Quebec Precious Metals Corp. (QPM:TSX.V; CJCFF:OTCQB;YXEP:FSE) is at a crossroads after the junior explorer saw the sale of heavy rare earth projects fall through.
After more than a year, Vital Metals Ltd.'s (VML:ASX) new management advised that it is not going through with the acquisition of QPM’s 68% interest in the Kipawa and 100% interest in the Zeus rare earth projects in Quebec, instead paying more than CA$1 million to break off the discussions.
QPM continues the sales process for the projects, and Chief Executive Officer Normand Champigny said it has received expressions of interest from several other companies.
According to Vital, the cancellation of the sale was, in particular, due to its understanding of one of the indigenous groups’ positions on the projects. QPM wants to now have those discussions and take closer stock of what Kipawa and Zeus can offer.
“We need to have a better understanding of what the value is of that project,” Champigny told Streetwise Reports. “So, we’re doing an internal review.”
The review could take several months, he said.
“The rising demand for consumer durables such as tablets, laptops, and smartphones is one of the factors driving consumption of rare earth elements,” said Fortune Business Insights wrote in the summary of a 2021 report.
Champigny said he is not worried about the salability of the projects, however, as rare earth elements (REEs) are needed across the world for the new green economy, and both the United States and Canadian governments are offering incentives to produce them.
The industry has a projected 10% compound annual growth rate between 2022 and 2026, according to the Research and Markets in a 2022 report.
The market is expected to grow to US$7.3 billion in 2026 from US$3.5 billion in 2020.
“The rising demand for consumer durables such as tablets, laptops, and smartphones is one of the factors driving consumption of rare earth elements,” said Fortune Business Insights wrote in the summary of a 2021 report. “The demand for these elements in developing economies is estimated to expand rapidly owing to an increase in industrialization, building, and construction activities.”
Also driving the demand is the need for more electric vehicles (EVs) and stringent rules on carbon discharges to shield the environment.
“However, the high cost of these minerals and the monopoly of China-based manufacturers is expected to hinder the market growth,” Fortune Business Insights wrote.
China has about 85% of the world’s REE processing capacity.
REEs are in high demand for purifying water, MRIs, fertilizers, weapons, research, wind turbines, computers, and permanent magnet motors for EVs.
According to QPM, the key rare earths that have been identified are neodymium, praseodymium, terbium, and dysprosium. The Kipawa deposit is defined by three enriched horizons that contain some light rare earth oxides but primarily heavy rare earth oxides. Drilling there since 2011 was used to prepare a feasibility study, which was finished in 2013.
Vital had agreed to acquire the interest in the projects for CA$8 million over five years but ended up paying more than CA$1 million under the terms of a binding term sheet from August 2021.
Champigny said Vital terminated the agreement for the rare earths projects because the two sides could not agree on terms to extend the due diligence period for discussions with indigenous groups.
Open to Consolidation
QPM this fall entered a binding memorandum of understanding with Idaho Champion Gold Mines Canada Inc. (ITKO:CNX) for Idaho Champion to acquire a 100% interest in two lithium pegmatite projects from QPM in the James Bay territory of Quebec.
Also in James Bay is QPM’s flagship gold project, Sakami, which remains largely under-explored. It has a potential of 2 million ounces (Moz) or more of gold, which could attract a major to mine and develop the property.
Champigny said the company is open to consolidation and has been in ongoing discussions.
“You could see the possibility that the rare earth (projects) could be sold or advanced to create a lot of value, and the gold project obviously could be combined with other projects to create value,” he said.
For the moment, Champigny said the company has cut back on exploration to save cash.
Ownership, Coverage, and Share Structure
Major mining company Newmont Corp. (NEM:NYSE) owns about 13% of QPM. Government-backed Caisse de Dépôt et Placement du Québec and other Québec institutions own about 12%, and QPM management owns 1.3%.
The company is covered by Laurentian Bank Securities' Barry Allan and Research Capital Corporation's Ryan Hanley. Newsletter writer of The National Investor also follows the stock.
Quebec Precious Metals has a market cap of CA$6.69 million and 82.67 million shares outstanding, of which about 71 million are free-floating. It trades in a 52-week range of CA$0.28 to CA$0.06.
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1) Steve Sobek wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports. He or members of his household own securities of the following companies mentioned in the article: None. He and members of his household are paid by the following companies mentioned in this article: None.
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