Great Western One Step Closer to being First Fully Integrated REE Producer Outside China

Yesterday, Great Western Minerals Group (TSX: GWG, OTC: GWMGF) took one step closer to their corporate strategy of being the first fully integrated rare earth elements (REE’s) producer outside of China, by signing an off-take agreement with Rare Earth Extraction Co Ltd (RareCo) to purchase 100% of REE production from their Steenkampskraal Mine. In addition, the agreement also stipulates that Great Western can purchase 100% of REE’s mined or obtained by RareCo from any other source that is owned, controlled or acquired by the RareCo group.

Jim Engdahl, President and CEO of Great Western, said of the agreement “This is an exceptionally important step forward for Great Western Minerals Group”, also noting “With the agreement in place, and as we meet its terms and conditions, GWMG will be positioned to supply its own Rare Earth chloride for further separation and use in its own processing, providing downstream margins. Moreover, the agreement creates the potential for GWMG to expand production beyond its own processing requirements".

A steady and stable supply of REE’s is become more and more valued in today’s market place, as demand for renewable energy and clean technologies brings with it an ever increasing demand for the rare earth elements involved in their production. With this fully integrated supply predominantly coming from China, a more diversified and one could argue, politically ‘safe’, regional supply is also in great demand. This is what Great Western hopes to be able to offer as it forms itself into a fully integrated REE producer.

"Supply certainty of Rare Earths is becoming a highly valuable commodity" suggests Jim Engdahl, "the ability for Great Western to purchase 100% of the output of the Steenkampskraal mine at market prices, as established through independent published reports as agreed by the parties, under this 10 year renewable agreement, moves our company well down the path toward the level of supply certainty valued by the market”.

To give you some background, Great Western Minerals Group, or GWMG, is a Canadian based mineral and exploration company, with market capitalisation of C$48 million, C$4 million in cash and cash equivalents and around C$5.6 million in working capital. The company has a unique mine to market strategy, pursuing a vertically integrated business model, which it believes gives it an extraordinary commercial advantage. On one end of this strategic spectrum, GWMG explores for, and will ultimately develop, properties to supply REE’s for its own use, as well as to other end users who currently rely solely on foreign sources.

On the other end of the spectrum, GWMG( through its wholly owned subsidiaries, Less Common Metals and Great Western Technologies Inc ) has the capability to create value added products for blue chip, global end users in the aerospace, automotive, industrial and high technology sectors. The company has six rare earth exploration and development properties in North America, and has an option agreement with Rare Earth Extraction to refurbish, re-commission, and operate the Steenkampskraal underground mine in the Western Cape, South Africa. The Company has paid out the commitments of this option agreement, and this latest announcement represents the securing of an off-take agreement for the property.

The specific terms of this off-take agreement require Great Western to complete a bankable feasibility study (BFS) by December 31, 2011 and providing financing in relation to the results of the BFS within two months of its completion. Alternatively, GWMG can provide a yet undisclosed certain financing specified in the agreement, by December 31 this year. In each case, Great Western must commence certain pre-production activities on project and mine site, as specified by local regulations, by June 2, 2011. The Financing may take the form of a loan to RareCo, an equity investment in RareCo, or a combination of the two.

The former producing Steenkampskraal Mine is a 474 hectare property located 70 kilometres north of the town of Vanrhynsdorp in the Western Cape Province of South Africa, approximately 350 kilometres north west of Cape Town. Infrastructure for the property is excellent, with access from paved and gravel roads, and with the property in close proximity to rail facilities and a sea port. There is also technical expertise and a trainable work force on hand. The property is permitted for mining until 2012, when the permit can be renewed for another 15 years, and in June this year, the company received a ‘new order’ mining right, a compulsory update from the previous ‘old order’ rights.

The main rare earth-bearing mineral at Steenkampskraal is monazite, and is hosted by an igneous intrusive dyke system (i.e. smaller igneous intrusions crossing the areas between larger igneous bodies). Historical data from precious work (non NI 43-101 compliant), shows the mineral deposit is tabular in shape, with a known strike length of 400 metres, traced down dip for 250 metres.

Thickness of the body ranges from 0.3 metres to 4 metres, and the average in-situ grade is 16.74% total rare earth oxide (TREO). This makes it one of the highest grade rare earth deposits known to exist. The main rare earth oxides within the project’s monazite mineralisation, are Cerium (approximately 47% of the total rare earth oxides found), Lanthanum (22%) and Neodymium (17%). The deposit also contains significant amounts of copper, gold and phosphate, which the company believes could be recovered as by-products. The company also notes that very little exploration work has been done on the property, with the deposit remaining open along strike and at depth.

In addition, historic underground mining operations deposited run-of-mine waste rock on the surface of the property, as well as tailings from the processing plant. Previous sample grades of the tailings and waste rock, indicate that historically both would qualify as resource tonnages for rare earth production. Furthermore, in addition to the remaining in-situ material, rock that was blasted but not hauled to surface also remains in place. Some of this rock was historically considered as low grade material and was used as ballast for the underground railroad track. Modern techniques could make this product more economically viable however, and so opens up further resource tonnage.

Another positive attribute of a mining operation at Steenkampskraal worth noting, is that the thorium content (with an historic in-situ grade of 2.5%) may provide another attractive by-product from the operation. RareCo has already received expressions of interest from third parties in recovering the thorium from the operation. Using existing proven technology, RareCo believes that it can extract the thorium during the production of the final mixed rare earth chloride concentrate to meet customer demands.

With Great Western’s mine to market strategy of becoming a fully vertically integrated rare earth producer, this latest step takes them significantly closer to accomplishing the goal. Ensuring supply from Steenkampskraal, means GWMG will be positioned to supply its own rare earth chloride for further separation and use in its own processing, and bringing with it, much improved downstream margins. With the forthcoming investment in the property, and the eventual development of the mine, Great Western has just took one step closer to becoming the first fully integrated REE producer outside China.