Molycorp is a $3 billion market-cap company and, like all majors mining a scarce commodity, is likely on the lookout for potential acquisitions.
On top of that, Molycorp's Mountain Pass Mine is the ONLY rare earth mine in North America. Molycorp'
s mine has been on the fast-track to production ever since the world realised China was in control of over 95% of all rare earth production. Naturally, Molycorp has become the biggest rare earth play this side of the Pacific and its market-cap currently sits around $3 billion - giving the company plenty of acquisition capital, whether it be via stock or cash.
The below map shows just how close Elissa Resources' flagship Thor REE project is to Molycorp's rare earth producing mine. As mentioned, during our visit to Elissa's Thor Project, we could see the activity from Molycorp's mine as we stood on the company's project. Molycorp is in the early stages of bringing the Mountain Pass Mine back into full production and achieved profitability with record net sales of $99.6 million in Q2 2011.
Elissa Resources is an entirely United States focused exploration company. Its flagship asset is the 100% owned Thor Heavy & Light Rare Earth Element Project (Nevada) located 16 miles (26 km) east of Molycorp's Mountain Pass rare earth mine and processing facility. Elissa's Thor REE Project is strongly represented in 8 of the heavy rare earth elements and in 5 of the light rare earth elements, including dysprosium, neodymium, yttrium and terbium. Elissa also has compelling drill ready gold projects in Idaho and Nevada, with multi-million ounce discovery potential. Its Idaho Project began drilling in early September. We will get to the gold projects shortly; but first you must learn more about the company's rare earth element advantage.
Elissa's Proximity to Mountain PassThe advantages for a junior resource company being so close to the largest and richest REE deposit and mine on earth are obvious. Our team travelled to Elissa's Thor REE Project in late August to see it for ourselves and were impressed with its locale. We could literally see the dust from the trucks driving up to MolyCorp's Mountain Pass Mine from where we stood on the Thor Project. Its location's convenience has already encouraged a number of analysts and geologists to schedule project visits and see it with their own eyes. During our visit there were independent institutional investors and geologists joining us as we were guided through Elissa's Thor REE project. We laid witness to several compelling outcrops, the infrastructure in place and the expansive 2.5 kilometre long Lopez Trend.
One can leave the black jack tables of Vegas behind and in only 2 hours be in the middle of the Mojave Desert scouring Elissa's Thor REE Project.
The infrastructure at Elissa's Thor project is favored by geologists for a number of reasons. There is a state maintained highway leading almost directly to the project. From the highway there is a short dirt road (used occasionally by amateur derby car racers) which takes you onto the project. Being an earshot on what we like to call the 'right side' of the California border (Elissa's Thor Project is situated entirely in Nevada) is also a distinct advantage, as Nevada has far more mining friendly laws than California. Elissa proved this by attaining drilling rights in only a few short months after acquiring the Thor Project.
Let's not forget that a $1 billion dollar REE processing plant is only 16 miles away at Molycorp's Mountain Pass Mine. Try finding another junior REE explorer with that advantage in North America.
If a significant discovery is made at Elissa's Thor Project, one must consider how feasible and logical it could be to share in this processing facility for the mutual benefit of both companies.
Can you think of one other rare earth exploration company in North America with such close proximity to a REE processing facility?
We couldn't find another.
When Elissa discusses Thor, and its advantages, it states that, unlike many REE projects - is strongly represented by both Heavy and Light REEs of good grade, including the most vital and critical (as deemed by the US Dept. of Energy) neodynium, terbium, yttrium, dysoprsium.
There's much more to Elissa's Thor Project than just its location.The below graph shows an assessment of REE grades conducted by the US Dept of Energy in December of 2010. Elissa has included some of the data received from its Thor Project and inserted it in with the other data ( note: Elissa Thor Project data - average of 28 samples ≥ 1.0% total REE).
The above graph demonstrates that some of Elissa's Thor REE Project samples ( note: Elissa Thor Project data above - average of 28 samples ≥ 1.0% total REE) have compelling averages for many key heavy REE's - the most expensive of the rare earth elements. You can see very clearly from the above graph that MolyCorp's Mountain Pass Mine is lacking in this area, with next to no heavy REEs. This is a huge reason why we decided to work with Elissa Resources by taking them on as a client and new Featured Company.
Heavy REEs are by far the most valuable and all companies in the sector are desperately hoping to increase their supply of these rare earth elements. Elissa's results thusfar have encouraged its management to quickly move forward with an aggressive drill program scheduled for November of this year (a key to our timing).
More on ThorTo date, Elissa has collected 127 total rock samples from the Thor Project, mostly continuous channel samples taken across widths of one to several metres from limited rock exposures throughout the project area. More than half of these samples (70 total) returned assays showing anomalous (> 0.1%) to very significant (>0.5%) amounts of REE, with at least 22 samples returning assays of 1.0% to 10.0% total REE. These 22 higher-grade samples, which represent various targets within each of the several separate discovery zones, contain an average of 2.58% REE, with the HREE comprising about 5% to 10% of the total REE content.
Note: The assay values mentioned here are of the REE metals themselves, not REO (rare earth oxides). REO values are 14 to 27 percent larger than REE. The total REE values herein include Yttrium (Y) which is technically not a REE but is classed with the HREE because of chemical and geochemical similarities; however, because Yttrium has value and abundance more similar to the LREE than the HREE, it has been excluded from the HREE contents reported herein.
On our property visit, our management team viewed several outcroppings on the Thor Project and more particularly, on the compelling Lopez Trend. The Lopez Trend on Elissa's Thor Project has garnered much of the company's interest thus far.
Elissa has reported in past news releases that drill targets were being selected and that a drill program on Thor is being organized for November - hence the timing of our introduction. This is speculation, but it would come as no surprise if Molycorp's geologists were interested in learning what Elissa and its team come up with at Thor. This is a location play. A company doesn't acquire a project in close proximity to the only producing rare earth mine on the continent by coincidence. This was a strategic acquisition for Elissa and it took a long time to finalize - for good reason. As investors, all we see is the end product. We don't see the time and sweat put into making significant property deals. On our property visit, Elissa's President, Paul McKenzie, explained the hard work that went into locking up the Thor Project. Getting this asset under management was pivotal for the company.
There's More to ElissaElissa Resources is also well positioned to capitalize on the gold sector, with two gold projects under its control. The one we have chosen to focus on is the Sage Creek Gold Deposit, which has drill results pending.
The company describes Sage Creek as a straightforward target concept which can be readily tested by shallow drilling. This is exactly what Elissa is doing right now. On August 10th 2011, Elissa announced that core drilling had commenced at its Sage Creek Gold Project in east-central Idaho, USA. The drill program is targeting gold with open-pit potential at depths of up to 150 meters.
Paul McKenzie, President and CEO of Elissa Resources stated that, "We believe the near-surface, tabular gold-bearing unit at Sage Creek has the potential to contain a large and economically viable gold resource."
He went on to note that, "Very encouraging near-surface drill results were overlooked by a previous explorer that focused its limited drill program on deeper, potential gold-bearing structures only."
The Sage Creek properties, located in the historical Indian Creek Mining District in Lemhi County, consist of 10 unpatented lode mining claims (approx. 200 acres) recently acquired through an option agreement (option for Elissa to own 100%, includes NSR buyout option) and 21 additional mining claims (approx. 420 acres) subsequently staked by Elissa to cover adjoining gold prospective ground. The option agreement calls for modest annual advance royalty payments and a 2% NSR production royalty to the vendor that can be purchased at any time.
What was most interesting to our team is the historic region in which the property lies. The Sage Creek Gold Project hosts a number of historical gold mines developed along a tabular stratabound cherty iron-formation unit that is up to 10 m thick and exposed intermittently over a distance of 6 km or more. It is part of the regionally extensive Belt Supergroup sedimentary rock sequence of Proterozoic age, host to many important metal mining districts throughout northern Idaho, western Montana and southern British Columbia. Stratiform cherty iron-formation units similar to those mapped in the Sage Creek area are hosts to important gold deposits in similar geological terranes elsewhere in the world and are often characterized by great lateral extents and reasonable gold continuity.
Sage Creek has widespread gold mineralization on the surface, including gold-bearing rock float that contains up to 30 grams per tonne (g/t) gold throughout the area. Up to 3.0 g/t gold was intersected over 10 meters (not true thickness) during limited historical drilling.
With Elissa's Sage Creek gold project being drilled and its Thor REE Project soon to be drilled, it's safe to say Elissa's management team has its hands full, but are more than capable, having several successes in the mining industry, from buyouts to production, under their belt.
The company is also well-prepared financially as it currently has roughly $2 million in its treasury - a substantial amount for a company with a market cap under $8 million. At the beginning of this report we listed our 6 criteria for selection of Elissa, with management firmly at the top. You can't win a horse race without a good jockey. It doesn't matter how fast or how strong the endurance of the horse is, if your jockey is driving him in the wrong direction, you will finish dead last every time. Elissa's management team is truly elite.
Management Team Head Geologist: Mel Klohn - LP Geo, Director
45 years senior geological management experience - MSc (Geology), Qualified Person
Yamana Gold - former Vice President and Project Manager (10 years)
Exxon - former Senior Exploration Geologist and Research
Geoscientist (25 years)
Red Hill Energy (now Prophecy Resource Corp) - former Director and Senior Geologist
Mel was the former VP of Yamana and one of the founders. During the early/lean days at Yamana, Mel even covered some of the expenses with his own credit card. This is before most investors had ever heard of the now top 10 largest gold producing company on earth. This man knows a thing or two about geology and after meeting him on 3 different occasions to discuss Thor, we are happy that he is at the helm of this operation. His conviction runs deep and he's not looking for just a paycheque - he wants to find another massive discovery.
If a company is going to be successful it has to have a money man, or a few members of the team that can readily raise capital. For Elissa, this man is Arnold Armstrong, its Chairman.
Chairman: Arnold Armstrong
40 years resource industry senior management experience
Red Hill Energy - Founder (now Prophecy Resource Corp)
Silvercorp Metals Founder
International Enexco Founder
Admitted to British Columbia Bar 1950
Mr Armstrong founded Silvercorp Metals, the lowest cost silver producer in the world.
Mr. Armstrong "orchestrated the rise of Pyramid Mines, which discovered the massive lead-zinc deposit at Pine Point in the Northwest Territories of Canada in 1965. Pyramid was so widely held that the discovery set off a major flood of investment into the entire resource sector, and started a claim-rush that had every piece of land from Pine Point down to the U.S. border staked" according to Casey Research.
Armstrong has always held his shareholders in the highest of regard. Casey Research reported that, "He duelled with the taxation department of Canada's federal government for three years over the sale Pyramid Mines to Pine Point Mines. His legal expertise and focus on detail helped him put together an unstoppable case. Eventually, Revenue Canada (now the Canada Revenue Agency) gave up, and Arnold distributed every penny of the proceeds directly to his shareholders."
He is an accomplished Canadian businessman and the former Chairman and CEO of SKN Resources, which became Silvercorp Metals Inc., now trading under the symbol SVM on the NYSE and TSX. In case you aren't aware of how big a story Silvercorp has become, it is the world's lowest cost silver producer.
Mr. Armstrong's old coal company, Red Hill Energy, merged with Prophecy Resources a few years ago and has just gone into production in Mongolia (announced on October 14th, just a few days ago). This is yet another example of Mr. Armstrong's ability to take junior companies all the way into production.
Armstrong's companies have 1.5 billion tonnes of Thermal Coal, 1 billion lbs Copper, 345 million lbs Nickel, 207 million lbs Vanadium and 5.8 million lbs of Titanium under management. Current Armstrong group of companies' partnerships include Cameco Corp and AREVA - the largest and second largest producing uranium companies in the world.
This is a man who can raise money in good markets or bad.
President /CEO: Paul McKenzie20 years resource industry management experience
Red Hill Energy (now Prophecy Resource Corp) - Founder and former transitional President
Mr. McKenzie is as driven a CEO as you are going to find in Canada. He lives, breathes and works mining and investing. He is acutely aware of everything his company has and what it needs to do in order to maximize value. We spent a considerable amount of time with him down at the Thor Project in Nevada and can tell he truly believes in what the company can achieve with its Thor Project. He has worked directly with Mel Klohn since his days at Red Hill Energy. They were both very successful working together in the past and hope to find that same success with the Thor REE Project.
We Found What We Were Looking ForOur team wanted to identify a company that had come way off its highs and was still well financed. Elissa hit a high of $0.70 cents per share in June of this year and now trades at just $0.26 per share. Its all-time low is $0.19 per share.
The company's largest financing, which primarily included insiders, was done at $0.20 in March.
We've been monitoring Elissa's trading patterns for months and have waited until this weekend to introduce it to you for obvious reasons. The timing of this introduction coincides with our thoughts on the overall market outlook.
Elissa has just over $2 million in its treasury and has completed the vast majority of drilling and work at its Sage Creek Gold Project for the season (currently waiting for results). It has cash and two projects advancing quickly. The company's shares trade with solid liquidity and typically a tight bid/ask.
In addition, Paul McKenzie and his team are constantly travelling all over the continent as they educate retail and institutional investors on Thor's proximity to the Mountain Pass Mine; as well as the company's compelling results returned from Thor. This is a hungry management team who know exactly what they have in their flagship asset. Many eyes will be on Elissa's Thor Project when drills begin to turn as Molycorp's Mountain Pass Mine, and billion dollar production facility, with limited heavy REE's, sits in the background.
All the best with your investments,
