pipestone lake project

Vanadium/Titanium/Iron

The Pipestone Project is a 50% owned joint-venture with Cross Lake Mineral Explorations Inc., a whollyowned private corporation of the Cross Lake First Nation. Gossan is continuing to encourage engagement with the Cross Lake Band Council and the Chiefs of the Pimicikamak Okimawin Four Councils in discussions regarding the development and/or sale of its mineral rights at the Pipestone Property.

In July of 2016, after a short hiatus, discussions pertaining to the future of the Pipestone Property resumed with the Pimicikamak Okimawin. Gossan has been advised that Pimicikamak Okimawin has completed their due diligence process and will soon be in a position to extend a formal purchase offer to Gossan for the Pipestone mineral rights. There is no indication that any offer will be immediately forthcoming. On July 13, 2018, a new Chief and Band Council were elected at the Cross Lake First Nation. An initial meeting was held with the new Chief, Councilors and advisors and Gossan’s management in December of 2018. On May 7, 2019, a new Chief and Band Council were elected and negotiations have yet to be resumed.

The Pipestone Property is currently comprised of 11 claims and covers 2,578 hectares. On 9 of the claims, assessment work requirements have been temporarily deferred. The other two claims totaling 278 hectares are in good standing with tenure that extends to at least 2030.

In the fall of 2015, Gossan again pursued the development of the Pipestone Lake Project with
representatives of the Cross Lake Band Council and the Chiefs of the Pimicikamak Okimawin Four Councils. On November 10, 2015, the Company called a meeting of the Management Committee of the Pipestone Lake Project. The representatives of Cross Lake Mineral Explorations Inc. did not attend the meeting nor a recalled meeting on November 17, 2015. At the recalled meeting, it was resolved that the Pipestone Lake Project’s mineral claims be managed to insure that the people of Cross Lake and the shareholders of Gossan will benefit from the future development of the Pipestone Lake Project.

In December of 2015, at the request of the Cross Lake First Nation and the Pimicikamak Okimawin, Gossan met with their representatives and legal counsel to discuss the future of the Pipestone Property.

In July of 2016, after a hiatus, discussions pertaining to the future of the Pipestone Property resumed with the Pimicikamak Okimawin.

The Pipestone Lake Property is located in north central Manitoba, approximately 150km south of Thompson and 550km north of Winnipeg. It is situated within Northern Flood Agreement Selection Site 1.9, an area that is otherwise withdrawn from staking as a potential and possible future site for a reserve. At the Pipestone Lake's Areas 1 and 2, drilling to date, 144 holes, has outlined an a non-compliant NI-43101 historic indicated resource of 156.8 million tonnes grading 5.56% TiO2, 28.11% Fe2O3 and 0.22% vanadium pentoxide and an inferred resource of 150 million tonnes at a similar grade. The mineral resources at Pipestone Lake were estimated by Reedman & Associates in a report prepared for the Company in 1998 but should not be relied upon as the report was not compliant with NI 43-101 and has not been verified by a Qualified Person under the Instrument. More drilling could significantly increase the resource.

A preliminary mine plan has been prepared for the Pipestone deposit by Reedman and Associates which classifies various tonnage according to titanium dioxide cut-off grades, provides proposed open pits, and estimates stripping ratios; however more detailed drilling is required to support a 30,000 tons per day operation. Additional metallurgical and other studies are required in order to assess the economic feasibility of the deposit. The operation of an open-pit mine of this magnitude would be expected to require 400-500 workers on a long-term basis.

Currently, about 85% of vanadium is used in the steel industry as a strengthener. Various nations are mandating stronger steel rebar in construction and building codes, likely increasing vanadium demand. On February 9, 2018, China announced new rebar standards which were implemented in November 2018 and to be phased in over 3 years.

Vanadium may also play an important new role in electrical storage technology which could substantially increase demand for this metal. In lithium-based auto batteries, the use of a vanadium phosphate cathode material can materially increase energy storage and lead to a 20%+ increase in an electric car’s travelling range. Another potential large-scale use of vanadium is in grid–scale electrical storage of renewable energy – wind, solar and hydro – using re-dox flow batteries. Vanadium re-dox batteries could substantially lower power utilities’ capital costs as they allow for electricity to be generated and transmitted in off-peak hours and then stored locally to satisfy the following day’s peak power demand. New electrical transmission grids are increasingly difficult to get approved and expensive to build.

In February of 2019, the USGS estimated mine production of vanadium metal at 73,000 tonnes in 2018 and 71,200 tonnes in 2017. Most of the metal is produced as a byproduct of the iron ore or uranium industries. As production is typically sold on a spot basis, the price of vanadium has been highly volatile.

Some forecasters are highly optimistic about the demand for vanadium as a green metal with rapidly increasing forecasts of new green demand from auto batteries for electric vehicles and from grid-scale redox storage batteries. Any substantial increase in green demand would lead to the need for new primary vanadium producers with production sold on long-term contracted prices. The change in the pricing mechanism would also improve the ability of financing new vanadium mines.

Vanadium pentoxide prices bottomed in early 2016 at about US $2.50 per pound. Prices increased during 2017 and 2018 with a peak price of over US $11.00 per pound in 2017 and US $28.00 per pound in 2018. The current market price is in excess of US $7.00 per pound.

Paints, paper and plastics are the main uses of titanium dioxide. Potential future green uses of titanium dioxide include pliable solar panels.

Gossan is continuing to encourage engagement with the Cross Lake Band Council and the Chiefs of the Pimicikamak Okimawin Four Councils in discussions regarding the development and/or sale of its mineral rights at the Pipestone Property. Gossan has been advised that Pimicikamak Okimawin has completed their due diligence process and will soon be in a position to extend a formal purchase offer to Gossan for the Pipestone mineral rights. There is no indication that any offer will be immediately forthcoming. On July 13, 2018, a new Chief and Band Council were elected at the Cross Lake First Nation. An initial meeting was held with the new Chief, Councilors and advisors and Gossan’s management in December of 2018. On May 7, 2019, a new Chief and Band Council were elected and negotiations have yet to be resumed.