Developing a World-Class Rare Earth Project in Canada

Enabling green technologies through rare
earth metal development
Developing a World-Class Rare Earth Project in Canada
October 2014
TSX: QRM; NYSE MKT: QRM
www.questrareminerals.com
Disclaimer
Forward-Looking Statements
Forward Looking Statements
Except for the statements of historical fact contained herein, the information presented constitutes “forward-looking
statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors which may cause the actual results,
performance or achievement of the Company to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements.
Although the Company has attempted to identify important factors that could cause actual results to differ materially,
there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no
assurance that such statements will prove to be accurate as actual results and future events could differ materially from
those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking
statements.
Cautionary Note to U.S. Investors Concerning Estimates of Measured, Indicated and Inferred
Resources
This presentation uses the terms “Measured, “Indicated” and “Inferred” Resources. U.S. investors are advised that
while such terms are recognized and required by Canadian regulations, the Securities and Exchange Commission does
not recognize them. “Inferred Resources” have a great amount of uncertainty as to their existence, and great
uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an inferred resource
will ever be upgraded to a higher category. Under Canadian rules, estimates of Inferred Resources may not form the
basis of feasibility or other economic studies. U.S. investors are also cautioned not to assume that all or any part of an
Inferred Mineral Resource exists, or is economically or legally mineable.
National Instrument 43-101
This presentation may include historical reserve and resource information in respect of the project areas that do not
conform to the requirements of National Instrument 43-101 and which has not been verified by the Company.
2
Capital Structure
As of October 6, 2014
3
Stock Exchange Symbol
QRM (TSX ; NYSE
MKT)
Last Close
$0.165
52-Week Trading Range
$0.165 - $1.03
Shares Outstanding –
Basic
78.8 million
Shares Outstanding –
Fully Diluted
85.4 million
Market Cap – Basic
$13 million
Cash and Cash Equivalents
(as of 6/31/14)
$3 million
Average Daily Trading
Volume (TSX+NYSE)
519,913 shares
Quest Highlights

Developing the world-class Strange Lake project, located in mining friendly jurisdictions in
Québec and Labrador

Strange Lake is a globally strategic asset in the heavy rare earth sector

Largest heavy rare earth deposit outside of China, with leading indicated HREO+Y grades of 0.36%

High-quality, high-grade HREE deposits are scarce, leading to a broadly anticipated supply-demand gap

World demand for REEs expected to grow ~6% annually between 2012 (136kt) and 2020
(220kt), with HREE expected to grow ~9% annually during the same period

Mineralogy amenable to simple processing and straight forward engineering, a material
advantage over other REE projects

Quest can provide long term non-Chinese supply of the rare earths required in growing
industries and new applications

Robust PEA supports viability of project - pre-tax IRR of 20.1%, and NPV10% of $1.4 billion

Led by experienced management and technical team
4
Quest is the Largest Rare Earth Deposit
Highest Grade and Lowest Technical Risk
Strange Lake positions Quest as the dominant player in HREE
Project name
Strange Lake
(B-Zone)
Nechalacho
Dubbo
Norra Kärr
Kipawa
Kutessay II
Bokan
Mountain
Location
Québec, Canada
NWT, Canada
New South Wales
Gränna, Sweden
Québec, Canada
Chui, Kyrgyzstan
Alaska, USA
PEA
FS
FS
PEA
FS
PFS
PEA
Total Resource
Size (t)
492 million
126 million
73 million
69 million
24 million
18 million
5.2 million
TREO Grade (%)
0.90%
1.43%
0.89%
0.60%
0.42%
0.26%
0.65%
HREO Grade (%)
0.36%
0.30%
0.23%
0.31%
0.06%
0.13%
0.26%
37.0%
20.8%
25.8%
51.7%
13.7%
46.1%
40%
TREO Resource (t)
4.40 million
1.80 million
0.65 million
0.41 million
0.10 million
0.05 million
0.034 million
HREO Resource (t)
1.58 million
373,547
167,960
214,210
14,005
21,455
13,541
Resource Category
Indicated/
Inferred
Proven/Probable/
Measured/
Indicated/
Inferred
Proven/Probable/
Measured/
Inferred
Indicated/
Inferred
Proven/probable/
Measured/
Indicated/
Inferred
Measured/
Indicated/
Inferred
Inferred
Stage
HREO/TREO
5
Source: Corporate disclosure and TSX trading
The Rare Earth Sector
• World demand for REEs was
~136,100 t in 2012, forecast to be
220,000 t in 2020
• China accounts for 48% of reserves
and supplies ~97% of world demand
• Government and industry policy to
diversify away from China in the
near-term
• Quest is focused on the critical, high
value, high demand heavy rare
earths
• Limited large economically feasible
HREE deposits exist in the world
6
Source: DOI, US Geological Survey, Circular 930-N.
Projected Western Supply Deficit
Currently NO HREE producers outside China
•
•
•
China imposed a stringent export quota in 2009 to preserve its rare earth reserves
Molycorp was the largest non Chinese supplier of REO in 2012
 Molycorp mainly supplies Light Rare Earth Elements
Uniquely positions Strange Lake in the supply of HREE
149,750 t
160,000
Demand tpa - REO
140,000
120,000
100,000
80,000
65,000 t
60,000
Deficit
40,000
20,000
Chinese Export Quotas 1
31,001 t
0
2006
2007
2008
2009
2010
2011
China
7
1: Assume Chinese Export Quota stabilizes at 2013 level
2: Demand information sourced from Roskill 2013
2012
ROW
2013
2014
2015
China Export Quota
2016
2017
2018
2019
2020
Forecast REO Global Demand
2020 Forecast REO Global Demand by
Application (220,000 t)
Ceramics
Phosphors
6%
6%
Metallurgy
15%
Glass 7%
Catalysts
17%
Polishing
11%
Other 13%
Magnets
25%
Source: Roskill 2013
8
Estimated Market Size for REE’s
(2020)
Permanent
Magnets
54,250 t
$5.0 b
Phosphors
12,250 t
$1.5 b
Ceramics
12,000 t
$0.5 b
Total
78,500 t
$7.0 b
Strategic market study
identified Nd, Pr, Tb,
Dy and Y as providing
best entry opportunity
Corporate Strategy
•
Quest’s vision:
 To de-risk and develop the largest heavy rare earth deposit globally
 To build long-term relationships within high growth segments
 To be a leading long-term supplier of critical metals
9
•
•
Develop the PEA into a feasibility study
•
•
•
•
Execute social plan (Aboriginal and non-Aboriginal)
Build strategic relationship with industry partners and continue to de-risk
Development
Environmental construction permits
Optimize financing plan (reviewing efficient alternatives)
Key initiatives and project plans are established and underway
Straight Forward Operational Plan
10

The port and mine site
will be linked by an allweather gravel access
road over a distance of
168 km

Port location has been
identified and surveyed
in Voisey’s Bay

Mine material will be
shipped to the
processing facility
located in Bécancour
(between Québec city
and Montréal)
Expansive Resource and Mine Plan


High quality resource with low
strip ratio of 0.35:1 and leading
HREE grades 0.32%
The mine plan is targeting no
stockpiling of mined materials
at the end of the 30 year mine
life
Domain
Tonnes
(x1000t)
LREO
HREO +
Y
TREO
+Y
H:T
Ratio
INDICATED
Enriched Zone
20,020
0.72
0.72
1.44
50%
Granite
258,108
0.55
0.33
0.89
38%
Total
278,128
0.57
0.36
0.93
39%
0.30
0.85
35%
INFERRED
Granite
214,351
0.55
Tonnage Mined
2,595,000 tpa
Tonnage Fed to Mill
1,538,000 tpa
Operating Period
11 1: Source: NI 43-101 Technical Report on the PEA for the Strange Lake Property filed on SEDAR April 9th, 2014
270 d/yr
Strange Lake Revenue
~75% of business focused on 5 key high growth critical strategic REEs (~80% HREE),
and ~60% focused on high demand, high margin HREE (Dy, Tb and Y)
• Quest focus is on high
growth rare earth
oxides (Dy, Nd, Y, Pr, Tb)
used in advanced
technologies
LOM Annual Revenue ($M) and
Contribution $758 mil/year
$192
25%
Dysprosium (Dy)
$286
38%
• Marketing and sales
strategy development
will focus on the
permanent magnet,
phosphor and ceramics
markets
$30 4%
$92
12% $62
8%
Neodymium (Nd)
Terbium (Tb)
Yttrium (Y)
Praseodymium (Pr)
$96
13%
12 1: Source: NI 43-101 Technical Report on the PEA for the Strange Lake Property filed on SEDAR April 9th, 2014
Other
Robust PEA (April 9th, 2014)
Strange Lake B-Zone Deposit PEA
NPV 10% Pre-Tax
$1.42 Billion
IRR Pre-Tax
20.1%
NPV 10% Post-Tax
$788 Million
IRR Post-Tax
16.7%
Cap-Ex
$1.63 Billion
Op-Ex (Annual)
$357 Million
Revenue (Annual)
$758 Million
Payback Period
5.3 Years
Life of Mine
30 Years
Production Volume
•
HREE+Y
4,400 t
•
LREE
6,000 t
Additional optimization opportunities exist and are being evaluated
13
1: Source: NI 43-101 Technical Report on the PEA for the Strange Lake Property filed on SEDAR April 9 th, 2014
2: All values are in CAD dollars
PEA Business Model
Efficient modular plan in place to optimize Strange Lake Project
MINE &
FLOTATION
Capex
Material
Flow
(MT/Yr)
14
ROAD, PORT
& LOGISTICS
$343 mil
2,600,000
Mine
Material
PROCESSING
$478 mil
1,500,000
Mill Feed
550,000
Flotation
Concentrate
SEPARATION /
REFINING
$493 mil
$317 mil
10,600
Mixed REE
Concentrate
10,400
Pure REO
Project Time Lines
EIA Process and Road Construction Control Critical Path
Jan 2014
Jan 2015
EIA Project Description
Feb
Social Milestones, First
Nations
Operational Partnerships
Feasibility Study (North)
Feasibility Study (South)
ECPM/ Detailed Eng
EIA Process & Approval
Construction Permits
for Early work
Road & Mine Site
Construction
Bécancour Construction
First Ore Shipment
Plant Commissioning
Commercial Production
15
Jan 2016
Jan 2017
Jan 2018
Jan 2019
Jan 2020
2014-15 Milestones and Catalysts
• Focused on completing feasibility study, and optimization review
 Feasibility study: North (2015) and South (by 2016)
 Integrated mini pilot plant by early 2015, full pilot (demonstration) plant operation – 2015
• Permitting process
 Submission of formal project description in early 2015
 Environmental Impact Assessment starts in 2015, environmental and construction permits
received in early 2017
• Continued negotiations with first nations and finalize Aboriginal Participation
Agreements
 Draft MOUs presented in 2013 and Project Description as basis for IBA in early 2015
 Official public consultation with stakeholders has been ongoing since 2012
• Review of potentially beneficial off-take and joint venture partners
 Discussions underway for closing MOU with separation partner in 2015
 Binding MOU with logistics partner 2014
 Potential MOU with strategic partner in 2015
16
Strong Team to Execute on Plan
• Peter J. Cashin, President & CEO
 Discovered the Strange Lake ore body in 2009 - over 30 years of experience in all facets of the mines
and minerals industry, including Inco, Senior Geologist for Eastern North America and the Ministry of
Northern Development and Mines for Ontario, Quest’s largest individual shareholder
• Dirk Naumann, Ph.D., Executive Vice President, Development
 30 years of experience in designing new products and processes, previously worked for Bayer AG,
Inco Ltd, and other resource companies internationally
• Mark Schneiderman, CFO
 Chartered Accountant and a Certified Fraud Examiner, recently the CFO of Freewest Resources
Canada Inc. prior to its acquisition
• Anil Singh, Vice President, Investor and Corporate Affairs
 Experience in mergers and acquisitions, equity and debt financing, and strategic planning. Previously
Vice President, Investment Banking at a private merchant bank
• Pierre Guay, B. Eng (Geo), Manager of Exploration
 Geologist with 22 years experience in mine development and production. Previously an Area
Geologist with Vale Inco Exploration and has worked for Vale for the past 10 years
17
Experienced Board
•
•
•
•
•
•
Pierre Lortie, M.C., FCAE, Chairman of the Board
 Currently senior Business Advisor at Dentons. Director of Element Financial Corporation, Canam Group Inc., and
Lamêlée Iron Ore Ltd. Mr. Lortie has held senior executive positions at Bombardier until December 2003. He was
Chairman, President and CEO of Provigo Inc, and the President and CEO of the Montréal Stock Exchange
Neil Wiener, B.C.L., Corporate Secretary and Director
 Practicing lawyer since 1981. Currently a partner in the Montreal office of Fasken Martineau DuMoulin LLP. Mr.
Wiener practices exclusively in the area of securities law, with emphasis on public financings
Ronald Kay, B. Eng (Geo), M.B.A., Director
 Metallurgical engineer with 40 years of experience in the financial industry, including senior positions as a mining
analyst as well as a consultant to several major brokerage companies
Michael Pesner, BCA, BA, Director
 Was a senior partner in financial advisory services at KPMG LLP, Montreal. He is a director of Richmont Mines Inc.,
Mint Technology Corp, Sand Technology, Liquid Nutrition Group Inc., and Bitumen Capital Inc.
John Panneton, Director
 Spent 30 years with CIBC Wood Gundy as the Executive Vice President, was the CEO of CIBC Investment
Management Corp., the Chairman of CIBC (Suisse) S.A., Executive Vice President of Dundee Wealth, Vice Chairman
of Dundee Capital Markets
George Potter, Director
 Senior mining executive with more than 36 years of international experience in project development and
operations, served as a Senior Vice-President Capital Projects for Barrick Gold Corp.
18
Summary
19
•
Quest’s vision is to create a Canadian-based integrated global rare earth metals
enterprise to bring the world’s largest rare earth deposit into production
•
The company will be a key, long term supplier of critical metals to a full
spectrum of global manufacturing customers
•
The Strange Lake project is located in an attractive geopolitical jurisdiction from
the perspective of both financial investors and customers
•
Project economics are attractive and Post PEA activities will improve the
economics and contribute to meeting key milestones
•
Key initiatives and project plans for the next year have been established and are
underway
Contact Information
Peter J. Cashin, President & CEO
Quest Rare Minerals Ltd.
Email: [email protected]
General Email: [email protected]
Corporate Office
10 King Street East
Suite 900
Toronto, Ontario M5C 1C3
Tel: (416) 916-0777
Toll Free: 1 (877) 916-0777
Fax: (416) 916-0779
Follow us:
20
Scan the barcode for a 3D
animation of the Strange Lake,
B-Zone Resource
Appendix
21
Anticipated Demand for REE
Value of REE input in auto
manufacturing has increased
from 0.1% in 2007, to 2% in
2011 to 25% by 2020e (BMW,
2012)
22
Source: BMW, RN Febtech; Shaw and Chegwidden, 2012
450GW by 2020 compared
to 250GW currently
Anticipated Demand for REE
Increase in Yttrium
consumption between 2010
and 2011 was 13.5%
23
Source: GE, Hometheater; Shaw and Chegwidden, 2012
China’s Impact on the Sector
China dynamics and policies to further magnify
a broadly anticipated supply-demand gap
• Primary producer, with depleting reserves
 China is the dominant producer, supplying ~97% of REE world demand (only HREE producer)
 China REEs account for 48% of world reserves (expecting further policy changes in China to
preserve for domestic consumption)
• Increased demand in China
 China is expected to consume ~70% of worldwide annual production in the near-term
 China will need to import to address supply shortages (especially HREE)
• Country production expected to decrease
 Consolidating REE producers and shutting down illegal mines to improve industry operational
standards and reduce environmental issues
24
Strong Long-term REE Market Forecast
•
Global Demand REO MT
250,000
•
200,000
150,000
•
100,000
50,000
•
0
2000
2010
Source: Roskill 2013
25
2020f
Demand will grow significantly
 Many applications are in high growth
markets, e.g. wind turbines, e-vehicles
 5-10+% annual growth rates for individual
rare earth elements
Suppliers will be strategic partners
 Buyers push for reductions in REE supply
chain risks
 Higher environmental expectations driven
by global supply chain initiatives
China dominance will moderate
 Will not be able to meet its REE needs as its
domestic demand for consumer and
industrial goods increases
Market will mature
 Greater market and price transparency due
to increased strategic importance to global
companies
HREE – Scarce Supply, High Demand
Quest’s HREE Content Substantially Larger
Quest Rare Minerals
(Strange Lake)
• Quest’s HREE+Y content in head grade is substantially larger
than current producers and peers, with ~44% HREE+Y
11%
 HREE+Y represent ~80% of Quest’s LOM annual revenue
3%
3%
44%
HREE
~44%
• HREE+Y: Scarce supply, and demand growing faster than LREE
28%
• LREE: Over-supply when Molycorp and Lynas are at full
production
12%
Heavy Rare Earths
Lanthanum
Cerium
Molycorp
(Mountain Pass)
12%
Praseodymium
Neodymium
Samarium
Lynas
(Mount Weld)
1%
1%
Avalon
(Nechalacho)
4%
3% 7%
18%
4%
17%
34%
HREE
~1%
27%
24%
5%
HREE
~7%
4%
HREE
~27%
15%
49%
33%
43%
26 Source: Quest PEA March 2014, Molycorp 2012 Annual Report, Avalon FS April 2013, www.lynascorp.com
The Rare Earth Sector and Applications
Quest to Supply to High Growth HREE Sectors
Heavy Rare Earth
(less abundant)
Terbium
Dysprosium
Phosphors, permanent magnets
Permanent magnets, hybrid
engines
Erbium
Phosphors
Yttrium
Red color, fluorescent lamps,
ceramics, metal alloy agent
Holmium
Glass coloring, lasers
Thulium
Medical x-ray units
Lutetium
Catalysts in petroleum refining
Ytterbium
Lasers, steel alloys
Gadolinium
Europium
27
Major End Use
Magnets
Red color for television and
computer screens
Source: DOI, US Geological Survey, Circular 930-N.
Light Rare Earth
(more abundant)
Major End Use
Lanthanum
Hybrid engines, metal alloys
Cerium
Auto catalyst, petroleum
refining, metal alloys
Praseodymium
Magnets
Samarium
Magnets
Neodymium
Auto catalyst, petroleum
refining, hard drives in
laptops, headphones, hybrid
engines
Simple Flow Sheet
Low Risk & Standard Engineering
Strange Lake B-Zone ROM Material
Comminution
Residue
Management
Floatation
Acid- ore Mixing
Sulfation
Roasting
Sulfuric Acid
Acid Recovery
Water Leaching
Precipitation
Residue
Management
Separation
28
High Purity
Rare Earth Oxide
Strange Lake
Bécancour