Proactive investors

Additional information

Additional	Information
Market:	TSX-V
Sector:	General Mining
Epic:	CCE
News:	Latest news
Web Site:	Commerce Resources
Other Articles:	18-02-201021-12-200930-11-2009

Proactiveinvestors Audio Interview with David Hodge of Commerce Resources

by Proactiveinvestors

Please give us a brief introduction to Commerce Resources and what distinguishes the company from its peers.

Commerce Resources started nine years ago as an IPO on the TSX-Venture exchange. From the very beginning it was very focused at becoming a low cost producer of both tantalum and niobium. We needed to discover a deposit, which I’m glad to say we have, and then produce a feasibility plan in order to put it into production. That’s where we are headed.


Why should investors be interested in a company exploring and developing tantalum and niobium projects?

The price of tantalum has been very very stable for the last 10-15 years and just at the moment there is a considerable demand and lack of supply in the tantalum world that certainly is creating a huge opportunity for anybody that’s in tantalum exploration, and that’s exactly where Commerce is. In terms of the niobium market, it has been very stable for a number of years as well. Just recently it has moved from about $7 per pound to $26 per pound at a high, to stabling off again in these tough economic times at about $16 per pound which would make Commerce Resources very profitable and that’s a good thing for any of our shareholders.


On the one hand, the Tantalum-Niobium International Study Centre has forecast that the demand for tantalum can be expected to grow by 7% a year over the next 20 years, on the other hand Talison Minerals which supplied over 30% of the world’s tantalum this year has announced plans to suspend its tantalum mining operation. How can investors make sense of that?

First of all, the figures that came from the TIC, which is the World Tantalum and Niobium Association, those figures were generated before this current financial crisis and are largely supported by demand for electronic equipment. Certainly there’s going to be some tapering off of that because of the current financial situation of the world but at a 7% growth – maybe it will drop to 5%. That’s still a very strong growth curve for the demand for tantalum.

The other interesting fact that was in your question there was that Talison had 30% of the world’s supply. Curiously that was in a statement made by Talison when they decided to go out of tantalum production. When they were a public company they claimed to have 55% of the market – our information was that they had even a larger percentage, closer to 75% of the world’s market. Certainly of the world’s free market – that would exclude China and Russia – but they had a very very large percentage of the world’s market. I think Talison, maybe in an effort to reduce the impact on the industry; suggested that their share of the market was lower than it actually is. I still believe that they still have in excess of 60% of the world’s market.

As to why they have decided to close down their tantalum operations; that’s certainly a question that would be better answered by Talison. But I think there are a couple of market situations that have a hand in that their mine is a lithium-tantalum or a tantalum-lithium mine – depending on the price of the individual commodities you always name the highest value one first – and recently the price of lithium has gone up. They are making money on the lithium and I think one of their motivations is to optimize that mine for lithium production because there is good money in it at the moment. It’s been well known that they have been having metallurgical challenges as they’ve gone deeper on the tantalum side and in any event, their decision to close their tantalum operation certainly increases the opportunity for Commerce Resources.


Does Commerce Resources still plan to be in production by late 2010 and who will the company be selling its product to?

Certainly production by late 2010 is mathematically possible but if we run into any delays in permitting or financing the construction that would all add onto that 2010 figure. That’s our target and you’ve got to keep your targets tight, that’s how you keep the team motivated, but it may take a little bit longer.
In terms of who we might be selling products to, that is certainly one of the keys to Commerce Resources taking its Upper Fir into production. There seems to be no question that the way we will finance the construction is through an arrangement down the supply chain in the tantalum world, either with a processor or perhaps even a capacitor manufacturer. Or there is the possibility that it could be somebody in the electronics industry themselves looking for guarantee of supply, because that’s what has driven the market in the past – that kind of long term guarantee.

That’s the position that Commerce will be in and again, in respect of price in that situation it isn’t as important as the company’s ability to guarantee that supply and the risk factors there are usually political. I am happy to say that with our deposit located in Canada that puts us as the number one choice in the world for the next supplier of tantalum. That’s because of our ability to long-term contract that is enforceable from anywhere in the world and that’s probably Commerce’s biggest asset.


Talk us through Commerce Resources’ exploration and development pipeline.

First of all the program for the Upper Fir is very focused on developing that into a mine and so I’ll give you that timeline. The schedule there essentially is to produce a pre-feasibility study which by definition would be accurate to plus or minus 25%. Certainly in our case that study will be very accurate through most of the cost up to the gravity separation and as that’s such a simple well known process the costs will be estimated very accurately. With the upgrading of the concentrate to pure tantalum and niobium there may be a little bit more room in there as it does not happen so often, although there is a similar facility in British Columbia. Based on that pre-feasibility study the program for the Upper Fir would be to begin negotiations with the industry in order to provide the financing because what that pre-feasibility study will do is give us hard enough information that we will be able to negotiate future price with the industry and that is what will allow us to go into production.

We are very confident that basically even if that cost were to come up on the high side we believe that industry will support Commerce because of a political location. I might add that we do have a number of exploration targets and those will be pushed along through process as the funds are available, as we will be diverting most of our funds into putting the Upper Fir into production.


What is Commerce Resources’ financial situation?

Our financial situation is very bright at the moment. We were very fortunate to raise a large amount of money very recently. We are currently sitting on in excess of $15million in cash and I can assure you that will be enough to get to some sort of feasibility on the Upper Fir which is going to put us in the position of negotiating that deposit into production. It will provide for some ongoing exploration on both the Blue River zone, the Hodgie zone in Blue River and of course our exciting Eldor – a very very large target in Northern Quebec to which we put 26 holes in this summer. We are expecting results back from that shortly.


What can we expect from Commerce Resources over the next 12-18 months?

You can expect a very constant information flow in terms of result from this summer’s program on the Upper Fir where the majority of the money was spent in Blue River, although we do have exploration results coming back and certainly all those results from Eldor. We are in the process of doing a pilot plan – potentially a bulk sample, a continuous sample that will show that will show that the metallurgy is sound and that’s a very important aspect for selling the downstream industry and is very important for feasibility study and certainly a landmark for the company.

Tantalum and niobium have different industrial applications. Does this effect the way you think about realizing value from a mining operation?

Almost definitely and this give us mostly advantages. The advantages being that both tantalum and niobium are sold in very different ways on the world market. Tantalum tends to have a very steady price that is long term, it is negotiated long term and that is going to provide a lot of stability to Commerce’s future mining operation. The price of niobium fluctuates with market demand and supply. Currently the price is extremely attractive even in these troubled times and we expect that either the tantalum or the niobium themselves can pay for the operation. We will be guaranteed on the tantalum side and able to work the market enjoying the high side of the niobium market.


What are your thoughts on the supply of blood tantalum coming out of the Congo?

Well certainly that’s a very very sad situation. I don’t know if your listeners are aware but blood tantalum, similar to blood diamonds, have been fueling or funding wars in the Congo and areas around the Congo for years. I suppose the bright side is that the Canadian government has produced the legislation called the Kimberly Accord which is a UN initiative that was championed by Canada and its what really put the brakes on the blood diamonds. Now there is quite a difference between a diamond that is mined in a politically appropriate country as opposed to that area of the world where it is used to fund wars. That’s the same thing that is going to happen with tantalum – I believe the Canadian government is going to step forward and ask that tantalum be added to the Kimberly Process and that certainly will be a good thing for the Congo and in its own way it’s a very strong situation for Commerce Resources.


Dr Axel Hopper recently became Chairman of Commerce Resources Board. What does that signify?

First of all let me tell you a little bit about who Dr Axel Hopper is. He spent his whole life in the tantalum industry. He’s a chemist by profession and was really running HC Starck, which is the world’s largest tantalum processor. They are German based by they have plants all over the world. When the good doctor retired he knew that the tantalum industry was going to have some troubled times with what was happening with the Australian deposits and looked around and I think he realized that Commerce Resources is going to be next in the world. He wanted to be a part of it and I think he is very glad he did join our team in that we are now teaching him all about the exploration game which is certainly a very fun kind of business to be in. However his expertise is really on the development side, that’s why he is on the team and I believe that with his expertise and his contacts, Dr Axel Hopper will be significant in terms of Commerce moving the Upper Fir into production.


What are your thoughts on the credit markets and the TSX-Venture exchange at this time?

The junior exploration market has had tough times before and I have been through a number of them, however never quite like this where the whole world is on its knees – usually it was just us! So this is kind of different; it’s interesting and part of history and I am certainly glad to be here. From a ‘what’s going to happen?’ point of view, maybe I should tell you what Commerce’s plans are and that certainly will let you know what I think.

We are planning to be able to operate and produce a feasibility study on the Fir within existing cash that we have in the bank for the next two years. I believe that you need to be planning for this to be pretty tough for at least two years. However, our hope and our dream is that this global financial crisis is behind us within six months. Certainly there is tremendous opportunity on the TSX-Venture exchange in terms of how cheap so many stock are trading, including Commerce, and any of the companies that have cash to last for two years are going to come out winners and Commerce is one of those.

Register here to be notified of future Commerce Resources articles.