PDAC 2013 Challenge: Matamec Offers Ideal REE Investment Proposition
Recently, ProEdgeWire published an article by our Publisher Tracy Weslosky titled PDAC 2013: More Ties than Cardigans – shooting dead fish in a barrel or opportunity abounds? In it she challenged the editorial team to identify noteworthy stories of companies with cash, minerals and metallurgy and in this case, a substantial joint venture partner.
While there are many opportunities for company that should have been included among the ‘chosen ones’. That company is Matamec Exploration (TSXV: MAT | OTCQX: MHREF). Matamec recently issued an update of the progress of the feasibility study for the proposed Kipawa heavy rare earths mine. The mine has earned the confidence of one of the largest corporations in the world, Toyota, which formed a joint venture with Toyota Tsusho Corp (‘Tsusho’, a trading company part of the Toyota Motor Co. group).
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Toyota plans to source rare metals need make hybrid and electric vehicles. Under the deal, Tsusho acquired a 49% stake in Matamec’s Kipawa heavy rare earth (HREE) deposit in Quebec in return for a CAD$ 16 million investment to enable Matamec to complete a feasibility study on the property, which can now be expected by the second quarter of 2013. To date Matamec over CAD$ 12 million out of the total CAD$ 16 million for the completion of a definitive feasibility study. The Feasibility Study for Kipawa is proceeding as planned and the results are expected by the end of Q2 2013.
Tsusho delivered the first CAD$ 8.5 million tranche of the investment (amounting to 25% of the agreed upon interest in Kipawa) at the end of last summer. The actual amount of rare earths used in hybrid vehicles is small; however, these elements are absolutely crucial for the manufacturing of the magnets, superconductors, catalysts and batteries that are increasingly used in hybrid and electric vehicles. HREE’s are making it possible to reduce battery weight, dimensions while increasing their power in conjunction with developments in battery charging technology that will drive demand for EV’s and hybrids over the next few years.
While the agreement is a boon for Matamec, which will be in strong financial position to develop its deposit to production stage, it is of even greater strategic value for Toyota Tsusho, which needs to secure rare earth elements. Indeed, in commercial terms, Matamec’s partner of choice offers immediate commercial applications.
The key elements of the implementation phase include the environmental impact study, sustainable development and of course the 2012 drilling campaign and estimation of mineral resources results among other aspects. The estimated capital costs for the operations are at an advanced stage and are expected to be finalized this spring. These estimates will be optimized by the next two months as well as infrastructure design will be reviewed in order to minimize the associated costs. Demand for rare earths could soon exceed supply, given that China produces 97% of these critical metals and is tightening the reins on exports. Matamec, meanwhile, “is the only rare earth exploration company to have received funds to accelerate and complete a feasibility study and an environmental and social impact assessment study of a HREE deposit”. If the yardstick is perhaps the time needed to complete the preliminary assessments and the availability of financing, Matamec satisfies Tracy’s PDAC Challenge as a worthy investment proposition.