Commerce Resources Corp (CCE)

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Commerce Resources: Tantalum and niobium potential

By Malcolm Bucholz
26 Mar 2009 at 08:56 PM GMT-04:00

Niobium need creates an opportunity for Canadian firm.

When investors talk about the metals markets, they generally get swept up into conversation about copper, nickel and so forth -- the popular metals.

However, there is more to the metals sector than just the popular ones. In fact, we often tend to watch the lesser known metals for unique trading and investing opportunities.

Our adventures of late have put us onto a Canadian story involving tantalum and niobium in the Province of British Columbia.

Niobium (or as some would call it columbium) is consumed mostly by the global steel industry in the form of ferro-niobium, which acts as a powerful alloy strengthener. Superalloys represent the other major end use for niobium. Tantalum is primarily used in the manufacture of capacitors for the technology world. Next time you use your cell phone,or your iPod you are doing so thanks to tantalum-based capacitors.

What intrigues me most about niobium is the notion that Brazil is sitting on the majority of future global supply. Any time one country is sitting on the bulk of a supply source, I get intrigued. Right now Brazil is pro-western in its ideology, but what if political sentiment changes? What if Brazil goes down the path of Venezuela, Ecuador and Bolivia?

Australia has been a major supplier of tantalum but earlier this year, the Aussie's shut down a major tantalum operation for economic reasons. And with that, 30% of global supply has been affected. The Democratic Republic of the Congo (DRC) is also a source of tantalum but given the political instability of this region, end users would be foolish to place any dependence on the DRC as a supplier. Hence, the future for tantalum could be interesting indeed.

Against this backdrop, it appears logical to conclude that there may be an opportunity at hand for a Canadian player to develop a new supply. And this is where Canadian based Commerce Resources enters into the picture. Commerce trades as CCE on the TSX Venture.

The Blue River Tantalum-Niobium Project is the focus of the team at Commerce Resources and excellent progress is being made on the Upper Fir portion of this project. In fact, Commerce has now stated that it is sitting on an indicated resource of 14.68M tonnes of ore at a cutoff grade of about one-third of a pound per ton (150 g/t). Average tantalum grade on the deposit is 190 g/tonne while average niobium grade is 1300 g/tonne (about 2.6 pounds per ton).

These grades and indicated quantities suggest that Commerce is sitting on the makings of something that could someday be an operating mine. With niobium trading at $20 per pound and tantalum trading at about $45 per pound, each ton of ore would have an economic value of about $65 which should be sufficient enough to economically support a mining operation assuming these prices hold.

In terms of valuation, market cap of Commerce Resources right now is about $20 million. Shares are trading for cash in the bank plus about $7 million in value assignable to the Blue River project.

Although niobium and tantalum prices have held together quite well of late, from here the team at Commerce needs to offer the markets some clarity on future milestones. For example, further drilling information to move this indicated tonnage into the proven category would be well received by the markets. In addition, Commerce needs to provide information on feasibility to clearly show investors the economics of the project as well as projected capex to put an operation into production. Lastly, Commerce needs to make some advances on the environmental front to satisfy investors that environmental hurdles will not hobble the project. Commerce is well cashed up to accomplish these goals. Financial statements as of Jan 2009 show $13 million cash in the till.

Once this clarity is offered, I dare say the markets will embrace the Commerce story and send the share price higher. A move above 25 cents will signal that a move has started. Watch carefully.

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