Lemhi Pass is not as well known in general circles as it used to be. It is a high mountain pass in the Beaverhead Mountains, part of the Bitterroot Range in the Rocky Mountains and within Salmon-Challis National Forest. The pass lies on the Montana-Idaho border on the continental divide, at an elevation of over 2,000 metres above sea level.

Until the mid-1840s it was popularly regarded as the “end of the United States”, a sort of “beyond here there be dragons” type of place in the American psyche.

For Rare Earth investors’ psyches though, it is site of the major asset of US Rare Earths (OTCBB: UREE).

Rare Earths in the USA

In the interests of accuracy in advertising the company in question has morphed from its original manifestation as Colorado Rare Earths into US Rare Earths to reflect the fact that the Lemhi Pass prospect is most definitely NOT in Colorado. The company is one the handful of plays that call the US home, with the 800lb gorilla being Molycorp and the other players being Ucore (in Alaska | TSXV: UCU | OTCQX: UURAF), Texas Rare Earth Resources (guess where…| OTCQX: TRER), Rare Element Resources (in Wyoming | TSX: RES | NYSE MKT: REE) and this company.

Besides it geological attributes one of the intriguing things about US Rare Earths is the composition of its board with the heavyweight presence of Tommy Franks (the retired four-star US general and former Commander in Chief, if he needs any introduction) and Bob Kerrey (the former Governor Nebraska and US Senator). With such an impressive crew on board, we are left wondering whether this company also might have a nexus to the Powers That Be similar to that which Molycorp enjoys. Many have long felt that, while Congress is torpid on the subject of recognizing where the best strategic interests of the US lie in the matter of metals and minerals, the Pentagon is not so sanguine and the “hidden hand” has anointed some players in REE, Beryllium etc as being of vital national interest.

Back at the Pass

The Lemhi deposit has been well-known since the 19th century, but its main interest to miners was as a copper deposit. The mineralisation has copper-rich veins, REE/Thorium-rich veins and veins of no particular interest. While Thorium usually sends investors into a tizzy it is worth noting that this is why the work was done on the deposit recent decades. Indeed, in a mini-boom for Thorium fueled reactors in the early 1970s extensive underground working were put in at the site, but more on that anon.

At Lemhi Pass, the average thoria content of some of the better explored thorium veins commonly exceeds 0.25%. The overall rare-earth content is about equal to the thoria content and varies from vein to vein and from place to place in the same vein. The ratio of total rare-earth oxides to thoria in various samples ranges from 0.05 to 5.2. Interestingly many of the samples taken there in a USGS survey were depleted in cerium and enriched in europium as compared with the normal distribution of the other lanthanides. Small amounts of silver, 0.2 to 2 ounces per ton have been found in samples from the Wonder, Black Rock, Buffalo, and Last Chance veins. More than 1% zinc occurs in some samples from the Wonder and Black Rock veins. So this is clearly a rather unique mineralisation.

The Last Chance or the Window of Opportunity

The area exciting most interest at the moment is the picturesquely named Last Chance Vein. Usually we thought Last Chance was referred for saloons. The Last Chance vein was first explored by Elkhorn Mining Co, in the 1950′s, under support by the Defense Minerals Exploration Administration (DMEA). After passing through several other owners, the property was held by the Union Pacific Railroad during the 1970′s. During this period UPR developed two adits and a shaft, and completed several drillholes to explore the vein. The adits developed by UPR consist of a northern adit 755 feet long and a southern adit 452 feet long. While the adits are not connected, both adits intersect the vein. Additional underground work by UPR included development of an 80-foot vertical shaft located between the adits which also intersected the vein with a short 22-foot tunnel.

In the 1980’s the ball passed to the Idaho Energy Resources Company (IERCO) with their focus being the rare earth content in the Last Chance vein. This led to additional rehabilitation and underground work on the northern adit. IERCO expanded the northern adit by driving an additional 100 feet to the northwest. The northern adit was last worked by IERCO in 1989 and has since been closed-in for safety purposes.

The relevance of all this is that in mid-September, US Rare Earths received approval from the U.S. Forest Service to re-open the Last Chance northern adit. This first phase of the mined material removal is part of the company’s efforts to accelerate development efforts. The permit allows for recovery and mining of 2,500 short tons of metallurgical samples.

The company is adopting a multi phased approach, beyond 2,500 tons of material already approved, it also has the right to apply to remove an additional 7,500 tons of material for metallurgical sampling under Montana state exploration guidelines. Based on historical reports and field observation, the company also plans to remove up to several hundred tons of stockpile of material historically known to have rare earth mineralization occurrences. Portions of the extracted rare earth material (including that from the stockpile) will be sent to the Hazen Research in Golden, Colorado and ALS Geochemistry Tucson, Arizona facilities for initial assay.

Competitive Advantage

As I have noted before the capex numbers in the Rare Earth space went through a phase of geometric (indeed logarithmic) expansion which meant that those that originally touted themselves using the mantra “bigger is better” ended up having a Wile E. Coyote moment when Jack Lifton’s dictum of “right-sizing” started to gain traction.

In the case of US Rare Earths, the Last Chance vein having such extensive existing underground workings holds a number of advantages that reduce cash outlays (in the short and longer term and potentially hasten (or negate in part) permitting requirements. In the company’s estimation these underground workings are estimated to represent savings of approximately $6 million in current dollars and more than three years of effort in permitting and development costs.

We would tend to agree with the management view that adit access to the main mineralized vein will provide an advanced development opportunity that shifts the Last Chance Project away from the typical Rare Earth exploration landscape where exploration and metallurgical development rely on drill core and weathered surface samples. Certainly we cannot think of another REE deposit being tested and potentially exploited in this way. While Great Western have an old underground mine at Steenkampskraal, it’s not clearly that they will ever get it into functional shape.

Conclusion

We have often likened the REE scene to a horse race with some favorites falling straight out of the gates and ending up at the glue factory while some of those obscure names with long odds plod around the track eventually passing the favoured runners and getting to the finishing line ahead of the household names. Ucore is one such company that has managed to pull off the “stealth performer” prize and now with this latest development we have cause to wonder whether US Rare Earths might even be creeping up as well.

After all, how many Rare Earths exploration companies can actually point to a mine with mineable material at their disposal? Added to that is the estimate doing the rounds that the reopening of the Last Chance vein’s existing adits will save the company approximately $6 million and reduce development time by at least three years. This alone would place it at an advantage over its more slow-moving and cash-strapped peers. It is still too early though to say whether this brings closer the company’s goal of providing a complete domestic supply chain solution of critical rare earths which are made in America.