Greenland Minerals & Energy [ASX: GGG]

Event
Dec.’11 Quarter Production & Cash Flow Report

Key Elements

  • During the December quarter 2011, GGG’s mineral license EL 2010/02 was upgraded to the “right to exploit all economic components of the world‐class Kvanefjeld resource, pending outcomes of environmental and social impact assessments”. This was a major plus to the project’s future dynamics and paths the way for future development.
  • Through the first half of 2011, GGG conducted extensive stakeholder engagement to establish the terms‐of‐reference for the Environmental Impact Statement [EIA] and [Social Impact Assessment [SIA]. These terms were approved by the Greenland Government in July 2011, and both the EIA and SIA are progressing on schedule. Both studies are expected to be completed by late 2012. The EIA and SIA form a critical part of an exploitation license application.
  • A second zone of mineralisation, Zone 2, was subject to further drilling in the quarter with best results being 66m @ 474ppm U3O8 & 1.55% TREO, 60m @ 486ppm U3O8 & 1.15% TREO and 65m @ 417ppm U3O8 and 1.36% TREO. GGG is expecting to have its first JORC on this zone by the end of the March quarter 2012.
  • Drilling at Zone 3 was also conducted during the quarter with a number of results expected in the next few weeks. Again management is expecting to release a JORC resource on this zone by the end of the March 2012 quarter.
  • In June 2011, GGG announced it had established an effective means of beneficiating the Kvanefjeld ore to produce a high‐grade, low mass concentrate. This step has paved the way for a number of alternate development scenarios. Piloting of the beneficiation step was successfully conducted in September 2011, and the mineral concentrates produced provided the basis for hydro‐metallurgical leach studies. Detailed evaluation of the possible flow‐sheet scenarios is now underway taking into account project economics and sensitivities, market risk and technical risk. GGG is aiming to firm up the optimal process flow‐sheet for the project through Q1 2012.
  • Agreement to buy-out the 39% equity partner [Westrip] in the project advanced with settlement by June 15th 2012. Pursuant to the buy-out agreement, GGG will pay the sum of A$39,000,000 in cash, 7,825,000 shares, and 5,000,000 options (ex $1.50) in a predetermined proportion to all shareholders of Westrip Holdings, the joint venture vehicle.
  • In November 2011, GGG negotiated terms to acquire a 3% royalty on the net profits of GME A/S, the Greenlandic subsidiary company through which the Kvanefjeld project is owned. The acquisition of the 3% net profit royalty will be finalised when GGG completes the transaction with Westrip to move to 100% ownership of GME A/S, and thereby full ownership of the Kvanefjeld project. GMEL will issue 17,500,000 ordinary shares to acquire the royalty.

Project Location

Kvanefeld uranium, rare earth and speciality metals project

Kvanefeld uranium, rare earth and speciality metals project

kvanefeld project resources

JORC Resources

Recommendation

2012 should see a number of stars align themselves for GGG.  JORC resource calculations for Zone 2&3 may very well see overall JORC resources for the Kvanefjeld project move from 619Mt to 1.0bn tonnes.  Given the initial grades of drilling at both Zones 2&3, there is a high probability that over grades of REO and U3O8 will be increased along with the tonnage increase.  By June 2012, GGG should be in a position to have 100% ownership of this massive project and work will have advanced on metallurgy and the best processing system for the deposit.  Environmental and social aspects of bringing this deposit into production are advancing, and if submitted to a satisfactory manner to the Greenland Government, may then convert the existing licence to “exploitation”.

With the stock trading at 30% of our valuation case of $1.80, we see significant upside for those investors with an appetite for big project/big return risk.  We maintain a BUY recommendation.

Financial Metrics

Issued Capital:   416.39m
Share Price:     $0.54
Mkt Cap:          $225.1m
Cash:               $10.9m
EV:                  $214.2
Mar’12 Exp.    $4.17m
Price Target:    $1.80
Recommendation:  BUY

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