TRER’s Round Top – where uranium glows….
Back in the first flush of Rare Earths a flock of uranium companies scrabbled through their old NI 43-101s to see if there were any REEs worth mentioning in their mix and, even if the showing was slight, such was their desperation at the woes of the Uranium space they nevertheless restyled themselves as Rare Earth players and were off the races.. literally.
It is somewhat ironic then, in light of this week’s announcement, that Texas Rare Earth Resources (OTCQX:TRER) did not start out as, or ever claim to be, a uranium company, in fact it came to the REE space from the more rarefied zone of Beryllium hunters (we use the plural advisedly because they were almost alone). It was briefly explored many decades ago by some uranium juniors but they were pushed aside by the heavyweights pursuing Beryllium. Now we find that TRER’s uranium is coming to the fore as a key part of the economics. This surprises us not the least as we have long trumpeted the multi-faceted multi-metal nature of the Round Top deposit and now this is being born out.
The Latest Transaction
Earlier this week TRER announced that it had entered into a uranium offtake agreement with a subsidiary of AREVA (OTC: ARVCY), the French giant, to supply up to 300,000 pounds of uranium concentrates (U308) per year based upon a pricing formula indexed to U308 spot prices at the times of delivery over a five-year period commencing in 2018 or as soon thereafter. This agreement is contingent upon development and production at TRER’s Round Top project.
The company’s most recent Preliminary Economic Assessment (dated December 20, 2013) estimates that Round Top has approximately 96.4 million pounds in total of measured, indicated and inferred U308 oxide resources, out of which 56.3 million pounds are measured and indicated resources. We might also note that the company’s CEO, Dan Gorski, is a uranium veteran.
Investorintel’s very own Jack Lifton (who also is a TRER board member) was understandably a happy camper and commented “This is, to the best of my knowledge, the first binding offtake contract for a valuable byproduct of a heavy rare earth project. We were able to attract a uranium industry market leader like AREVA because of the progress on our Round Top project metallurgy due to our application of the K-Tech continuous ion exchange/continuous ion chromatography (CIX/CIC) technology. This separation technology has been applied to the recovery of uranium from similar process leach solutions and is commonly used in the uranium extraction industry”.
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Areva is the closest thing the uranium space has to a fairy godmother. One cannot underestimate the importance of the French company waving its magic wand over Round Top as it gives the stamp of approval of a group that is savvy and serious to a project that many in the REE space had sidelined with their backbiting and technology one-upmanship. While this agreement is not the same as money in the bank it certainly gives the company an offtaker which is not shy to step forward and take supply from wherever it can get it. And the US is a better source than many for a product where majors are in a close hand-to-hand tussle with the Chinese to secure future supplies.
We should also note that Uranium (or Thorium) in a REE deposit has hitherto been seen as a deleterious element and TRER shows that it can actually be monetized and act as a project driver rather than as an anchor. But moreover the Holy Grail of REE wannabes is a real live REE offtaker and these have proven to be rarer than a unicorn. I have long sustained that TRER’s advantage was in its other metals/minerals as enablers for the REE component of the project.
The Texas Angle
It should also be recalled that Texas has been one of the most trouble-free areas of the US for permitting, including for uranium-mining permitting. The state is the second largest producer of uranium in the United States. The Texas Railroad Commission reports ten uranium exploration permits issued in the state as of January 2015. According to the U.S. Energy Information Administration, as of the 4th quarter of 2014, Texas has an annual production capacity of 7.3 million pounds of uranium as represented by seven existing projects.
This receptive jurisdiction is certainly a change from the various hostile ones where uranium producers must live in hope like New Mexico in the US and Queensland in Australia.
Areva is the closest thing the uranium space has to a fairy godmother. One cannot underestimate the importance of the French company waving its magic wand over Round Top as it gives the stamp of approval of a group that is savvy and serious to a project that many in the REE space had sidelined with their backbiting and technology one-upmanship.
Christopher Ecclestone is a Principal and mining strategist at Hallgarten & Company in London. Prior to founding Hallgarten & Company in New York in 2003 ... <Read more about Christopher Ecclestone>