Since we last spoke with Gary Billingsley, Executive Chairman of Great Western Minerals, in May 2008, his company has continued to expand on their mine-to-market business strategy with the acquisition of another production facility, an option to recommission a former rare earth mine in South Africa, and a new heavy rare earth property in New Brunswick.

Well positioned with raw materials and vertically integrated in product manufacture, they have also gained an acquisition that Billingsley describes as a complement to their current situation.

“Our purchase in June 2008 of Less Common Metals advances the mine-to-market economic model that our company strategy is based on,” he said.

Since 1992, Less Common Metals has been a producer of magnet powders and other high purity powders. With yearly revenues of $20 million, Less Common Metals supplies 20 percent of the world's Samarium-cobalt for Samarium-cobalt magnets. They also have a significant production of neodymium iron boron for neodymium permanent magnets.

“They are a complimentary manufacturer to what we had already established in Troy, Michigan, but with much more experience. And there were a lot of synergies there that made the purchase worthwhile. It was a significant step forward for us in that mine-to-market model,” Billingsley said.

Specializing in Rare Earth Elements

Established in 1983, Great Western Minerals Group Ltd. became a Saskatchewan-based mineral exploration and development company when new management took over in 2003 and shifted the Company focus to rare earth elements. Gary L. Billingsley 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 exploration.

James B. Engdahl joined the firm as President and CEO in March 2006. He has over 20 years experience in corporate finance, financing mergers, acquisitions, and reorganizations. He also had familiarity with the global regulatory regime and specialty metals.

Great Western Minerals’ Hoidas Lake project in Saskatchewan has the potential to become the only producer of Rare Earth Elements (REE) in North America operating at full capacity with downstream processing capability, unique in the world as a producing primary rare earth mine.

At Hoidas Lake, the REE are found in the silicate mineral allanite and the phosphate mineral apatite. 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.

REE are used to make alloys for rechargeable batteries for hybrid vehicles, permanent magnets for hard-disc drives, iPods and DVDs. They are also essential for the permanent magnets in electric motors and braking systems for hybrid cars, catalysts in cracking petroleum and for catalytic converters in automobiles, and for making super alloys for medical and dental lasers and the aerospace industry. While China currently supplies most of the world’s REEs, those supplies are expected to be completely consumed internally by China by 2012. Obviously, demand outside of China will still be high.

A more recent and very significant development for the Company is the option agreement with Rare Earth Extraction Company (Rareco) to recommission the former Steenkampskraal REE mine in South Africa.

The main rare earth-bearing mineral is monazite and is hosted by an igneous intrusive dyke system. The mineral deposit is tabular in shape with a known strike length of 400m and has been traced down dip for 250m. Thickness ranges from 0.3m to 4.0m and the average in-situ grade is 16.74% total rare earth oxide (“TREO”), making it one of the highest grade rare earth deposits known to exist. The deposit also contains significant amounts of copper, gold and phosphate which could be recovered as by-products.

The mine originally operated through a subsidiary company of Anglo American Corporation from 1952 to 1963, making a monazite concentrate that was sold mostly for its thorium content rather than its rare earth content.

According to Jim Engdahl, this is a significant acquisition since “the project has excellent potential for fast-tracking access to REE products for our value-added processing facilities of Great Western Technologies located in Troy, Michigan, and LCM, located in Birkenhead, UK.”

Along with the Hoidas Lake rare earth project in northern Saskatchewan, the Deep Sands rare earth project in Utah, and the potential for the South African mine, Great Western has several other rare earth properties in its portfolio. Its manufacturing facilities in Troy, Michigan turn rare earth elements into materials, powders, and custom vacuum-grade specialty alloys containing nickel, copper, cobalt, aluminum and titanium as well as battery and magnet alloys and hydrogen storage systems.

Manufacturing Synergies

Since the acquisition of LCM by Great Western Minerals, the Troy plant managers have discovered new areas of production and increased efficiency, due to the experience of the new team.

“Thanks to the expertise that Less Common Metals brought to the table, we have discovered that the Troy plant actually has some very, very unique manufacturing capabilities, including hydrating,” said Billingsley. “This was originally used for making hydrogen storage materials, when the original owners were pursuing hydrogen storage for fuel cell cars, battery materials and things like that.”

“We have since discovered that the same technology is also important in manufacturing magnet alloys and actually removes a step in the production of neodymium iron boron, which are used by groups like Toyota. So, we're pretty excited to try to ramp up that type of production at the Troy plant,” he said.

Many of the senior people at Less Common Metals previously worked at Johnson Matthey. The Johnson Matthey Rare Earth Product business manufacturing plant, analytical laboratory and personnel became part of Less Common Metals in 2000.

Less Common Metals was founded in 1992 by David Kennedy who is currently Managing Director, Metals and Alloys. Mr. Kennedy has more than 20 years experience in the rare earth sector as a chemist and metallurgist and has had several papers published on the technology and economics of rare earth alloy production. He joined the GWMG Board of Directors in November 2008. Previously, he was Technical Manager at Johnson Matthey Rare Earth Products and is a professional member of the Institute of Materials, Minerals and Mining. Kennedy has held the positions of Chairman of the Liverpool Metallurgical Society and President of Birmingham University Metallurgical Society.

“There's a broad base of experience there that we were very, very happy to bring to Great Western Minerals Group. There are great synergies with the group at Great Western Technologies Inc., where the expertise was mostly on the battery side. I think the combination is going to pay off very handsomely down the road,” Billingsley said.

Good Results from Winter Drilling

The 2007 drilling exploration at the Hoidas Lake Project (located 50 km northeast of Uranium City in Northern Saskatchewan) was focused on about 700 meters of a 10,000-meter strike length, and down about 150 meters of a 1,600 m deep structure. This program was completed in April 2008.

In September 2008, Great Western disclosed details about the new footwall zone discovered during last winter’s drilling program, which was about 7,000 meters, in an effort to double the resource base.

This new zone lies approximately 30 m into the footwall or northwest of the JAK II Zone, has been traced along strike for 250 m and was intersected at depths between 166 m and 315 m below surface. The new footwall zone was a surprise, discovered despite the lack of geophysical or geochemical expression to indicate its presence.

The grades of the zone vary from 0.49% TREO (Total Rare Earth Oxide) over a core length of 7.4 m to 2.1 % TREO over core length of 10.9 m. with interval grades grading up to 4.6% over a core length of 3.6 m. In September, Jim Engdahl said the firm’s intention was to double the size of the resource at Hoidas Lake, adding, “The discovery of this new zone demonstrates the potential to expand significantly that resource which could greatly enhance the viability of the project. This new zone may also provide additional working faces for a future mining operation which could increase the production rate or extend the life of the mine.”

Buoyed by a New US Administration

Because China produces over 97% of the world's rare earth elements, with 77% of world production coming from one mine, Japanese technology and manufacturing firms have relied on China. There are very few companies developing rare earths outside of China –three in North America including Great Western Minerals and two companies in Australia. Only Great Western has significant downstream manufacturing capability.

Consequently, Great Western also hopes to expand its association with companies outside the U.S. “There are a number of Japanese companies that are very, very interested in getting involved at the exploration stage,” Billingsley said. “They really do want to secure some of the mine-to-market chain. Even though they still can access materials from China, they are worried particularly about the heavy rare earths, like dysprosium, moving forward.”

Billingsley cited that access to materials outside of China is one reason investors are attracted to Great Western Minerals.

“This is going to be critical to the economies of the Western world moving forward,” he said. “By 2012 or 2013 these rare earth elements will be consumed almost entirely internally in China, and nobody knows if they will make any available for export. To hedge bets and be prudent it's important to invest in companies outside of China that are developing these rare earth resources.”

It is worth noting that Saskatchewan is the world's largest producer of uranium and potash with 18 producing mines, and that the United States Geological Survey (USGS) estimates the value of RE products consumed in the US at over US$1 billion.

Great Western expects that with a modest 500 tonne-per-day mining operation, Hoidas Lake is capable of supplying 4,000 to 5,000 tonnes of TREO per year.

Great Western Minerals is particularly attractive because of its value-added downstream capabilities. They already have customers in Japan and Europe and the United States and can grow through that demand for REE materials outside of China.

“Investors who believe that the economy will recover moving forward, also believe that more and more manufacturing is going to be done outside of China,” Billingsley said. “That makes Great Western Minerals a fairly attractive investment.”

For more information:

Board of Directors and Primary Management

Technical Advisory Committee

Head Office

Great Western Minerals Group Ltd.
226 Cardinal Crescent
Saskatoon, SK S7L 6H8 Canada
Phone:                (306) 659-4500        
Fax: (306) 659-4501

Company Web Site: http://www.gwmg.ca