President and CEO Mark Saxon at the the PDAC 2012 Conference
The recent publication of Tasman Metals' preliminary economic assessment (PEA) has been very positive for the company. President and CEO Mark Saxon says: “The PEA for our Norra Karr project is a real milestone for the company. We have demonstrated a very large net present value (NPV) and that the project is extremely robust. It is very exposed to dysprosium demand, but both the demand and price of dysprosium are growing very strongly and we feel confident that price will stay high for a long time. For that reason, we're very happy with the results of the PEA.”
Tasman Metals is a Canadian mineral exploration and development company that focuses on strategic metals in Scandinavia, with properties in Sweden, Finland and Norway. The strategic metals in question include the fifteen rare earth elements, around 95% of which are currently sourced from China. So developing a significant resource within Europe, which is what Tasman is hoping to do, will be a major achievement.
The company's main concentration is on its Norra Karr property in southern Sweden, which was the subject of the recently published PEA. The NI 43-101 compliant report for that PEA and the expanded resource is due out in April. “The challenge for us now is refining and scaling up our metallurgy,” comments Mark. “We have a pretty robust flow sheet for the processing of our material, but we're always working towards improving that flow sheet, understanding the inputs, the outputs and the costs, and trying to reduce costs whenever we can. Our acid consumption at the moment is approximately 200 kilos per ton of ore, which is a pretty low number and very competitive in the market place. Obviously, anything we can do to reduce that number is very advantageous to us economically. Our REE and Zr products have been modeled through the PEA. Our process is crushing and grinding, producing a mineral concentrate and dissolving that mineral concentrate in acid. That will create a number of different products in the mine site that will be our first salable material.
The results so far have been described in the PEA press release but will have a stronger technical description in the 43-101 report. Mark admits the project has gone from almost nothing to something very significant in only a short time, but knows there is a lot of value to add. He says: “We've done a lot of research on the metallurgy to get where we are today and we have a lot more to do. We also need to drill out the project out to a measured resource status and that's underway. There are big milestones also for us in getting our permits in place.”
“We've done a lot of environmental monitoring and environmental testing so we are able to submit our application for a mining lease in the first half of this year. That'll be a very key moment for us.”
At the moment, Tasman is talking to some potential partners that can assist in that next step of separation and value adding to the product. However, with production not expected to start until 2016, there is plenty of time to get those separation partners in place. The key product is dysprosium, which will account for around 50% of the revenues, prompting Mark to claim the project will 'live or die on dysprosium'. Nevertheless, he has good reason to be confident it will be the former: “When you look at the dysprosium consumption in Europe, it particularly goes into automobiles.
“So, the German market is very strong for that and we can look at as there are a range of major car makers. Major engineering companies will also be consumers of dysprosium. That creates a good opportunity for us because Sweden is very close to Germany. They do a lot of business together, they understand each other in terms of business practices and so there's a very natural tie-up between our project and the German market.”
There are currently around 60 million shares out and about another five million in options and warrants. Some 35% of the company is owned by the company's management or by people who are closely aligned to it. The bank balance stands at around $13 million, which is considered plenty for the current state of the business. Further financing will be undertaken at a time that's considered right for the company over the next 12-18 months.
Long Mine Life
The recently released PEA has shown a large NPV on the project, demonstrating it's a real project and potentially one of the very largest in the world. It also shows the project has a very long mine life, indicating Tasman can be a very long-term and stable producer of metals for 40 years or so. The European focus is also an advantage, with Germany in particular doing extremely well economically and always very active in looking for new and stable sources of its raw materials, so Tasman is extremely well placed for that.
There is a long history of mining in Scandinavia, which is now a modern, low cost and highly mechanized region for mine development. There's also political stability and good infrastructure, which applies particularly to the Norra Karr property. Power and water are on site, active rail and port facilities are nearby and a main highway runs close to the deposit. The Swedish capital is only 3.5 hours by road and there are a number of large mines within 90 kilometers, so a skilled workforce is available.
Putting everything together, Mark believes the company's current valuation will move up quickly to those of its peers as it hits the milestones on the Norra Karr project over the next twelve months. He advises: “Stay in touch with the company as we move quickly now into our pre-feasibility study. That will generate a whole lot of new information about the company and about the project, which will expose the good opportunity we have. We also have a number of other projects in Europe that we're bringing on as well and we'll be hitting some milestones with those over the next 6-12 months.”
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