Great Western Minerals Poised for Rare Opportunity
Dr. Allen Alper and Alison Conte
Interview with Gary Billingsley, Chairman, and Jim Engdahl, CEO, of
Great Western Minerals
The U.S. National Research Council’s Committee on Critical Mineral
Impacts has listed minerals that are essential for the health of
U.S. economy. Platinum group elements are first and the rare earth
elements (REE) are second.
“Without the rare earths, we go back to the turn of the century,
and I mean, the 1900s,” said Gary Billingsley, C.A., P.Eng.,
P.Geo., Executive Chairman of Great Western Minerals. “Without them
we wouldn’t have gasoline, automobiles, TVs, cell phones – any of
the modern technologies that play a big part in our everyday
China produces over 97% of the world's rare earth elements, with
77% of world production coming from one mine. There are no longer
any REE producing mines outside of China. Moreover, by 2012, China
is expected to need all its REE to feed its own rapidly growing
industries, with none to spare for the rest of the world.
This is why Great Western Mineral’s Hoidas Lake project in
Saskatchewan is so promising. Its REE are found in the silicate
mineral allanite and the phosphate mineral apatite. It could become
the only producer in North America operating at full capacity,
unique in the world as an in-situ rare earth mine.
“So the timing is perfect for a company like Great Western Minerals
to establish itself in that rare earth marketplace outside of
China,” said Billingsley
Mining the Rare Earths
Rare earths are the 15 elements in the lanthanide series – the best
known being cerium, lanthanum, neodymium, praseodymium, gadolinium,
europium, and samarium. Usually found in the minerals monazite and
bastnaesite, REE are rare in that they are hard to find in
commercially viable quantities.
As Billingsley points out, REE are used to make alloys for
rechargeable batteries for cell phones, magnets for hard-disc
drives, iPods and DVDs. They are also essential for electric motors
and braking systems for cars, catalysts in petroleum and
automobiles, and to make super alloys for medical and dental lasers
and the aerospace industry.
Great Western Minerals Group Ltd. is a Saskatchewan-based mineral
exploration and development company that is planning to feed this
demand. It was incorporated in 1983. Gary L. Billingsley, who first
became involved with the company as a consultant in 1993, is a
professional engineer and geoscientist with more than 30 years'
experience in the mineral industry, much of it in Saskatchewan. He
has experience with uranium, base-metal, gold and diamond mine
James B. Engdahl joined the firm as President and CEO in March
2006. He had over 20 years experience in corporate finance,
financing mergers, acquisitions, and reorganizations. He also had
familiarity with the global regulatory regime and specialty
Along with the Hoidas Lake rare earth project in northern
Saskatchewan, Great Western has two copper/gold projects in the
southwestern U.S. As a vertically integrated organization, the
company also operates manufacturing facilities in Troy, Michigan
through a subsidiary, Great Western Technologies Inc.
In Michigan, Great Western turns rare earth elements into
materials, powders, and custom vacuum-grade specialty alloys to
make ferro, nickel, copper, cobalt, aluminum and titanium alloys as
well as battery and magnet alloys and hydrogen storage systems.
Great Western owns two 12,000-square-foot, state-of-the-art
manufacturing plants for research, development and production.
This side of the company’s business has created cause for Engdahl
to be optimistic. “When we initially bought the Michigan facility
in 2006, we aimed for some positive cash flow by the end of the
second year. We believe we’re going to be fairly close. We are
anticipating a couple major contracts. One is in the aeronautical
space industry, and it’s definitely in the value-added chain that
we’re building as a company,” Engdahl said.
Great Western Diamonds Corp. (TSXV-"GWD") is the company's
40%-owned subsidiary exploring and developing diamond-bearing
kimberlites in Saskatchewan.
Activity at Hoidas Lake
According to Engdahl, the Hoidas Lake project has moved ahead
substantially in the last few years. “This winter we added another
level of drilling to extend our resource base for the property,”
Hoidas Lake lies 50 km northeast of Uranium City, Saskatchewan,
accessible by float or ski-equipped aircraft. It lies within the
Northern Rae Geological Province, which consists of blocks of
ancient granitic rock separated by major faults. The company holds
a 100% interest in thirteen claims totaling 25,470 acres.
All of the Rare Earth Element (REE) prospects are present in the
minerals, apatite and allanite, and occur in veins that parallel
the Nisikkatch-Hoidas Fault.
The previous drilling exploration, totaling 8,500 meters, tested
about 700 meters of a 10,000-meter strike length along the fault
system, and to a depth of about 150 meters of a potentially 1600
meter deep structure. The winter drill program added another 7,000
meters of drilling; in an effort to double the resource based and
was completed in late April 2008.
Preliminary indications, announced in early May, are that the
extensions of the previously drilled veins show similar
mineralization to that previously identified in the JAK Zone and
are expected to have similar grades. In addition, a new vein system
has been identified in the Footwall of the JAK Zone.
“We have some wider zones at depth. We’ve got some new zones in the
hanging and footwall, so overall it looks very strong,” said
Great Western is now planning to conduct a summer drilling program
to test the Nisikkatch South vein system, the new JAK Zone Footwall
Vein, and other targets that were previously identified.
Great Western Minerals may also consider recovering the phosphate
at Hoidas Lake, which is running about 17.8% phosphate. “Because
phosphate fertilizer is $1,000 a ton plus, that has now become an
economic possibility in that deposit,” Engdahl said.
Deep Sands Hold Heavy Minerals
The company’s third significant advancement in the last two years
was the acquisition of 25% interest in the rare earth side of the
Deep Sands Projects in Utah. “It’s got some very, very large
potential. We’ve just started drilling on that property in May, and
hopefully by this fall we’ll have a very good indication of what we
actually have down there,” Billingsley said.
The rare earths that Great Western seeks, along with a significant
amount of magnetite, are in those beaches, according to airborne
geophysic surveys of the 66 square mile property.
Great Western Mineral has taken random surface samples of the sand,
which is known to extend to at least 150 feet depth -- about 15
billion tons of material – and is getting assays averaging around
0.15 % for the sampling. Some areas average up to 0.8% total rare
earth oxides, considered a significant amount of REE in a mineral
At Hoidas Lake, neodymium is the most prevalent element, 22% rare
earth by proportion. The Hoidas Lake rare earth showings are
unique, in that they are found in the silicate mineral allanite and
the phosphate mineral apatite, as opposed to the monazite and
bastnaesite mined in China and California.
At Deep Sands Project, monazite, bastnaesite and xenotime are
present, which gives it a fairly high proportion of some of the
heavier rare earths, such as dysprosium and terbium, along with a
lot of the light rare earths.
Financial Picture Shows Growth
Jim Engdahl describes the company’s cash position at about $2
million, with plans to do another financing in 2008. Despite the
share price doldrums that many companies have experienced because
of the subprime lending problem in the U.S., Great Western saw very
good liquidity in the marketplace during the early spring of 2008,
trading a significant number of shares.
“We do hope that with some early results out of Deep Sands and our
winter drill program at Hoidas Lake, we’ll have some impact on
getting that price back and corrected, at least to the level where
we think it should be,” Engdahl said.
Great Western Minerals is also continuing to work on bringing one
of their REE end-user companies into a partnership. “There is an
extreme amount of interest in that for many of the Japanese
companies as well as some European ones,” Engdahl said.
A Chinese Dominated Market
Anyone following rare earths exploration knows that China is now
supplying up to 98% of this materials. With so many uses for REE, a
second source is urgently needed.
Japanese companies and other users worldwide expect that by 2012,
Chinese industries will be able to consume all the rare earths
produced there, leaving the rest of the world searching for rare
earths to fuel so many of our modern technologies.
“If all the companies that are planning on being in rare earth
production by 2012 actually get to production, there still isn’t
going to be enough,” Engdahl said. There are three non-Chinese
manufacturers -- Great Western Minerals and two companies in
Australia -- that are targeting production by 2012.
Further affecting the short supply will be an increase in demand,
which Engdahl expects to grow enormously, particularly in the
automobile hybrid market.
Investors Take Note
Jim Engdahl advises that investors take a serious look at the whole
industry and see which firms have a strong management team and a
good basis on properties. “What makes us stand out is we’re one of
the few that are in the total value-added chain. We are building a
fully integrated model from mine-to-market. This is going to
minimize risk and get the value that you wouldn’t normally get by
just mining,” he said
“I think that this is a little understood industry right now, but
it’s about to become well understood,” Billingsley said. With China
tightening its grip on its rare earth elements, he expects that
rare earth exploration outside China will take on much greater
“With the auto industry in particular, it has become critical that
sources for these things be developed outside of China,”
Billingsley said. Great Western Minerals appears to be in a rare
position to do just that.
On June 09, 2008, Great Western Minerals Group Ltd. (“GWMG” or the
“Company”) announced that it signed a non-binding Letter of Intent
to acquire all of the issued and outstanding shares of Less Common
Metals Ltd. ("LCM") of Birkenhead, United Kingdom, subject to the
required regulatory approvals in the UK and Canada. The purchase
price of this acquisition is £4,000,000 or approximately
C$7,800,000, with closing anticipated on 18 June 2008.
Founded in 1992, LCM is a profitable, private company with
excellent long-term relationships with many blue-chip
market-leading customers across a wide range of industries
including automotive, aerospace, nuclear and defense. One of LCM’s
key clients is Aichi Steel Corporation of Japan, one of the Toyota
Group Companies. Aichi uses LCM products in high efficiency, low
weight, permanent magnet motors for ancillary equipment used in the
latest vehicles manufactured by Toyota.
LCM is a leading, global manufacturer and supplier of rare earth
based alloys, high purity metals, and ultra-high-purity indium.
Other specialty alloys produced at the state-of-the-art plant in
Birkenhead include neodymium-iron-boron and samarium cobalt alloys
for the permanent magnet industry, magneto-optic and
magnetostrictive materials, hydrogen storage systems and master
alloys used in the production of other specialty alloys. LCM’s
production of samarium cobalt accounts for 20% of global demand.
Additional information about LCM can be obtained from
LCM management expects to produce 430 tonnes of alloy and metals in
the twelve months ending June 30, 2008. The production capacity of
the plant is approximately 1,100 tonnes per annum and the plant is
very well positioned to increase production to meet the demand for
rare earth alloys from key clients. This ability to increase
production will play a significant role in the implementation of
GWMG’s “mine to market” business model should the Hoidas Lake rare
earth deposit, and the Company’s other REE-related projects
including Deep Sands, be successfully brought on-stream to provide
the raw material for rare earth metals and alloys.
As a result of strong demand for its products, LCM’s revenue for
fiscal year ending June 30, 2008 is expected to be approximately
£9.8 Million (C$ 19.1 Million), up from £5.4 Million (C$10.5
Million) for fiscal year 2007.
GWMG and LCM are especially pleased to report that the entire
management and staff of 27 highly skilled and dedicated personnel
at LCM will be staying on and will continue to operate the
The purchase price of £4,000,000 will be satisfied as follows: (i)
Great Western has obtained a senior debt facility of £2,700,000
secured against the assets of LCM, of which £2,000,000 will be
applied to the purchase price, with the balance to be used as
working capital for operations; and (ii) the issuance by GWMG of a
£2,000,000 convertible debenture to the vendors of the LCM shares.
GWMG will also issue 750,000 common share purchase warrants to the
Mr. David Kennedy, Founder and Managing Director of LCM, sees this
as a great match. Kennedy says, “Joining Great Western Minerals
Group opens up the prospects for the long term strategic supply of
key rare earth raw materials for LCM. This is of great interest to
existing and potential customers as this alliance has the potential
to secure the critical raw materials for key industries long into
Mark Ellis, President and CEO of Great Western Technologies Inc.
agrees: “The tremendous synergy and complementary capabilities that
exist between LCM and Great Western Technologies creates so many
mutually beneficial opportunities for LCM, Great Western
Technologies, and all of our clients. LCM brings to this
transaction a solid base of blue-chip, global customers and an
established magnet business; That, combined with GWTI’s existing
client base and proven capabilities in the battery sector, presents
great collaborative potential for all of us.”
Jim Engdahl, President and CEO of GWMG, is very pleased with the
deal and the new relationships and opportunities. Engdahl says, “As
with most acquisitions, it is the people that are important, and
this purchase adds another dimension of intellectual knowledge and
goodwill to GWMG with regards to specialty metals and, in
particular, the Rare Earth industry. We are extremely impressed
with the quality and dedication of the staff that David Kennedy has
assembled and how well they fit in with GWMG’s “mine to market”
strategy. We are also extremely impressed with the caliber of
clientele that LCM brings to the table, and we look forward to
long-term and mutually beneficial relationships with all of