Niobium mine developers remain committed to Nebraska
October 5th, 2012
Elk Creek, NE â€“ A year ago, a potential mining operation in southeast Nebraska was the talk of the town. Local economic development promoters scrambled to see what they could to help get the operation underway. A summer with almost no activity raised concerns, but the man behind the project says itâ€™s still on track.
The president of the Canadian development company behind plans for a niobium mine in southeast Nebraska told NET News he is â€œdefinitely committed to developingâ€ the ore deposits despite delays in finding outside funding to advance the project.
In a phone interview this week, Peter Dickie of Quantum Rare Earth Development said he hopes to have proposals from companies interested in developing the mine â€œin the next few weeks.â€
The news is reassuring to residents and economic development officials with high hopes for the project. Quantumâ€™s lack of communication with local officials had become a source of frustration and concern.
â€œWe like to pre-plan as much as we can,â€ said Doug Goracke, the economic development director for Johnson County. He had heard nothing directly from the company since the beginning of the year. Meanwhile, planning for the potential of a major new business, the county had begun preliminary research into areas like the need for new housing.
â€œThe company who might do this is going to look to us for help,â€ explained Goracke. â€œThe wheels of city and county government donâ€™t spin real fast and we donâ€™t have the kind of capital laying around that we can just one year throw out hundreds of thousands of dollars for a project.â€
Excitement peaked in 2011 after Quantum quickly and quietly secured mineral rights underneath nearly ten thousand acres of land west of Elk Creek, Neb.
According to Quantumâ€™s third quarter update to shareholders, tests conducted on core samples pulled from hundreds of feet below the earthâ€™s surface showed the quality and quantity was even higher than the companyâ€™s initial estimates.
Niobium is an added ingredient to steel making it make lightweight and super hard. The metal is used in jet fighters and electronic components. Niobium is even preferred by somebody piercers. Nearly all of it is mined in China, Brazil and Canada. The American defense and high tech industries have stated it is important to have a domestic supply.
Following the flurry of activity and publicity in 2011, this past summer came and went with no additional drilling and little communication from Quantumâ€™s headquarters in Vancouver, British Columbia. Beyond its quarterly press release to the investment community, there was no public contact with many of the Nebraskans.
Part of the unease is rooted in the history of the deposits under Johnson County. In the 1980s the community was disappointed by the unmet promise of another company. Molycorp, a California based developer of rare earth mineral mines, showed interest in the deposits only to walk away because, at the time, market demand did not justify the high cost of building the mine.
There have also been concerns from observers outside of Nebraska.
Last year Quantumâ€™s stock reflected the early excitement of the discovery, with a significant spike in share prices. Since the companyâ€™s lengthy silence this summer its sharesâ€™ value dropped by half. It is also not unusual for small companies like Quantum, traded on over-the-counter exchanges, to have wide swings in their share prices.
The company had a mixed message for anyone listening: glowing reports about the quality and quantity of the ore at Elk Creek tempered with caution about when something might develop.
Quantum insists the latest delays should not be mistaken for any lessening of interest in the project. Dickie says his project, like many others seeking â€œhighly prospectiveâ€ funding, have been bogged down by investors playing it safe.
â€œItâ€™s been quiet, from the equity markets point of view, which of course is the source of our funding,â€ said Dickie.
Current discussions have been with companies either in the mining business or that create products that would benefit from a large new source for niobium in North America. He offered few details, saying he has to be â€œa little bit delicate because we have so many non-disclosure agreements that I canâ€™t give too many hints to you.â€
At the start of the year Dickie says those discussions made little progress but more recently â€œthe level of discussions and the tone of the discussions has definitely improved in the last three or four weeks.â€
â€œSo fingers crossed that we are going to have at least something on paper, some proposals flying back and forth in the next few weeks.â€
The companyâ€™s notices to shareholders caution â€œthere is no assurance that these discussions will result in any transaction.â€
Tests done by geologistâ€™s hired by the company indicate the mine could be a source of other rare earth elements besides that are in demand by high-tech manufacturers. This could be, according to Quantum, an added source of profit for the project.
The market for those other elements may be undergoing dramatic changes according to some analysts. Recently some companies, most notably Ford Motor Company, have announced they are cutting back the use of the rare earths in their products so they donâ€™t have to worry about the cost or supply.
Dickie says his project shouldnâ€™t suffer from that market shift.
â€œFrom an economic point of view we have always only looked at this as a project. If during process we are able to extract those rare earths as well, it will simply be a bonus to the operation,â€ Dickie said. He does not believe reduced demand for the other elements will affect enthusiasm for developing the Nebraska project.
He adds that the latest round of testing of the minerals that have been excavated makes him even more enthusiastic.
â€œThe more we drill this project, the better it looks,â€ Dickie said.
There are few signs anyone in southeast Nebraska is up in arms about the slow progress. Goracke is sympathetic with the complex financial machinery Quantum must assemble to proceed with a profitable business.
â€œI know thatâ€™s a lot of moneyâ€, Goracke said. â€œAnd with the way that it is in this economy raising that kind of money is a pretty tall order.â€
And he is optimistic about the future of mining in the area.
â€œI donâ€™t think itâ€™s dead by any stretch but there are some questions about where we are at in the process.â€
Johnson County Commissioner Scotty Gottula of Elk Creek hasnâ€™t been too worried.
â€œYou know I think everybody went in with caution to start with,â€ Gottula said.
â€œMost of these are farmers, so they are a little more long-range planners than most people. They understand things donâ€™t happen overnight.â€
Gottula already sees the benefits just driving around the area.
â€œFarmers took the money and reinvested that they got from those leases. You see new big machine sheds, maybe they put up more pivot irrigation,â€ Gottula said. â€œThere was a lot of money invested in the area that did people a lot of good.â€
Meanwhile everyone in the area continues to pay special attention if any news filters down from Vancouver, Canada about the potential for a mine being dug in the neighborhood.
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