Mr. William Dawes reports
MKANGO RESOURCES ANNOUNCES RESULTS OF PRE-FEASIBILITY STUDY FOR THE SONGWE HILL RARE EARTH PROJECT IN MALAWI
Mkango Resources Ltd. has released the results of a prefeasibility study for the Songwe Hill rare earth project.
- The prefeasibility study indicates $293-million (U.S.) aftertax net
present value, using a 10-per-cent nominal discount rate, and 36-per-cent aftertax
internal rate of return for the Songwe Hill rare earth project, based on rare earth oxide prices equivalent to a total
rare earth basket price for Songwe Hill of $55.0 (U.S.) per kilogram REO. The basket
price reflects the selective removal of a large proportion of the cerium
during the hydrometallurgical process which enhances the value of the
product mix.
- Initial capital expenditure of $217-million (U.S.), including a contingency
of $20-million (U.S.), is among the lowest in the rare earth sector.
- Cash operating costs average $13.4 (U.S.) per kg REO for the first five years
of production and $17.0 (U.S.) per kg REO for the life of mine. The study
assumes an additional cost of $10.0 (U.S.) per kg REO to account for the
cost or discount associated with toll separation or the sale of a mixed
chemical concentrate.
- The study supports the declaration of a maiden probable mineral reserve
estimate of 8.5 million tonnes grading 1.60 per cent TREO (total rare earth oxides) for the project and is
based on an open-pit operation, using contract mining, with a mine life
of 18 years commencing in 2017.
- There is potential to significantly expand production or the mine life
and for a lower strip ratio given the large additional inferred resource
and potential to expand the mineral resource.
- This first phase of development envisages production of a high-grade,
critical and heavy rare earth-enriched, purified chemical concentrate for
toll treatment or sale, with annual production of approximately 2,840
tonnes per year of REO in concentrate.
William Dawes, chief executive officer of Mkango, stated: "This is a major milestone in the development of the project. Since listing in 2011, Mkango has progressed an early-stage exploration project to one of only three rare earth projects in Africa with a prefeasibility study or feasibility study announced. We are very encouraged by the project's strong returns and relatively low capex."
Alexander Lemon, president of Mkango, stated: "With the ongoing support of the Ministry of Natural Resources, Energy and Mines as well as the communities surrounding the project, the nation of Malawi has the potential to be a leading sustainable producer of rare earths on a global scale. We are proud to be spearheading this initiative with the government and people of Malawi."
Project overview
The study is based on a conventional open-pit operation using contract mining, a mine life of 18 years commencing in 2017 and is focused on the probable mineral reserve estimate. Unless specified otherwise, costings have been undertaken at an accuracy level of plus or minus 25 per cent.
The project features broad zones of outcropping rare earth mineralization on the northern slopes of a steep-sided hill. The annual processing capacity was assumed at 500,000 tonnes per year of ore with a view to producing an average of approximately 2,840 tonnes of REO in mixed chemical concentrate per year with a large proportion of the cerium removed during the hydrometallurgical process. Cerium is currently considered to have challenging market fundamentals and, under Mkango's current strategy to produce a concentrate, there is a strong economic rationale to remove as much as possible of the cerium from the final concentrate.
A summary of the key outputs of the study is presented in the tables.
KEY OUTPUTS
Total ore mined and processed tonnes 8,482,603
Average strip ratio x 4.5
Total waste mined tonnes 38,441,726
Average life-of-mine TREO grade % 1.60
Mine life years 18
Total REO recovered to concentrate(1) tonnes 48,275
Annual ore processed(2) tonnes 500,000
Rare earth oxide Overall recovery REO production
to concentrate in concentrate(2)
Lanthanum La2O3 55% 1,075
Cerium CeO2 9% 341
Praseodymium Pr6O11 57% 227
Neodymium Nd2O3 57% 756
Samarium Sm2O3 60% 114
Europium Eu2O3 59% 27
Gadolinium Gd2O3 58% 62
Terbium Tb4O7 56% 7
Dysprosium Dy2O3 58% 35
Yttrium Y2O3 58% 165
Holmium(3) Ho2O3 57% 6
Erbium(3) Er2O3 57% 13
Thulium(3) Tm2O3 56% 2
Ytterbium(3) Yb2O3 56% 10
Lutetium(3) Lu2O3 53% 1
Average annual production REO
in concentrate tonnes 2,841
Average heavy rare earth
production in concentrate tonnes 328
(1) A large proportion of the cerium will be selectively removed during the
hydrometallurgical process.
(2) Average annual at full capacity excluding first and last years.
(3) No value currently attributed to these rare earths in the financial
evaluation.
It is currently envisaged that the product of the operation in Malawi will be a high-grade, heavy and critical rare earth-enriched, purified chemical concentrate. The project is connected by road to Blantyre, the largest commercial centre in Malawi, located approximately 70 kilometres away, and which has a rail head and international airport. For the purposes of import of reagents and export of product, it is assumed that the project will utilize the existing road and rail network, in addition to the new railway being completed through Malawi to the Nacala port in Mozambique.
Economic analysis
A detailed financial model was constructed based on input parameters from the study. Free cash flows were modelled in both real and nominal terms for a range of discount rates and on a debt-free basis.
Long-term rare earth price assumptions were based on an average of those included in feasibility studies and prefeasibility studies announced by peer group companies in the rare earth sector in 2013 and 2014, resulting in the equivalent price for a total rare earth basket for Songwe Hill of $55.0 (U.S.) per kilogram REO. Prices are assumed to remain flat in real terms over the life of the mine.
The outcomes of the financial model are summarized in the table.
FINANCIAL EVALUATION
Nominal Real Posttax
discount rate(1) discount rate NPV
(US$M)
9.0% 6.3% $326
Base case 10.0% 7.3% 293
11.0% 8.3% 262
12.0% 9.3% 234
13.0% 10.2% 210
14.0% 11.2% 188
Internal rate of return 36% 32%
(1) Includes inflation at 2.5 per cent.
The main revenue drivers are neodymium (37 per cent), dysprosium (14 per cent), praseodymium (13 per cent) and europium (18 per cent) as illustrated in the table.
REVENUE DRIVERS
Rare earth oxide REO in
REO in conc.
REO price REO in conc. REO in split by
assumption conc.(1) split conc. value
(US$/kg) (t) (US$/kg)
Lanthanum La2O3 7.7 1,075 37.8% 2.9 5.3%
Cerium CeO2 5.9 341 12.0% 0.7 1.3%
Praseodymium Pr6O11 91.4 227 8.0% 7.3 13.3%
Neodymium Nd2O3 77.3 756 26.6% 20.6 37.4%
Samarium Sm2O3 7.9 114 4.0% 0.3 0.6%
Europium Eu2O3 1,066.0 27 0.9% 10.0 18.3%
Gadolinium Gd2O3 49.0 62 2.2% 1.1 1.9%
Terbium Tb4O7 912.0 7 0.3% 2.3 4.3%
Dysprosium Dy2O3 627.9 35 1.2% 7.8 14.2%
Yttrium Y2O3 32.9 165 5.8% 1.9 3.5%
Holmium(2) Ho2O3 6 0.2%
Erbium(2) Er2O3 13 0.5%
Thulium(2) Tm2O3 2 0.1%
Ytterbium(2) Yb2O3 10 0.3%
Lutetium(2) Lu2O3 1 0.0%
Average annual
production REO in
concentrate 2,841 100.0% 55.0 100.0%
Average heavy rare
earth production in
concentrate 328 11.5% 23.2 42.1%
(1) Average annual at full capacity excluding first and last years.
(2) No value currently attributed to these rare earths in the financial
evaluation.
Operating costs
Cash operating costs include the costs of contract mining, milling, flotation, leaching, purification and precipitation in addition to other costs associated with the operation. The study also assumes an additional cost of $10.0 (U.S.) per kg REO to account for the cost or implied discount associated with toll separation or the sale of a mixed chemical concentrate.
REAL OPERATING COSTS
Life of mine Life of mine 2017-2021 2017-2021
(US$/kg REO) (US$/t processed) (US$/kg) (US$/t processed)
Mining 4.1 23.5 3.0 21.1
Beneficiation 3.7 21.3 3.0 21.2
Hydrometallurgical 7.7 43.5 6.1 43.5
G&A/other 1.5 8.4 1.3 9.3
Cash operating costs 17.0 96.7 13.4 95.1
Tolling/conc. sale 10.0 56.9 10.0 70.9
Total cash costs 27.0 153.6 23.4 166.0
Capital expenditure
The largest capital expenditure component is an integrated processing plant comprising a mill, flotation plant, hydrometallurgical plant and a sulphuric acid plant with power co-generation capacity. The capex estimate for the integrated processing plant was completed by SNC-Lavalin (Pty.) Ltd. and is to an accuracy defined as (minus-20 per cent/plus-25 per cent) covering the design, engineering, procurement, supply/manufacture, construction and precommissioning of the proposed new processing facility and associated plant complex infrastructure. Other major capex items include the cost of a lined tailings storage facility provided by Epoch Resources (Pty.) Ltd.
INITIAL CAPITAL EXPENDITURE
(In millions of U.S. dollars)
Site facilities and infrastructure $ 22.0
Power supply 14.2
Mining 1.7
Beneficiation plant 45.2
Hydrometallurgical plant 57.1
Sulphuric acid plant 32.7
Tailings storage facility 12.7
Other costs 12.0
Total initial capital expenditure 197.5
Contingency 19.8
Total initial capital expenditure including contingency 217.3
Total initial capital expenditure is $217.3-million (U.S.) including a contingency of $19.8-million (U.S.).
Capital expenditure after initial project development costs is estimated to be $1-million (U.S.) per year for sustaining capital. The costs of future reclamation are assumed to be provided for by Mkango on an annual basis for the life of the mine and are included in operating costs (general and administrative/other).
Mineral resource and mineral reserve estimates
The study is based on the National Instrument 43-101 mineral resource estimate in the technical report entitled "NI 43-101 Technical Report and Mineral Resource Estimate for the Songwe Hill Rare Earth Element (REE) Project, Phalombe District, Republic of Malawi," filed on Nov. 22, 2012, and authored by Dr. Scott Swinden, PhD, PGeo, and Michael Hall, PrSciNat, MAusIMM (who are independent qualified persons in accordance with National Instrument 43-101), and prepared by the MSA Group (Pty.) Ltd. The report's mineral resource estimates, as previously announced, are summarized in the table.
MINERAL RESOURCE ESTIMATE
Cut-off grade Indicated mineral resource estimate Inferred mineral resource estimate
1.0% TREO 13.2 mt grading 1.62% TREO 18.6 mt grading 1.38% TREO
1.5% TREO 6.2 mt grading 2.05% TREO 5.1 mt grading 1.83% TREO
The study supports the declaration of a mineral reserve estimate for the project as summarized in the table.
MINERAL RESERVE ESTIMATE
Cut-off grade Probable mineral reserve estimate
1.0% TREO 8.5 mt grading 1.60% TREO
The modifying factors shown in the table were used to convert the mineral resource estimate to the mineral reserve estimate.
MODIFYING FACTORS USED IN MINERAL RESERVE ESTIMATE
Factor Unit Quantity Comment
Cut-off
grade % TREO 1% Higher than pay limit of 0.57 per cent
Mining
recovery % 95% 5-per-cent ore loss expected during mining
Mining
Dilution % 5% Dilution assumed to carry zero grade
Plant accounts for the portion of Ce which is
recovery % removed by the metallurgical process and
34% is not sold
Product Average recovered basket price per kg of
price US$/kg 55.01 recovered rare earth oxides
Operating US$/tonne Average life-of-mine operating cost per
cost processed 96.42 tonne processed
Operating Average life-of-mine operating cost per kg
cost US$/kg 16.95 of REO recovered
The economic parameters used for calculating the mineral reserve estimate may vary from those used in the economic model for the study.
Indicated mineral resources are inclusive of mineral reserves. Mineral resources that are not mineral reserves do not have demonstrated economic viability. For further details of the mineral resource estimates, including the breakdowns thereof, please refer to the report which is available at SEDAR.
Mining
The mine design was completed by the MSA Group. It is based on a conventional open-pit mining operation and assumed the use of a contract miner. The mine plan incorporates the use of stockpiles to manage the grade profile and maximize returns. As part of the study, a contract mining company visited the Songwe Hill site and was integrally involved in the estimation process.
Processing and metallurgical testwork
A comprehensive three-year program of mineralogical studies formed the basis for the metallurgical testwork. Mineralogical work included investigations by high-definition mineralogy incorporating QEMSCAN completed by SGS Minerals Services and Camborne School of Mines; scanning electron microscope (SEM), electron microprobe and laser ablation inductively coupled plasma mass spectrometry (LA-ICP-MS) analyses completed at the Natural History Museum, Aberystwyth University, Camborne School of Mines and the British Geological Survey. Further mineralogical work (SEM) on mineral concentrate was completed at Mintek and the Camborne School of Mines. The mineralogical program identified the fluorocarbonate mineral, synchysite and the phosphate mineral apatite as the most important rare earth-bearing minerals and confirmed that the apatite contained significantly higher concentrations of heavy rare earths and yttrium relative to apatite in other carbonatites worldwide.
Songwe Hill's favourable mineralogy means that high capital and energy intensive kilns will not be required in the flow sheet. This contrasts to projects dominated by monazite, xenotime or other refractory REE minerals. Plant design comprises conventional technology largely comprising tanks, pumps and filters, and will be modular, facilitating the potential for future expansions, the latter underpinned by a significant mineral resource base. The use of low-strength acid enables the use of plastics or composite materials for tanks and pipework.
The design of the integrated processing plant and associated infrastructure was completed by SNC-Lavalin. The metallurgical testwork was completed by Mintek, South Africa and Nagrom Laboratories, Australia, which was reviewed and supervised, respectively, by Met-Chem Consulting, Australia.
A number of potential flowsheets were evaluated at Mintek and Nagrom Laboratories. Based on this testwork, a flowsheet was developed incorporating flotation, two-stage leaching and acid regeneration.
The flotation process was largely developed at Mintek and then reproduced and verified at Nagrom Laboratories. This work demonstrated that flotation can be used to upgrade the mineralized material. In the flow sheet, this concentrate is then treated in the hydrometallurgical plant.
In the first leach step (gangue leach), dilute hydrochloric acid (HCl) is used to remove largely calcite, with minimal rare earth losses. A solution amenable for recycling HCl using sulphuric acid is thereby produced. This process has considerable merit in that sulphuric acid is considerably cheaper to produce versus the cost of importing HCl. Solid sulphur will be transported to site and used to produce concentrated sulphuric acid along with co-generation of power from a combined sulphur burner and steam turbine plant. HCl lost during the process will be replaced by importing solid calcium chloride.
The residue from the gangue leach is then subjected to a second, more intensive HCl leach during which the majority of the rare earths are solubilized. In addition, caustic conversion followed by HCl dissolution are completed on the rare earth leach residue to maximize overall rare earth leach recovery. The resultant pregnant liquor solution reports to the purification stage, during which impurities are removed, and cerium is selectively precipitated for stockpiling and potential future sale.
Environmental, social and health impact studies
Prefeasibility environmental and social baseline studies were conducted during 2013 by Digby Wells Environmental in consultation with Malawian environmental specialists, based on the requirements of the equator principles, International Finance Corp. performance standards, as well as specific requirements and interpretations of Malawian legislation as provided by its Department of Environmental Affairs (DEA). A project brief for the proposed environmental and social studies for the environmental, social and health impact assessment (ESHIA) was submitted to the DEA in the fourth quarter of 2013. The DEA has responded with a suggested terms of reference which will be addressed in the ESHIA for the definitive feasibility study.
Qualified persons
A National Instrument 43-101 technical report supporting the study is being prepared by the MSA Group under the guidance of Rob Croll, principal consultant for the MSA Group, who is a qualified person in accordance with National Instrument 43-101.
The mineral reserve calculation was completed by the MSA Group under the supervision of Clive Brown, who is a qualified person in accordance with National Instrument 43-101.
The process design and cost estimation for the integrated processing plant for the study were completed by SNC-Lavalin under the supervision of Jansen Scheepers, who is a qualified person in accordance with National Instrument 43-101.
The design and cost estimation for the infrastructure associated with the integrated processing plant for the study were completed by SNC-Lavalin under the supervision of Tinus Redelinghuys, who is a qualified person in accordance with National Instrument 43-101.
Scientific and technical information contained in this release in relation to metallurgical testwork has been approved and verified by Gavin Beer, BSc (ExtMet), MAusIMM (CP), consultant metallurgist, who is a qualified person in accordance with National Instrument 43-101.
The NI 43-101-compliant technical report in respect of the results of the study described herein will be filed on SEDAR within the next 45 days.
Independence of qualified persons
All of the qualified persons referred to in this press release are independent of Mkango Resources.
The Songwe Hill rare earth project
The Songwe Hill rare earth project is located within the 100-per-cent-owned exclusive exploration licence 0284/10R in southeast Malawi. The project is accessible by road from Zomba, the former capital, and Blantyre, the principal commercial town of Malawi. Total travel time from Blantyre is approximately two hours, which will reduce as infrastructure continues to be upgraded in the area.
We seek Safe Harbor.
© 2024 Canjex Publishing Ltd. All rights reserved.