Mr. Mark Saxon reports
TASMAN ANNOUNCES RESULTS OF PRE-FEASIBILITY STUDY FOR THE NORRA KARR HEAVY RARE EARTH ELEMENT PROJECT IN SWEDEN
Tasman Metals Ltd. is providing a summary of the prefeasibility study, with an effective date of Jan. 13, 2015, for the 100-per-cent-owned Norra Karr heavy-rare-earth-element deposit in Sweden. The PFS confirms Norra Karr to be an economically robust project, with a long mine life, and the capacity to be a major producer of the most critical REEs, dysprosium, yttrium, neodymium and terbium.
PFS highlights
- Aftertax net present value of $313-million (U.S.) using a 10-per-cent discount rate;
- Internal rate of return (IRR) of 24 per cent pretax and 20 per cent aftertax, using a 10-per-cent discount rate;
- Initial capital cost of $378-million (U.S.), including contingency -- low for long-mine-life heavy REE producer;
- Major exposure to the most critical REEs, with 74 per cent of revenue from magnet metals Dy, Nd, Pr, Tb, samarium;
- Norra Karr is the only REE project at PFS stage within the European Union;
- Project able to produce more than 200 tonnes of dysprosium oxide per year for at least 20 years;
- Unconstrained mine life is in excess of 60 years with extensive mineralization below and along strike from 20-year pit;
- No requirement in flowsheet or economic model for proprietary or commercially untested technologies.
Key project attributes
- 25-year mining lease is already granted;
- Highest heavy-rare-earth-oxide-to-total-rare-earth-oxide ratio (HREO/TREO) of all major Western projects at 53 per cent;
- Conventional open-pit mining, with a constrained 20-year life-of-mine stripping ratio of 0.73;
- Attractive location with extensive transport/power/water infrastructure in place and close to major European REE consumers;
- High-quality heavy REE-rich concentrate as reported in the company's July 9, 2014, press release;
- High leverage to anticipated increase in REE prices; most revenue from Dy, Nd, Tb -- the most in-demand metals; only 2.6 per cent of revenue from cerium and lanthanum, which are forecast to remain in long-term oversupply;
- High level of reliance on local equipment, reagents and labour.
"The release of this PFS is a major milestone for Tasman, and I congratulate our team of staff and consultants for the achievement," said Mark Saxon, Tasman's president and chief executive officer. "Norra Karr now stands out as one of the major potential producers of dysprosium in the Western world. There are very few projects known that can deliver more than 200 tonnes of dysprosium oxide per year for more than 20 years to the high-strength permanent magnet market and perhaps none other that can do so with less than $400-million (U.S.) capital investment.
"The extensive existing infrastructure surrounding Norra Karr, the strong mining industry and political stability of Sweden, and presence of a highly skilled local work force provides industrial consumers of permanent magnets with a high degree of confidence that a long-lived and sustainable European REE supply alternative to China is possible.
"Our PFS engineering and design has focused on identifying the lowest-risk process solutions for Norra Karr, therefore neither the economics nor the flowsheet rely on commercially untested technologies. Through Norra Karr, the opportunity now exists for Sweden to retake its historic lead in rare-earth-element production and research, and become part of the next generation of REE-inspired design and innovation.
"The Tasman team is excited to take the next steps towards project development."
PFS key financial and operating metrics
Key results and operational assumptions of the Norra Karr PFS are provided in the tables.
PFS FINANCIAL RESULTS, NORRA KARR PROJECT, JANUARY, 2015
Financial result Value
Initial capital cost (million) US$378
Pretax/aftertax IRR 24%/20%
Pretax/aftertax NPV at 10% discount rate (million) US$456/US$313
Aftertax payback period 4.9 years
Mine life (constrained to 20 years) 20 years
TREO basket price/kg US$64.57
Average annual operating cash flow (after tax) (million) US$96
PFS FINANCIAL RESULTS AT VARIOUS DISCOUNT RATES
Discount rate Posttax NPV Pretax NPV
(%) (US$M) (US$M)
6 $620.2 $837.1
8 443.9 619.1
10 312.7 456.2
12 213.7 332.8
PFS OPERATING ASSUMPTIONS
Operational metrics Value
Average annual ore mining rate (million tonnes) 1.18
Average annual TREO production (tonnes) 5,119
Average annual saleable TREO production (tonnes) (excludes Ho, Er, Tm, Yb) 4,733
Average mining grade, % TREO 0.59%
Average mining grade, ppm Dy2O3 269
Life-of-mine (20 years) strip ratio (waste to ore) 0.73:1
Beneficiation plant recovery rate 89%
Hydrometallurgical average annual feed rate (tonnes) 5,235
Hydrometallurgical recovery rate 86%
Overall recovery 77%
Separation charge per kg TREO (converting mixed to individual REOs) US$19
Operating cost per tonne processed, including REO separation US$179.60
Operating cost per kg TREO, including REO separation $US39.69Project overview
Norra Karr lies in south-central Sweden, 15 kilometres north-northeast of the township of Granna and 300 km southwest of the capital Stockholm in mixed forestry and farming land. The project is 100 per cent owned by Tasman, with a 25-year mining lease in place surrounded by an extensive area of exploration licences.
Norra Karr is a zirconium and heavy REE-enriched peralkaline nepheline syenite intrusion which covers 450 metres by 1,500 m in area. The deepest extents of the REE mineralized intrusion have not been delineated, but exceed 350 m. Mineralogical studies show nearly all of the REEs in the deposit are found within the mineral eudialyte, with only trace britholite and mosandrite. Eudialyte at Norra Karr is relatively rich in REEs compared with most other similar deposits globally and also contains a very high proportion of high-value heavy REEs.
Spatial distribution of rare-earth-bearing minerals at Norra Karr is very consistent. TREO grade, mineral grain size and HREO/TREO per cent vary only slightly across the deposit in a concentric manner. REE-bearing minerals do not vary with either strike or depth to any significant degree.
Uranium and thorium levels at Norra Karr are considered very low for an REE-enriched intrusion and do not significantly exceed background levels in surrounding areas. Thorium and uranium average value six parts per million and 13 ppm, respectively.
This PFS and economic assessment is based on conventional open-pit mining of a newly calculated mineral resource that was constrained to provide for a 20-year mine life. An average annual rare-earth-oxide (REO) output of about 5,100 tonnes is envisaged, reflecting the recommendations of a market study for the most critical REEs. Ore is processed via a simple flowsheet, comprising crushing, grinding, magnetic separation, sulphuric acid leaching and precipitation of a purified mixed REE-oxalate which is calcined to form a mixed REO product.
The PFS model provides for REE separation to individual saleable oxides by an external partner on a commercial basis. Such REE separation facilities operate within Europe today.
Engineering and design work under the PFS has focused on identifying the lowest-risk process solutions. The result is a simple operation, with consistent use of commercially available technology, and use of external partners where appropriate. Sweden is very highly regarded for quality, efficiency and world-leading productivity, skills essential in the consistent delivery of high-purity REE products.
Conclusions within this PFS are supported by very extensive drilling, sampling, process testwork and REE consumer discussions. The PFS is considered a complete study, addressing in addition to mining and processing, all required on-site and off-site infrastructure, land access, reagent and fuel transport and storage, power access, water recycling and purification, waste rock and tailings storage, and final closure.
GBM Minerals Engineering Consultants Ltd., an independent specialist metallurgy, minerals processing, infrastructure and engineering consulting group based in Twickenham, United Kingdom, co-ordinated and authored the PFS. Other members of the PFS team include Wardell Armstrong International Ltd. (WAI), Golder Associates Oy and Denco Strategic Research & Consulting Inc, all of which are independent to Tasman. The company anticipates filing a technical report reflecting the results of the PFS under its profile at SEDAR within 45 days of the date of this news release.
Project output and pricing
Forecast REE output as modelled under the PFS is provided in the table along with pricing assumptions used in the PFS financial models. Pricing assumptions were provided by independent consultants at Denco following a detailed market study and lie at the lower end of those assumed by heavy REE peer companies in recent studies. No value has been ascribed to REEs with very small markets and no public pricing.
Demand for high-strength magnets is widely forecast to grow at 5 to 10 per cent annually and the REEs used in these magnets (Nd, Pr, Dy, Tb, Sm) present the strongest opportunity in the REE sector. Magnet metals comprise 74 per cent by revenue and 26 per cent by volume at Norra Karr, indicating the project presents strong exposure to this high-growth market. The elements identified by the U.S. Department of Energy as critical to clean energy with supply uncertainty (Nd, Dy Eu, Tb, Y), comprise 85 per cent by revenue and 49 per cent by volume at Norra Karr.
The basket price of Norra Karr is one of the highest in the REE sector, due to the high percentage contribution of Dy, Tb, Y and Nd.
ANNUAL REO OUTPUT AND ASSUMED PRICING
REO Recovery Avg. annual production Assumed price % of revenue
(%) (t) (US$/kg)
Light REE
La2O3 78 485 $7 1.0
Ce2O3 78 1,090 $5 1.6
Pr2O3 79 144 $115 5.0
Nd2O3 79 580 $80 14.1
Sm2O3 79 160 $8 0.4
Eu2O3 79 20 $700 4.2
Heavy REE
Gd2O3 79 177 $40 2.1
Tb2O3 79 36 $950 10.3
Dy2O3 79 243 $575 42.3
Ho2O3 78 52 $0 0
Er2O3 77 162 $0 0
Tm2O3 77 24 $0 0
Yb2O3 76 148 $0 0
Lu2O3 75 20 $900 5.5
Y2O3 72 1,778 $25 13.5
Norra Karr TREO basket price $64.57
Mineral resource and mineral reserve estimate
For the purposes of the PFS and following a supply-and-demand study of various REE market segments by Denco, WAI was requested to optimize the mineral resource and pit that would allow for production of 5,000 tonnes per year of separated REO over a constrained mine life of 20 years. This production rate was chosen due to the globally significant output of dysprosium, yttrium and terbium from Norra Karr under this scenario.
Using the production rate and duration guidance provided by Tasman, WAI produced an optimized pit model to estimate the in-pit mineral resource as provided in the table. The mineral resource estimation was completed using a 3-D block modelling approach utilizing Datamine Studio 3 software. A TREO cut-off grade of 0.4 per cent shall be considered as the base case.
WAI was supplied with a database of geological and geotechnical logging, as well as assay results. The database contained sample data from surface diamond drilling containing a total of 119 holes (20,420 m) from which 9,986 samples have been assayed. All work completed by Tasman was considered to be of a high standard, with robust quality assurance/quality control protocols in place that demonstrated precision and accuracy of samples.
Cautionary note to U.S. investors concerning estimates of indicated mineral resources
This section uses the term indicated mineral resources. The company advises U.S. investors that while that term is recognized and required by Canadian regulations, the U.S. Securities and Exchange Commission does not recognize it. U.S. investors are cautioned not to assume that any part or all of an indicated mineral resource will ever be converted into reserves.
INDICATED MINERAL RESOURCE FOR NORRA KARR PROJECT
TREO % HREO
cut-off Tonnes TREO in TREO Dy2O3 Y2O3 Eu2O3 La2O3 Nd2O3 Ce2O3 Gd2O3 Tb2O3 Pr2O3 Sm2O3 Lu2O3
(%) (M) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
0.2 36.82 0.55 53.2 0.0253 0.2005 0.0020 0.0519 0.0603 0.1156 0.0183 0.00371 0.01504 0.01647 0.00227
0.4 31.11 0.61 52.6 0.0273 0.2178 0.0022 0.0573 0.0668 0.1282 0.0200 0.00403 0.01668 0.01815 0.00238
0.6 17.12 0.68 52.2 0.0299 0.2429 0.0025 0.0621 0.0769 0.1441 0.0226 0.00447 0.01896 0.02083 0.00251
1) Mineral resources are not mineral reserves and do not have demonstrated economic viability.
2) Mineral resources are reported inclusive of any reserves.
3) The mineral resources reported have been constrained on the basis of a 20-year pit.
4) Mineral resources are reported for combined migmatitic grennaite, pegmatitic grennaite, grennaite with
catapleiite and eudialyte lakarpite mineralization only.
5) The mineral resources reported represent estimated contained metal in the ground and have not been
adjusted for metallurgical recovery.
6) Total rare-earth oxides (TREO) include: La2O3, Ce2O3, Pr2O3, Nd2O3, Sm2O3, Eu2O3, Gd2O3, Tb2O3, Dy2O3,
Ho2O3, Er2O3, Tm2O3, Yb2O3, Lu2O3, Y2O3.
7) Heavy rare-earth oxides (HREO) include: Eu2O3, Gd2O3, Tb2O3, Dy2O3, Ho2O3, Er2O3, Tm2O3, Yb2O3, Lu2O3,
Y2O3.
8) Preferred base-case mineral resources are reported at a TREO cut-off grade of 0.4 per cent TREO.
9) The potential development of mineral resources may be materially affected by legal, political,
environmental or other risks.
WAI has completed an open-pit design based on the mineral resource block model of Norra Karr. Datamine NPV Scheduler software was used to generate an optimized design based on technical and economic parameters supplied by Tasman and GBM, and mining costs derived by WAI. Taking into account of modifying factors (loss/dilution, geotechnics) an open-pit mine design was based on the optimized pit shell to provide an estimate of mineral reserves.
Probable mineral reserves are reported at this stage due to the confidence of mineral resources, as provided in the table, with a full breakdown of REEs in the table. Probable mineral reserves total 23.6 million tonnes (Mt) of ore material at 0.59 per cent TREO. Mined waste totals 17.3 Mt for total 20-year mining of 40.8 Mt, life-of-mine stripping ratio (total waste to total ore) of 0.73 and an average pit slope angle of 53 degrees. Mineral reserve estimates have been based on a targeted 20-year mine life. The unconstrained mine life, at current economic parameters, is in excess of 60 years.
Cautionary note to U.S. investors concerning estimates of proven and probable reserves
The references in the tables to probable mineral reserves are Canadian mining terms as defined in accordance with National Instrument 43-101 and the Canadian Institute of Mining, Metallurgy and Petroleum standards on mineral resources and mineral reserves, adopted by the CIM council, as amended. These definitions differ from the definitions in SEC Industry Guide 7 under the United States Securities Act of 1933, as amended. Under SEC Industry Guide 7 standards, mineralization may not be classified as a reserve unless the determination has been made that the mineralization could be economically and legally produced or extracted at the time the reserve determination is made. Among other things, all necessary permits would be required to be in hand or issuance imminent in order to classify mineralized material as reserves under the SEC standards. Accordingly, the following information may not be comparable with similar information made public by U.S. companies subject to the reporting and disclosure requirements under the United States federal securities laws, and the rules and regulations thereunder.
PROBABLE MINERAL RESERVES FOR NORRA KARR PROJECT
% HREO
Tonnes TREO HREO in TREO Dy2O3 Y2O3 Eu2O3 La2O3 Nd2O3 Ce2O3 Gd2O3 Tb2O3 Pr2O3 Sm2O3 Lu2O3
(M) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
23.6 0.592 0.314 53.1 0.0269 0.215 0.0022 0.0551 0.0648 0.124 0.0196 0.00396 0.0161 0.0178 0.00234
1) Mineral reserves are reported based on material contained within the final mine design.
2) Mineral reserves are constrained to a designed 20-year mine life.
3) Mineral reserves are reported for combined migmatitic grennaite and pegmatitic grennaite only.
4) Mineral reserves reported have been adjusted for mining factors, at 3.5-per-cent dilution and 5.0-per-cent
loss.
5) Mineral reserves are reported to three significant figures.
6) Total rare-earth oxides include: La2O3, Ce2O3, Pr2O3, Nd2O3, Sm2O3, Eu2O3, Gd2O3, Tb2O3, Dy2O3, Ho2O3,
Er2O3, Tm2O3, Yb2O3, Lu2O3, Y2O3.
7) Heavy rare-earth oxides include: Eu2O3, Gd2O3, Tb2O3, Dy2O3, Ho2O3, Er2O3, Tm2O3, Yb2O3, Lu2O3, Y2O3.
8) Indicated mineral resources are inclusive of mineral reserves.
9) Mineral resources that are not mineral reserves do not have demonstrated economic viability.
10) The potential development of mineral resources may be materially affected by legal, political,
environmental or other risks.
COMPOSITION OF TREO IN 20-YEAR MINERAL RESERVE
REO Grade Relative distribution
Light REE
Lanthanum (La) 0.0551 9.3%
Cerium (Ce) 0.1240 20.9%
Praseodymium (Pr) 0.0161 2.7%
Neodymium (Nd) 0.0648 10.9%
Samarium (Sm) 0.0178 3.0%
Total light REO 0.2778 46.9%
Heavy REE
Europium (Eu) 0.0022 0.37%
Gadolinium (Gd) 0.0196 3.3%
Terbium (Tb) 0.0040 0.7%
Dysprosium (Dy) 0.0269 4.5%
Holmium (Ho) 0.0059 1.0%
Erbium (Er) 0.0184 3.1%
Thulium (Tm) 0.0028 0.5%
Ytterbium (Yb) 0.0172 2.9%
Lutetium (Lu) 0.0023 0.4%
Yttrium (Y) 0.2150 36.3%
Total heavy REO 0.3143 53.1%
TREO 0.5920 100%
Other metals
ZrO2 1.84
Hf 0.0286
U 0.0013
Th 0.0006
Samples submitted by Tasman Metals used with the mineral resource calculation were analyzed by the ME-MS81 technique by ALS Chemex Ltd.'s laboratories in Pitea, Sweden, and Vancouver, Canada, where duplicates, repeats, blanks and known standards were inserted according to standard industry practice. Where overrange for ME-MS81, zirconium was determined using the ME-XRF10 technique. The qualified person for the company's exploration projects, Mark Saxon, president and chief executive officer of Tasman, member of the Australasian Institute of Mining and Metallurgy and Australian Institute of Geoscientists, oversaw this data collection.
Mining
The Norra Karr REE deposit, as modelled in this PFS, is a single body of mineralization, about 300 m by 700 m in size at surface, which begins under 0.5 m average of soil cover. Under the PFS, mining at Norra Karr is planned as a single simple open pit that will extend from surface to a maximum depth of 160 m over a 20-year mine life. It is anticipated that average annual tonnes of ore mined would be 1.18 million while waste rock mined would be 840,000. Many intersections of mineralized rock that exceed the 0.4-per-cent-TREO cut-off lie below the 20-year pit.
For reference, Sweden's largest open-pit mine is Aitik, where in excess of 60 million tonnes of rock is mined each year. The closest active mine to Norra Karr is the Zinkgruvan mine of Lundin Mining that lies only 90 kilometres to the north, where approximately 1.2 million tonnes of ore are mined annually.
As both grade and mineralogy are homogeneous throughout the Norra Karr deposit, no stockpiling of ore or blending are envisaged as necessary under the PFS. Due to relatively recent glacial action in the Nordic countries, little weathering exists near surface at Norra Karr, limiting metallurgical complexity.
The mining methods designed under the PFS have taken account of two constraints, blasting fragmentation and a nearby highway. Fragmentation has been required to meet a maximum size of 600 millimetres and in conjunction planned blasting has been designed within a safety envelope for a nearby highway to the west of the project site. The PFS contemplates open-pit mining operations consisting of conventional hydraulic shovel and rigid body trucks with ancillary support vehicles. Mining operations would be carried out over a single eight-hour shift per day for five days per week, with the exception of drilling, which shall be undertaken over two eight-hour shifts per day for five days per week. The open-pit mine design in the PFS has targeted the pit ramp entrance on the southern end of the pit, directly toward the processing facilities. Ore will be hauled from within the pit directly to the run-of-mine (ROM) pad, where a wheel loader will load material into a primary jaw crusher and into the processing circuit.
Processing
Flowsheet design as incorporated in the PFS is the result of three years of mineralogical, comminution, beneficiation and leaching research and testwork at a variety of leading facilities. Much of this work has been under the guidance of GBM, which has integrated all results in the process design.
Early research on Norra Karr identified that almost all (greater than 95 per cent) of REEs are hosted by the zircono-silicate mineral eudialyte. Furthermore, despite some mineral colour variation across the deposit, the eudialyte is fairly homogeneous throughout and consistently elevated in heavy REEs. Microprobe and LA-ICP-MS data have indicated that eudialyte from Norra Karr is some of the richest in REE known globally and is typically three to five times richer in REEs than that found in Zr-REE deposits on the Kola peninsula in Russia, where previous eudialyte processing research attempted to extract zirconium. Eudialyte is well known to be easily soluble in weak acid at room temperature.
Eudialyte is weakly (para) magnetic, and therefore magnetic separation has been the focus of processing research. After early success, three equipment manufacturing companies were engaged to optimize the magnetic separation process. Metso's HGMS equipment gave the most satisfactory performance, resulting in a clean and high-recovery eudialyte-rich mineral concentrate. Gangue in this mineral concentrate is limited to the mafic mineral aegirine, which is not acid soluble under normal leaching conditions.
Optimization has continued with Metso equipment at the Geological Survey of Finland (GTK), under the guidance of Metso Minerals. This optimization has increased REE recovery in beneficiation to in excess of 86 per cent in less than 35 per cent of the original mass, such that flotation is no longer deemed necessary as was envisaged under the Norra Karr preliminary economic assessment published June, 2013. Magnetic separation shall use standard commercial equipment and does not require process chemicals. Beneficiation recovery higher than 90 per cent is now anticipated and targeted.
Following early testwork at a range of laboratories, most extensive hydrometallurgical research has been completed by ANSTO Minerals in Australia. ANSTO tested a process of sulphuric acid leaching, leach solution purification, REE solvent extraction and precipitation of an REE concentrate. Further process optimization shall focus on more efficient reagent use, or reagent substitution for more cost-effective alternatives.
Sulphuric acid was chosen due to its relatively low cost and its widespread availability in Sweden. A railway line which passes only 25 km from Norra Karr currently transports bulk sulphuric acid from Swedish company Boliden's Swedish and Finnish base metal smelters. Boliden was selected as the preferred supplier of sulphuric acid under the PFS, with combined train and road transport capability to site.
Under the hydrometallurgical process developed, leaching is undertaken at ambient temperature and pressure. High-temperature roasting is not required to dissolve eudialyte. Improvements in magnetic separation efficacy during 2014 significantly reduced the amount of sulphuric-acid-consuming gangue minerals within the eudialyte-rich mineral concentrate. As a result, sulphuric acid consumption per tonne of ore has fallen to 85 kilograms/tonne.
A heavy-REE-enriched, low-impurity oxalate has been precipitated by ANSTO with a grade of approximately 45 per cent REE. This oxalate can be easily calcined to a high-grade REE oxide subject to customer requirements. The composition of this oxalate is provided in the table.
ANSTO is an acknowledged expert in radionuclide behaviour and deportment, and the process behaviour of the small amount of uranium, thorium and daughter products is well understood.
COMPOSITION OF REE OXALATE
Element Weight % REE in oxalate solid REO as % of TREO
Light REE
La 4.94 10.7
Ce 10.75 23.2
Pr 1.46 3.1
Nd 6.76 14.5
Sm 1.65 3.5
Eu 0.27 0.6
Heavy REE
Gd 1.66 3.5
Tb 0.35 0.7
Dy 2.19 4.6
Ho 0.49 1.0
Er 1.29 2.7
Tm 0.18 0.4
Yb 1.14 2.4
Lu 0.15 0.3
Y 12.21 28.6
Total REE 45.48 100 %
Light REE % 55.1
Heavy REE % 44.9Environmental and permitting
Sweden is home to a significant and diverse mining industry, and a well-tested and transparent Minerals Act that has been in effect since 1992.
In 2013, Tasman was granted a 25-year mining lease for the Norra Karr project. The mining lease gives Tasman the full mineral rights for an initial period of 25 years, when it is then automatically renewed in 10-year increments if the mine is in operation. The lease was granted by the Swedish Mining Inspectorate (Bergsstaten) after the assessment of environmental impact data that were collected by independent consultants and submitted by Tasman. To commence mining, in addition to the mining lease, an environmental permit must be granted to the project, pursuant to the provisions of the Swedish Environmental Code (1998:808). The application for an environment permit must include an environmental impact assessment.
Golder Associates was engaged under the PFS to review environmental and social data collected by independent experts commissioned by Tasman, provide input to the PFS report, undertake an environmental and social issues red flag assessment, and review and comment upon all issues relating to permitting. Numerous baseline studies have been completed on and around the mining lease; however, further studies are expected to be needed for environmental permitting. Certain nature values have been identified on-site; however, these are not expected to present major obstacles to project development. Furthermore, management believes it is unlikely that further studies will find or identify nature values of a character or magnitude that would stop the project from progressing.
All site water discharge will be directed away from the catchment area of the nearby Lake Vattern. The receiving watercourse flows southward of the site area toward smaller lakes and eventually into the Baltic Sea. The predicted discharge from the mine is high compared with natural flow rates in the stream and would represent a significant portion of the entire streamflow. This is expected to result in strict control of discharge water quality.
Current process design incorporates a water recycling plant, resulting in a substantial reduction of both make up water intake and the discharge water flow rate. A detailed water management plan will be developed in later stages of project development. The water management plan should be based on further information about quality as well as quantity of the water discharge. Potential need for treatment of the discharge beyond that considered under the PFS will be investigated in the detailed water management plan.
A conceptual-level mine closure plan has been prepared for the project under the PFS. The mine closure plan will be further refined in the feasibility study design stage and during operations to meet any conditions imposed by the environmental permit. Mine closure targets are set so as to ensure safety and no significant on-site or off-site impact.
Capital expenditures
The estimated start-up capital cost for the Norra Karr project, as provided in the table, is considered low amongst its peer group of heavy REE projects that can support a mine life in excess of 20 years. The capital cost estimates for the mining operation were developed by GBM with contribution from Golder Associates and WAI. The extensive existing road/power/rail infrastructure and the presence of a local skilled work force minimize the need for off-site infrastructure investment, whilst the ambient temperature and pressure processing conditions reduce the need for high-capital-cost process equipment. Tasman is very aware that the project's success is dependent on providing an environmentally and socially sustainable REE supply chain, and therefore significant investments are planned to be made in the management and minimization of water and solid waste streams. Furthermore, Tasman has focused on the use of Nordic equipment and reagent suppliers wherever possible to ensure maximum local benefit and minimize any equipment or supply downtime.
Initial capital cost for Norra Karr is estimated to be a relatively low $378.3-million (U.S.), including $40.1-million (U.S.) in contingency and $25.3-million (U.S.) in working capital. It is estimated that an additional $44.3-million (U.S.) shall be required during the life of the project in sustaining capital.
ESTIMATED INITIAL CAPITAL REQUIREMENT
(In millions of U.S. dollars)
Cost area Initial capital
Mining $21.9
Process and tailings $169.5
Waste management $14.3
Product handling -
Infrastructure and utilities $18.1
General $7.5
Direct total $231.3
EPCM $36.2
Field indirect $45.3
Contingency $40.1
Indirect total $121.6
Fixed capital total $352.9
Working capital $25.3
Total capital investment $378.3
Operating costs
The operating cost estimates for the mine were developed by GBM with contribution from Golder Associates and WAI, as provided in the table. The operating cost for Norra Karr incorporates mining, milling, magnetic separation, leaching, purification, precipitation, calcination and transport of a mixed REE oxide concentrate, as well as water management, tailings disposal, transport of material to and from site, general and administration fees, along with associated infrastructure and services.
The operating cost estimate also assumes a separation or tolling charge of $19 (U.S.) per kg, following discussion with various potential industry partners. Operating costs are viewed as in keeping with peer heavy REE projects, and include significant investments in water recycling, purification, and efficient storage of tailing and waste rock.
OPERATING COST FOR NORRA KARR PROJECT
Operating costs Avg. annual Cost per kg REO % of total opex
(US$M)
Mining costs $6.57 $1.35 3.4%
Processing costs
Labour $8.35 $1.71 4.3%
Reagents $35.70 $7.32 18.4%
Maintenance and consumables $7.89 $1.62 4.1%
Utilities $12.88 $2.64 6.7%
Water treatment and waste management $24.40 $5.00 12.6%
General and admin $5.08 $1.04 2.6%
Refining/separation costs $92.6 $19.00 47.9%
Total $193.51 $39.69 100.0%
NPV sensitivity analysis
Beyond the base-case analysis, a sensitivity analysis was performed on the economic model to assess the impact for changes in the REE price deck as well as changes to the operational costs. The results of the sensitivity analysis are provided in the table, which demonstrate that the economic model is most sensitive to changes in the REO basket prices, followed by initial capital expenditures and finally increases or decreases in operational costs.
SENSITIVITY ANALYSIS
Selling price of REO basket NPV @ 10% IRR
(US$M)
US$54.8/kg -- decrease 15% $61.6 12%
US$58.0/kg -- decrease 10% $145.3 15%
US$61.2/kg -- decrease 5% $229.0 17%
US$64.5/kg -- base case $312.6 20%
US$67.7/kg -- increase 5% $396.3 22%
US$70.9/kg -- increase 10% $480.0 24%
US$74.1/kg -- increase 15% $563.7 27%
Initial capital expenditure NPV @ 10% IRR
US$340.5M -- decrease 10% $342.1 22%
US$359.4M -- decrease 5% $327.5 21%
US$378.3M -- base case $312.6 20%
US$397.2M -- increase 5% $297.9 19%
US$416.1M -- increase 10% $283.2 18%
US$435.0M -- increase 15% $268.5 18%
US$453.9M -- increase 20% $253.8 17%
Operating costs/kg TREO output NPV @ 10% IRR
(US$M)
$35.7 -- decrease 10% $363.9 21%
$37.7 -- decrease 5% $338.3 21%
$39.7 -- base case $312.7 20%
$41.7 -- increase 5% $287.1 19%
$43.7 -- increase 10% $261.5 18%
$45.6 -- increase 15% $235.9 18%
$47.6 -- increase 20% $210.3 17%Rare-earth pricing and markets
Pricing assumptions used in the PFS financial model were provided by independent consultants at Denco following a market study on various industry segments and discussions with various industry partners, as provided in the table.
REE pricing is more challenging to forecast than other commodities, as REEs are traded on a contract basis and have varying pricing points based on purity, transaction volume and other supply conditions. Sources for current REE pricing include news publications such as Metal-Pages, Asian Metal and Industrial Minerals. These sources can provide regularly updated contract pricing data, though the volume of material sold that correspond with each price point is not known.
REE pricing is impacted by more than just supply and demand. Prices have been volatile for the last decade as China introduced export quotas in 2005 and significantly reduced them in 2010, which sent some rare-earth prices up over 10 times. Prices in 2011 were at unprecedented highs, which resulted in stockpiling, recycling and research into the reduction of usage in certain applications. Currently, prices are depressed as demand growth has slowed and inventory (including illegal product) continues to work through the system.
The involvement of centralized Chinese planning in the REE sector remains highly relevant, with 2014 witnessing very significant attempts to consolidate production under state-owned enterprises, increase supply chain integration and reduce black market smuggling of higher-priced heavy REEs. Despite this, production and separation capacity for light REEs remains in severe oversupply within China. Chinese government influence is widely forecast to remain high in the REE sector. A new Chinese export tax system, replacing the quota system, is anticipated to provide both price control and volume constraint in the future.
The long-term price forecast used in the PFS is lower than the trailing three-year average for all elements but above current prices for some elements today (Nd, Tb, Dy and Y). Higher prices are primarily supported by demand growth for permanent magnets and the slow ramp-up of heavy-rare-earth mines outside of China. Tasman believes that pricing for La and Ce will continue to be depressed in the long term due to new production from Lynas and Molycorp, as well as the continued ramp-up of production from both facilities. As noted, only 2.6 per cent of revenue from Norra Karr under the PFS is derived from La and Ce.
RARE EARTH OXIDE PRICE ASSUMPTIONS
REO PFS pricing Current Trailing three-year avg.
(US$/kg) (US$/kg) (US$/kg)
Ce2O3 5.00 4.65 11.88
La2O3 7.00 4.85 11.99
Pr2O3 115.00 117.00 110.94
Nd2O3 80.00 58.00 84.32
Sm2O3 8.00 16.50 27.59
Eu2O3 700.00 705.00 1,455.48
Gd2O3 40.00 46.50 65.34
Tb2O3 950.00 615.00 1,199.23
Dy2O3 575.00 340.00 670.69
Ho2O3 n/a n/a n/a
Er2O3 n/a n/a n/a
Tm2O3 n/a n/a n/a
Yb2O3 n/a n/a n/a
Lu2O3 900.00 n/a n/a
Y2O3 25.00 14.00 44.40
NK basket $64.46 $41.42 $80.65
Project opportunities
The company, in conjunction with the PFS consultants, has identified a range of areas warranting further investigation during the planned project optimization phase. Opportunities relating to process improvements and cost reductions of the existing flowsheet are under way; however, additional opportunities for byproduct development may be available. Norra Karr's unique location in Europe surrounded by well-developed infrastructure and in close proximity to the large European population allows the supply of bulk materials to be considered.
Opportunities under consideration include:
- Further development of nepheline/feldspar product for ceramic and glass markets;
- Development of saleable Zr and hafnium products for nuclear or ceramic industries;
- Development of silica-based thermal insulation products;
- Recycling and substitution of high-cost reagents;
- In-house separation/group separation;
- Removal of Ce/La on-site to increase basket price;
- Recovery increase;
- Alternative water management solutions;
- Alternativee mining scenarios;
- Increasing mine life or production rate with expanded resource.
National Instrument 43-101 compliance
A technical report supporting the PFS is being prepared by GBM Minerals Engineering Consultants under the guidance of Michael Short, principal consultant for GBM Minerals Engineering Consultants, who is a qualified person in accordance with National Instrument 43-101.
The mineral resource and mineral reserve estimates were completed by Wardell Armstrong International Ltd. under the supervision of Greg Moseley and Mark Mounde, who are both qualified persons in accordance with National Instrument 43-101.
The process and infrastructure design and cost estimation for the integrated processing plant for the study were completed by GBM Minerals Engineering Consultants under the supervision of Mr. Short, who is a qualified person in accordance with National Instrument 43-101.
Scientific and technical information contained in this news release in relation to metallurgical testwork was completed by GBM Minerals Engineering Consultants under the supervision of Mr. Short, who is a qualified person in accordance with National Instrument 43-101.
The environmental and social section and the permitting review were completed by Golder Associates under the supervision of Gareth Digges La Touche, who is a qualified person in accordance with National Instrument 43-101.
Tasman's qualified person, Mark Saxon, president and chief executive officer of Tasman, fellow of the Australasian Institute of Mining and Metallurgy, member of the Australian Institute of Geoscientists, has reviewed and verified the contents of this news release.
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