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Critical Elements research and analysis

Contributed by eResearch

By Bob Weir

Critical Elements Corporation (“Critical Elements” or “the Company”) is a Canadian mining exploration company with a number of metal projects in Quebec and British Columbia.

INVESTMENT HIGHLIGHTS

Critical Elements’ key Rose project boasts 26.5 million tonnes in NI 43-101 compliant Indicated resources at 1.3% Li2O equivalent and 10.7 million tonnes in Inferred resources at 1.1% Li2O equivalent;

The project in November 2011 obtained a Preliminary Economic Assessment which estimated the project’s after-tax NPV (8%) at $279 million;

The Company plans to have a Pre-feasibility Study and an Environmental Impact Study for the project in the near future.

PROJECTS SUMMARY

Critical Elements holds 18 projects in Quebec and British Columbia (see the table below). The Company’s main focus is on the rare metals and rare earths, particularly tantalum. Croinor 1 and Matchi-Manitou are gold and base metals projects where Blue Note Mining is the operator. This report covers the Company’s key Rose project.

ROSE TANTALUM-LITHIUM PROJECT

Location and Infrastructure: The Rose project is located in Quebec, 75 km due south of Goldcorp’s Éléonore Gold Deposit (see the map below). The project comprises 636 active mining titles covering a total of 33,307 ha. The project is accessible by road, and there is a power-line on the project.

Resource: Critical Elements started drilling the Rose property in late 2009. So far, a total of 26,500m in 181 drill holes have been conducted on the property. Out of 181 drill holes, 175 returned significant values for Li, Ta, Rb, Cs, Ga or Be and, in most cases, for more than one of these elements. The Company's exploration and drilling results were used by InnovExplo to produce a NI 43-101 resource estimate in September 2011 (see the table below). Based on the density of the processed data, the search ellipse criteria, and specific interpolation parameters, the authors of the estimate believe that the resource currently can only be classified as Inferred and Indicated categories. A cut-off grade of 0.75% Li2O was considered for the estimate. Metallurgical testing provided lithium recovery of 90.7% at 5.87% Li2O and tantalum recovery of 84.8% at 1,016 ppm Ta2O5.

Preliminary Economic Assessment: The project obtained a Preliminary Economic Assessment (“PEA”) in November 2011, completed by Genivar with the collaboration of Bumigeme and InnovExplo. The PEA assumes a 1,500,000 tonnes per year open-pit mine; a concentrator at the mine site (crushing, grinding, flotation circuits) with a nominal capacity of 4,600 tonnes per day of ore at 90% availability; and a lithium bicarbonatation plant at the mine site to convert the lithium oxide ore (Li2O) to lithium carbonate (Li2CO3). See the key assumptions and results of the assessment in the table below.

Development Plans: Critical Elements is currently carrying out magnetic separation testing to explore production of high-grade tantalite concentrate and ceramic grade spodumene. The Company has also assigned Genivar with completing a Pre-feasibility Study and an Environmental Impact Study for the project, which are underway. Critical Elements is holding negotiations about possible off-take agreements.

FINANCIAL POSITION

As of the end of May 2011, Critical Elements had more than $2.1 million in cash and temporary investments reserved for exploration. The Company’s rate of capital expenditures in the last couple of years was at $3 million - $5 million  annually. Given active exploration of the Rose project, to fulfill its near-term plans for the project, the Company will need new financing.

eResearch Analysts on this report:
Yuri Belinsky, B.A., M.A.
Bob Weir, B.Sc., B.Comm., CFA