Great Western Minerals Poised for Rare Opportunity
Dr. Allen Alper and Alison Conte

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Interview with Gary Billingsley, Chairman, and Jim Engdahl, CEO, of Great Western Minerals

Gary Billingsley, Executive Chairman, James B. Engdahl, CEO and Gordon G. Dent Manager, Corporate Communications

The U.S. National Research Council’s Committee on Critical Mineral Impacts has listed minerals that are essential for the health of U.S. economy. Platinum group elements are first and the rare earth elements (REE) are second.

Gary Billingsley, Executive Chairman of Great Western

“Without the rare earths, we go back to the turn of the century, and I mean, the 1900s,” said Gary Billingsley, C.A., P.Eng., P.Geo., Executive Chairman of Great Western Minerals. “Without them we wouldn’t have gasoline, automobiles, TVs, cell phones – any of the modern technologies that play a big part in our everyday lives.”

China produces over 97% of the world's rare earth elements, with 77% of world production coming from one mine. There are no longer any REE producing mines outside of China. Moreover, by 2012, China is expected to need all its REE to feed its own rapidly growing industries, with none to spare for the rest of the world.

This is why Great Western Mineral’s Hoidas Lake project in Saskatchewan is so promising. Its REE are found in the silicate mineral allanite and the phosphate mineral apatite. It could become the only producer in North America operating at full capacity, unique in the world as an in-situ rare earth mine.

“So the timing is perfect for a company like Great Western Minerals to establish itself in that rare earth marketplace outside of China,” said Billingsley

Mining the Rare Earths

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.

As Billingsley points out, REE are used to make alloys for rechargeable batteries for cell phones, magnets for hard-disc drives, iPods and DVDs. They are also essential for electric motors and braking systems for cars, catalysts in petroleum and automobiles, and to make super alloys for medical and dental lasers and the aerospace industry.

Great Western Minerals Group Ltd. is a Saskatchewan-based mineral exploration and development company that is planning to feed this demand. It was incorporated in 1983. Gary L. Billingsley, who first became involved with the company as a consultant in 1993, 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, CEO of Great Western.

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

Along with the Hoidas Lake rare earth project in northern Saskatchewan, Great Western has two copper/gold projects in the southwestern U.S. As a vertically integrated organization, the company also operates manufacturing facilities in Troy, Michigan through a subsidiary, Great Western Technologies Inc.

In Michigan, Great Western turns rare earth elements into materials, powders, and custom vacuum-grade specialty alloys to make ferro, nickel, copper, cobalt, aluminum and titanium alloys as well as battery and magnet alloys and hydrogen storage systems.

Great Western owns two 12,000-square-foot, state-of-the-art manufacturing plants for research, development and production.

This side of the company’s business has created cause for Engdahl to be optimistic. “When we initially bought the Michigan facility in 2006, we aimed for some positive cash flow by the end of the second year. We believe we’re going to be fairly close. We are anticipating a couple major contracts. One is in the aeronautical space industry, and it’s definitely in the value-added chain that we’re building as a company,” Engdahl said.

Great Western Diamonds Corp. (TSXV-"GWD") is the company's 40%-owned subsidiary exploring and developing diamond-bearing kimberlites in Saskatchewan.

Activity at Hoidas Lake

According to Engdahl, the Hoidas Lake project has moved ahead substantially in the last few years. “This winter we added another level of drilling to extend our resource base for the property,” explained Engdahl.

Hoidas Lake lies 50 km northeast of Uranium City, Saskatchewan, accessible by float or ski-equipped aircraft. It lies within the Northern Rae Geological Province, which consists of blocks of ancient granitic rock separated by major faults. The company holds a 100% interest in thirteen claims totaling 25,470 acres.

All of the Rare Earth Element (REE) prospects are present in the minerals, apatite and allanite, and occur in veins that parallel the Nisikkatch-Hoidas Fault.

Winter drilling at Hoidas Lake in 2008 revealed new veins of rare earth elements

The previous drilling exploration, totaling 8,500 meters, tested about 700 meters of a 10,000-meter strike length along the fault system, and to a depth of about 150 meters of a potentially 1600 meter deep structure. The winter drill program added another 7,000 meters of drilling; in an effort to double the resource based and was completed in late April 2008.

Ivan Young, Site Geologist, examines the rare earth core samples revealed by the winter drilling project.

Preliminary indications, announced in early May, are that the extensions of the previously drilled veins show similar mineralization to that previously identified in the JAK Zone and are expected to have similar grades. In addition, a new vein system has been identified in the Footwall of the JAK Zone.

“We have some wider zones at depth. We’ve got some new zones in the hanging and footwall, so overall it looks very strong,” said Engdahl.

Great Western is now planning to conduct a summer drilling program to test the Nisikkatch South vein system, the new JAK Zone Footwall Vein, and other targets that were previously identified.

Great Western Minerals may also consider recovering the phosphate at Hoidas Lake, which is running about 17.8% phosphate. “Because phosphate fertilizer is $1,000 a ton plus, that has now become an economic possibility in that deposit,” Engdahl said.

Deep Sands Hold Heavy Minerals

The company’s third significant advancement in the last two years was the acquisition of 25% interest in the rare earth side of the Deep Sands Projects in Utah. “It’s got some very, very large potential. We’ve just started drilling on that property in May, and hopefully by this fall we’ll have a very good indication of what we actually have down there,” Billingsley said.

Gary Billingsley, Executive Chairman,
on a site trip to Deep Sands,
a project in the Lake Bonneville salt basin,
about 2 hours from Salt Lake City, Utah. Deep Sands is in the Lake Bonneville salt basin, about 2 hours from Salt Lake City, Utah. It is a heavy mineral sands project, as opposed to Hoidas Lake, which is a fault-hosted vein-type system. Hoidas Lake will be underground mining, while the Deep Sands Utah Project is an alluvial deposit and will be a heavy mineral sands operation.

“There’s a granite intrusion in the Deep Creek Mountains, and over the last 130,000 years, there’s been erosion in the mountains that washed the heavy minerals into the southern part of ancient Lake Bonneville, concentrating the heavy minerals into three beaches – paleo-beaches,” said Billingsley.

John G. Pearson, M.Sc. Geol., P. Geo.
Vice President, Exploration,
has considerable expertise in
Saskatchewan Precambrian mineral deposits
and their genesis. He reviewed mineral samples
the Deep Sands Project. The rare earths that Great Western seeks, along with a significant amount of magnetite, are in those beaches, according to airborne geophysic surveys of the 66 square mile property.

Great Western Mineral has taken random surface samples of the sand, which is known to extend to at least 150 feet depth -- about 15 billion tons of material – and is getting assays averaging around 0.15 % for the sampling. Some areas average up to 0.8% total rare earth oxides, considered a significant amount of REE in a mineral sands operation.

At Hoidas Lake, neodymium is the most prevalent element, 22% rare earth by proportion. The Hoidas Lake rare earth showings are unique, in that they are found in the silicate mineral allanite and the phosphate mineral apatite, as opposed to the monazite and bastnaesite mined in China and California.

At Deep Sands Project, monazite, bastnaesite and xenotime are present, which gives it a fairly high proportion of some of the heavier rare earths, such as dysprosium and terbium, along with a lot of the light rare earths.

Financial Picture Shows Growth

Jim Engdahl describes the company’s cash position at about $2 million, with plans to do another financing in 2008. Despite the share price doldrums that many companies have experienced because of the subprime lending problem in the U.S., Great Western saw very good liquidity in the marketplace during the early spring of 2008, trading a significant number of shares.

“We do hope that with some early results out of Deep Sands and our winter drill program at Hoidas Lake, we’ll have some impact on getting that price back and corrected, at least to the level where we think it should be,” Engdahl said.

Great Western Minerals is also continuing to work on bringing one of their REE end-user companies into a partnership. “There is an extreme amount of interest in that for many of the Japanese companies as well as some European ones,” Engdahl said.

A Chinese Dominated Market

Anyone following rare earths exploration knows that China is now supplying up to 98% of this materials. With so many uses for REE, a second source is urgently needed.

Japanese companies and other users worldwide expect that by 2012, Chinese industries will be able to consume all the rare earths produced there, leaving the rest of the world searching for rare earths to fuel so many of our modern technologies.

“If all the companies that are planning on being in rare earth production by 2012 actually get to production, there still isn’t going to be enough,” Engdahl said. There are three non-Chinese manufacturers -- Great Western Minerals and two companies in Australia -- that are targeting production by 2012.

Further affecting the short supply will be an increase in demand, which Engdahl expects to grow enormously, particularly in the automobile hybrid market.

Investors Take Note

Jim Engdahl advises that investors take a serious look at the whole industry and see which firms have a strong management team and a good basis on properties. “What makes us stand out is we’re one of the few that are in the total value-added chain. We are building a fully integrated model from mine-to-market. This is going to minimize risk and get the value that you wouldn’t normally get by just mining,” he said

“I think that this is a little understood industry right now, but it’s about to become well understood,” Billingsley said. With China tightening its grip on its rare earth elements, he expects that rare earth exploration outside China will take on much greater significance.

“With the auto industry in particular, it has become critical that sources for these things be developed outside of China,” Billingsley said. Great Western Minerals appears to be in a rare position to do just that.

On June 09, 2008, Great Western Minerals Group Ltd. (“GWMG” or the “Company”) announced that it signed a non-binding Letter of Intent to acquire all of the issued and outstanding shares of Less Common Metals Ltd. ("LCM") of Birkenhead, United Kingdom, subject to the required regulatory approvals in the UK and Canada. The purchase price of this acquisition is £4,000,000 or approximately C$7,800,000, with closing anticipated on 18 June 2008.

Founded in 1992, LCM is a profitable, private company with excellent long-term relationships with many blue-chip market-leading customers across a wide range of industries including automotive, aerospace, nuclear and defense. One of LCM’s key clients is Aichi Steel Corporation of Japan, one of the Toyota Group Companies. Aichi uses LCM products in high efficiency, low weight, permanent magnet motors for ancillary equipment used in the latest vehicles manufactured by Toyota.

LCM is a leading, global manufacturer and supplier of rare earth based alloys, high purity metals, and ultra-high-purity indium. Other specialty alloys produced at the state-of-the-art plant in Birkenhead include neodymium-iron-boron and samarium cobalt alloys for the permanent magnet industry, magneto-optic and magnetostrictive materials, hydrogen storage systems and master alloys used in the production of other specialty alloys. LCM’s production of samarium cobalt accounts for 20% of global demand. Additional information about LCM can be obtained from www.lesscommonmetals.com.

LCM management expects to produce 430 tonnes of alloy and metals in the twelve months ending June 30, 2008. The production capacity of the plant is approximately 1,100 tonnes per annum and the plant is very well positioned to increase production to meet the demand for rare earth alloys from key clients. This ability to increase production will play a significant role in the implementation of GWMG’s “mine to market” business model should the Hoidas Lake rare earth deposit, and the Company’s other REE-related projects including Deep Sands, be successfully brought on-stream to provide the raw material for rare earth metals and alloys.

As a result of strong demand for its products, LCM’s revenue for fiscal year ending June 30, 2008 is expected to be approximately £9.8 Million (C$ 19.1 Million), up from £5.4 Million (C$10.5 Million) for fiscal year 2007.

GWMG and LCM are especially pleased to report that the entire management and staff of 27 highly skilled and dedicated personnel at LCM will be staying on and will continue to operate the Birkenhead plant.

The purchase price of £4,000,000 will be satisfied as follows: (i) Great Western has obtained a senior debt facility of £2,700,000 secured against the assets of LCM, of which £2,000,000 will be applied to the purchase price, with the balance to be used as working capital for operations; and (ii) the issuance by GWMG of a £2,000,000 convertible debenture to the vendors of the LCM shares. GWMG will also issue 750,000 common share purchase warrants to the vendors.

Mr. David Kennedy, Founder and Managing Director of LCM, sees this as a great match. Kennedy says, “Joining Great Western Minerals Group opens up the prospects for the long term strategic supply of key rare earth raw materials for LCM. This is of great interest to existing and potential customers as this alliance has the potential to secure the critical raw materials for key industries long into the future.”

Mark Ellis, President and CEO of Great Western Technologies Inc. agrees: “The tremendous synergy and complementary capabilities that exist between LCM and Great Western Technologies creates so many mutually beneficial opportunities for LCM, Great Western Technologies, and all of our clients. LCM brings to this transaction a solid base of blue-chip, global customers and an established magnet business; That, combined with GWTI’s existing client base and proven capabilities in the battery sector, presents great collaborative potential for all of us.”

Jim Engdahl, President and CEO of GWMG, is very pleased with the deal and the new relationships and opportunities. Engdahl says, “As with most acquisitions, it is the people that are important, and this purchase adds another dimension of intellectual knowledge and goodwill to GWMG with regards to specialty metals and, in particular, the Rare Earth industry. We are extremely impressed with the quality and dedication of the staff that David Kennedy has assembled and how well they fit in with GWMG’s “mine to market” strategy. We are also extremely impressed with the caliber of clientele that LCM brings to the table, and we look forward to long-term and mutually beneficial relationships with all of them.”

For more information: http://www.gwmg.ca Great Western Minerals Group Ltd. 226 Cardinal Crescent Saskatoon, SK S7L 6H8 Ron Malashewski Manager - Investor Relations Phone: (306) 659-4500 Fax: (306) 659-4501 E-mail: info@gwmg.ca