Technical Report: PEA Ashram Deposit at the Eldor Project

NI 43-101 Technical Report
Preliminary Economic Assessment

Ashram Rare Earth Deposit
For
Commerce Resources Corp.

Respectfully submitted to:
Commerce Resources Corp.

Effective Date: July 5th 2012

Prepared by:

Gaston Gagnon, Eng.
SGS Canada Inc. (Geostat)
Gilbert Rousseau, Eng.
Yann Camus, Eng.
Jonathan Gagné, Eng.

Geostat
10 boul. de la Seigneurie Est, Suite 203, Blainville, Québec Canada
SGS Canada Inc. t (450) 433 1050 f (450) 433 1048 www.geostat.com www.met.sgs.com

Member of SGS Group (SGS SA)

Commerce Resources Corp. – Ashram Project – Preliminary Economic Assessment ii

Table of Contents

1 Summary .................................................................................................................................................... 11
1.1 Introduction....................................................................................................................................... 11
1.2 Property Location and Tenure........................................................................................................ 11
1.3 Royalties Obligations........................................................................................................................ 11
1.4 Mineralization .................................................................................................................................... 11
1.5 Property Geology.............................................................................................................................. 12
1.6 Resource Estimate ............................................................................................................................ 12
1.7 Mining Method ................................................................................................................................. 13
1.8 Mineral Processing, Metallurgical Testing ..................................................................................... 13
1.9 Recovery Methods ............................................................................................................................ 14
1.10 Cracking .......................................................................................................................................... 15
1.11 Infrastructure ................................................................................................................................. 15
1.12 Power .............................................................................................................................................. 16
1.13 Tailings and Water Management ................................................................................................ 16
1.14 Environmental ............................................................................................................................... 16
1.14.1 Provincial Jurisdiction - Environment Quality Act .............................................................. 16
1.14.2 Federal Jurisdiction - Canadian Environment Assessment Act ......................................... 17
1.14.3 Physical Environment .............................................................................................................. 17
1.15 Capital Cost Estimate ................................................................................................................... 17
1.16 Operating Cost Estimate ............................................................................................................. 17
1.17 Economic Analysis ....................................................................................................................... 18
1.18 Conclusion ..................................................................................................................................... 18
2 Introduction .............................................................................................................................................. 19
2.1 General ............................................................................................................................................... 19
2.2 Terms of Reference .......................................................................................................................... 19
2.3 Units and Currency........................................................................................................................... 20
2.4 Disclaimer .......................................................................................................................................... 22
3 Reliance on Other Experts...................................................................................................................... 23
4 Property Description and Location ....................................................................................................... 24
4.1 Location ............................................................................................................................................. 24
4.2 Property Ownership and Agreements ........................................................................................... 25
4.3 Royalties Obligations........................................................................................................................ 27
4.4 Permits and Environmental Liabilities .......................................................................................... 27
4.5 Mineralization .................................................................................................................................... 27
5 Accessibility, Climate, Local Resources, Infrastructure and Physiography...................................... 29
5.1 Accessibility ....................................................................................................................................... 29
5.2 Climate................................................................................................................................................ 29
5.3 Local Resources and Infrastructures .............................................................................................. 29
5.4 Physiography ..................................................................................................................................... 29

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6 History........................................................................................................................................................ 31
6.1 Regional Government Surveys ....................................................................................................... 31
6.2 Mineral Exploration Work .............................................................................................................. 31
7 Geological Setting and Mineralization................................................................................................... 34
7.1 Regional Geology.............................................................................................................................. 34
7.2 Property Geology.............................................................................................................................. 36
7.3 Property Mineralization ................................................................................................................... 39
7.4 Ashram Deposit Geology ................................................................................................................ 40
7.5 Ashram Deposit Mineralization...................................................................................................... 43
8 Deposit Types ........................................................................................................................................... 50
9 Exploration................................................................................................................................................ 53
10 Drilling ................................................................................................................................................... 56
11 Sample Preparation, Analyses and Security ...................................................................................... 63
11.1 Sampling Method and Approach ................................................................................................ 63
11.2 Sample Preparation and Analyses ............................................................................................... 64
11.3 Quality Assurance and Quality Control Procedure .................................................................. 65
11.3.1 Analytical Certified Reference Materials ................................................................................ 65
11.3.2 Analytical Blanks ....................................................................................................................... 73
11.3.3 Drill Core Duplicates ................................................................................................................ 75
11.3.4 Pulp Duplicates.......................................................................................................................... 77
11.3.5 QA/QC Conclusion ................................................................................................................. 82
11.4 Specific Gravity ............................................................................................................................. 83
11.5 Conclusions.................................................................................................................................... 84
12 Data Verification .................................................................................................................................. 86
13 Mineral Processing and Metallurgical Testing .................................................................................. 93
14 Mineral Resource Estimates................................................................................................................ 96
14.1 Introduction ................................................................................................................................... 96
14.2 Exploratory Data Analysis ........................................................................................................... 96
14.2.1 Analytical Data........................................................................................................................... 97
14.2.2 Composite Data....................................................................................................................... 100
14.2.3 Specific Gravity ....................................................................................................................... 101
14.3 Geological Interpretation ........................................................................................................... 102
14.4 Spatial Analysis ............................................................................................................................ 102
14.5 Resource Block Modeling .......................................................................................................... 105
14.6 Grade Interpolation Methodology ........................................................................................... 105
14.7 Mineral Resource Classification ................................................................................................ 107
14.8 Mineral Resource Estimation .................................................................................................... 107
14.9 Mineral Resource Validation ..................................................................................................... 110
14.10 Comments about the Mineral Resource Estimate ................................................................. 111
15 Mineral Reserve Estimates ................................................................................................................ 112

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16 Mining Methods.................................................................................................................................. 113
16.1 Mining Method............................................................................................................................ 113
16.2 Overall Pit Slope Angle .............................................................................................................. 113
16.3 Pit Optimization .......................................................................................................................... 114
16.3.1 Pit Optimization Procedure ................................................................................................... 114
16.3.2 Pit Optimization Parameters ................................................................................................. 115
16.3.3 Pit Optimization Results ........................................................................................................ 116
16.4 Ultimate Pit .................................................................................................................................. 118
16.4.1 Pit Design Parameters ............................................................................................................ 118
16.4.2 Ultimate Pit Design ................................................................................................................. 118
16.4.3 Mineralization Contained Within Pit Design ...................................................................... 119
16.5 Mine Development and Production Schedule........................................................................ 120
16.5.1 Pushback Width ...................................................................................................................... 120
16.5.2 Pit Dewatering ......................................................................................................................... 120
16.5.3 Mine Development ................................................................................................................. 121
16.5.4 Production Schedule ............................................................................................................... 123
16.6 Mine equipment selection .......................................................................................................... 125
16.6.1 Drilling ...................................................................................................................................... 125
16.6.2 Blasting ..................................................................................................................................... 126
16.6.3 Major Equipment Selection ................................................................................................... 126
17 Recovery Methods .............................................................................................................................. 128
17.1 Historical Background ................................................................................................................ 128
17.2 Milling ........................................................................................................................................... 128
17.2.1 Processing Description ........................................................................................................... 129
17.2.1.1 Run of Mine Ore ........................................................................................................................................................................ 129
17.2.1.2 Crushing ....................................................................................................................................................................................... 129
17.2.1.3 Grinding and Classification ...................................................................................................................................................... 129
17.2.1.4 Flotation ....................................................................................................................................................................................... 130
17.2.1.5 Thickening – Filtration.............................................................................................................................................................. 130
17.2.2 Milling Operation Costs ......................................................................................................... 130
17.2.2.1 Consumables (wear parts, grinding media, lubricants and chemical reagents) .............................................................. 131
17.2.2.2 Spare Parts ................................................................................................................................................................................... 131
17.2.2.3 Electrical Power .......................................................................................................................................................................... 131
17.2.2.4 Manpower .................................................................................................................................................................................... 132
17.2.2.5 Salaries .......................................................................................................................................................................................... 133
17.2.3 Mill Cost Control and Instrumentation ............................................................................... 133
17.2.4 Mill Services and Other Mill Common Spaces ................................................................... 134
17.2.5 Mill Capital Cost Estimate ..................................................................................................... 134
17.2.6 Construction Schedule............................................................................................................ 134
17.3 Thermal Cracking........................................................................................................................ 135
17.3.1 Process Description ................................................................................................................ 135
17.3.2 Recovery ................................................................................................................................... 136
17.3.3 OPEX and CAPEX ................................................................................................................ 136
17.3.4 Construction schedule ............................................................................................................ 136
18 Project Infrastructure ......................................................................................................................... 141
18.1 Mackay’s Island ........................................................................................................................... 141
18.2 Kuujjuaq ....................................................................................................................................... 142
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18.3 All-weather Road (AWR) ........................................................................................................... 143
18.4 Mine Site ....................................................................................................................................... 145
18.5 Quebec Northern Infrastructure & Sustainable Development (Plan Nord) ..................... 151
19 Market Studies and Contracts ........................................................................................................... 153
19.1 Oxides Price Forecasts ............................................................................................................... 153
19.2 Oxide Value Discount ................................................................................................................ 159
20 Environmental Studies, Permitting and Social or Community Impact ...................................... 161
20.1 Methodology ................................................................................................................................ 163
20.1.1 Physical Environment ............................................................................................................ 163
20.1.2 20.1.2- Biological Environment ............................................................................................ 165
20.1.3 20.1.3- Human Environment ................................................................................................ 167
20.2 Environmental permitting framework ..................................................................................... 169
20.2.1 Provincial Jurisdiction............................................................................................................. 169
20.2.2 Federal Jurisdiction ................................................................................................................. 170
20.3 Potential Issues ............................................................................................................................ 171
20.4 Recommendations for Future Studies ..................................................................................... 172
20.4.1 Physical Environment ............................................................................................................ 172
20.4.2 Biological Environment ......................................................................................................... 173
20.5 Human Environment ................................................................................................................. 174
21 Capital and Operating Costs ............................................................................................................. 176
21.1 Capital Cost .................................................................................................................................. 176
21.2 Operating Costs........................................................................................................................... 179
21.2.1 Mining Cost.............................................................................................................................. 180
21.2.2 General and Administration (G&A) Costs.......................................................................... 181
21.2.3 Processing costs ....................................................................................................................... 183
22 Economic Analysis ............................................................................................................................. 184
22.1 DCF Method – Base Case Scenario ......................................................................................... 184
22.2 Tax Rate and Royalties ............................................................................................................... 184
22.3 DCF Results for the Base Case Scenario ................................................................................. 185
22.4 Sensitivity Analysis ...................................................................................................................... 187
23 Adjacent Properties ............................................................................................................................ 189
24 Other Relevant Data and Information ............................................................................................ 191
25 Interpretation and Conclusions ........................................................................................................ 192
26 Recommendations .............................................................................................................................. 195
27 References............................................................................................................................................ 199

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Commerce Resources Corp. – Ashram Project – Preliminary Economic Assessment vi

List of tables
Table 1-1: Metallurgical Testwork Results ................................................................................................... 14
Table 1-2: Operating Cost .............................................................................................................................. 18
Table 1-3: Ashram Base Case Consolidated Cash Flow Model ................................................................ 18
Table 2-1: List of Abbreviations .................................................................................................................... 20
Table 2-2: Element to Oxide and Total Rare Earth Definitions .............................................................. 22
Table 4-1: Summary of Mineralization Occurring on the Eldor Property .............................................. 28
Table 10-1: Drilling Program Attributes ...................................................................................................... 56
Table 10-2: Drill Hole Attributes (Ashram Deposit) 1/4 .......................................................................... 58
Table 11-1: Expected Values and QA/QC Ranges of SX18-01, SX18-05, and TRM-2 Analytical
CRMs for Y and REEs ............................................................................................................................ 66
Table 11-2: Statistics of SX18-01, SX18-05, and TRM-2 Analytical CRMs for Y and REEs .............. 67
Table 11-3: Comparative Statistics for the Drill Core Duplicates ............................................................ 76
Table 11-4: Statistics for the Pulp Duplicates (Actlabs vs. ALS) .............................................................. 77
Table 11-5: Specific Gravity Statistics from 2010 Independent Check Sampling Program ................. 83
Table 11-6: Specific Gravity Statistics from the 2010 and 2011 Exploration Programs ....................... 84
Table 12-1: Statistics for the Independent Check Samples (Actlabs vs. SGS Minerals) ....................... 86
Table 12-2: Sign Test for the Independent Check Samples (Actlabs vs. SGS Minerals) ...................... 87
Table 12-3: Final Drill Hole Database .......................................................................................................... 92
Table 13-1: Metallurgical Testwork Results ................................................................................................. 94
Table 14-1: Summary Statistics of Analytical Data Used in the Mineral Resource Estimate ............... 97
Table 14-2: Summary Statistics for the 3 metres Composites ................................................................. 100
Table 14-3: Resource Block Model Parameters......................................................................................... 105
Table 14-4: Ashram Deposit Mineral Resource Estimate........................................................................ 108
Table 14-5: Ashram Deposit Mineral Resource Estimate with Individual REO Values .................... 109
Table 14-6: MHREO Zone Mineral Resource Estimate ......................................................................... 110
Table 14-7: MHREO Zone Mineral Resource Estimate with Individual REO Values ...................... 110
Table 14-8: Ashram Deposit Mineral Resource Estimate per Zone ...................................................... 110
Table 14-9: Comparative Statistics of the Assays, Composites, and Blocks Datasets ......................... 110
Table 16-1: Economic Parameters of Pit Optimization........................................................................... 115
Table 16-2: Resources Contained Into Base Case Pit Shell ..................................................................... 116
Table 16-3: Mineralization Contained Within Pit Design ........................................................................ 119
Table 16-4: Tonnage by Phase ..................................................................................................................... 121
Table 16-5: Oxides Contained in Mine Concentrate (using 66.5% Mill-Cracking Recovery) ............ 123
Table 16-6: Production Schedule Proposed by SGS ................................................................................ 124
Table 16-7: Drilling Parameters ................................................................................................................... 125
Table 16-8: Blasting Parameters................................................................................................................... 126
Table 16-9: Proposed Mining and Service Fleet ........................................................................................ 127
Table 18-1: Number of Employees per Department ............................................................................... 146
Table 19-1: Selected Oxide Prices ............................................................................................................... 158
Table 19-2: Selected Oxides Prices (after 25% discount) ........................................................................ 160
Table 21-1: Capital Expenditures (CAPEX) .............................................................................................. 177
Table 21-2: Equipment Listing .................................................................................................................... 178
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Table 21-3: Operating Costs ........................................................................................................................ 179
Table 21-4: Average Mining Cost Breakdown........................................................................................... 181
Table 21-5: Staff and Camp hourly salaries................................................................................................ 182
Table 21-6: Estimated G&A Costs ............................................................................................................. 183
Table 22-1: DCF Parameters for the Base Case Scenario........................................................................ 184
Table 22-2: DCF Results for the Base Case Scenario............................................................................... 185
Table 22-3: Discounted Cash Flows (DCF)............................................................................................... 186
Table 22-4: Sensitivity Analysis .................................................................................................................... 187
Table 26-1: Future Work Cost Summary ................................................................................................... 198

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Commerce Resources Corp. – Ashram Project – Preliminary Economic Assessment viii

List of Figures
Figure 4-1: General Location Map ................................................................................................................ 24
Figure 4-2: Map of the Mineral Titles, Eldor Property .............................................................................. 26
Figure 7-1: Regional Geology Map ............................................................................................................... 35
Figure 7-2: Property Geology Map ............................................................................................................... 37
Figure 7-3: 2011 Ashram Model View to West ........................................................................................... 41
Figure 7-4: 2011 Ashram Model Plan View ................................................................................................. 42
Figure 7-5: Western Contact .......................................................................................................................... 45
Figure 7-6: Drill Core from Hole EC10-028 Showing the A, B, BD, and Contact Zone .................... 46
Figure 8-1: Schematic Representation of St-Honore Carbonatite ............................................................ 51
Figure 9-1: Eldor Exploration Areas............................................................................................................. 54
Figure 10-1: Ashram Drill Hole Locations .................................................................................................. 57
Figure 11-1: Variation of Reported Values with Time for Analytical CRM TRM-2 (Y, La, Ce, Pr, Nd,
and Sm) ...................................................................................................................................................... 68
Figure 11-2: Variation of Reported Values with Time for Analytical CRM TRM-2 (Eu, Gd, Tb, Dy,
Ho, and Er) ............................................................................................................................................... 69
Figure 11-3: Variation of Reported Values with Time for Analytical CRM TRM-2 (Yb and Lu) ....... 70
Figure 11-4: Variation of Reported Values with Time for Analytical CRM SX18-01 (Y, La, Ce, and
Nd).............................................................................................................................................................. 71
Figure 11-5: Variation of Reported Values with Time for Analytical CRM SX18-05 (Y, La, Ce, and
Nd).............................................................................................................................................................. 72
Figure 11-6: TREE in the Original ‘Qtz’ Blank .......................................................................................... 74
Figure 11-7: TREE in the ‘Qtz-A’ Blank...................................................................................................... 75
Figure 11-8: Correlation Plot of the Drill Core Duplicates for TREE and F......................................... 76
Figure 11-9: Correlation Plot of the Pulp Duplicates for TREE, Y, La, and Ce (Actlabs vs. ALS).... 78
Figure 11-10: Correlation Plot of the Pulp Duplicates for Pr, Nd, Sm, and Eu (Actlabs vs. ALS) .... 79
Figure 11-11: Correlation Plot of the Pulp Duplicates for Gd, Tb, Dy, and Ho (Actlabs vs. ALS) ... 80
Figure 11-12: Correlation Plot of the Pulp Duplicates for Er, Tm, Yb, and Lu (Actlabs vs. ALS) .... 81
Figure 12-1: Correlation Plot of the Independent Checks Samples for TREE, Y, La, and Ce (Actlabs
vs. SGS Minerals) ..................................................................................................................................... 88
Figure 12-2: Correlation Plot of the Independent Checks Samples for Pr, Nd, Sm, and Eu (Actlabs
vs. SGS Minerals) ..................................................................................................................................... 89
Figure 12-3: Correlation Plot of the Independent Checks Samples for Gd, Tb, Dy, and Ho (Actlabs
vs. SGS Minerals) ..................................................................................................................................... 90
Figure 12-4: Correlation Plot of the Independent Checks Samples for Er, Tm, Yb, and Lu (Actlabs
vs. SGS Minerals) ..................................................................................................................................... 91
Figure 14-1: Histogram of Samples Length from Ashram Database....................................................... 98
Figure 14-2: Plan View of the Drill Holes at Ashram ................................................................................ 99
Figure 14-3: Longitudinal View of the Drill Holes at Ashram (looking north) ...................................... 99
Figure 14-4: Plan View Showing the Spatial Distribution of the Composites ...................................... 101
Figure 14-5: Longitudinal View Showing the Distribution of the Composites (looking north) ........ 101
Figure 14-6: Modeled 3D Wireframe Envelope in Longitudinal View (looking south)...................... 102
Figure 14-7: Variograms of TREO Grade of 3 Metre Composite for Central Zone .......................... 103
Figure 14-8: Variograms of TREO Grade of 3 Metre Composite for Inner Zone ............................. 104
Figure 14-9: Variograms of TREO Grade of 3 Metre Composite for Outer Zone ............................ 104
Figure 14-10: Different Search Ellipsoids Used for the Interpolation Process in Plan View ............ 106
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Figure 14-11: Plan View Showing Block Model Interpolation Results.................................................. 106
Figure 14-12: Longitudinal View Showing Block Model Interpolation Results (looking south) ....... 107
Figure 14-13: Comparative Histograms of the Assays, Composites, and Blocks Datasets ................ 111
Figure 16-1: Cases of Rock Slope With Stable and Failed Conditions Distinguished ......................... 114
Figure 16-2: Plan View of the Base Case Pit Shell .................................................................................... 116
Figure 16-3: Section View (6,312,175N) of the Base Case Pit Shell ....................................................... 117
Figure 16-4: Ramp Width, Single and Double Lanes (annotations in metres) ..................................... 118
Figure 16-5: Plan View of Designed Pit and Dimensions ....................................................................... 119
Figure 16-6: Minimum Push-back Width ................................................................................................... 120
Figure 16-7: Plan View - Pushback’s 1, 2 and 3 (Optimal Pit Design) .................................................. 122
Figure 16-8: Pushback’s 1, 2 and 3 (Optimal Pit Design) ........................................................................ 122
Figure 16-9: Production Schedule Proposed by SGS ............................................................................... 124
Figure 17-1: Mill Plan Drawing.................................................................................................................... 137
Figure 17-2: Crushing – Grinding Process Diagram ................................................................................ 138
Figure 17-3: Flotation – Thickening – Filtering Process Diagram ......................................................... 139
Figure 17-4: Cracking Process Diagram ..................................................................................................... 140
Figure 18-1: Docking Location (Mackay's Island) .................................................................................... 141
Figure 18-2: All-weather Road Elevation Profile ...................................................................................... 143
Figure 18-3: Typical Road Section............................................................................................................... 143
Figure 18-4: 185 km All-Weather Road ...................................................................................................... 144
Figure 18-5: Preliminary Infrastructure Arrangement .............................................................................. 145
Figure 18-6: Proposed Accommodation Complex ................................................................................... 146
Figure 18-7: Proposed Dewatering Dikes .................................................................................................. 148
Figure 18-8: Airport Location vs. Site Infrastructure ........................................................................... ....150
Figure 19-1: REEs Demand Forecast ......................................................................................................... 153
Figure 19-2: Analyst Consensus Average REE Supply Demand............................................................ 154
Figure 19-3: Lanthanum Price History and Forecasts .............................................................................. 155
Figure 19-4: Cerium Price History and Forecasts ..................................................................................... 155
Figure 19-5: Praseodymium Price History and Forecasts ........................................................................ 155
Figure 19-6: Neodymium Price History and Forecasts ............................................................................ 156
Figure 19-7: Samarium Price History and Forecasts................................................................................. 156
Figure 19-8: Europium Price History and Forecasts ................................................................................ 156
Figure 19-9: Gadolinium Price History and Forecasts ............................................................................. 157
Figure 19-10: Terbium Price History and Forecasts ................................................................................. 157
Figure 19-11: Dysprosium Price History and Forecasts .......................................................................... 157
Figure 19-12: Yttrium Price History and Forecasts .................................................................................. 158
Figure 19-13: Processing Costs and Recovery Converted into RoM ..................................................... 159
Figure 20-1: Study Areas of the Ashram Rare Earth Project .................................................................. 162
Figure 20-2: Precipitations and Temperatures Averages.......................................................................... 163
Figure 20-3: Environmental Assessment Procedure for Mining Projects North of 55th Parallel ...... 169
Figure 21-1: Total Operating Cost Breakdown ......................................................................................... 179
Figure 21-2: Mining Cost per Tonne Through Mine Life ....................................................................... 180
Figure 22-1: Sensitivity Analysis (Spider Graph)....................................................................................... 188
Figure 23-1: Map of Adjacent Properties in the Vicinity of the Eldor Property .................................. 190

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Commerce Resources Corp. – Ashram Project – Preliminary Economic Assessment x

List of Appendices
Appendix A: Certificates of Qualified Persons

Appendix B: Eldor Property Mineral Title Attributes

Appendix C: Analytical Laboratory Protocols (Actlabs, ALS, SGS Minerals)

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Commerce Resources Corp. – Ashram Project – Preliminary Economic Assessment 11

1 Summary
1.1 Introduction

SGS Canada Inc. (Geostat) was commissioned by Dahrouge Geological Consulting Ltd. on behalf
of Commerce Resources Corp. (Commerce) to complete a preliminary economic assessment (PEA)
of the Ashram Rare Earth Element Project (the ‘Project’). SGS Geostat has prepared this technical
report in general accordance with the guidelines provided in National Instrument 43-101 (NI 43-
101) Standards of Disclosure for mineral projects.

1.2 Property Location and Tenure

The Eldor Property (the ‘Property’) is located in the Nunavik Region of the Province of Québec,
approximately 130 km south of the community of Kuujjuaq (Figure 4-1). The Property is situated
about longitude 68°24’0” west and latitude 56°56’0” north at its centre and covers portions of NTS
map sheets 24C15, 24C16, and 24F01. The Property is only accessible by float or ski-equipped
airplane, helicopter or by snowmobile during winter months.

As of June 2012, the Property consists of one block totalling 404 claims covering 19,006.52 ha. The
Property area extends approximately 17.5 km in an east-west direction and 24 km in a north-south
direction. Figure 4-2 displays the claims that comprise the Property with a detailed listing included in
Appendix B.

Of the 404 claims comprising the Property, eight claims were acquired in May 2007 by a purchase
agreement with Virginia Mines Inc (Virginia). The other 396 claims were acquired by map staking
between May 2007 and October 2010

1.3 Royalties Obligations

The original eight claims acquired from Virginia are subject to a 1% NSR royalty in favour of
Virginia and a 5% NPI royalty in favour of two individuals. Commerce has the right to buy back the
5% NPI royalty in consideration of $500,000. The Ashram Rare Earth Deposit is not situated within
the Virginia claims, and is not subject to any royalties.

1.4 Mineralization

Several different types of mineralization, related to the carbonatite intrusive complex, occur at the
Eldor Property. The main commodities of interest include rare earth elements (REEs) and fluorine
as discovered at the Ashram Zone; however they also occur in other areas on the Property.
Niobium, tantalum, and phosphate mineralization also occur on the Property; mainly at the Star
Trench, Southeast, and Northwest areas.

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1.5 Property Geology

The Property is situated within the central portion of the New Quebec Orogen, also known as the
Labrador Trough, straddling two lithotectonic zones that are separated by a major thrust fault. To
the east is the SC Zone, comprising Proterozoic paraschist, paragneiss, and amphibolites; to the west
is the Gerido Zone, comprising the Le Moyne Group, Doublet Group, and the Le Moyne Intrusion,
also known as the Eldor Carbonatite

Historic exploration of the Eldor Carbonatite has shown that it has an elliptical shape with
approximate dimensions of 7.3 km long by 3 km wide (Sherer, 1984). More recently, Clark and
Wares (2006) suggested a carbonatite extent of almost double, at 15 km long by 4 km wide.
Emplacement occurred near the end of the second cycle of the belt's formation, approximately 1.88
– 1.87 Ga (U - Pb dating). Multiple carbonatite intrusive events are believed to have occurred
during emplacement of the Eldor Complex with calcio-carbonatite, magnesio-carbonatite, and ferro-
carbonatite present.

The geology of the Eldor Carbonatite is very complex, with several lithological subdivisions
proposed/identified (Wright et al., 1998) and separate eruptive centres postulated (Demers and
Blanchet, 2002). Simplistically, the Eldor Complex can be separated into three major divisions:
early, mid, and late-stage carbonatite. The mid-stage carbonatite is most closely related to tantalum-
niobium mineralization (pyrochlore, columbite) with late-stage carbonatite crosscutting all earlier
phases and is the primary host to the REE mineralization observed at the Ashram Deposit.

The carbonatite is thought to have undergone minimal weathering, mainly due to the sub-arctic
climate, with glaciation believed to be the major eroding force. Only a thin veil of overburden
covers the complex, with fresh rock being encountered essentially at the soil-rock interface. This
geological history prevented the formation of the deep lateritic weathering profile that sometimes
proves problematic in rare earth deposits due to rare earth mineral re-crystallization etc.

1.6 Resource Estimate

The base case cut-off grade (CoG) for the reporting of the 2012 mineral resource estimate of the
Ashram Project was retained from 2011 and a base case CoG of 1.25% total rare earth oxide
(TREO) was selected. Using the Ashram basket price of $35.02 per kg, the marginal (mill) CoG was
calculated at 0.51% TREO. Although all the material above 0.51% TREO is economical, a mining
CoG of 1.25% TREO was selected in order to maximise the mill feed grade when evaluating the
economic potential of the Project.

The mineral resource estimate utilized in the PEA for the Eldor Property was released on March 6,
2012 and includes all drilling completed at the Ashram Deposit to date, totalling 15,691.74 m over
45 holes. At a base case CoG of 1.25% TREO the resource totals 29.3 million tonnes averaging
1.90% TREO in the measured and indicated categories and 219.8 million tonnes averaging 1.88%
TREO in the inferred category.

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1.7 Mining Method

Taking into account the proximity of the mineralized zone with the surface topography and the
presence of high grades of REEs at shallow depth, the mining method selected to mine the Ashram
Deposit is open-pit mining. Conventional mining machinery, such as trucks, loaders, and hydraulic
shovels will be used on 5 metre benches.

At a rate of 4,000 tonnes of ore per day processed at a CoG of 1.25%, the Ashram Deposit contains
enough resource to support an operation for more than 177 years (open pit and underground
mining). Therefore, the main purpose of the optimization process was to highlight a section of the
deposit providing a sufficient TREO grade (over 1.25% TREO) with a reasonable stripping ratio,
rather than determining the optimum pit limit.

Gems WhittleTM was used to create a series of nested pit shells based on varying revenue factors
(RF). In order to maximise the mined TREO grade, the smallest shell containing sufficient resources
for 25 years of production at a mining CoG of 1.25% TREO was selected as the base case.

The mining operation will be carried out with a mining fleet of two 100 mm blast hole drills, one
CAT 988H loader, one CAT 385 shovel and four CAT 773 off the road trucks, supplemented by
support equipment such as tracked dozers, graders, water trucks, and emulsion tankers backed by
other minor equipment.

1.8 Mineral Processing, Metallurgical Testing

The rare earth mineralization at Ashram consists primarily of monazite and lesser bastnäsite and
xenotime in a matrix of ferro-dolomite, fluorite, and lesser apatite. Particle size of the rare earth
minerals is very fine, typically less than 30 m down to <5 m with an average of 15-20 m.

Metallurgical testwork on a representative sample of the Ashram Deposit is currently being
completed at Hazen Research Inc. in Colorado and UVR-FIA GmbH in Germany. Of the material
received, the rare earth head assay for the main light rare earths are as follows:

Ce: 0.75%
La: 0.41%
Nd: 0.27%

After initial experimentation with several separation techniques, flotation was identified as the most
promising and has thus been the chief upgrading process utilized so far. Numerous potential
collectors for direct rare earth mineral flotation have been tested under a variety of operational
parameters with significant upgrading achieved at reasonable recoveries. No optimization of the
process has been attempted as the primary focus is currently on determining the best rare earth
collector and carbonate depressant. A listing of the most promising test results is presented in Table
1-1.

SGS Geostat

Table 1-1: Metallurgical Testwork Results
TEST # % of Original CONCENTRATE DISTRIBUTION
Weight GRADE % %
Ce La TREO Ce La TREO
(EST) (EST)
3475-102 14.0 4.07 1.98 9.95 68.5 67.3 67.9
3475-125 15.0 4.04 1.96 9.87 63.7 62.5 63.1
3503-28 10.0 4.44 2.36 11.18 68.1 68.9 68.5
3503-29 7.9 4.81 2.54 12.09 55.9 55.9 55.9
3503-34 15.1 4.05 2.25 10.37 74.0 72.7 73.4

A mineral concentrate with a grade of 10% TREO and 70% recovery (12.7% of the original feed
weight) is used as a base case result of physical upgrading at the mine site via conventional grinding
and flotation techniques. The base case selection is considered conservative and constrained by the
best Hazen testwork result thus far as this is standard policy for SGS Geostat.

The waste rock and the mine tailings are not considered acid generating due to the high amount of
carbonates and corresponding low sulphide content. This conclusion is currently being confirmed
by Hazen, however, initial testwork is supportive. Moreover, the tailings are not deemed to be
radioactive since the amount of the only radioactive element (thorium) in the tailings will be, for all
practical purposes, in the same order of magnitude as in the mill feed.

1.9 Recovery Methods

A 4,000 tpd mill is proposed in this study. The mill process will be conventional with operation
relying on operators’ experience and skill supported by electronic monitoring and instrumentation.
It is anticipated that the head grade will be 1.81% TREO, the mineral concentrate grade will be a
minimum of 10% TREO, while recovery will be in the 70% range. Rare earth mineral concentrating
and cracking is proposed in the PEA to be completed on site with a 99.9% pure mixed rare earth
carbonate (REC) concentrate to be produced for the market.

The process plant is designed to produce a rare earth mineral concentrate by froth flotation. It will
incorporate the following sections: run-of-mine ore storage, a one-stage crushing plant, crushed ore
storage, SAG milling with screen classification followed by a single-stage ball milling with cyclone
classification, flotation of the rare earth minerals, concentrate thickening and filtering, tailings
handling, water and reagents distribution.

SGS Geostat

1.10 Cracking

Cracking of the mineral concentrates generated by Hazen is currently underway. Although only
premliminary results are available, a TREO recovery of 95% is foreseen at the cracking plant based
on applicable and well-known cracking techniques. Because the radioactivity of the mill concentrate
is not fully quantified at this time (testwork results pending), for the purpose of this report, it is
assumed thermal cracking will be done directly at the mine site with any radioactive material
remaining on site. A trade-off study will be completed in pre-feasibility level evaluation to determine
if it is more practical to complete cracking on site or at a location further south (e.g. near Montreal).

The major components of the Acid Cracking Section include the following units: roasting, leaching,
calcium and fluorine removal, thorium and iron precipitation and removal, REE carbonate
precipitation, centrifuging and drying of the REE carbonate, free of radioactivity. The potential by-
product of phosphate, primarily from the cracking of monazite, is not considered in this economic
evaluation. Further, the recovery of fluorite as a by-product is also not considered as part of this
study.

A trade-off study will be completed during pre-feasibility work to evaluate conventional sulphuric
acid cracking versus caustic cracking techniques. Both techniques are expected to be applicable
based on the simple and well-known Ashram mineralogy. Such evaluation will assist in determining
if a mixed REO product is more economic/practical than and mixed REC product.

1.11 Infrastructure

The on-site and off-site infrastructure will comprise: primary crushing and associated stockpiling
area, camp and mill complex, waste rock stockpile, tailings storage facility, power plant, mine garage
facility, acid and fuel farms, access roads, airstrip, concentrate storage shed and port facility.

Site roads will be located to provide access to all operational areas of the mine. A road will be built
from the mine site to Kuujjuaq, mainly for the transportation of fuel, acid, chemicals plus other
spare parts to the mine and for the shipping out of the REE carbonate to the port facility.

The camp and mill complex will be designed for a harsh environment and will include the following
buildings: processing mill and laboratories, cracking plant, office complex, mine dry including shift
change rooms, general maintenance work shop, mine garage, fuelling station, warehouse facility,
staff and employees dormitories, kitchen/cafeteria, sulphuric acid depository, power house,
emulsion plant, powder houses, garbage incineration plant and airstrip.

In addition, the recent announcement of the Quebec Government northern infrastructure and
sustainable development plan (Plan Nord) and its potential impact on the Project is discussed in
Section 18.5.

SGS Geostat

1.12 Power

The electrical power will be supplied by 5 x 3640 kW diesel generators with an output voltage of
4160 V at 60 Hz. Four of the units will operate permanently while the fifth one will be available as a
stand-by unit. The generators will be located near the mill building as it has the largest loads. Excess
heat from the power generators will be used to heat part of the camp buildings.

1.13 Tailings and Water Management

The mill and cracking plant tailings will be stored and confined into a dry natural valley or
depression nearby the mining area. This valley or depression will be dammed and strategically
located to take into account the environmental constraints. Decant water from the polishing pond
will be reused at the process plant.

The mill and cracking plant tailings are not considered acid generating and will contain no
deleterious elements or heavy metals that will necessitate the installation of a lime plant. Moreover,
the tailings are not deemed to be radioactive since the amount of the only radioactive element
(thorium) in the tailings will be, for all practical purposes, in the same order of magnitude as in the
mill feed.

1.14 Environmental

1.14.1 Provincial Jurisdiction - Environment Quality Act

Quebec’s Environment Quality Act (EQA) comprises two chapters. Chapter I set out general
provisions including protection of living species, protection of the environment, environmental
impact assessments, depollution attestation, land and water resource protection, residual material
management, etc. The Act says that no one shall alter the quality of the environment (Section 20)
and provides a framework for activities likely to alter it, when unavoidable. Chapter II sets out
provisions applicable to the James Bay and Northern Quebec Region.

The environmental assessment procedures established for northern projects vary according to
whether the project is located south or north of the 55th parallel. Section 168 of the EQA defines
the territory north of the 55th parallel as: “the whole territory located to the north of the 55th
parallel, except in Category I and II lands for the Crees of Great Whale River”. The Eldor Property
is located within the territory described above (north of the 55th parallel and on Category III lands).

SGS Geostat

1.14.2 Federal Jurisdiction - Canadian Environment Assessment Act

Even though the Project is subject to a joint federal-provincial review panel, some distinct permits
may be required to satisfy federal bodies such as Fisheries and Oceans Canada. However, it should
be noted that the Federal Government has recently announced plans to amend certain aspects of the
Act.

1.14.3 Physical Environment

In terms of environment, the Project involves three main elements: the mine site, the road linking
the mine site to Kuujjuaq, and the shipment port.

The Project will be subjected to an environment impact assessment potentially from both the federal
and provincial governments. The environment impact assessments will measure the potential
effects of the Project on the natural environment. Also, the Project will be subject to a socio-
economic impact assessment, which will assess the potential effects of the Project on the human
milieu. The water management plan for the mining-milling site will be developed during subsequent
Project planning stages. No wastewater investigation has been completed to date but will be
scheduled for the pre-feasibility study (PFS) as part of the environment permitting review in order to
specifically identify any issues or parameters of concern and treatment requirements.

Given the general nature of the resource being mined, acid rock drainage/metal leaching from the
waste rock or the mill tailings are not a likely concern for this Project as the waste rock consists
mainly of carbonates and sulphur is, for all practical purposes, absent. However, confirmatory
testing is still required. At this time, even if metal leaching does not seem to be an issue, it will be
tested along with the turbidity of the water discharging from the tailings pond.

1.15 Capital Cost Estimate

The total capital expenditure cost (CAPEX) is estimated at an overall accuracy of ±30%. The
CAPEX were defined by SGS using in-house database and the Mine & Mill Equipment Costs
Estimator's Guide: Capital & Operating Costs (2010). The costs from the Guide were updated to
2012 using an inflation rate of 4% per year. The total required investment is estimated at
$763,000,000 and includes a contingency of 25%. The CAPEX assumes that all costs for the
transport road and the port facility are covered entirely by Commerce, with no potential outside
assistance from third parties evaluated (e.g. Plan Nord).

1.16 Operating Cost Estimate

The operating costs (OPEX) are estimated at an overall accuracy of ±30%. The operating costs
were defined by SGS using in-house database and the Mine & Mill Equipment Costs Estimator's
Guide: Capital & Operating Costs (2010). The costs from the Guide were updated to 2012 using an

SGS Geostat

inflation rate of 4% per year. The OPEX assumes that all costs for maintenance of the transport
road and port facility are covered entirely by Commerce, with no potential outside assistance from
third parties evaluated (e.g. Plan Nord).

The total operating cost for the mine and processing over the life of the mine is estimated at
$3,331,850,000 which represents $95.20 per tonne of ore treated or $7.91 per kg of rare earth oxide
(REO) produced. Table 1-2 summarizes the main costs used to evaluate the Project economics.

Table 1-2: Operating Cost
Item Cost Unit
Mining 5.32** $/t mined (RoM*)
G&A 47.70 $/t treated (RoM*)
Processing (flotation) 23.87 $/t treated (RoM*)
Processing (cracking) 17.40 $/t treated (RoM*)
*RoM = Run of mine, ** Equivalent to $6.23 per tonne treated

1.17 Economic Analysis

The Ashram base case consolidated cash flow model is presented in Table 1-3. The economic
analysis illustrates a base case for a 4,000 tpd operation (350 days per year) producing a 10% TREO
mineral concentrate and further processing to a mixed rare earth carbonate (REC) product via a
cracking stage on-site with an overall final recovery of 66.5% (70% to concentrate + 95% at
cracking). Based on an open-pit head grade of 1.81% TREO, a total of approximately 36,000
tonnes of 99.9% pure mixed REC is anticipated to be produced annually, representing
approximately 16,850 tonnes of REO. The economics of producing a mixed REO product directly
on-site instead of a mixed REC product will be evaluated in subsequent studies.

Table 1-3: Ashram Base Case Consolidated Cash Flow Model
Item Unit Value
Pre-tax and Pre-finance NPV $ 2,317,600,000
Pre-tax and Pre-finance IRR % 44
Pre-tax and Pre-finance Payback period* year 2.25

1.18 Conclusion

Since this Project is certainly one of merit, it is recommended that Commerce continue the
metallurgical testing in order to establish the optimal flotation reagents and increase the concentrate
grade. These metallurgical tests should be followed by a pre-feasibility study supported by a pilot
plant operation on a minimum 300-tonne sample. Pilot testing should include cracking of the
flotation concentrate and further, evaluation of the optimal cracking technique and subsequent
marketable product.

SGS Geostat

2 Introduction
2.1 General

SGS Canada Inc - Geostat (SGS Geostat) was commissioned by Commerce Resources Corp.
(Commerce or Company) on May 17, 2011 to prepare a NI 43-101 compliant Preliminary Economic
Assessment (PEA) of the Ashram Rare Earth Project. This technical report was prepared by SGS
Geostat for Commerce to support the disclosure of the PEA for the Project.

Commerce Resources Corp. is a Canadian exploration and development company with a particular
focus on deposits of rare metals and rare earth elements. The Company is specifically focused on the
development of its Upper Fir Tantalum and Niobium Deposit at the Blue River Project in British
Columbia, and the exploration of the Eldor Rare Earth Property in northern Quebec, which is the
subject of the present report. Commerce trades on the Toronto Stock Venture Exchange (TSX.V)
under the symbol CCE, on the Frankfurt Stock Exchange under the symbol D7H, and on the
OTCQX U.S. marketplace under the symbol CMRZF.

The Eldor Property is located in northern Quebec approximately 130 km south of the community
of Kuujjuaq and ~85 km north of Adriana Resources' Lac Otelnuk Iron Deposit. The property is
100% owned by Commerce and encompasses 404 claims totalling approximately 19,006 hectares. In
2009, the exploration program by Dahrouge Geological Consulting Ltd. (Dahrouge), on behalf of
Commerce, led to the discovery of a significant new rare earth element deposit known as the
Ashram Deposit.

The purpose of this report is to evaluate the preliminary economic potential of the Ashram Project
based on the analytical results from diamond drilling during the 2010 and 2011 exploration
programs. The economic scenario takes into account the most recent resource estimation, a
processing scenario based on tests results, a mining scenario, a list of required infrastructure, and
economic parameters such as oxide prices from market studies. The report also provides
recommendations for future work.

2.2 Terms of Reference

This preliminary economic assessment was prepared by:

Gaston Gagnon, Eng. Responsible for all sections except 11.3, 11.4, 11.5, 12, 13, 14 and 17
Yann Camus, Eng. Responsible for sections 11.3, 11.4, 11.5, 12 and 14
Gilbert Rousseau, Eng. Responsible for sections 13 and 17
Jonathan Gagné, Eng.

This technical report was prepared according to the guidelines set under “Form 43-101F1 Technical
Report” of National Instrument 43-101 Standards and Disclosure for Mineral Projects. The
certificates of qualification for the Qualified Persons responsible for this technical report can be
found in Appendix A.

SGS Geostat

One of the authors, M. Gaston Gagnon, Eng. visited the Property, accompanied by Robert De
l’Étoile, Eng. from SGS Geostat, between September 18 and 21, 2011, for a review of exploration
methodology, sampling procedures, and to conduct independent check sampling of selected
mineralized drill core.

Information in this report is based on critical review of the documents, information and maps
provided by personnel of Commerce and Dahrouge, in particular Mr. Darren L. Smith, M.Sc.
P.Geol., Project Geologist/Manager, and Mr. Wayne McGuire, Senior GIS Technician.

2.3 Units and Currency
All measurements in this report are presented in International System of Units (SI) metric system,
unless otherwise stated, with all currency amounts in Canadian Dollars (C$) unless otherwise stated.
Abbreviations used in this report are listed in Table 2-1.
Table 2-1: List of Abbreviations
°C Degree Celcius
m Micrometre
Actlabs Activation Laboratories
ALS ALS Group
Bn Billion
BTW Core diameter (B-thin wall, 42 mm)
C$ Canadian Dollars
CA Certificate of Authorization
CAPEX Capital expenditures
CCME Canadian Council of Ministers of the Environment
CDD Counter current decantation
CEAA Canadian Environment Assessment Act
CDPNQ Centre de données sur le patrimoine naturel du Québec (CDPNQ)
cm Centimetre
CoG Cut-off-grade
Commerce Commerce Resources Corporation
CRMs Certified reference materials
Dahrouge Dahrouge Geological Consulting Ltd., Edmonton, Alberta, Canada
D Diameter
DCF Discounted Cash Flow
EI Environement Illimité inc.
Eldor Eldor Property (site of Ashram Deposit)
FS Feasibility Study
Eng Engineer
EQA Environment Quality Act
G&A General and Administrative
g/cc Gram per cubic centimetre
g/t Gram per tonne
Ga Billion years
GSC Geological Survey of Canada
H Height
ha Hectares
Hazen Hazen Research Inc., Denver, Colorado
Hz Hertz
ICP Inductively coupled plasma
ICP-MS Inductively coupled plasma mass spectrometry
IRR Internal rate of return

SGS Geostat

ISE Ion selective electrode
IUGS International Union of Geological Sciences
k Kilo
kg Kilogram
km Kilometre
kW Kilowatt
kW-h Kilowatt-hour
LFO Light fuel oil
LoM Life of mine
LREO Light rare earth oxide
m Metre
M Million
m2 Square metre
Ma Million years
MCC Motor Control Centre
MDDEP Ministère du Développement Durable, de l’Environnement et des Parcs
mg Milligram
MHREO Middle and heavy rare earth oxide
min Minute
mm Millimetre
MMER Metal Mining Effluent Regulation
MREO Middle rare earth oxide
MRNF Ministère des Ressources Naturelles et de la Faune
MW Megawatt
NAD83 North American datum of 1983
NI 43-101 National Instrument 43-101
NPI Net profit interest
NPV Net present value
NQ Core diameter (47.6 mm)
NSR Net smelter return
NTS National Topographic System of Canada
NWPA Navigable Waters Protection Act
OK Ordinary Kriging methodology
OPEX Operating expenditures
PEA Preliminary economic assessment
PFS Pre-feasibility study
PGE Platinum Group Elements (six elements)
pH Potential of hydrogen (acidity scale)
PLC Programmable logic controller
ppm Part per million
Project Ashram Project
Property Eldor Property
QA/QC Quality assurance/Quality control
QP Qualified Person
Qtz Quartz
REC Rare earth carbonate
REE Rare earth element
REO Rare earth oxide
RF Revenue factors
RoM Run of mine
RPD Relative percent difference
SAG Semi-Autogenous Grinding Mill
SECP Southeastern Churchill Province
SEDAR System for Electronic Document Analysis and Retrieval
SG Specific Gravity
SGS-Geostat SGS Canada Inc, Geostat’s office in Blainville, QC
SI International System of Units metric system

SGS Geostat


T Metric tonne
t/m3 Tonne per cubic metre
tpd Tonne per day
tpy Tonne per year
tpa Tonne per year
TREE Total REE (Sum of the Rare Earth Elements (La through Lu) + Yttrium)
TREO Total REO (Sum of the Rare Earth Oxides (La through Lu) + Yttrium)
TRM-2 Certified Reference Material for analytical work, from Mongolia
US$ United States dollars
UTM Universal transverse mercator
V Volt
Virginia Virginia Mines Inc
XRF X-ray fluorescence

Table 2-2 presents some factors to convert elements to oxides and also provides total rare earth
definitions.
Table 2-2: Element to Oxide and Total Rare Earth Definitions

Name Element Definitions Conversion Factor Oxide Definitions
(Element to Oxide)
Lanthanum La 1.17276 La2O3
Cerium Ce 1.17127 Ce2O 3 LREO
Praseodymium Pr LREE 1.17031 Pr2O3
Neodymium Nd 1.16638 Nd2O 3
Samarium Sm 1.15961 Sm2O3
Europium Eu MREE 1.15793 Eu2O 3 MREO
Gadolinium Gd 1.15261 Gd2O 3
Terbium Tb TREE 1.15100 Tb2O 3 TREO
Dysprosium Dy 1.14768 Dy2O 3
Holmium Ho 1.14551 Ho2O 3
Erbium Er 1.14348 Er2O3
Thulium Tm HREE 1.14206 Tm2O3 HREO
Ytterbium Yb 1.13868 Yb2O 3
Lutetium Lu 1.13716 Lu2O3
Yttrium Y 1.26993 Y2O 3

2.4 Disclaimer

It should be understood that mineral resources, which are not mineral reserves, do not have
demonstrated economic viability. The mineral resources presented in this Technical Report are
estimated based on available sample data and on assumptions and parameters available to the
authors. The comments in this Technical Report reflect the authors and SGS Canada Inc. – Geostat
best judgement in light of the information available.

SGS Geostat

3 Reliance on Other Experts

SGS Geostat did not rely on any experts other than Hazen Research Inc, (Hazen), Commerce
Resources Corp., and Dahrouge Geological Consulting Ltd. during the writing of this report. All
information, estimations, opinions and conclusions presented in this report are based on a thorough
review of the literature and on data, reports and other information supplied by Commerce, and on
SGS expertise including in-house database.

For the purpose of the report, SGS has relied on Hazen, Commerce, and Dahrouge for information
pertaining to the following sections:

4- Property Description and Location
5- Accessibility, Climate, Local Resources, Infrastructure and Physiography
6- History
7- Geological Setting and Mineralization
8- Deposit Types
9- Exploration
10- Drilling
13- Mineral Processing and Metallurgical Testing
17- Recovery Method

However, these sections were read, revised and approved by SGS experts. SGS is of the opinion that
the data provided by Hazen, Commerce, and Dahrouge is acceptable compared to standards and
that the work done by Hazen, Commerce, and Dahrouge is professional and trustworthy. SGS
experts are comfortable to use such data in assessing the preliminary economic potential of the
Ashram Project.

SGS Geostat

4 Property Description and Location
4.1 Location

The Eldor Property is located in the Nunavik Region of the Province of Québec, approximately 130
km south of the community of Kuujjuaq (Figure 4-1). The Property is situated about longitude
68°24’0” west and latitude 56°56’0” north at its centre and covers portions of NTS map sheets
24C15, 24C16, and 24F01. The Property is only accessible by float or ski-equipped plane, helicopter
and by snowmobiles during winter months.

Figure 4-1: General Location Map

SGS Geostat


4.2 Property Ownership and Agreements

As of June 2012, the Property consists of one block totalling 404 claims covering 19,006.52 ha. The
Property area extends approximately 17.5 km in an east-west direction and 24 km in a north-south
direction. Figure 4-2 shows the claims that comprise the Property with a detailed listing included in
Appendix B.

Of the 404 claims comprising the Property, eight claims were acquired in May 2007 by a purchase
agreement with Virginia Mines Inc (Virginia). The other 396 claims were acquired by map staking
between May 2007 and October 2010.

SGS Geostat


Figure 4-2: Map of the Mineral Titles, Eldor Property

SGS Geostat

4.3 Royalties Obligations

The original eight claims acquired from Virginia are subject to a 1% NSR royalty in favour of
Virginia and a 5% NPI royalty in favour of two individuals. Commerce has the right to buy back the
5% NPI royalty in consideration of $500,000. The Ashram Rare Earth Deposit is not situated within
the Virginia claims, and is not subject to any royalties.

4.4 Permits and Environmental Liabilities

Commerce is conducting exploration work under valid permits and authorisations delivered by the
provincial Ministère des Ressources Naturelles et de la Faune (MRNF) and the Ministère du
Développement Durable, de l’Environnement et des Parcs (MDDEP). On March 19, 2011, the
Company confirmed having the following work permits in good standing:

• Intervention permit (by the MRNF);
• Camp authorisation (by the MDDEP);
• Certificate of authorisation (by the MDDEP);
• Attestation of exemption (by the MDDEP).
There are no known environmental liabilities pertaining to the Property, according to the Company.

4.5 Mineralization

Several different types of mineralization, related to the carbonatite intrusive complex, occur at the
Eldor Property. The main commodities of interest include rare earth elements and fluorine as
discovered at the Ashram Zone; however they also occur in other areas on the Property. Niobium,
tantalum, and phosphate mineralization also occur on the Property; mainly at the Star Trench,
Southeast, and Northwest areas, Table 4-1 summarises the mineralization currently known on the
Property.

SGS Geostat


Table 4-1: Summary of Mineralization Occurring on the Eldor Property

Location
Area Name Commodities Significant Results Sampling Type
UTM East UTM North

EC10-032: 0.43% Nb2O5 over 155.95 m, incl. 0.71% Nb2O5 over 15.33 m
EC10-033: 0.58% Nb2O5, 8.9% P2O5, and 0.47% TREO over 74.25 m, incl.
Nb, Ta, F, Drill Core,
538000 6311000 Southeast 12.7% F over 32.42 m;
Phosphate Boulders, Soils
EC08-015: 0.55% Nb2O5 over 26.1 m, incl.16.1% F over 13.78 m
0.065% Ta2O5 (boulder); 1.21% Nb2O5 (boulder); 19.2% P2O5 (boulder)

Nb, Ta, EC08-008: 0.46% Nb2O5 over 46.88 m; Drill Core,
535900 6312700 Northwest
Phosphate 28.2% P2O5 (outcrop); 5.74% Nb2O5, 0.46% Ta2O5 (outcrop) Outcrop, Soils
Ta, Nb, EC08-025: 0.31% Nb2O5, 0.060% Ta 2O5, and 16.60% P2O5 over 4.37 m; Drill Core,
537300 6310100 Star Trench
Phosphate 37.3% P2O5 (outcrop); 4.23% Nb2O5 (boulder); 0.14% Ta2O5 (boulder) Outcrop, Boulders
536300 6312100 Ashram REE, F EC11-048: 2.10% TREO over 586.92 m, incl. 3.00% TREO over 36.99 m Drill Core
EC10-037: 1.73% TREO over 7.87 m; Drill Core,
541400 6311700 MC Exposure REE, F
2.03% TREO (outcrop) Outcrop
Nb, REE,
537400 6313000 Miranna 2.42% Nb2O5 (boulder); 15.8% P2O5 (boulder); 1.25% TREO (soils) Boulders, Soils
Phosphate
535700 6313500 Triple-D REE EC11-055: 1.38% TREO over 10.00 m Drill Core
EC11-069: 1.96% TREO over 2.85 m;
Drill Core,
535100 6312700 West Rim REE, Nb, Ta 2.27% TREO (boulder); 16.09% Nb2O5, 0.754% Ta 2O5 (boulder);
Boulders
21.0% P2O5 (boulder)
EC11-081: 1.36% TREO and 2.3% F over 10.45 m; Drill Core,
539100 6312900 Beckling REE, F
4.30% TREO, 20.1% F (outcrop) Outcrop

SGS Geostat

5 Accessibility, Climate, Local Resources, Infrastructure and
Physiography
5.1 Accessibility

Due to its remoteness, the Property is only accessible by float or ski-equipped plane, helicopter or by
snowmobiles during winter months.

5.2 Climate

The climate is sub-arctic continental with average temperatures ranging from -25°C in February to
+11°C in July for the nearest community of Kuujjuaq. The average annual precipitation for the last
10 years in the region is 41 cm of rain and 174 cm of snow (weather base website, 2011). Lake
freeze-up generally begins in early to middle October and ice break-up usually occurs around the
end of May-early June.

5.3 Local Resources and Infrastructures

The regional resources regarding labour force, supplies and equipment are challenging due to the
remoteness of the Project. The nearest communities are Kuujjuaq, located 130 km north with a
population of more than 2,000 citizens, and Schefferville (including the nearby native community)
situated approximately 250 km southeast with a population of about 800 citizens (2006 census).
Both communities are serviced by a regional airport, float plane base, and helicopter base. Kuujjuaq
has no sea port facilities. Cargo boats must unload at Mackay’s Island (on the Koksoak River)
located approximately 35 km northeast of Kuujjuaq, due to shallow waters, and use barges for the
remaining river transportation. Schefferville is the northern terminus of the Tshiuetin railway
(formerly operated by the Quebec North Shore & Labrador), which connects to Labrador City then
Sept-Iles to the south.

Exploration work on the Property is completed from a temporary base camp (known as Eldor
camp) located nearby the Ashram REE Deposit. The camp can be open year-round and currently
has the capacity to accommodate up to 35 persons. The camp is equipped with core logging,
sampling facilities, core photography, and core fluorescence installations. It also hosts the drill core
archive of the Project. No permanent access road has been built on the Property although a network
of temporary access trails connects the camp to the Ashram Deposit and is passable by quad and
side-by-side all terrain vehicles

5.4 Physiography

The Property is characterised by a rolling hill topography generally created by the underlying glacial
drumlins and eskers. Glacial sediments, mostly till, cover most of the Project area and can be up to

SGS Geostat

ten metres thick, although is typically less than 1-3 m over the Ashram Deposit. Outcrops are rare,
but boulders are abundant. The elevation above sea level ranges from 200 m to 320 m.

Drainage in the area, typical of the transitional taiga to tundra regions, is northward toward Ungava
Bay using small creeks and local poorly drained swampy area connecting to larger lakes and major
rivers. The vegetation is generally forest-covered in the central portion of the Property, populated
mainly by black spruce and tamarack trees, with generally barren areas occurring in the more
elevated southern area. Willow and alder shrubs, often densely populated, also occur in low-lying
areas throughout the Property.

SGS Geostat


6 History

6.1 Regional Government Surveys

Several regional surveys have been conducted in the area of the Property by the Geological Survey
of Canada (GSC) and the MRNF. Between the 1950s and the 1970s, different authors from the GSC
and the MRNF conducted regional geological surveys in the New Quebec Orogen at varying scales,
from 4 miles per inch (1:253,440) to 1 mile per inch (1:63,360). In 1979, a compilation of the various
geological surveys conducted in the area was completed (Dressler and Ciesielski, 1979). Since the
end of the 1970’s, only a few localised and more detailed geological surveys were completed by the
MRNF.

The geological syntheses reported by the MRNF for the area since the 1990’s include a 1:250,000
scale map of the mineral occurrences of the New Quebec Orogen (Avramtchez et al., 1990), a
preliminary lithotectonic and metallogenic synthesis at a 1:500,000 scale (Bandyayera et al., 2002),
and more recently a complete lithotectonic and metallogenic synthesis of the New Quebec Orogen
(Clark and Wares, 2006).

In addition to regional geological surveys, a stream sediment geochemical survey was completed in
1974 (Dressler, 1974), followed in 1987 by a regional lake sediment geochemical survey (Baumier,
1987).

6.2 Mineral Exploration Work

The information reported in this section relates mainly to mineral exploration work conducted for
the mineralization related to the carbonatite intrusive complex occurring on the Property. The
Eldor Carbonatite Intrusive Complex was first discovered in 1981 by Eldor Resources Ltd. (Eldor
Res.) following a regional lake-water and sediment sampling program completed in the northern part
of the Labrador Trough for uranium exploration.

In 1982, after the acquisition of an exploration permit in the area of the Property, Eldor Res.
completed a 982 line-km airborne radiometric survey that outlined several radiometric anomalies in
the area.

In 1983, Eldor Res. followed up the airborne anomalies with a prospecting program. During the
program, many of the anomalies were explained, using a scintillometer in hand-dug pits or trenches,
or by radioactive carbonatite outcrops or boulders. The samples collected returned anomalous
thorium values with some of the samples returning up to 7% Nb, 0.18% Ta, and 4% total
lanthanides. A reconnaissance geological mapping survey was also conducted in the area of the
newly discovered carbonatite (Meusy et al., 1984; Lafontaine, 1984).

In 1985, Unocal Canada Ltd. carried out a five-day field program consisting of magnetic-radiometric
geophysical and soil geochemical orientation surveys along with prospecting. Samples collected for

SGS Geostat

geochemical analysis and petrographic study confirmed the historical results by Eldor Res. and
additional Nb-Ta occurrences were outlined in the area (Knox, 1986).

The Eldor Carbonatite was staked in April, 2002 by Virginia Gold Mines Ltd. (now Virginia Mines
Inc.) based on the historical Ta values reported by Eldor Res. Virginia conducted a small program
and re-sampled the known Nb-Ta showings, confirming the historical results. No additional work
was performed in the area by Virginia (Demers and Blanchet, 2002).

In April, 2007, Commerce concluded a purchase agreement with Virginia on the 8 original claims
and subsequently acquired an additional 396 claims over the next three years, covering the
carbonatite and immediate vicinity. During the summer of 2007, the Company mandated Dahrouge
Geological Consulting Ltd. (Dahrouge) to conduct an exploration program consisting of
prospecting (56 observation points) and rock sampling (60 samples), soil sampling (901 samples),
and ground radiometric (scintillometer) and magnetic surveys. In addition to the field program, an
862 line-km airborne magnetic-electromagnetic-radiometric survey was flown over the Property at
200 m line spacing (Smith et al., 2008).

During 2008, Dahrouge, on behalf of Commerce, conducted an exploration program on the
Property consisting of prospecting and rock sampling, regional soil sampling, ground geophysics,
trenching, and diamond drilling. A total of 5,482.29 metres of drilling was completed over 26 holes
in three areas of the Property (Star Trench, Northwest, and Southeast). From these holes, 3,471
samples totalling 4,003 metres were collected and analysed during 2008 (2,928 samples) and
subsequent infill sampling programs during 2009 (97 samples) and 2010 (446 samples), not including
duplicates. Some of the best results from the initial drilling and sampling are as follows:

Star Trench Area: EC08-025 - 4.37 m grading 597 ppm Ta2O5, 3,058 ppm Nb2O5, 736 ppm
U3O8, and 16.6% P2O5
Northwest Area: EC08-008 - 46.88 m grading 4,562 ppm Nb2O5
Southeast Area: EC08-015 - 26.10 m grading 5,466 ppm Nb2O5

Fifteen (15) trenches, with 71 samples collected, were documented on the Property. The ground
geophysics consisted of magnetic and scintillometer surveys. The soil sampling program significantly
extended the 2007 regional grid and returned 685 samples collected at 50 m intervals along 1 km-
spaced lines. The prospecting work totalled 270 observation points and returned a total of 93 rock
samples.

In 2009, Dahrouge, on behalf of Commerce, completed a relatively small exploration program with
field work consisting of prospecting and additional sampling of 2008 drill core (97 samples).
Additional work was completed in the office and consisted of air-photo interpretation and re-
interpretation of the 2007 airborne geophysical survey. The most significant result from the 2009
exploration program was the discovery of REE mineralization in outcrop on the Ashram Peninsula,
highlighting the exploration potential for rare earth elements on the Property. Of the 70 rock

SGS Geostat

samples collected in the Ashram area, more than half returned TREO greater than 1%, with the best
sample grading more than 3% TREO (Smith and Peter-Rennich, 2010).

After the success of the abbreviated 2009 program, and improvement in the global market
conditions, Dahrouge, on behalf of Commerce, initiated an aggressive follow-up drilling,
prospecting, and soil sampling program during 2010. Five trenches were completed on the Property
with 30 samples collected. The soil sampling program returned 839 samples collected mostly along
extensions of the regional 2007-8 grid (50 m intervals along 1 km-spaced lines). The prospecting
work totalled 297 observation points and returned nearly 300 rock samples. Prospecting and soil
sampling work led to the discovery of the ‘Miranna’ REE target near J Lake as well as the ‘MC
Exposure’ carbonatite showing located to the east and outside of the main complex as inferred by
magnetics. In addition to the ground work, detailed satellite imagery at 0.5 m resolution was acquired
over the entire property.

A total of 5,389.98 metres of drilling was completed over 21 holes in four different areas of the
Property (Star Trench, Southeast, MC Exposure, and Ashram). Some of the best results are as
follows:

Star Trench Area: No significant intersections were returned, with the area proving to be
enigmatic. Strong mineralization was encountered but only over very
narrow widths.
Southeast Area: EC10-033 – 74.25 m grading 5,750 ppm Nb2O5, 140 ppm Ta2O5, 0.47%
TREO, and 8.9% P2O5
MC Exposure: EC10-037 – 7.37 m grading 1.73% TREO
Ashram Area: EC10-045 – 309.18 m grading 1.99% TREO and 2.6% F

The chief highlight of the 2010 drill program was the confirmation of significant rare earth
mineralization extending from surface to considerable depth on the Ashram Peninsula. A total of
3,312.67 m over 12 drill holes completed during the summer and fall of 2010 formed the basis for
an initial NI 43-101 compliant mineral resource estimate released in March, 2011 by SGS-Geostat of
Montreal (Blainville). The estimate yielded a total inferred resource of 117.4 Mt grading 1.74%
TREO at a cut-off grade of 1.25% (Laferrière, 2011).

SGS Geostat

Technical Report: PEA Ashram Deposit at the Eldor Project

Technical Report: PEA Ashram Deposit at the Eldor Project

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Technical Report: PEA Ashram Deposit at the Eldor Project