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

1. SECUTOR CAPITAL MANAGEMENT CORPORATION
17 October 2014
COMMERCE RESOURCES CORP
Commerce Resources Update
Cashed Up and Ready to Advance Ashram
COMPANY SUMMARY
Price:
Market Cap:
Common Shares:
Fully Diluted:
52 Wk Range:
30 Day Avg Vol:
Source: Stockhouse
$ 0.20
$ 40.2 MM
201 MM
229 MM
$ 0.05 - 0.34
292,200
Project:
LocaƟon:
Ownership:
Commodity:
Status:
Resource:
Catalysts:
Project:
LocaƟon:
Ownership:
Commodity:
Status:
Resource:
Catalysts:
Ashram Deposit (Eldor)
Nunavik Region, Northern QC
100 %
REE
Pre-Feasibility Stage
29.3 Mt 1.90 % TREO (M&I)
220 Mt at 1.88 % TREO (Inferred)
PFS, metallurgical results, joint
venture partnership
Upper Fir Deposit (Blue River)
250 km north of Kamloops, BC
100 %
Tantalum, Niobium
PEA complete
48.4 Mt at 197 ppm Ta₂O₅,
1610 ppm Nb₂O₅ (Indicated)
5.4 Mt at 191 ppm Ta₂O₅,
1760 ppm Nb₂O₅ (Inferred)
PFS, joint venture partnership
MARKET DATA
TOP HOLDERS
Marquest Asset Management Inc
Zimtu Capital Corp
UBS Global Asset Management
Zurcher Kantonalbank
5.36 %
2.25 %
1.16 %
0.40 %
Company Update
Arie Papernick
Equity Capital Markets
apapernick@secutor.ca
(416) 847-1220
Maria Kalbarczyk, CFA
Analyst
mkalbarczyk@secutor.ca
(416) 545-1015
V-CCE
On October 6th, Commerce Resources closed a private placement for gross
proceeds of $5 million. The Company will use the proceeds of the financing to
advance metallurgical test work and exploraƟon at its pre-feasibility-level
Ashram deposit in Quebec. The Company is conƟnuing to bench test and
opƟmize the flowsheet, and is targeƟng producƟon of a mixed rare earth
carbonate concentrate using feed from a mineral processing mini pilot plant
to demonstrate the viability of its product to end users. While the producƟon
of rare earth elements is anything but straighƞorward, Commerce Resources
is taking all the right measures to de-risk Ashram. In addiƟon, the Company
owns the Upper Fir tantalum-niobium deposit in BriƟsh Columbia, which
warrants addiƟonal aƩenƟon following the recent announcement of the sale
of the IAMGOLD Niobec mine to a consorƟum of companies led by Magris
Resources.
Ashram One of a Handful of Advanced Development Rare Earth Element
(REE) Projects in Canada. Commerce’s Eldor Property in northern Quebec is
fully-owned by the Company, and covers 19,336 hectares over 411 claims in
the central area of the Labrador Trough. Eldor hosts the Ashram rare earth
project. In addiƟon to Ashram, the property has numerous showings of other
types of mineralizaƟon, including niobium, tantalum, phosphate, fluorine,
copper and nickel.
Ashram is a carbonaƟte-hosted rare earth deposit rich in middle and heavy
rare earth oxides. The deposit also features a core zone enriched in middle
and heavy rare earth oxides, referred to as the Middle and Heavy Rare Earth
Oxide Zone (MHREO Zone). Further, the Ashram deposit hosts considerable
concentraƟons of the five criƟcal rare earth elements: neodymium, europium,
terbium, dysprosium, and yƩrium. These criƟcal REEs are anƟcipated to face
supply shortages beginning in 2015, when the demand for these criƟcal REEs
is projected to be 47,400 tonnes per year, versus supply of 41,900 tonnes.
In March 2012, the Company announced an updated resource esƟmate for
Ashram of 29.3 million tonnes of measured & indicated resources grading
1.89% and 219.8 million tonnes of inferred resources grading 1.88% total rare
earth oxides (TREO) at a cut-off grade of 1.25% TREO. The resource esƟmate
was based on 15,692 metres drilled in 45 holes. Since then, the Company has
drilled approximately 2,700 metres over 24 holes targeƟng the deposit.
Ashram has been traced over 700 metres along strike, over a width of 500
metres, to a depth of 600 metres, and remains open to the north, south, and
to depth.
Scrambling to Secure Canadian REE Supply. According to Natural Resources
Canada, there are 11 advanced exploraƟon REE projects in Canada, and 28 in
the world. Canada is aiming to develop its REE industry and to supply criƟcal
REEs to the world market.
In 2013, the Canadian Rare Earth Elements Network (CREEN) was launched
with the support of Natural Resources Canada to sƟmulate Canadian-based
rare earths producƟon and secure 20% of criƟcal REE global supply by 2018, to
promote funding of rare earth research and development, and to educate

2. Commerce Resources Corp 17 October 2014
stakeholders about taking acƟon to avoid REE price volaƟlity and supply shortages such as those witnessed in 2010
and 2011.
In 2013, global REE demand was esƟmated at 115,000 tonnes, and demand is projected to grow to 190,000 tonnes
by 2020. China, which accounts for over 90% of global producƟon and approximately 40% of global reserves, is
anƟcipated to contribute less to global supply as the ministry of Commerce of China imposes export quotas for
China’s REE producƟon and as a result of restricƟons to Chinese producƟon due to environmental concerns.
SECUTOR
CAPITAL MANAGEMENT CORP
CriƟcal REE Supply and Demand
Source: Natural Resources Canada
Advanced Rare Earth Elements ExploraƟon Projects in Canada
Source: Natural Resources Canada

3. Commerce Resources Corp 17 October 2014
Advanced Rare Earth Elements ExploraƟon Projects in Canada ConƟnued
Ashram Cross-SecƟon
Source: Natural Resources Canada
2012 Ashram PEA a Good StarƟng Point…Lots of Room for OpƟmizaƟon. In May 2012, Commerce released a preliminary
economic assessment (PEA) for Ashram, which outlined an open-pit operaƟon with a throughput of 4,000 tpd and a mine life
of 25 years. The PEA outlined annual producƟon of approximately 16,850 tonnes of rare earth oxide based on an average head
grade of 1.81% TREO, including 2,870 tonnes neodymium oxide, 96 tonnes europium oxide, 26 tonnes terbium oxide, 106
tonnes dysprosium oxide, and 440 tonnes yƩrium oxide. The Company esƟmated an operaƟng cost of $95.20 per tonne
treated, or $7.91 per kilogram of REO produced. The Company esƟmated a basket price of $38 per kilogram of REO for the
in-pit resources at the Ɵme the PEA was completed. Currently, the basket price is $32 to $33 per kilogram of REO for the in-pit
resources. Commerce’s PEA was based on the producƟon of a 10% TREO concentrate grade and a 12.7% mass pull. However,
with further test work, Commerce has shown that it can produce a concentrate grading 43.6% TREO, and achieve a mass pull
of 3.1%, which will likely result in a material reducƟon in operaƟng costs. The PEA’s economics were also based on only a
fracƟon of the deposit’s resources, and the global resource could supply the operaƟon with feed for 177 years.
SECUTOR
CAPITAL MANAGEMENT CORP
Rare Earth Oxide Price Deck for PEA
Oxide Original $/Kg *Discounted $/kg
Lanthanum $ 15.00 $ 11.25
Cerium $ 10.00 $ 7.50
Praseodymium $ 76.00 $ 57.00
Neodymium $ 77.00 $ 57.75
Samarium $ 12.00 $ 9.00
Europium $ 905.00 $ 678.75
Gadolinium $ 45.00 $ 33.75
Terbium $ 980.00 $ 735.00
Dysprosium $ 800.00 $ 600.00
Yttrium $ 28.00 $ 21.00
Ashram Basket Price
(Overall Resource) $ 35.03 $ 26.27
Source: Commerce Resources
Ashram Basket Price (In-pit
Resource) $ 38.43 $ 28.82

4. Commerce Resources Corp 17 October 2014
Commerce esƟmated capex for the operaƟon of $763 million, including a 25% conƟngency. The Company’s capex
esƟmate included significant infrastructure costs, including the construcƟon of 185 kilometres of road connecƟng
the property with shipping faciliƟes at on the Koksoak River, as well as $42 million for a docking facility. Development
of the regional infrastructure, including all-weather roads, with the government’s help under the Plan Nord Plus
program may aid in reducing the up-front cost of infrastructure development.
Straighƞorward Flowsheet by REE Standards…AddiƟonal Tweaking Should Result in an Improved End Product. The
REE mineralizaƟon of the Ashram deposit is hosted within monazite, bastnaesite, and xenoƟme, which have been
shown to be amenable to straighƞorward processing using industry standard techniques. There are mulƟple hard
rock mines already in operaƟon which recover REEs from these minerals. Molycorp’s Mountain Pass mine produces
a REO concentrate from bastnaesite, while Lynas CorporaƟon’s Mount Weld mine produces concentrate from mona-zite.
Earlier this year, Commerce completed bench scale tesƟng of the deposit and confirmed a mineral processing
flowsheet that includes a grinding circuit, a flotaƟon circuit, a weak hydrochloric acid (HCl) leach to remove carbon-ate,
and Wet High Intensity MagneƟc SeparaƟon (WHIMS) to remove fluorite. The Company has shown that with this
proposed flowsheet, it can achieve metallurgical recoveries of 70.7%, producing a 43.6% TREO mineral concentrate.
Commerce has also shown that the deposit will require minimal downstream hydromet processing, as a result of a
mass pull of 3.1%. Commerce is advancing the hydromet opƟmizaƟon work for the deposit, which may result in
increased recoveries. Commerce could also potenƟally improve the project’s economics through the producƟon of a
fluorite concentrate.
SECUTOR
Simplified Flowsheet for the ProducƟon of a Rare Earth Mineral Concentrate
CAPITAL MANAGEMENT CORP
Source: Commerce Resources

5. Commerce Resources Corp 17 October 2014
An advantage of the Ashram Deposit is its low acid consumpƟon during processing, which will result in lower operaƟng costs.
The Company is also looking at ways to regenerate the acid used in the process, which may ulƟmately result in further reduc-
Ɵons in acid consumpƟon. Bench tests have shown that Ashram consumes 25 to 90 kilograms acid (100% HCl basis) per tonne
of whole rock without opƟmizaƟon. The Company will look at opƟmizing temperature, pH levels and reagent dosage.
We note that Avalon Rare Minerals has been able to make significant strides at its Nechalacho REE deposit with opƟmizaƟon.
TesƟng of the hydrometallurgical process has improved overall heavy rare earth oxide recoveries to more than 93%. Avalon has
also shown that approximately 80% of the hydrochloric acid used during the processing of ore can be recycled.
In September 2014, Commerce iniƟated downstream hydrometallurgical processing tests at Ashram. The next steps for the
Company include the construcƟon of a mini pilot plant which will allow for the trial producƟon of a mixed rare earth carbonate
(REC) concentrate product which would fit the criteria of an REE processor. Successful trial producƟon of a mixed REC or oxide
end-product would also help the Company secure off-take agreements or end-user partnerships.
Commerce currently has a working capital balance of $6.5 million. During the remainder of the year, the Company plans to
spend $1.2 million on downstream metallurgical work at Ashram, including the operaƟon of a pilot plant, and producƟon of a
cerium- and lanthanum-depleted and thorium-free TREO carbonate concentrate as well as a +40% TREO chloride concentrate
which would fit the facility specificaƟons of an REE processor. In early 2015, the Company will iniƟate a drilling and ground
work program which will allow Commerce to complete a feasibility study for the Ashram deposit
Upper Fir Niobium Tantalum Deposit in the Back Pocket. In addiƟon to the Ashram Deposit on the Eldor Property, Commerce
is the 100% owner of the Upper Fir tantalum niobium deposit on the Blue River Property in BriƟsh Columbia. Upper Fir is a
deposit with indicated resources of 48.4 million tonnes at 197 ppm tantalum pentoxide (Ta2O5) and 1,610 ppm niobium
pentoxide (Nb2O5), as well as inferred resources of 5.4 million tonnes at 191 ppm Ta2O5 and 1,760 ppm Nb2O5 at a tantalum
price assumpƟon of US$381 per kilogram, a niobium price assumpƟon of US$46 per kilogram, as well as an economic cut-off
at operaƟng costs of $45 and $66 per tonne based on a bulk mining and selecƟve mining scenario respecƟvely. A November
2011 PEA outlined an underground operaƟon with a throughput of 7,500 tpd, annual producƟon of 0.57 million kilograms of
tantalum and 4.41 million kilograms of niobium, a mine life of 9.3 years, tantalum cash costs of $24.91/kg per tonne net of
niobium credits, and capex of $379 million. Commerce anƟcipates a flowsheet with standard grinding and flotaƟon to produce
a ferrocolumbite-pyrochlore concentrate. The Company anƟcipates that process would be similar to that used at the
IAMGOLD’s producing Niobec mine.
ConƟngent on the fundamentals of the tantalum market, Commerce will potenƟally begin metallurgical test work for Upper
Fir, as well as move forward with the construcƟon of a pilot plant to produce representaƟve oxide product samples. The
Company believes that the tantalum market may move into a deficit as demand for the mineral conƟnues to increase. Since
2012, approximately 2.6 million pounds of tantalum supply have come offline following the closures of the Wodgina, Tanco,
Noventa and KenƟcha mines.
On October 3rd, IAMGOLD announced the sale of the Niobec mine and the adjacent REE deposit to a consorƟum of companies
led by Magris Resources, Aaron Regent’s investment vehicle. Total consideraƟon for the transacƟon includes cash proceeds of
US$500 million on an aŌer-tax basis, a $30 million payment upon achievement of commercial producƟon at the neighboring
REE deposit, and a 2% gross proceeds royalty on REE producƟon. The mine is the third-largest producer of ferroniobium,
accounƟng for 8 to 9 percent of world consumpƟon, and highlights that niobium can be profitable even in a market dominated
by three large producers.
The transacƟon also brings aƩenƟon to REEs, especially if Magris chooses to develop the adjacent REE deposit as well. Michel
Robert, a mine developer and metallurgist with over 40 years of experience in the mining industry, helped Cambior turn
around the flowsheet at Niobec before its acquisiƟon by IAMGOLD in 2006. Michel believes that development of the REE
deposit could be straighƞorward, because a porƟon of the REE mineralizaƟon is hosted in bastnaesite. In addiƟon, Michel
believes that Magris and its partners could use the same infrastructure for the niobium and REE mine, including the same
underground primary access.
.
SECUTOR
CAPITAL MANAGEMENT CORP

6. Commerce Resources Corp 17 October 2014
During H1/14, Niobec sales and producƟon totalled 2.7 and 2.9 million kilograms of niobium respecƟvely. The plant processed
1.163 million tonnes grading 5,500 ppm Nb2O5, and generated margins of $19 per kilogram of niobium, based on average
realized niobium prices of ~$41 per kilogram and operaƟng costs of ~$22 per kilogram.
In 2011, the world’s largest producer of niobium, CBMM, sold a 15% stake in the company to a Japanese and Korean steel
consorƟum and another 15% stake to a Chinese consorƟum for consideraƟon of US$1.95 and US$1.98 billion respecƟvely. The
consideraƟon implied an enterprise value of ~US$90 per kilogram of 2010 niobium producƟon and ~US$65 per kilogram of
installed capacity.
Summary. The Ashram Project has the potenƟal to be one of the world’s largest REE producing mines. While China sƟll domi-nates
the world’s REE producƟon, commanding approximately 90% of the market, companies have successfully developed rare
earth mines outside of China in recent years. Ongoing concerns about the detrimental environmental impact of Chinese
mines, as well as concerns about China’s status as the prevailing REE supplier should increase the aƩracƟveness of projects like
Ashram.
Commerce’s May 2012 PEA outlined a project NPV of C$2.3 billion, an IRR of 44%, and a 25 year-mine life based on only 15%
of the total resource. Importantly, the project’s mineralogy is simple (relaƟve to other REE deposits) due to the presence of the
minerals monazite, bastnaesite, and xenoƟme which dominate commercial processing in the REE space, allowing Commerce
to use standard processing techniques. In addiƟon, Commerce will be able to produce a 43.6% total rare earth oxide TREO
mineral concentrate, allowing the Company to achieve much lower processing costs than many other projects.
SECUTOR
CAPITAL MANAGEMENT CORP
Source: IAMGOLD
CBMM TransacƟon Metrics

7. Commerce Resources Corp 17 October 2014
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I, Maria Kalbarczyk cerƟfy that the views expressed in this commentary accurately reflect my personal views about
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Ticker Company 1 2 3 4 5 6
CCE-V Commerce Resources Corp. X X X
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SECUTOR
securiƟes of the company or serve as a director, officer or advisory board member
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CAPITAL MANAGEMENT CORP