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The Associated Press March 16, 2011, 9:11AM ET

Estimate shows big deposit of rare mineral in Neb.

A new geology report confirms that a large deposit of a valuable and rare heat-resistant element rests underneath southeast Nebraska, but more exploration is needed to determine whether a mine will be built, a Canadian mining company said Tuesday.

Quantum Rare Earth Developments released the new estimate of the size of the niobium deposit near Elk Creek. The company wants to set up a mine to retrieve the niobium, which hasn't been produced in the U.S. in significant amounts since the 1950s.

Doing so would create several hundred jobs, but retrieving the niobium from more than 500 feet underground might not be economically feasible. And even if Quantum can find investors, a project remains several years away.

"We are greatly encouraged by these exceptional results, as they provide the United States with the opportunity to develop a domestic supply of Niobium," Quantum President and CEO Peter Dickie said.

Quantum, which is based in Vancouver, hired Toronto-based Wardrop to complete the estimate.

The U.S. currently imports nearly all the niobium used in this country, and 84 percent of the world's supply comes from Brazil.

But the underground carbonatite formation near Elk Creek has the potential to become one of the world's largest sources of niobium and other rare earth elements that are used in cell phones, wind turbines, hybrid car batteries and other applications, according to the U.S. Geologic Survey.

The agency estimates that 8.5 million kilograms of niobium worth roughly $330 million was imported into the U.S. in 2010.

The resource estimate that Quantum released Tuesday updates figures developed in the 1970s and 1980s by a Colorado-based mining company called Molycorp.

During the 1990s, Molycorp abandoned the Elk Creek site about 70 miles southwest of Lincoln because it didn't appear that it would be profitable to build a niobium mine there. Niobium prices have since increased enough to prompt Quantum's interest.

Plus, Molycorp's earlier work reduces the amount of research Quantum will have to do because University of Nebraska-Lincoln geologist Matt Joeckel collected Molycorp's core samples and data in a Lincoln warehouse that Quantum was able to access.

If the Elk Creek deposit lives up to projections and a mine is built, Joeckel said the niobium could be a strategic resource for the U.S., and Nebraska would benefit economically.

"This deposit could be a game changer," Joeckel said.

An underground niobium mine could employ as many as 400 to 500 people, but the project would likely cost between $300 million and $400 million to get started. Quantum has mineral-rights leases on about 9,500 acres of rural land near Elk Creek for the project.

"It's still early in the game for us," Dickie said.

He said the new estimate of how much niobium is available is based on samples from about two dozen drill holes spread across a large area.

Later this spring, Quantum plans to drill additional samples on the Elk Creek site to help determine the boundaries of the carbonatite formation and to fill in between the previously drilled holes. Those will be the first new samples drilled on the site in more than 25 years.

Then Quantum will have to analyze the samples to determine the best method for extracting niobium from the ore. Dickie said that analysis will take several months to complete.

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