management did not indulge in any selective disclosure during last week's trip, but given the positive spin put on this subject during presentations and in response to questions, I will be very surprised if the results of the metallurgical testing are anything but positive. This is admittedly conjecture on my part, but if I'm wrong, I will lose a large sum of money. I'll also be very grateful that I'm no longer in the newsletter business, because this would be a judgment call that I'd be getting very wrong. It's one thing to blow up one's own account, and quite another to do the same for hundreds and sometimes thousands of others. I feel pretty comfortable being at risk on this point, and if I were making the call on behalf of others right now, in this instance I wouldn't feel any differently.
Kaiser: What else got your attention on last week's trip?
Bishop: As those in the business have long known and the Fraser Institute reminds us each year in its annual survey, Quebec is the best jurisdiction in the world to make a discovery and, with any luck, advance that project to production. Generous tax credits for exploration are one part of this story, but for more advanced projects, the provincial government is supportive in ways that greatly aid the journey from prospect to production. In contrast, many other jurisdictions seem to spend their time creating obstacles that inhibit this process. While it's not exactly a news flash that Quebec is the best place to have a discovery that looks as if it has the potential to become a mine, still, it was encouraging to see several representatives of the provincial government on site for day two of our group's visit. Several field geologists were among them, and so was the Deputy Minister of Mines. I've been on a lot of field trips over the years, and as I'm sure you know as well, it is most uncommon to find high-level government representatives on field trips with analysts and investors.
In between swatting mosquitoes and some particularly vicious deer flies, I couldn't help but thinking that seeing the Deputy Minister wearing his Quest Rare Minerals baseball cap was the stuff of stock promoters' dreams. More importantly, his presence in the field showed that Strange Lake is not just on the province's radar screen, I think it demonstrated that they're taking this project very seriously. That's most uncommon, and I think the province's apparent support for the project is an intangible whose importance is hard to overestimate. Quest is already on the market's short list of what might be termed serious rare earths projects, but seeing that the province is so obviously on side gives the company a huge advantage over the competition in other, less friendly jurisdictions.
Kaiser: Besides yourself and the government officials, who else was on the trip?
Bishop: There were analysts and investment bankers, but more important, we all got a lot more out of the trip due to the presence of independent consultant Dr. Tony Mariano, McGill Earths Sciences professor Dr. A.E. Williams-Jones, and Dr. Anton Chakhmouradian. All are well-recognized authorities in the realm of rare earths, and much like the visible show of support from the government representatives in attendance, it was good to see the academic and practical experts in this field appear to be taking Quest's project seriously. Better than anyone perhaps except for end-users who are painfully aware of security of supply issues---all thanks to China for raising the profile of this looming issue---those who know the rare earths markets best also know that industry must develop sources of supply outside of China. It gets my attention when the experts in a field are paying close attention, and I think it has a lot of relevance to the rare earths story.
Let me give you an analogy that I think applies to the current situation in rare earths: when I was writing Gold Mining Stock Report I often found myself writing about things which, initially at least, I had limited knowledge. Diamonds in Canada is a good example. I knew very little about diamonds when Dia Met announced that it and a then much lesser-known partner named BHP had discovered diamonds in the Northwest Territories. As you know better than most, John, it was Dr. John Gurney's work on indicator minerals that motivated BHP to become Dia Met's partner. It was Gurney's reputation as the most widely published academic in the field of diamonds, and his work on indicator minerals, that gave BHP the confidence to become involved. Beyond that, it was Gurney and the presence of BHP, one of the world's largest mining companies, which gave a boatload of Canadian juniors the confidence to join the diamond rush.
Kaiser: What does this have to do with rare earths?
Bishop: At the same time that a number of junior companies were jumping on the diamond bandwagon, there was also a great deal of skepticism about the diamond story, and many who thought it was just the latest scam from Vancouver. It took the better part of a year for the diamond play to truly be embraced by the market, but by then most of the easy money had long since been made. As always happens, over time there was little to show for most of the money that was raised to search for diamonds. That's the nature of exploration, and no doubt a reflection of the willingness of some promoters to jump on a topical story just because it gives them a sexy hook on which to raise money.
While huge sums raised on behalf of diamond-focused juniors proved to be for naught, it's also worth remembering that Canada now has four (Ekati, Diavik, Snap Lake, Victor) diamond mines, and the country has joined the ranks of the world's most important producers. There were a few, major success stories among the diamond juniors , and when we look back on it I expect the same thing is likely to be true for rare earths. As in diamonds, it seems that success in rare earths will favor those who were earliest on the ground, in part because the prospects for success will be limited by the small size of the markets for some of these metals. Like you, I've heard some of the dismissive commentary directed toward rare earths; also like you, I think at the end of the day there will be a small handful of rare earths success stories, just as there were in diamonds. I'm as cynical as anyone when it comes to assessing the prospects for success of most of today's so-called rare earths companies. That said, I believe there will be a few winners---in part because the need to develop sources outside of China is so obvious---and after last week's trip, I continue to be of the view that Quest stands a good chance of being one of those winners. I may be biased, but my money is also where my mouth is.
Kaiser: Thank you Bob, as somebody who is still in the newsletter business, owns Quest and has open buy recommendations out on it, I hope you are right!
|
