Acquisition of Less Common Metals provides immediate cash flow
Great Western acquired a private UK company, Less Common Metals Inc
(LCM) earlier this year. This acquisition greatly enhances Great Western’s mineto-
market strategy and provides immediate cash flow. The company recorded
revenues of C$19.1m for the year ended 30 June 2008, based on sales of
430 tonnes of rare earth alloys. The LCM plant has a capacity of 1,100 tonnes
per annum.
A winter drill programme at Hoidas Lake adds encouragement
Great Western completed one drill programme at Hoidas Lake earlier this year.
The work extended the strike length of the main JAK zone by approximately
25 percent and tested the zone to a depth of 300 metres. The drilling also
identified a new vein system in the footwall of the JAK zone. The results should
allow the company to expand its NI 43-101 resource estimates significantly.
On the downside, the preliminary economic assessment is further delayed and
we have increased estimates for capex.
Summer- follows winter -drilling confirms a new zone at Hoidas
Great Western believes there are additional vein systems containing rare
earth elements on its Hoidas Lake property. The winter drilling revealed the
Nisikkatch South system, approximately ten kilometres south of the JAK zone.
The company completed a new phase of drilling this summer to the south of
JAK, with several new holes intersecting the Nisikkatch South system. Assays
are expected this quarter.
Development of Great Western Technologies remains a company priority
As part of its mine-to-market strategy, Great Western acquired a US-based
business capable of supplying rare earth alloys to specialty users. Whilst the
economic crisis in the US and elsewhere is having negative influences on
Great Western Technologies’ revenues, the company is pressing ahead with
upgrades and developments. Great Western is recruiting new customers and
it anticipates profitability in two to four years.
Drilling at Deep Sands is now complete
Great Western has wrapped up an aggressive drill programme that saw it
complete approximately 1,000 holes into the uppermost portion of the deposit.
The company also completed a deeper drilling programme at Deep Sands.
Great Western expects to compile the data and prepare a resource estimate,
ahead of a prefeasibility study.
Core valuation maintained but with increased confidence. Wider risk/reward spread
Our revised model maintains a base-case value of C$0.26 per share on
Great Western. However the 2008 winter and summer drill programmes
provide gathering confidence ahead of a likely expansion of NI 43-101
resource estimates. The spread between our pessimistic and optimistic cases
has widened reflecting a greater risk/reward profile associated with doubling
the mining rate and, for the optimistic case, the potential for more aggressive
marketing at LCM.
