Mr. David Hodge reports

COMMERCE RESOURCES CORP. REPORTS ROBUST ECONOMICS FROM PRELIMINARY ECONOMIC ASSESSMENT FOR THE ASHRAM RARE EARTH ELEMENT DEPOSIT, NORTHERN, QUEBEC

Commerce Resources Corp. has released the results of a positive National Instrument 43-101-compliant preliminary economic assessment (PEA) for the Ashram rare earth element (REE) deposit at the Eldor property in Quebec. The PEA, prepared by independent consultants SGS Canada Inc. -- Geostat of Montreal (Blainville), indicates that the deposit can be developed economically as an open-pit mine, and recommends future work applicable to the prefeasibility and feasibility phases of economic evaluation. The Eldor property is located within the Labrador Trough, northeastern Quebec, approximately 130 kilometres south of the community of Kuujjuaq.

Highlights:

• Study results show a strongly positive cash flow from a 4,000-tonne-per-day open-pit operation at Ashram with a 25-year mine life, a pretax and prefinance net present value (NPV) at a 10-per-cent discount rate of $2.32-billion, a pretax/prefinance internal rate of return (IRR) of 44 per cent, and a pretax/prefinance payback period of 2.25 years.
• SGS's economic evaluation was based on the March 6, 2012, resource estimate which used a base-case geologic cut-off grade of 1.25 per cent TREO (total rare earth oxide), and provided 29.3 million tonnes (Mt) of measured and indicated resource, as well as 219.8 Mt of inferred resource averaging 1.88 per cent TREO.
• The rare earth elements at Ashram occur in simple and well-understood mineralogy, being primarily in the mineral monazite, and to a lesser extent in bastnesite and xenotime. These minerals dominate the currently known commercial extraction processes for rare earths.

"The PEA displays robust economics for the Ashram deposit, and recommends next steps for the economic evaluation of this very large and highly strategic resource. The high NPV derives partly from the value of the Ashram material in that it is enriched with all five of the critical REEs namely neodymium, europium, dysprosium, terbium and yttrium," states David Hodge, president and chief executive officer of Commerce Resources. "Management believes that significant benefits will be further realized during the next phase of metallurgy based on the testwork completed to date, given the deposit's simple mineralogy and history of successful commercial processing of Ashram's three host minerals. We look forward to initiating the prefeasibility study to demonstrate this."

Key findings of the PEA

• Four-thousand-tonne-per-day, open-pit operation with 0.19-to-1 (waste-to-ore) strip ratio over 25-year mine life;
• Pretax NPV of $2.32-billion at a 10-per-cent discount rate;
• Pretax IRR of 44 per cent and pretax payback period of 2.25 years;
• Estimated capital cost of $763-million (including 25-per-cent contingency);
• Estimated operating cost of $95.20 per tonne treated, or approximately $7.91 per kilogram of rare earth oxide produced;
• Greater than 175 years worth of minable mineralized material (open pit plus underground) using a cut-off grade (CoG) of 1.25 per cent TREO;
• Annual production averaging approximately 16,850 tonnes of rare earth oxide over life of mine, including 2,870 tonnes Nd oxide, 96 tonnes Eu oxide, 26 tonnes Tb oxide, 106 tonnes Dy oxide and 440 tonnes Y oxide;
• Rare earth element host mineralogy (monazite, bastnesite and xenotime) comprises phases amenable to recovery with processing using conventional and proven techniques.

Basis for the study: the base-case scenario

The base-case scenario used for the PEA outlines a 4,000-tonne-per-day (t/d) open-pit mining operation (350 days per year). The mineralized material will be upgraded on site to a minimum 10-per-cent TREO mineral concentrate, using conventional flotation techniques, resulting in a mass reduction of 87.3 per cent. The material will be subjected to sulphuric acid cracking on site to produce a mixed rare earth carbonate (REC) product. Recoveries at the mineral concentrate and acid cracking stages are anticipated to be at least 70 per cent and 95 per cent, respectively, for a final overall recovery of 66.5 per cent. Using an in-pit average head grade of 1.81 per cent TREO, a total of approximately 16,850 tonnes of a rare earth oxide are anticipated to be produced annually over a 25-year mine life.

The mixed REC product will be trucked north 185 kilometres, on an all-weather road that Commerce will construct, to a storage and docking facility at Mackay's Island, north of Kuujjuaq, at Ungava Bay. The product will be stored and shipped during the three or four months of the year that shipping lanes are operational.

Mineral resource estimate and geological setting

The PEA uses the updated mineral resource estimate for the Ashram deposit (SGS Geostat, 2012), released March 6, 2012, which is an approximate 100-per-cent increase in tonnage over the company's initial inferred mineral resource estimate. This resource includes all drilling completed at the Ashram deposit to date (15,691.74 metres in 45 holes).

The Ashram deposit hosts a well-balanced rare earth distribution throughout in addition to significant enrichment over all five of the rare earths considered to be critical (Nd, Eu, Tb, Dy and Y). Within the overall resource, there exists a zone of more intense middle and heavy rare earth oxide (MHREO) enrichment, termed the MHREO zone. This type of MHREO enrichment is unique to Ashram, and extends from surface with significant tonnage and grade (6.55 Mt at 1.63 per cent TREO, measured and indicated, and 2.79 Mt at 1.57 per cent TREO, inferred). Over all, the Ashram deposit has a pervasive enrichment in the MHREOs, with the MHREO zone itself an area of more intense enrichment occurring directly at surface that extends to depths in excess of 175 metres.

The rare-earth-mineralized footprint at Ashram extends approximately 700 m along strike, over 500 m across and to depths exceeding 600 m. Mineralization remains open to the north, south and at depth, and is not fully constrained to the west and east.

Mine design and operations

The mining scenario will be a 4,000-tonne-per-day open-pit operation supporting an initial mine life of 25 years. At the current CoG of 1.25 per cent TREO, the deposit contains enough material to support a mining operation of more than 175 years (open pit plus underground). If the calculated economic CoG of 0.51 per cent TREO is used, the mining operations could be sustained for 300 years (open pit plus underground) with potential for significant expansion as the deposit remains open.

The mine site infrastructure will consist of a camp, airport, power plant, fuel and acid farms, emulsion plant, and processing/tailings facilities for the production of a mixed REC product.

The initial open pit will lie almost entirely within minable mineralized material, centred on the MHREO zone, and will consist of three push-back phases. Conventional mining equipment will be used, such as trucks, loaders and hydraulic shovels on five-metre benches. The in-pit material consists of 35 Mt of mineralized material at a head grade of 1.81 per cent TREO with only 6.7 Mt of waste material. Minimal overburden is present over the deposit resulting in a near-negligible strip ratio of 0.19 to 1 (waste to ore) with the grade of mineralized material increasing over time. Waste rock and overburden will be used as construction material during year zero, including material used to dike off the northern portion of Centre Pond where the open-pit site currently lies under approximately 0.5 to three m of water.

Mining will occur for 350 days of the year resulting in 1.4 million tonnes per year of mineralized material mined. An average of approximately 16,850 tonnes of REO, in a REC product, will be produced annually over the initial 25-year mine life. The pit will reach approximately 175-metre depth allowing for open-pit operations to be sustained many years past the initial 25-year mine life plan. The production schedule proposed by SGS is presented in an attached table.

                                     PRODUCTION OF INDIVIDUAL REO

Year                    zero to five     six to 10    11 to 15     16 to 20      21 to 25        Total

Mill input      tonnes     7,000,000     7,000,000   7,000,000    7,000,000     7,000,000   35,000,000
Grade input     % TREO          1.72          1.73        1.77         1.86          1.94         1.81

La oxide        tonnes        19,200        19,700      20,300       21,400        23,000      103,600
Ce oxide        tonnes        36,400        36,800      37,700       39,500        42,530      192,930
Pr oxide        tonnes         3,900         3,900       4,000        4,200         4,500       20,500
Nd oxide        tonnes        13,900        13,800      14,000       14,500        15,600       71,800
Sm oxide        tonnes         1,900         1,900       1,900        2,000         2,180        9,880
Eu oxide        tonnes           470           460         460          480           520        2,390
Gd oxide        tonnes         1,200         1,100       1,100        1,200         1,300        5,900
Tb oxide        tonnes           130           120         120          130           140          640
Dy oxide        tonnes           530           500         500          540           590        2,660
Y oxide         tonnes         2,200         2,100       2,100        2,200         2,400       11,000
Total           tonnes        79,830        80,380      82,180       86,150        92,760      421,300

All tonnages are rounded.

Metallurgy and processing

Metallurgical testwork on a representative sample of the Ashram deposit is in progress at Hazen Research Inc. in Colorado. 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. To date, testwork has focused on initial grinding and determination of the best rare earth collectors and carbonate depressants.

Flotation results to date show significant upgrading to a rare earth mineral concentrate. Presently, the best results obtained in the laboratory are a mineral concentrate grade of approximately 10.37 per cent TREO at 73.4-per-cent recovery and another of 11.18 per cent TREO at a 68.5-per-cent recovery using conventional flotation techniques with no attempt at optimization. This represents a TREO upgrading of nearly six times the original grade at favourable recoveries with a corresponding 85-per-cent to 90-per-cent reduction from the original feed weight. In addition, it has been demonstrated that all three rare-earth-bearing minerals (monazite, bastnesite and xenotime) liberate together and share conventional processing techniques.

The PEA base case considers physical upgrading at the mine site by way of conventional grinding and flotation techniques to produce a 10-per-cent TREO mineral concentrate at 70-per-cent recovery (12.7 per cent of the original feed weight).

The process plant, as envisaged, will produce a rare earth mineral concentrate by conventional froth flotation. It will incorporate the following sections: run-of-mine material storage, a one-stage crushing plant, crushed material 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, and water and reagents distribution.

According to Roland Schmidt, director of Hazen's mineralogy laboratories, who is directing the Ashram testwork: "There is no technical obstacle that would prevent [the project] from reaching the current target of 20-per-cent TREO [concentrate] at a recovery of 60 to 70 per cent. It is expected that an improvement of this magnitude should be possible in view of the relatively simple, albeit fine-grained, mineralization and also because the flotation chemistry for separation of the types of minerals present from a carbonate matrix is an established and commercially proven technology."

Cracking of the mineral concentrate will be completed at the mine site using standard techniques common to the rare earth minerals monazite, bastnesite and xenotime. Acid cracking with concentrated sulphuric acid will remove the impurities (such as calcium, fluorine, phosphorus, thorium and iron) and precipitate the rare earth elements as carbonates which will be sold to market. The process and economics for producing a mixed REO end product, as a potential alternative to an REC product, will be evaluated in a prefeasibility study.

Economic analysis

Capital expenditures (capex)

The total required capital investment for the Ashram deposit is estimated at $763-million and includes a contingency of 25 per cent. The costs are broken down in an attached table.

                        CAPITAL EXPENDITURE BREAKDOWN

Item                                       Cost (millions)       % of total

Port facility upgrades (Mackay's Island)          $42                  5.5%
Road (Kuujjuaq to mine site)                     $204                 26.7%
Infrastructure (mine site)                       $287                 37.7%
Equipment                                         $21                  2.8%
EPCM/administration (10 per cent)                 $56                  7.3%
Contingency (25 per cent)                        $153                 20.0%
Total                                            $763                  100%

The largest expense of the project is the construction of an approximately 185-kilometre all-weather road from the mine site to the shipping facilities at Mackay's Island, north of Kuujjuaq. The PEA includes 100 per cent of the cost for the construction and maintenance of the road. However, the government of Quebec has recently announced its ambitious infrastructure and sustainable development plan for the north called Plan Nord. Part of this plan is to complete a land link (road or rail) and hydroelectric power line connecting Kuujjuaq to the south via the Labrador Trough. The route, as currently proposed, would run within 35 km of the Ashram deposit. The government of Quebec has stressed the flexible and dynamic nature of Plan Nord, and the need for industry involvement to help finance and develop its final route. As such, Commerce intends to work with the government to integrate its planned shipping and transport route with the government's infrastructure plan. These efforts may help offset construction and associated maintenance costs.

Operating expenditures (opex)

The total estimated operating expenditures for the Ashram deposit are $95.20 per tonne treated or $7.91 per kg REO produced. Operating expenditures are relatively low due to the negligible overburden, open-pit mining method and simple mineralogy that is amenable to conventional processing techniques. The costs are broken down in an attached table.

                         OPERATING EXPENDITURE BREAKDOWN

Cost type                   $/tonne treated   $/kg REO          Total cost

Mining (open pit)                     $6.23      $0.52        $217,900,000
General and administrative            47.70       3.96       1,669,500,000
Processing
Flotation                             23.87       3.43       1,444,450,000
Acid cracking                         17.40       3.43       1,444,450,000
Total                                 95.20       7.91       3,331,850,000
   
Mining includes drilling, blasting, mucking, hauling and auxiliary.
G&A includes staff salaries, flights, camp costs, power, acid/mineralized 
    material transportation and storage.
Processing includes consumables, spare parts, salaries and power.

Much of the G&A costs are due to transportation of acid and other consumables. Trade-off studies will be completed to evaluate the economic savings of building some of these facilities further south; however, this was outside the scope of the PEA.

Price deck and market analysis

The selected oxide values used to estimate the economic potential of the Ashram project are a combination of multiple analysts' consensus forecasts at year 2017 as compiled by Deloitte. Many recent analyst and market reports were consulted, including Roskill Information Services, CIBC, the MetalPages website, IMCOA, Mackie Research Capital Corp., Dundee Securities Corp. and Cormark Securities Inc., in addition to reviewing the values used in recent PEA/PFS studies of company peers.

The scenario used in the PEA evaluates sale of a pure mixed REC product rather than individual separated oxides. As such, a discount of 25 per cent was applied to the price deck as Commerce would not be able to fully profit from individual oxide prices. This discount was calculated based on the evaluation of separation facility costs for similar projects in addition to an added contingency. The REO price deck used in the PEA, along with the 25-per-cent discounted prices, is presented in an attached table.

      RARE EARTH OXIDE PRICE DECK FOR PEA

Oxide                   Original    Discounted*
                            $/kg          $/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
Ashram basket price
(in-pit resource)          38.43         28.82

* Discount of 25 per cent applied to each
 individual oxide
** Resource effective March 6, 2012

It should be noted that much uncertainty remains with respect to future rare earth pricing, and forecasting more than five years ahead must be done with caution. Supply forecasts range considerably providing for the dramatic differences in industry price decks seen over the last 12 months. With the real possibility that China will continue to reduce exports and restrict production from its rare earth producers as it strives to consolidate the industry, new production coming on stream will not automatically result in softer prices for the rare earth sector. The economics of the PEA shows that the Ashram deposit can absorb a significant decline in the values used in the price deck herein and still remain profitable.

Discounted cash flow analysis

The Ashram consolidated cash flow model is presented in an attached table. The project hosts a pretax NPV of $2,318-million and a pretax IRR of 44 per cent with a payback of 2.25 years at a discount rate of 10 per cent.

    DISCOUNTED CASH FLOW FOR BASE-CASE SCENARIO

Item                                       Value

Pretax and prefinance NPV             $2,318,000,000
Pretax and prefinance IRR                44 per cent
Pretax and prefinance payback period*     2.25 years
Discount rate                            10 per cent

* from start of production
* exchange rate of 1 to 1 (Canadian to U.S. dollar)

Total operating costs of the project are estimated to be $3,331.85-million while total revenues are estimated to be $12,059,196,450 for a pretax benefit of $8,727,346,450. No consideration is given for a potential fluorite or phosphate byproduct during the PEA.

Sensitivity analysis

A sensitivity analysis was performed on the base-case scenario using major variables that have the greatest impact on the overall economics of the project: oxide value discount, basket price (or overall recovery revenues), capital expenditures and operating expenditures. The analysis indicates that the economics of the project are most influenced by oxide pricing and overall processing recovery which is commonly the case for such projects. The results are presented in an attached table.

   SENSITIVITY ANALYSIS AT 10-PER-CENT DISCOUNT RATE

Oxide value discount

Variation            Discount      NPV (millions)   IRR

-30%                      18%        $2,719         50%
-20%                      20%         2,604         48%
-10%                      23%         2,432         46%
0                         25%         2,318         44%
+10%                      28%         2,145         42%
+20%                      30%         2,031         40%
+30%                      33%         1,859         37%

Basket price

Variation*         Basket price    NPV (millions)   IRR

-30%          $         24,52        $1,028         25%
-20%          $         28,02         1,458         32%
-10%          $         31,53         1,888         38%
0             $         35,03         2,318         44%
+10%          $         38,53         2,747         50%
+20%          $         42,04         3,177         56%
+30%          $         45,54         3,607         63%

Opex

Variation            Opex          NPV (millions)   IRR

-30%          $      2,332.40        $2,683         49%
-20%          $      2,665.60         2,561         48%
-10%          $      2,998.80         2,439         46%
0             $      3,332.00         2,318         44%
+10%          $      3,665.20         2,196         42%
+20%          $      3,998.40         2,074         40%
+30%          $      4,331.60         1,953         39%

Capex

Variation            Capex         NPV (millions)   IRR

-30%          $        534.10        $2,546         63%
-20%          $        610.40         2,470         55%
-10%          $        686.70         2,394         49%
0             $        763.00         2,318         44%
+10%          $        839.30         2,241         40%
+20%          $        915.60         2,165         37%
+30%          $        991.90         2,089         34%

Recovery

Variation            Recovery      NPV (millions)   IRR

-30%                      47%        $1,029         25%
-20%                      53%         1,458         32%
-10%                      60%         1,888         38%
0                         67%         2,318         44%
+10%                      73%         2,747         50%
+20%                      80%         3,177         56%
+30%                      86%         3,607         63%

* While oxide value discount remains at 25 per cent

Opportunities for improvement

Opportunities for improved economics have been identified in multiple areas. These include:

• Additional upgrading of the mineral concentrate, where no technical obstacle has been observed, and further optimization once the proper collectors and depressants have been identified;
• Improved recoveries based on favourable results and trends thus far;
• Additional cracking information to evaluate the exact amount of acid required (anticipated to be less than the one-tonne-acid-per-one-tonne concentrate used in PEA);
• Economic trade-off studies for concentrate cracking in Southern Quebec (such as near Montreal);
• Economic trade-off study for concentrate cracking to produce a mixed REO instead of an REC;
• Potential partnering with the Quebec government on the advancing infrastructure of Plan Nord;
• Potential of higher-grade mineralized material at surface directly north of the current pit location that may be included in the pit during a PFS;
• Potential for acid-grade fluorspar and phosphate byproducts.

NI 43-101 disclosure

The following qualified persons, as defined by National Instrument 43-101, for the report are SGS Geostat employees, based out of Montreal (Blainville): Gaston Gagnon, Ing, principal mining engineer, and Gilbert Rousseau, Ing, principal metallurgical engineer. All of the qualified persons have read and approved the contents of this news release.

Jody Dahrouge, BSc, PGeol, Commerce Resources, a qualified person, reviewed and approved the disclosure of the technical information in this news release with respect to the exploration.

A technical report on the Eldor project preliminary economic assessment will be completed within 45 days and will be filed on SEDAR and the company's website.

We seek Safe Harbor.