Commerce Resources: Like A Phoenix From The Ashes
- 1. September 19, 2018 Report #29 Rare Earth Elements, Niobium and Tantalum in Canada Like A Phoenix From The Ashes In a recent interview with the indus- try-leading newspaper The Northern Miner, the President of Commerce Resources Corp., Chris Grove, said that the company has, for the first time, applied for a grant from the US Government. The filed application pertains to the company’s Ashram REE Project in Québec and the company is actively working on a second grant for their Blue River Niobium-Tantalum Project in British Columbia. The application to these grants comes as the United States continues to work to “adjust” the trade imbalance bet- ween the US and China, who is the do- minant producer of REEs, with increa- sing levels of tariffs on almost all goods exported from China. These grants represent part of the work being done by the US Government to prepare itself and US manufacturers for the severing of the umbilical cord of dependence upon China for resources. The reality is that most Americans, if not all, cannot understand how and why the US became so dependent upon a country not seen as an ally for these strategic resources, and especial- ly the REEs without which it would not be possible, for example, to put an F35 in the air as it is today. Company Details Commerce Resources Corp. #1450 - 789 West Pender Street Vancouver, BC, Canada V6C 1H2 Phone: +1 604 484 2700 Email: cgrove@commerceresources.com www.commerceresources.com Shares Issued & Outstanding: 310,496,558 Canadian Symbol: CCE Current Price: $0.06 CAD (09/18/2018) Market Capitalization: $19 Million CAD German Symbol / WKN: D7H / A0J2Q3 Current Price: €0.04 EUR (09/19/2018) Market Capitalization: €13 Million EUR Chart Canada (TSX.V) Chart Germany (Tradegate)
- 2. 2 To answer the question that Grove poses in the interview as to what the Chinese might do in retaliation for these tariffs, this statement was published yesterday: “China has pledged to retaliate to any new tariffs imposed by the U.S., with reports suggesting the communist country could go beyond raising tariffs on U.S. imports and restrict exports of goods critical to U.S. manufacturing.“ It looks to me like it is “Go Time“ and investors should be prepared to take advantage of the world’s two largest economies having it out on the front page. In terms of the news announcing that REEs have been exempted from the current round of $200 billion of tariffs, let us be completely clear: The exempted REE feed stock is the raw material for which there is very little market at this time in the US; the majority of Chinese REEs are imported in various products manufactured in China from Chinese REE feed stock and these products are those that currently most US manufacturers need to produce whatever end-products they are making whether it be a F35, a computer hard-drive, or a Predator drone, and these products are still facing a 25% tariff which is in place at this time. In terms of these grants from the United States Defense Logistics Agency and Strategic Materials division, although Commerce Resources’ projects are on Canadian soil, the chances of securing such a grant are good because both are advanced- stage projects of resources that are of the greatest strategic interest for the US. Historically, Canada is a welcome ally to the US, for which reason Canadian mining projects have been and can be classified as “domestic“ for the US Government. As the grant’s filing deadline is September 30, 2018, a decision should be expected thereafter. In case Commerce Resources will indeed receive this grant from the US Government, the market may celebrate such with a firework, figuratively speaking. Although this grant is limited at “only“ $3 million USD, it would nonetheless immediately send a vital message to the market, and to the world; namely that the US is ready, willing and able to advance North American mining projects to the next level, strategically speaking. Bigger grants and support, and even strategic partnerships with the goal of bringing such a project towards production, may very well follow after a successful first grant. Further cooperation between different levels (Provincial/Federal) of the Canadian and US Government is also imaginable following the reality of the Government of Québec working with Commerce Resources by the financing of 2 separate programs with a total budget of $665,000. The results thus far observed are extremely positive (see here, here and here), hence an expanded collaboration with increased budgets after completion of both programs is possible. Overall, exciting times are ahead and it will be interesting to watch what the near future will bring in this respect. After all these years, the time could now be ripe for Commerce Resources to advance to the next level with strong partners. Shareholders eagerly await such an event and Commerce Resources works hard to reward shareholders and stakeholders accordingly. The company has not announced the filing for US grants in a press-release. Thus, the market does not have any expectations in this regard. However, should Commerce Resources announce a positive outcome, the market may react even more surprised and in a potentially more positive fashion. The interview with The Northern Miner is copied on the next pages (authorized PDF reprint here). Research #29 | Commerce Resources Corp.
- 3. 3 Research #29 | Commerce Resources Corp. AUTHORIZED REPRINT SEPTEMBER 6 2018 / WWW.NORTHERNMINER.COM Page 1 of 4 Commerce hopes new US gov’t policy will benefit North American REE projects U.S. President Donald J. Trump signing an Executive Order giving conditional approval for Energy Transfer Partners’ Dakota Access Pipeline for Bakken crude and TransCanada’s Keystone XL pipeline to bring Canadian diluted bitumen to refineries in Texas. Credit: White House. POSTED BY: RICHARD QUARISA SEPTEMBER 6, 2018 Commerce Resources (TSXV: CCE; US-OTC: CMRZF) has spent the past 10 years developing its Ashram rare earth element (REE) project in northern Quebec. Like many REE juniors, Commerce’s fate has been influenced by a strong Chinese supply chain and, in particular, the prolific Bayan Obo REE mining district in northern China. But Commerce president Chris Grove believes that recent U.S.-China politics may open a window for Commerce’s success. He points to the U.S. imposed tariffs on Chinese goods, as well as specific language from the 2019 U.S. Defense budget to demonstrate his case. “The language specifically prohibits the Department of Defense from the purchase of Chinese REE magnets,” Grove tells The Northern Miner.
- 4. 4 Research #29 | Commerce Resources Corp. AUTHORIZED REPRINT SEPTEMBER 6 2018 / WWW.NORTHERNMINER.COM Page 2 of 4 A drill site on Commerce Resources’ Ashram REE project in 2011. Credit: Commerce Resources. According to Grove, U.S. legislation allows the government to view Canadian resource projects as potentially “domestic” if they are of interest to the U.S. Department of Defense. As a result, the company has for the first time applied for a grant worth up to US$3 million from the Strategic Materials division of the United States Defense Logistics Agency to help develop Ashram. The company says it would use the grant to finish a pilot plant at Hazen Research in Golden, Colorado. It would use the plant to produce samples of its REE hydroxide product to shop to processors in the U.S., like Ucore Rare Metals (TSXV: UCU; US-OTC: UURAF) in Utah and Rare Earth Salts in Nebraska. Commerce is filling out a separate application for its Blue River tantalum and niobium project in British Columbia. Although China buys most of its niobium from external sources, Grove says the country is a processor of tantalum it buys from Central Africa. As a result, he says the 2019 U.S. Defense budget could impact tantalum sales, as well.
- 5. 5 Research #29 | Commerce Resources Corp. AUTHORIZED REPRINT SEPTEMBER 6 2018 / WWW.NORTHERNMINER.COM Page 3 of 4 Workers collect a bulk sample at Commerce Resources’ Eldor REE project in Quebec’s Nunavik region. Credit: Commerce Resources. Commerce has never before applied for one of these grants. The deadline for grant applications is Sept. 30, 2018. The US-China monthly trade deficit hit a record high in July when it totaled US$36.8 billion. “This current move by the Trump government is turning up the heat exponentially,” Grove says. “I think the anxiety level is rising and the main outstanding question is: ‘What is China going to do?’” The Ashram project sits 130 km south of the town of Kuujjuaq in northern Quebec’s Nunavik area. It contains 1.6 million measured tonnes grading 1.77% total rare earth oxides (TREO), 28 million indicated tonnes at 1.90% TREO and 220 million inferred tonnes at 1.88% TREO. The company drilled nearly 10,000 metres at Ashram that it will incorporate into an updated resource estimate for a prefeasibility study. But to carry out the study, the company needs more capital. Commerce completed a 2012 preliminary economic assessment on Ashram that pegged potential production at 16,850 tonnes of rare earth oxides per year over 25 years. It calculated a $2.3-billion pre-tax net present value at a 10% discount rate and a 44% pre-tax internal rate of return. Currently, two facilities in Quebec are processing material from Ashram in two separate programs financed by the Quebec government.
- 6. Previous Coverage Report #28“SENKAKU 2 –Total Embargo“ Report #27“Technological Breakthrough in the Niobium-Tantalum Space“ Report #26“Win-Win Situation to Develop One of the Most Attractive Niobium Prospects in North America“ Report #25“The GoodTimes are Back in the Rare Earths Space“ Report #24“Commerce Resources and Ucore Rare Metals:The Beginning of a Beautiful Friendship?“ Report #23 “Edging China out of Rare Earth Dominance via Quebec‘s Ashram Rare Earth Deposit“ Report #22 “Security of REE Supply and an Unstoppable Paradigm Shift in theWestern World“ Report #21“Commerce well positioned for robust REE demand growth going forward“ Report #20“Commerce records highest niobium mineralized sample to date at Miranna“ Report #19“Carbonatites:The Cornerstones of the Rare Earth Space“ Report #18“REE Boom 2.0 in the making?“ Report #17“Quebec Government starts working with Commerce“ Report #16“Glencore to trade with Commerce Resources“ Report #15“First Come First Serve“ Report #14“Q&A Session About My Most Recent Article“ Report #13“Shedding Light onto the Rare Earth Playing Field“ Report #12“Key Milestone Achieved from Ashram’s Pilot Plant Operations“ Report #11“Rumble in the REE Jungle: Molycorp vs. Commerce“ Report #10“Interview with Smith and Grove while the Graveyard of REE Projects Gets Crowded“ Report #9 “The REE Basket Price Deception & the Clarity of OPEX“ Report #8“A Fundamental Economic Factor in the Rare Earth Space: ACID“ Report #7“The Rare Earth Mine-to- Market Strategy & the Underlying Motives“ Report #6“What Does the REE Market Urgently Need? (Besides Economic Sense)“ Report #5“Putting in Last Pieces Brings Fortunate Surprises“ Report #4“Ashram:The Next Battle in the REE Space between China & ROW?“ Report #3“Rare Earth Deposits: A Simple Means of Comparative Evaluation“ Report #2“Knocking Out Misleading Statements in the Rare Earth Space“ Report #1“The Knock-Out Criteria for REE Deposits: Cutting theWheat from the Chaff“ 6 Research #29 | Commerce Resources Corp. AUTHORIZED REPRINT SEPTEMBER 6 2018 / WWW.NORTHERNMINER.COM Page 4 of 4 Drill core at Commerce Resources’ Blue River tantalum-niobium project, 250 km north of Kamloops, British Columbia. Credit: Commerce Resources. A $365,000 program at the University of Laval is using an Ashram sample to validate a new hydrometallurgical process for extracting rare earth elements as well as using computer software to simulate the process. A $300,000, three-year program at the National Institute of Scientific Research in Quebec City is focused on optimizing tailings at Ashram. The program began two years ago. “Our material reacts extremely well to standard processing,” Grove says. “The majority of projects do not share the fundamentals of Bayan Obo, as we do.” Commerce staked the initial Blue River project claims in 2000, about 230 km north of Kamloops, British Columbia. Between 2006 and 2011, it drilled nearly 60,000 metres into the property. In total, it’s spent more than $30 million at Blue River. As of a 2013 estimate, the project contains 48.4 million indicated tonnes grading 197 grams tantalum oxide per tonne and 1,610 grams niobium oxide per tonne for 21 million lb. tantalum oxide and 171.5 million lb. niobium oxide. The project also contains 5.4 million inferred tonnes at 191 grams tantalum oxide per tonne and 1,760 grams niobium oxide per tonne for 2.2 million lb. tantalum oxide and 21.1 million lb. niobium oxide. Shares of Commerce are currently trading at 6¢ with a 52-week range of 5¢ to 10¢. The company has an $18 million market capitalization. “Rare earth elements are a very weird commodity,” Grove says. “They’re not rare. Economic deposits are rare. If you compare favourably to Bayan Obo, then you’ve got a legitimate shot at success.”
- 7. 7 Disclaimer and Information on Forward Looking Statements All statements in this report, other than state- ments of historical fact should be considered forward-looking statements. Much of this report is comprised of statements of projec- tion. Statements in this report that are forward looking include that REE and metal prices are expected to rebound; that a total embargo on rare earths is possible and even likely; that Commerce Resources Corp. or its partner(s) can and will start exploring further; that exploration has or will discover a mineable deposit; that the company can raise sufficient funds for explora- tion or development; that any of the mentioned mineralization indications or estimates are valid or economic; that Commerce Resources’ad- vanced-stage Ashram REE Deposit can compare favorably to the Chinese REE mines; that Com- merce Resources can become like a phoenix from the ashes; that Commerce Resources has filed and is actively working on grants from the US for its projects in Canada; that these these grants represent part of the work being done by the US Government to prepare itself and US manufacturers for the severing of the umbilical cord of dependence upon China for resources; that the time is ripe /“Go Time”and investors should be prepared to take advantage of the world’s two largest economies having it out on the front page; that the chances are good for Commerce Resources to secure a grant from the US, because both are advanced-stage projects of resources that are of the greatest strategic interest for the US although Commerce Resour- ces’projects are on Canadian soil; that histor- ically, Canada is a welcome ally to the US, for which reason Canadian mining projects have been and can be classified as“domestic“ for the US Government; that as the grant’s filing dead- line is September 30, 2018, a decision should be expected thereafter; that in case Commerce Resources will indeed receive this grant from the US Government, the market may celebrate such with a firework, figuratively speaking; that although this grant is limited at“only“ $3 million USD, it would nonetheless immediately send a vital message to the market, and to the world; namely that the US is ready, willing and able to advance North American mining projects to the next level, strategically speaking; that bigger grants and support, and even strategic partnerships with the goal of bringing such a project towards production, may very well follow after a successful first grant; that further cooperation between different levels (Provin- cial/Federal) of the Canadian and US Govern- ment is also imaginable following the reality of the Government of Québec working with Commerce Resources by the financing of 2 sep- arate programs with a total budget of $665,000; that the results thus far observed from those programs are extremely positive, hence an expanded collaboration with increased budgets after completion of both programs is possible; that those programs will be completed at all; that after all these years, the time could now be ripe for Commerce Resources to advance to the next level with strong partners; that sharehold- ers eagerly await such an event and Commerce Resources works hard to reward shareholders and stakeholders accordingly; that Commerce Resources has not announced the filing for US grants in a press-release and thus the market does not have any expectations in this regard; that in case Commerce Resources announces a positive outcome, the market may react even more surprised and in a potentially more posi- tive fashion. Such statements involve known and unknown risks, uncertainties and other fac- tors that may cause actual results or events to differ materially from those anticipated in these forward-looking statements. Risks and uncer- tainties respecting mineral exploration and mining companies are generally disclosed in the annual financial or other filing documents of Commerce Resources Corp. and similar companies as filed with the relevant securities commissions, and should be reviewed by any reader of this report. In addition, with respect to Commerce Resources, a number of risks relate to any statement of projection or forward statements, including among other risks: the receipt of all necessary approvals and permits; the ability to conclude a transaction to start or continue development; uncertainty of future REE and metal prices, capital expenditures and other costs; financings and additional capital requirements for exploration, development, construction, and operating of a mine; the receipt in a timely fashion of further permitting for its legislative, political, social or economic developments in the jurisdictions in which Commerce Resources carry on business; oper- ating or technical difficulties in connection with mining or development activities; the ability to keep key employees, joint-venture partner(s), and operations financed; and despite positive indications, the REE deposits of Commerce may not be able to be economically mined. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking information. Rockstone and the author of this report do not undertake any obligation to update any statements made in this report unless required by law. Disclosure of Interest and Advisory Cautions Nothing in this report should be construed as a solicitation to buy or sell any securities men- tioned. Rockstone, its owners and the author of this report are not registered broker-dealers or financial advisors. Before investing in any se- curities, you should consult with your financial advisor and a registered broker-dealer. Never make an investment based solely on what you read in an online or printed report, including Rockstone’s report, especially if the investment involves a small, thinly-traded company that isn’t well known. The author of this report is paid by Zimtu Capital Corp., a TSX Venture Exchange listed investment company. Part of the author’s responsibilities at Zimtu are to research and report on companies in which Zimtu has an investment. So while the author of this report is not paid directly by Commerce Resources Corp., the author’s employer Zimtu will benefit from appreciation of Commerce Resources Corp.’s stock price. In addition, the author owns shares of Commerce Resources Corp. and Zimtu Capital Corp., and would also benefit from volume and price appreciation of its stocks. In this case, Commerce Resources Corp. has one or more common directors with Zimtu Capital Corp. Thus, multiple conflicts of interests exist. The information provided here- within should not be construed as a financial analysis but as an advertisement. 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Kfm., FH) Rockstone Research 8050 Zurich, Switzerland Phone: +41-44-5862323 Email: sb@rockstone-research.com Stephan Bogner studied at the Inter- national School of Management (Dort- mund, Germany), the European Business School (London, UK) and the Univer- sity of Queensland (Brisbane, Australia). Under supervision of Prof. Dr. Hans J. Bocker, Stephan completed his diploma thesis (“Gold In A Macroeconomic Con- text With Special Consideration Of The Price Formation Process”) in 2002. A year later, he marketed and translated into German Ferdinand Lips‘ bestseller (“Gold Wars“). After working in Dubai for 5 years, he now lives in Switzerland and is the CEO of Elementum International AG specialized in duty-free storage of gold and silver bullion in a high-security vaulting facility within the St. Gotthard Mountain Massif in central Switzerland. Rockstone is specialized in capital markets and publicly listed companies. The focus is set on exploration, development, and production of resource deposits. Through the publication of general geological basic knowledge, the individual research reports receive a background in order for the reader to be inspired to conduct further due diligence. All reports from our house are being made accessible free of charge, whereas it is always to be construed as non- binding educational research and is addressed solely to a readership that is knowledgeable about the risks, experienced with stock markets, and acting on one’s own responsibility. For more information and sign-up for free newsletter, please visit: www.rockstone-research.com Research #29 | Commerce Resources Corp.