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SECUTOR CAPITAL MANAGEMENT CORPORATION 
17 October 2014 
COMMERCE RESOURCES CORP 
Commerce Resources Update 
Cashed Up and...
Commerce Resources Corp 17 October 2014 
stakeholders about taking acƟon to avoid REE price volaƟlity and supply shortages...
Commerce Resources Corp 17 October 2014 
Advanced Rare Earth Elements ExploraƟon Projects in Canada ConƟnued 
Ashram Cross...
Commerce Resources Corp 17 October 2014 
Commerce esƟmated capex for the operaƟon of $763 million, including a 25% conƟnge...
Commerce Resources Corp 17 October 2014 
An advantage of the Ashram Deposit is its low acid consumpƟon during processing, ...
Commerce Resources Corp 17 October 2014 
During H1/14, Niobec sales and producƟon totalled 2.7 and 2.9 million kilograms o...
Commerce Resources Corp 17 October 2014 
Secutor Capital Management CorporaƟon Commentary Disclaimers 
The informaƟon and ...
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Secutor Capital Management Corporation Update on Commerce Resources Corp. (February 2015)
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Secutor Capital Management: Commerce Resources Corp. (October 2014)

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Secutor Capital Management research note on Commerce Resources Corp. (October 2014)

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Secutor Capital Management: Commerce Resources Corp. (October 2014)

  1. 1. SECUTOR CAPITAL MANAGEMENT CORPORATION 17 October 2014 COMMERCE RESOURCES CORP Commerce Resources Update Cashed Up and Ready to Advance Ashram COMPANY SUMMARY Price: Market Cap: Common Shares: Fully Diluted: 52 Wk Range: 30 Day Avg Vol: Source: Stockhouse $ 0.20 $ 40.2 MM 201 MM 229 MM $ 0.05 - 0.34 292,200 Project: LocaƟon: Ownership: Commodity: Status: Resource: Catalysts: Project: LocaƟon: Ownership: Commodity: Status: Resource: Catalysts: Ashram Deposit (Eldor) Nunavik Region, Northern QC 100 % REE Pre-Feasibility Stage 29.3 Mt 1.90 % TREO (M&I) 220 Mt at 1.88 % TREO (Inferred) PFS, metallurgical results, joint venture partnership Upper Fir Deposit (Blue River) 250 km north of Kamloops, BC 100 % Tantalum, Niobium PEA complete 48.4 Mt at 197 ppm Ta₂O₅, 1610 ppm Nb₂O₅ (Indicated) 5.4 Mt at 191 ppm Ta₂O₅, 1760 ppm Nb₂O₅ (Inferred) PFS, joint venture partnership MARKET DATA TOP HOLDERS Marquest Asset Management Inc Zimtu Capital Corp UBS Global Asset Management Zurcher Kantonalbank 5.36 % 2.25 % 1.16 % 0.40 % Company Update Arie Papernick Equity Capital Markets apapernick@secutor.ca (416) 847-1220 Maria Kalbarczyk, CFA Analyst mkalbarczyk@secutor.ca (416) 545-1015 V-CCE On October 6th, Commerce Resources closed a private placement for gross proceeds of $5 million. The Company will use the proceeds of the financing to advance metallurgical test work and exploraƟon at its pre-feasibility-level Ashram deposit in Quebec. The Company is conƟnuing to bench test and opƟmize the flowsheet, and is targeƟng producƟon of a mixed rare earth carbonate concentrate using feed from a mineral processing mini pilot plant to demonstrate the viability of its product to end users. While the producƟon of rare earth elements is anything but straighƞorward, Commerce Resources is taking all the right measures to de-risk Ashram. In addiƟon, the Company owns the Upper Fir tantalum-niobium deposit in BriƟsh Columbia, which warrants addiƟonal aƩenƟon following the recent announcement of the sale of the IAMGOLD Niobec mine to a consorƟum of companies led by Magris Resources. Ashram One of a Handful of Advanced Development Rare Earth Element (REE) Projects in Canada. Commerce’s Eldor Property in northern Quebec is fully-owned by the Company, and covers 19,336 hectares over 411 claims in the central area of the Labrador Trough. Eldor hosts the Ashram rare earth project. In addiƟon to Ashram, the property has numerous showings of other types of mineralizaƟon, including niobium, tantalum, phosphate, fluorine, copper and nickel. Ashram is a carbonaƟte-hosted rare earth deposit rich in middle and heavy rare earth oxides. The deposit also features a core zone enriched in middle and heavy rare earth oxides, referred to as the Middle and Heavy Rare Earth Oxide Zone (MHREO Zone). Further, the Ashram deposit hosts considerable concentraƟons of the five criƟcal rare earth elements: neodymium, europium, terbium, dysprosium, and yƩrium. These criƟcal REEs are anƟcipated to face supply shortages beginning in 2015, when the demand for these criƟcal REEs is projected to be 47,400 tonnes per year, versus supply of 41,900 tonnes. In March 2012, the Company announced an updated resource esƟmate for Ashram of 29.3 million tonnes of measured & indicated resources grading 1.89% and 219.8 million tonnes of inferred resources grading 1.88% total rare earth oxides (TREO) at a cut-off grade of 1.25% TREO. The resource esƟmate was based on 15,692 metres drilled in 45 holes. Since then, the Company has drilled approximately 2,700 metres over 24 holes targeƟng the deposit. Ashram has been traced over 700 metres along strike, over a width of 500 metres, to a depth of 600 metres, and remains open to the north, south, and to depth. Scrambling to Secure Canadian REE Supply. According to Natural Resources Canada, there are 11 advanced exploraƟon REE projects in Canada, and 28 in the world. Canada is aiming to develop its REE industry and to supply criƟcal REEs to the world market. In 2013, the Canadian Rare Earth Elements Network (CREEN) was launched with the support of Natural Resources Canada to sƟmulate Canadian-based rare earths producƟon and secure 20% of criƟcal REE global supply by 2018, to promote funding of rare earth research and development, and to educate
  2. 2. Commerce Resources Corp 17 October 2014 stakeholders about taking acƟon to avoid REE price volaƟlity and supply shortages such as those witnessed in 2010 and 2011. In 2013, global REE demand was esƟmated at 115,000 tonnes, and demand is projected to grow to 190,000 tonnes by 2020. China, which accounts for over 90% of global producƟon and approximately 40% of global reserves, is anƟcipated to contribute less to global supply as the ministry of Commerce of China imposes export quotas for China’s REE producƟon and as a result of restricƟons to Chinese producƟon due to environmental concerns. SECUTOR CAPITAL MANAGEMENT CORP CriƟcal REE Supply and Demand Source: Natural Resources Canada Advanced Rare Earth Elements ExploraƟon Projects in Canada Source: Natural Resources Canada
  3. 3. Commerce Resources Corp 17 October 2014 Advanced Rare Earth Elements ExploraƟon Projects in Canada ConƟnued Ashram Cross-SecƟon Source: Natural Resources Canada 2012 Ashram PEA a Good StarƟng Point…Lots of Room for OpƟmizaƟon. In May 2012, Commerce released a preliminary economic assessment (PEA) for Ashram, which outlined an open-pit operaƟon with a throughput of 4,000 tpd and a mine life of 25 years. The PEA outlined annual producƟon of approximately 16,850 tonnes of rare earth oxide based on an average head grade of 1.81% TREO, including 2,870 tonnes neodymium oxide, 96 tonnes europium oxide, 26 tonnes terbium oxide, 106 tonnes dysprosium oxide, and 440 tonnes yƩrium oxide. The Company esƟmated an operaƟng cost of $95.20 per tonne treated, or $7.91 per kilogram of REO produced. The Company esƟmated a basket price of $38 per kilogram of REO for the in-pit resources at the Ɵme the PEA was completed. Currently, the basket price is $32 to $33 per kilogram of REO for the in-pit resources. Commerce’s PEA was based on the producƟon of a 10% TREO concentrate grade and a 12.7% mass pull. However, with further test work, Commerce has shown that it can produce a concentrate grading 43.6% TREO, and achieve a mass pull of 3.1%, which will likely result in a material reducƟon in operaƟng costs. The PEA’s economics were also based on only a fracƟon of the deposit’s resources, and the global resource could supply the operaƟon with feed for 177 years. SECUTOR CAPITAL MANAGEMENT CORP Rare Earth Oxide Price Deck for PEA Oxide Original $/Kg *Discounted $/kg Lanthanum $ 15.00 $ 11.25 Cerium $ 10.00 $ 7.50 Praseodymium $ 76.00 $ 57.00 Neodymium $ 77.00 $ 57.75 Samarium $ 12.00 $ 9.00 Europium $ 905.00 $ 678.75 Gadolinium $ 45.00 $ 33.75 Terbium $ 980.00 $ 735.00 Dysprosium $ 800.00 $ 600.00 Yttrium $ 28.00 $ 21.00 Ashram Basket Price (Overall Resource) $ 35.03 $ 26.27 Source: Commerce Resources Ashram Basket Price (In-pit Resource) $ 38.43 $ 28.82
  4. 4. Commerce Resources Corp 17 October 2014 Commerce esƟmated capex for the operaƟon of $763 million, including a 25% conƟngency. The Company’s capex esƟmate included significant infrastructure costs, including the construcƟon of 185 kilometres of road connecƟng the property with shipping faciliƟes at on the Koksoak River, as well as $42 million for a docking facility. Development of the regional infrastructure, including all-weather roads, with the government’s help under the Plan Nord Plus program may aid in reducing the up-front cost of infrastructure development. Straighƞorward Flowsheet by REE Standards…AddiƟonal Tweaking Should Result in an Improved End Product. The REE mineralizaƟon of the Ashram deposit is hosted within monazite, bastnaesite, and xenoƟme, which have been shown to be amenable to straighƞorward processing using industry standard techniques. There are mulƟple hard rock mines already in operaƟon which recover REEs from these minerals. Molycorp’s Mountain Pass mine produces a REO concentrate from bastnaesite, while Lynas CorporaƟon’s Mount Weld mine produces concentrate from mona-zite. Earlier this year, Commerce completed bench scale tesƟng of the deposit and confirmed a mineral processing flowsheet that includes a grinding circuit, a flotaƟon circuit, a weak hydrochloric acid (HCl) leach to remove carbon-ate, and Wet High Intensity MagneƟc SeparaƟon (WHIMS) to remove fluorite. The Company has shown that with this proposed flowsheet, it can achieve metallurgical recoveries of 70.7%, producing a 43.6% TREO mineral concentrate. Commerce has also shown that the deposit will require minimal downstream hydromet processing, as a result of a mass pull of 3.1%. Commerce is advancing the hydromet opƟmizaƟon work for the deposit, which may result in increased recoveries. Commerce could also potenƟally improve the project’s economics through the producƟon of a fluorite concentrate. SECUTOR Simplified Flowsheet for the ProducƟon of a Rare Earth Mineral Concentrate CAPITAL MANAGEMENT CORP Source: Commerce Resources
  5. 5. Commerce Resources Corp 17 October 2014 An advantage of the Ashram Deposit is its low acid consumpƟon during processing, which will result in lower operaƟng costs. The Company is also looking at ways to regenerate the acid used in the process, which may ulƟmately result in further reduc- Ɵons in acid consumpƟon. Bench tests have shown that Ashram consumes 25 to 90 kilograms acid (100% HCl basis) per tonne of whole rock without opƟmizaƟon. The Company will look at opƟmizing temperature, pH levels and reagent dosage. We note that Avalon Rare Minerals has been able to make significant strides at its Nechalacho REE deposit with opƟmizaƟon. TesƟng of the hydrometallurgical process has improved overall heavy rare earth oxide recoveries to more than 93%. Avalon has also shown that approximately 80% of the hydrochloric acid used during the processing of ore can be recycled. In September 2014, Commerce iniƟated downstream hydrometallurgical processing tests at Ashram. The next steps for the Company include the construcƟon of a mini pilot plant which will allow for the trial producƟon of a mixed rare earth carbonate (REC) concentrate product which would fit the criteria of an REE processor. Successful trial producƟon of a mixed REC or oxide end-product would also help the Company secure off-take agreements or end-user partnerships. Commerce currently has a working capital balance of $6.5 million. During the remainder of the year, the Company plans to spend $1.2 million on downstream metallurgical work at Ashram, including the operaƟon of a pilot plant, and producƟon of a cerium- and lanthanum-depleted and thorium-free TREO carbonate concentrate as well as a +40% TREO chloride concentrate which would fit the facility specificaƟons of an REE processor. In early 2015, the Company will iniƟate a drilling and ground work program which will allow Commerce to complete a feasibility study for the Ashram deposit Upper Fir Niobium Tantalum Deposit in the Back Pocket. In addiƟon to the Ashram Deposit on the Eldor Property, Commerce is the 100% owner of the Upper Fir tantalum niobium deposit on the Blue River Property in BriƟsh Columbia. Upper Fir is a deposit with indicated resources of 48.4 million tonnes at 197 ppm tantalum pentoxide (Ta2O5) and 1,610 ppm niobium pentoxide (Nb2O5), as well as inferred resources of 5.4 million tonnes at 191 ppm Ta2O5 and 1,760 ppm Nb2O5 at a tantalum price assumpƟon of US$381 per kilogram, a niobium price assumpƟon of US$46 per kilogram, as well as an economic cut-off at operaƟng costs of $45 and $66 per tonne based on a bulk mining and selecƟve mining scenario respecƟvely. A November 2011 PEA outlined an underground operaƟon with a throughput of 7,500 tpd, annual producƟon of 0.57 million kilograms of tantalum and 4.41 million kilograms of niobium, a mine life of 9.3 years, tantalum cash costs of $24.91/kg per tonne net of niobium credits, and capex of $379 million. Commerce anƟcipates a flowsheet with standard grinding and flotaƟon to produce a ferrocolumbite-pyrochlore concentrate. The Company anƟcipates that process would be similar to that used at the IAMGOLD’s producing Niobec mine. ConƟngent on the fundamentals of the tantalum market, Commerce will potenƟally begin metallurgical test work for Upper Fir, as well as move forward with the construcƟon of a pilot plant to produce representaƟve oxide product samples. The Company believes that the tantalum market may move into a deficit as demand for the mineral conƟnues to increase. Since 2012, approximately 2.6 million pounds of tantalum supply have come offline following the closures of the Wodgina, Tanco, Noventa and KenƟcha mines. On October 3rd, IAMGOLD announced the sale of the Niobec mine and the adjacent REE deposit to a consorƟum of companies led by Magris Resources, Aaron Regent’s investment vehicle. Total consideraƟon for the transacƟon includes cash proceeds of US$500 million on an aŌer-tax basis, a $30 million payment upon achievement of commercial producƟon at the neighboring REE deposit, and a 2% gross proceeds royalty on REE producƟon. The mine is the third-largest producer of ferroniobium, accounƟng for 8 to 9 percent of world consumpƟon, and highlights that niobium can be profitable even in a market dominated by three large producers. The transacƟon also brings aƩenƟon to REEs, especially if Magris chooses to develop the adjacent REE deposit as well. Michel Robert, a mine developer and metallurgist with over 40 years of experience in the mining industry, helped Cambior turn around the flowsheet at Niobec before its acquisiƟon by IAMGOLD in 2006. Michel believes that development of the REE deposit could be straighƞorward, because a porƟon of the REE mineralizaƟon is hosted in bastnaesite. In addiƟon, Michel believes that Magris and its partners could use the same infrastructure for the niobium and REE mine, including the same underground primary access. . SECUTOR CAPITAL MANAGEMENT CORP
  6. 6. Commerce Resources Corp 17 October 2014 During H1/14, Niobec sales and producƟon totalled 2.7 and 2.9 million kilograms of niobium respecƟvely. The plant processed 1.163 million tonnes grading 5,500 ppm Nb2O5, and generated margins of $19 per kilogram of niobium, based on average realized niobium prices of ~$41 per kilogram and operaƟng costs of ~$22 per kilogram. In 2011, the world’s largest producer of niobium, CBMM, sold a 15% stake in the company to a Japanese and Korean steel consorƟum and another 15% stake to a Chinese consorƟum for consideraƟon of US$1.95 and US$1.98 billion respecƟvely. The consideraƟon implied an enterprise value of ~US$90 per kilogram of 2010 niobium producƟon and ~US$65 per kilogram of installed capacity. Summary. The Ashram Project has the potenƟal to be one of the world’s largest REE producing mines. While China sƟll domi-nates the world’s REE producƟon, commanding approximately 90% of the market, companies have successfully developed rare earth mines outside of China in recent years. Ongoing concerns about the detrimental environmental impact of Chinese mines, as well as concerns about China’s status as the prevailing REE supplier should increase the aƩracƟveness of projects like Ashram. Commerce’s May 2012 PEA outlined a project NPV of C$2.3 billion, an IRR of 44%, and a 25 year-mine life based on only 15% of the total resource. Importantly, the project’s mineralogy is simple (relaƟve to other REE deposits) due to the presence of the minerals monazite, bastnaesite, and xenoƟme which dominate commercial processing in the REE space, allowing Commerce to use standard processing techniques. In addiƟon, Commerce will be able to produce a 43.6% total rare earth oxide TREO mineral concentrate, allowing the Company to achieve much lower processing costs than many other projects. SECUTOR CAPITAL MANAGEMENT CORP Source: IAMGOLD CBMM TransacƟon Metrics
  7. 7. Commerce Resources Corp 17 October 2014 Secutor Capital Management CorporaƟon Commentary Disclaimers The informaƟon and opinions contained in this commentary were obtained or arrived at from sources we believe to be reliable at the Ɵme and neither Secutor Capital Management CorporaƟon (Secutor) nor its employees, agents or informaƟon suppliers can guarantee that such informaƟon is accurate or complete and it should not be relied on as such. InvesƟng in companies within the mining and resource sector typically carries a great deal of risk, including forecast, financial, valuaƟon, exchange and poliƟcal risks. Past performance should not be seen as an indicaƟon of future performance. Any securiƟes in this commentary can fluctuate in value and accordingly you are not certain to make a profit by purchasing or selling them: you could make a loss. Secutor analysts are salaried employees who may receive a bonus that may be derived, in part, from corporate finance income. Analyst Certification I, Maria Kalbarczyk cerƟfy that the views expressed in this commentary accurately reflect my personal views about the subject issuers. I also cerƟfy that I have not, am not, and will not receive, directly or indirectly, compensaƟon in exchange for expressing my views in this commentary. Secutor does and seeks to do business with companies covered in this commentary. As a result, investors should be aware that the firm may have a conflict of interest. Secutor and/or its employees from Ɵme to Ɵme may hold, buy and sell shares, opƟons or warrants of any company included in this commentary. Ticker Company 1 2 3 4 5 6 CCE-V Commerce Resources Corp. X X X 1 The Analyst preparing this report (or member of the Analysts' household) have a long or short posiƟon in the 2 As at the end of the month immediately preceding this publicaƟon either Secutor, one of its affiliated companies, its 3 Secutor or one of its affiliated companies has managed or co-managed or parƟcipated as selling group in a public 4 On officer or director of Secutor or the Analyst preparing this commentary has received compensaƟon from this 5 Secutor or one of its affiliated companies expects to receive compensaƟon or intends to seek compensaƟon for 6 The Analyst or Secutor has been reimbursed by the issuer for travel costs incurred as a result of a site visit in the last This commentary is intended for use only in provincial jurisdicƟons where Secutor is registered and not to be construed as an offer or solicitaƟon to buy or sell any security. The securiƟes menƟoned in this commentary may not be suitable for all investors and may not be eligible for sale in some jurisdicƟons. Our commentary (an analyst comment about an issuer that does not include a raƟng or recommendaƟon) is only intended for professional investors. Secutor accepts no liability whatsoever for any loss arising from any use or reliance on this commentary or the informaƟon contained herein. Any reproducƟon in whole or part of this commentary without permission is prohibited. Secutor is a member of the Investment Regulatory OrganizaƟon of Canada and the Canadian Investor ProtecƟon Fund. SECUTOR securiƟes of the company or serve as a director, officer or advisory board member directors or officers beneficially own 1% or more of the company offering of securiƟes for this company in the past 12 months company in the past 12 months investment banking services from this company in the next 3 months 12 months CAPITAL MANAGEMENT CORP

Secutor Capital Management research note on Commerce Resources Corp. (October 2014)

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