By: Tomas Ronolski - AllPennyStocks.com News

Tuesday, July 9, 2013

Zirconia, also called zirconium oxide, is a white crystalline oxide of zirconium found in natural form. It is primarily used in producing ceramics, but also is used in oxygen sensors and fuel cells in a stabilized form. Different versions, such as alumina zirconia, are driving demand for zirconia because of widespread use in the automobile industry, aerospace applications, grinding metals and more. The demand plays nicely into growth potential for Quest Rare Minerals Ltd. (TSX:QRM) (AMEX:QRM), a Toronto-based rare earth mineral explorer with it principal properties in northeastern Quebec. Quest’s Strange Lake property covers 54,000 hectares (133,436 acres) and contains the B-Zone, a new rare earth deposit for which Quest has completed a Preliminary Resource Estimate (PRE) suggesting the large project could contain one of the world’s highest concentrations of rare earth elements. The PRE indicated that a 0.95% total rare earth oxides base-case cut-off grade, contained an Indicated Resource of 36.4 million tonnes grading 1.16% TREO, 2.17% zirconium oxide (ZrO2) as well as other rare earth elements. A further Inferred Resource of 14.4 million tonnes graded 1.11% TREO and 2.02% ZrO2 and additional REEs.

120 kilometers south, Quest’s Misery Lake project canvases 79,407 hectares (196,219 acres). Additional exploration needs to be conducted to complement earlier samples showing to 27% iron oxide (Fe2O3), 1.2% phosphate (P2O5), 1.5% titanium oxide (TiO2) and 2.25% TREO.

Shares of Quest are getting a lift on Tuesday on the company signing a non-binding letter of intent with TAM Ceramics Group of NY, LLC, a 107-year old company based in Niagara Falls, New York specializing in marketing and manufacturing zirconia chemical products. The LOI specifies that TAM will agree to purchase up to 24,000 tonnes of zirconia annually. Quest expects the deal to be supplied from its Strange Lake project, with the amount constituting 100-percent of the anticipated annual zirconia production from the property.

The deal also says that Quest will deal exclusively with TAM for the sale of the product and that TAM will work with Quest to develop markets for zirconia.

A definitive agreement still needs to be negotiated and agreed upon, which will include pricing and other terms and conditions. The agreement initially specifies that a definitive agreement, which is speculated to be executed no later than the end of 2014, will provide an initial five-year term and five potential renewals of five years each, bringing the contract length possibly to 30 years. That time frame dovetails with the expected minimum life of the deposit.

“We believe that Strange Lake is a world-class asset that has the potential to produce a substantial quantity of strategic materials that will be attractive to customers around the globe,” said Quest president and CEO Peter Cashin. He added, “We view TAM's involvement with our Strange Lake project as a significant vote of confidence in the considerable progress we have made in precipitating chemical-grade zirconia product at our pilot plant. The LOI will allow us to develop a partnership with a company that has many years of zirconium marketing and manufacturing experience."

Toronto-listed shares of QRM are trading up by about 13 percent at 52 cents as the day winds towards a close. Shares are down about 50 percent so far in 2013, but are holding 30 percent above 52-week lows of 40 cents hit in April.

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