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JIMBOWEN27

Great Western Minerals (GWG)

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Does anyone follow GWG? It is the only rare earth stock outside China that will have a fully integrated mine to market strategy and will be producing in just over two years. Rare earths prices have continued to rise substantially over the last few months but it is the Heavy Rare earth elements (HREE's) that are expected to be have the highest long term demand. GWG is one of the highest grade and highest % of HREE's outside of China. The market does not seem aware of the difference between the HREE's and Lights (LREE's) and to me GWG appears an overlooked and undervalued rare earth stock. Any thoughts are welcome

 

Here is a link from Proactive article from last Nov. GWG now owns 93% of Rareco

 

Great Western Minerals Group [TSX.V: GWG]

 

Saskatchewan-based Great Western Minerals has a fully integrated rare earths mine to market (M2M) strategy. The company's aim is to become the first vertically integrated rare earth elements producer in North America, a leader in the industry outside of China, and to create certainty of supply for its customers. To that end the company is investing in three stages in the rare earths supply chain: exploration, mining and processing.

 

Working backwards down the chain, the company already processes rare earths through two of its subsidiaries; Less Common Metals (LCM) based in Birkenhead, England and Great Western Technologies Inc in Troy, Michigan, USA. LCM has been highly profitable for 18 years supplying customers globally with a wide range of rare earth based alloys and metals. Its specialities include neodymium iron boron and samarium cobalt alloys for supermagnets, supplying 20% of the world demand of samarium cobalt. Great Western Technologies is a leading production facility in North America for rare earth materials, powders, and custom vacuum-grade specialty alloys. Both companies aim to be leading-edge, innovative and high quality offering flexible customised approaches to their customers. Great Western has just signed a letter of intent to supply samarium, gadolinium and samarium-cobalt alloys to the Pennsylvania-based Electron Energy Corporation to manufacture magnets.

 

Great Western will source its feedstock from the former-producing Steenkampskraal Mine in South Africa, located 350km north west of Cape Town. The mine was operated by Anglo American from 1952-63 producing rare earths and thorium (it was then the world's largest producer of thorium). It was eventually acquired by Rare Earth Extraction Co ("Rareco"), and in January 2009 GWT entered into an option agreement with Rareco to refurbish and recommission the mine and to have exclusive access to 100% of the rare earth elements mined there for a ten-year period. The New Order Mining Right was granted in June 2010, and in September 2010 GWT acquired a 20.8% equity interest in Rareco. In December GWMG offered to purchase all the remaining Rareco shares at 3 South African Rand, an offer which Rareco Directors recommended accepting. By 24 January the company had acquired about 70% of the outstanding shares. The offer remains open until 28th February.

 

SRK Consulting is conducting a feasibility study on the project with the aim of resuming production as quickly as possible; the target is the second half of 2013. Infrastructure is excellent, with access to the site by paved and gravel roads and close proximity to rail and sea-port; the government is pro-development, and there is technical expertise and a trainable workforce at hand.

 

GWMG is also looking to the long term by investing in 7 exploration projects in Canada and the USA all focussed to heavy rare earths; four of these are 100% owned and three are joint ventures. Hoidas Lake in Saskatchewan some 50km north of Uranium City is the most advanced with an NI43-101 compliant measured and indicated resource of 2.6M tonnes at an average grade of 2.43% TREO plus yttrium oxide. The endowment of neodymium is particularly high.

 

Couple more links:

 

http://www.techmetalsresearch.com/?p=3358

 

http://www.pmem.ws/FORECAST

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I dialled in to the GWG conference call yesterday, which was very informative. I'm impressed with developments and potential earnings given the fully integrated rare earths model. I cannot understand why GWG is so overlooked and underpriced. Here is a summary of points covered on the call:

 

a. All time lines advancements announced in the April 21, 2011 News Release are on target.The mining of ore will begin early 2012 and production at SKK benefication facility will commence late 2012 early 2013.

b. The partnership arrangement and location of the Separation and Extraction plant is scheduled to be announced in July as earlier indicated. Advancement on those negotiation are progressing extremely well.

c. Douglas River 2010 drill results have been received on the last two holes and the result will be released as soon as they are compiled and also the 2011 program has begun on the Douglas River property.

d. The Hoidas Lake metallurgy is on going as a pilot plant sampling is currently underway.

e. The total Capex is currently projected at $60 million for both the refurbishment of SKK, the benefication plant at SKK and the Separation and Extraction Plant at a location to be announced. As a comparison, Avalon need to raise $1bn!

f. All permitting is in place for SKK and the Separation Plant will be constructed in a location currently approved for such industry.

g. According to SRK Consulting no local or regional environmental issues have been encountered and support for both the Mine and Separation facility are receiving support from the public and Government groups.

h. Capacity Expansion is easily achieved as the design of both the SKK Mine operations and the Separation and Extraction facility are in modular form for easy expansion. Expansion at LCM can be easily accomplished when the demand warrants such expansion.

i. The production capacity at SKK and the Separation plant can meet the entire demand of LCM UK and LCM USA by providing the critical rare earth elements used by those facilities and any surplus of elements in excess of the demand will be sold on the open market.

j. Financing of the $60 million Capex, which by the way is the lowest of any other Rare Earth Company projecting to come on stream in the world, will be easily achieved through the exercising of the current outstanding warrants which are in the money, the cash on hand and through either Off-Take Agreements, debt financing available through financial institutions in South Africa. The last resort would be equity financing which is a route that doubtfully will be pursued.

k. Additional source monazite material is being negotiated with Titanium producers that have monazite tailings that contain rare earth elements, thorium and TSP.

l. Supply of monazite tailings from Titanium Producers could keep the SKK operation going for countless years

m. The Rare Earth and thorium content in the tailing varies from 1% to as high as 11% giving SKK an excellent opportunity in guaranteeing its customers a supply of high quality products.

n. Metallurgy on those tailings from the Titanium Producers is adaptable to the metallurgy to be carried out on the SKK ore deposit.

 

However, the really interesting part is looking at the numbers and what GWG can realistically expect to earn. The recent $792,415,836 EBITDA guidance was derived at using $100/kilo but the current basket price is around $300/Kilo "suggesting" an updated EBITDA of $2,377,247,508. OK we will have a wait a few years to generate this but given the current market cap is c$300m it’s easy to see the shares could be multiples of the current price. They are expecting more analyst coverage in the next six months but it’s clear that most investors do not fully understand the GWG business model. They are aware of getting the story out to institutions/potential investors.

 

Jim was of the view that most other rare earth projects will be delayed, given the complex metallurgy and this will continue to hold back supply and support rare earth prices. He said there could be an oversupply of Cerium/Lanthium a few years down the line.

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I did not know of any companys outside of china that were still mineing rare earth.

Id heard that the mines in the US were now all closed.

Well you learn somthing new everyday. LOL.

 

With all the tech we now have and use. Rare earth is becomming more and more of a life line for us.

The company could very well be a good long tearm bet.

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I did not know of any companys outside of china that were still mineing rare earth.

Id heard that the mines in the US were now all closed.

Well you learn somthing new everyday. LOL.

 

With all the tech we now have and use. Rare earth is becomming more and more of a life line for us.

The company could very well be a good long tearm bet.

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I did not know of any companys outside of china that were still mineing rare earth.

Id heard that the mines in the US were now all closed.

Well you learn somthing new everyday. LOL.

 

With all the tech we now have and use. Rare earth is becomming more and more of a life line for us.

The company could very well be a good long tearm bet.

 

Halight,

 

Lynas (LYC.AX) will be the first non Chinese rare earth company into production and they are expected to be producing by end of this year. Molycorp and GWG are next inline and should be producing in 2013. The main advantage of GWG is that it's fully integrated (processing, separation & extraction). It is also the highest grade deposit outside of China (cheaper production costs) and has a higher % of Heavy Rare Earth Elements, where longer term demand is forecast to be highest.

 

Jim

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Here is a must read document on GWG:

 

https://dl.dropbox.com/u/21644826/CHAPTERONE.pdf

 

The company has a very bright future imo and is the only fully integrated rare earths mine to market company outside of China. Unfortunately, the sentiment towards the sector is poor and the share price continues to drift! A great long term buying opportunity coming up

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GWG releases PEA - the numbers look promising with a very high IRR:

 

$555 Million after-tax net present value ("NPV") applying a 10% discount rate and a 28% South African corporate tax rate

66% after-tax internal rate of return ("IRR")

4.3 year estimated Project payback period, on an after-tax basis, from start of underground mining production.

11 year potential life of mine

 

http://www.proedgewire.com/rare-earth-intel/great-western-takes-one-more-step-toward-transforming-from-rare-earth-processor-to-rare-earth-producer/

 

Byron Capital have a $2 price target - link to note below:

 

http://www.stockhouse.com/bullboards/messagedetailthread.aspx?p=0&m=32343850&l=0&r=0&s=GWG&t=LIST

 

 

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