Mr. Don Burton reports
PRELIMINARY ECONOMIC ASSESSMENT CONFIRMS POTENTIAL FOR HEAVY RARE EARTH MINE AT LOFDAL
Namibia Rare Earths Inc. has provided the positive results of the NI 43-101-compliant preliminary economic assessment on the Lofdal rare earths project,
Namibia, which confirms the technical and economic potential of the
Lofdal heavy rare earth project in northwestern Namibia.
The PEA concludes that the project currently has the potential to
produce an average of 1,500 tonnes per annum of separated rare earth
oxides (REO) which would generate after-tax cumulative cash flow of
$257-million (U.S.) with a net present value 10 per cent (NPV) of $147-million (U.S.) and an internal rate of return (IRR) of 43 per cent. The
PEA indicates that there is considerable potential to expand the
current mineral resource and recommends that additional drilling be
carried out to provide for an extended mine life in conjunction with a
six-month prefeasibility study (PFS) program. Financial sensitivities
of the project are summarized in the "Financial sensitivities summary" table, financial highlights in the "Financial highlights" table, mineral resource estimates in the "In-situ mineral resources (1) for the Area 4 deposit within the more-than-0.1-per-cent TREO envelope with effective date
July 31, 2012" table, capital costs are in the "Total capital costs summary" table,
operating costs are in the "Total operating costs summary" table and REO pricing is in the "Projected 2017 FOB China export prices for REOs
and projected REO distribution for Lofdal concentrate (average
17.3 per cent TREO from Mintek Studies)" table.
Donald Burton, president of Namibia Rare Earths, stated: "This preliminary economic assessment provides shareholders and
investors with the first indications of the economic potential of
Lofdal. The PEA confirms the strengths of the project in terms of its
favourable rare earth distribution and amenability to conventional
mining and processing, and demonstrates its financial strengths in
terms of the low capital costs and significant cash flows. The PEA
provides a clear path forward for development of the project.
Management believes that there remains considerable upside to the
project as we move towards prefeasibility and feasibility studies.
Together with ongoing metallurgical optimizations, we will target
additional drilling to significantly expand mineral resources and to
establish minable reserves thereby extending the life of mine. The
company will aggressively pursue the most expeditious path towards
development of Lofdal through all available options."
FINANCIAL SENSITIVITIES SUMMARY
Discount rate Pretax NPV After-tax NPV
(%) (U.S.$) (U.S.$)
8 $264,068,000 $164,960,000
10 238,227,000 147,385,000
12 214,912,000 131,455,000
Pretax After tax
IRR (%) 53 43
Cumulative cash
flow (U.S.$) $400,954,000 $256,971,000
FINANCIAL HIGHLIGHTS
Initial capital costs (U.S.$) $92,056,000
Total capital costs (U.S.$) 155,735,000
Total operating costs per tonne mined (U.S.$) 91.07
Total operating costs per kg TREO produced (U.S.$) 49.95
Basket price per kg TREO produced (U.S.$/kg) 105.77
Life of mine (years) 7.25
The PEA should not be considered to be a prefeasibility or feasibility
study, as the economics and technical viability of the project have not
been demonstrated at this time. The PEA is preliminary in nature and
includes inferred mineral resources that are considered too speculative
geologically to have the economic considerations applied to them that
would enable them to be categorized as mineral reserves. Furthermore,
there is no certainty that the PEA will be realized.
The company will hold a webcast on Friday, Oct. 3, 2014, at 11 a.m.
EST to discuss the results of the PEA. Call-in details are provided at
the end of this press release.
The MDM Group, South Africa, was the principal consultant responsible for
the preparation of the PEA which is co-authored by the MSA Group, South
Africa, and MineTech International Ltd., Canada.
Project overview
Mineral resource estimate
The PEA utilized the initial 43-101-compliant mineral resources for the
Area 4 deposit at a cut-off grade of 0.1 per cent total rare earth oxides
(TREO) which provides 2.88 million tonnes of indicated mineral resources yielding
9,230 tonnes of REO, of which 7,050 t are estimated to be heavy rare earth
oxides (HREO) and 3.28 million tonnes of inferred mineral resources yielding
8,970 t of REO, of which 6,700 t are estimated to be HREO (see "In-situ mineral resources (1) for the Area 4 deposit within the more-than-0.1-per-cent TREO envelope with effective date
July 31, 2012" table).
These REO and HREO tonnages are rounded to the nearest 10 t but are
shown as originally calculated in the "In-situ mineral resources (1) for the Area 4 deposit within the more-than-0.1-per-cent TREO envelope with effective date
July 31, 2012" table. The remainder of the REO is
made up of light rare earth oxides (LREO).
IN-SITU MINERAL RESOURCES (1) FOR THE AREA 4 DEPOSIT WITHIN THE MORE-THAN-0.1% TREO ENVELOPE WITH
EFFECTIVE DATE JULY 31, 2012
In-situ indicated mineral resource
Cut-off Tonnes LREO HREO TREO REO HREO
% TREO million % % % tonnes proportion
0.1 2.88 0.08 0.24 0.32 9,234 76.3%
0.2 1.62 0.09 0.37 0.45 7,358 80.9%
0.3 0.90 0.09 0.53 0.62 5,594 85.6%
0.4 0.58 0.09 0.69 0.78 4,477 88.3%
0.5 0.39 0.09 0.84 0.93 3,673 90.3%
0.6 0.28 0.09 1.00 1.09 3,039 91.8%
0.7 0.20 0.08 1.18 1.26 2,524 93.5%
In-situ inferred mineral resource
Cut-off Tonnes LREO HREO TREO REO HREO
% TREO million % % % tonnes proportion
0.1 3.28 0.07 0.20 0.27 8,973 74.7%
0.2 1.80 0.08 0.30 0.37 6,748 79.3%
0.3 0.75 0.08 0.47 0.56 4,180 85.1%
0.4 0.42 0.08 0.64 0.72 3,071 88.8%
0.5 0.27 0.08 0.81 0.89 2,377 90.9%
0.6 0.21 0.08 0.91 0.99 2,049 92.1%
0.7 0.16 0.07 1.03 1.10 1,717 93.5%
(1) Mineral resources which are not mineral reserves do not have demonstrated economic viability.
Mining and processing
Mining will be by conventional open pit methods utilizing an owner-operated mine fleet at a mining rate of 2,500 tonnes per day (840,000 tonnes per year) with
the ultimate pit reaching a vertical depth of 200 metres. A total of
6.04 MT of mineralized material at a diluted grade of 0.28 per cent TREO will
be provided to the primary crusher over the 7-1/4-year life of mine
(LOM).
Following secondary and tertiary crushing the feed is delivered to X-ray
technology (XRT) and X-ray fluorescent (XRF) sorters to eliminate
internal waste, thereby reducing volume to the ball mill for fine
grinding. Ball mill product slurry is fed to the rougher magnetic
separator with tails going through three scavenger magnetic stages. The
magnetic concentrate product is subjected to a cleaner flotation
circuit and then passes through a concentrate thickener prior to the
acid leach circuit.
The leach circuit utilizes a four-stage hydrochloric acid (HCl) leach
to dissolve the carbonate minerals. A gangue leach centrifuge circuit
provides for a primary acid water wash to remove the entrained
dissolved calcium chloride solution and a secondary potable water wash
with a second centrifuge for solid-liquid separation. The resultant
solids are filtered in a filter press for final concentrate bagging and
shipping to a hydrometallurgical facility which is proposed to be
located at the deep-water port of Walvis Bay.
Concentrate batches of 29 tonnes each will be shipped in containers over
a distance of 375 kilometres to the hydrometallurgical facility for
caustic cracking and washing. The caustic cracking plant is designed
for the purpose of breaking or "cracking" the phosphate component of
the rare earth mineral xenotime in order to access the contained
thorium for removal by subsequent HCl leaching. Following the caustic
cracking stage the washed residue is transferred to the HCl digestion
tank to leach the thorium. Subsequent precipitation steps will produce
a thorium hydroxide product for storage and a rare earth hydroxide
product to be combined with the HCl digestion residue as a final
product for drying and drumming.
The project is not of sufficient scale to support capitalization for a
separation plant and it is envisioned that the final product will be
delivered to a third party facility and subject to an offshore
treatment charge.
Capital costs
The total capital costs for the project are estimated at $155,735,000
(U.S.) and include direct capital costs for mining, mill site processing
facilities, cracking plant processing facilities, tailings storage
facility and camp allowance; sustaining capital; closure costs;
indirect costs and contingency (see "Total capital costs summary" table). Indirect costs, including
EPCM, owner's costs, first fills and spares, have been estimated at 30 per cent
of direct costs. The contingency has been estimated at 20 per cent of the total
of direct costs plus indirect costs.
TOTAL CAPITAL COSTS SUMMARY (U.S.$)
Direct mining costs $25,710,000
Direct mine site processing costs 48,059,000
Direct cracking plant processing costs 15,887,000
Direct tailings storage facility costs 2,400,000
Subtotal initial capital costs 92,056,000
Sustaining capital mining 5,580,000
Sustaining capital processing 4,385,000
Mine closure costs 2,163,000
Indirect costs 27,617,000
Contingency 23,935,000
Total capital costs 155,735,000
The project initial capital requirements are estimated at $92,056,000 (U.S.).
Operating costs
Operating costs include the costs of the owner-operated mine fleet,
processing at the mill site and cracking plant facility, transportation
costs for concentrates from the mine site to Walvis Bay and from port
to an offshore treatment facility for separation. Technology Metals
Research of the United States has indicated that a tolling charge of
$15 (U.S.) to $20 (U.S.) per kilogram of finished REOs would be a reasonable estimate for the
processing (outside of China) of an intermediate concentrate with a
rare earth element distribution similar to the one associated with the
Lofdal project to commonly required purity levels and finished forms. A
separate cost has therefore been estimated for the offshore treatment
cost and is considered as part of the total operating costs which are
summarized in the "Total operating costs summary" table.
TOTAL OPERATING COSTS SUMMARY
Description Cost per tonne mined Cost per kg TREO produced
(U.S.$/t) (U.S.$/kg)
Mining 23.49 12.88
Processing (mill site and cracking) 29.02 15.92
Tailings storage facility 0.5 0.27
Offshore treatment charge 38.06 20.88
Total operating costs 91.07 49.95
Rare earth pricing
A price deck has been developed for 2017 by Technology Metals Research
and Core Consultants, based on REO supply/demand projections and
pricing models for that year, which would be a reasonable approximation
of when Lofdal might be expected to enter production. The nature of the
REE market is such that it does not lend itself to traditional models
for commodity forecasting. In analyzing potential future prices,
consideration is given to the likely relative surplus or deficit of
REEs available to the market, in order to gain a sense of price
direction. Two key assumptions made in the price projections are that
China maintains its production targets of 100,000 to 105,000 tonnes in
the near to medium term, and that there are no sudden or unexpected
policy changes in China that would shock the export market as occurred
in 2010/2011. The resulting 2017 FOB China export price projections for
REOs are shown in the "Projected 2017 FOB China export prices for REOs
and projected REO distribution for Lofdal concentrate (average
17.3 per cent TREO from Mintek Studies)" table.
The projected REO distribution for Lofdal concentrates is also presented
in the "Projected 2017 FOB China export prices for REOs
and projected REO distribution for Lofdal concentrate (average
17.3 per cent TREO from Mintek Studies)" table. The projected basket price of $105.77 (U.S.) is calculated from
the REO distribution and the projected 2017 FOB China prices.
PROJECTED 2017 FOB CHINA EXPORT PRICES FOR REOS
AND PROJECTED REO DISTRIBUTION FOR LOFDAL CONCENTRATE (AVERAGE
17.3% TREO FROM MINTEK STUDIES)
REO price Grade Distribution Value
(U.S./kg) (%) (% TREO) (U.S.$/kg)
La oxide 5 0.081 0.47 0.02
Ce oxide 4 0.135 0.78 0.03
Pr oxide 95 0.014 0.08 0.08
Nd oxide 73 0.056 0.32 0.24
Sm oxide 8 0.089 0.51 0.04
Eu oxide 750 0.092 0.53 3.99
Gd oxide 47 0.609 3.52 1.65
Tb oxide 870 0.197 1.14 9.91
Dy oxide 530 1.573 9.09 48.20
Ho oxide 55 0.352 2.04 1.12
Er oxide 75 1.089 6.30 4.72
Tm oxide 1,000 0.162 0.94 9.37
Yb oxide 55 0.961 5.56 3.06
Lu oxide 1,250 0.135 0.78 9.76
Y oxide 20 11.752 67.94 13.59
Total 17.297 100.00 105.77
Basket price 105.77
Economic analysis
The economic analysis assumes that the project will be 100 per cent equity
financed and uses parameters relevant as of September, 2014, under
conditions likely to be applicable to project development and operation,
and analyzes the sensitivity of the project to changes in the key
project parameters. All costs have been presented in United States
dollars and wherever applicable conversion from South African
rand has utilized an exchange ratio of 10.70 based on
July, 2014, exchange rates.
Mining and treatment data, capital cost estimates and operating cost
estimates have been put into a base case financial model to calculate
the IRR and NPV based on calculated project after-tax cash flows. The
scope of the financial model has been restricted to the project level
and as such, the effects of interest charges and financing have been
excluded.
For the purposes of the PEA, the evaluation is based on 100 per cent of the
project cash flows before distribution of profits to the equity owners.
Both pretax and after-tax cash flows have taken 5-per-cent royalty payments
into account.
At a discount rate of 10 per cent the project is anticipated to yield a pretax
IRR of 53 per cent with an NPV of $238,227,000 (U.S.), and an after-tax IRR of 43 per cent
with an NPV of $147,385,000 (U.S.). Cumulative cash flows are $400,954,000
(U.S.) pretax and $256,971,000 (U.S.) after tax over the seven-year LOM (see the "In-situ mineral resources (1) for the Area 4 deposit within the more-than-0.1-per-cent TREO envelope with effective date
July 31, 2012" table).
The project is expected to pay back initial capital within the first two
years.
Socio-economic and environmental impact
The presence of the mine will have significant positive impacts on the
local population of Khorixas as job opportunities and indirect economic
opportunities will be created. The location of the hydrometallurgical
facility in Walvis Bay will provide similar opportunities to the local
population of that area. It is estimated that the mining activities
will require a work force of approximately 230 people.
The details regarding the cracking process at Walvis Bay need to be
confirmed and the proposed management options of the radioactive waste
assessed to determine the environmental and social impacts. An
environmental impact assessment has not yet been undertaken, however,
the PEA indicates that the project can be developed in an
environmentally responsible manner. A comprehensive environmental
management system will be developed to facilitate and control the
environmental and social aspects during the development and operation
of the project.
The predominant environmental impacts associated with the mining
activities are associated with surface and groundwater quantity, dust
contamination and the potential side effects of radioactive thorium.
It is proposed that the baseline monitoring of surface water,
groundwater, dust fallout and radiological background levels be
undertaken. With the implementation of effective mitigation and
management measures, any negative environmental and social impacts can
be avoided, reduced and managed to ensure there are minimal long term
or adverse impacts.
Conclusions
The PEA has been modelled on the available NI 43-101 mineral resources
for the Lofdal Area 4 rare earth deposit at a 0.1-per-cent TREO cut-off. There
are no mineral reserves estimated for the project. Mining by open pit
at a rate of 840,000 tpy provides just over seven years of mine life.
The available resource is modelled to a vertical depth of 200 metres
and the geological potential to increase the resource, as evidenced by
deeper exploration drilling to over 300 vertical meters, is considered
high.
The PEA has concluded that the Lofdal Area 4 heavy rare earth deposit
can be easily mined by open pit and treated by conventional grinding,
magnetic separation, gangue acid leach and cracking processes. Similar
facilities are currently in operation locally in Namibia. The plant
design was based on the results of the initial metallurgical test
program completed on deposit samples, which showed the suitability of
sorting technology, magnetic separation, flotation and gangue acid
leach treatment. The plant feed will be delivered to the mine site
processing plant from the open pit mine using conventional mining
practices and equipment suitable to this type of recovery.
Hydrometallurgical cracking will be accomplished at a separate facility
in Walvis Bay. The mixed REO concentrate must then be treated for
separation at a suitable facility offshore.
An environmental impact assessment has not yet been undertaken, however,
the PEA indicates that the project can be developed in an
environmentally responsible manner with significant economic benefits
to the town of Khorixas and the local communities, and to Walvis Bay. A
comprehensive environmental management system will be developed to
facilitate and control the environmental and social aspects during the
development and operation of the project. A number of recommendations
are made to implement baseline environmental monitoring in advance of
environmental impact assessment.
The capital costs are estimated at $155,735,000 (U.S.) and the economic model
has concluded that the project is positive based on the projected REO
price deck which assumes a basket price for the heavy enriched Lofdal
concentrates of $105.77 (U.S.) per kilogram. The costing estimates for the study were
prepared in mid-2014 and based to a large extent on South African
supply and installation rates, which are believed to be comparable with
local Namibian rates.
The financial analyses are based on the scenario of 100 per cent equity
financing for the project. The base case model assumes a constant
price of $105.77 (U.S.) per tonne of separated REO and at a 10-per-cent discount
rate generates a pretax IRR of 53 per cent with an NPV of $238,227,000 (U.S.) and a
posttax IRR of 43 per cent with an NPV of $147,385,000 (U.S.). Cumulative cash flows
are $400,954,000 (U.S.) pretax and $256,971,000 (U.S.) posttax over the seven-year LOM. The forecast capital payback time is within two years.
Recommendations
The PEA makes recommendations that Namibia Rare Earths:
-
Complete current test work in order to confirm the proposed process
route;
-
Undertake additional drilling to expand the current resource and to
upgrade the quality of the resource in order to derive mineable
reserves and to extend the life of mine;
-
Obtain a representative bulk sample from the deposit suitable for pilot-plant-scale test work;
-
Carry out a six-month preliminary feasibility study (PFS) to further
develop the engineering design of the plant and recognize value
engineering where possible;
-
Revisit the capital cost estimates in general for possible savings due
to optimizing the cost estimates from plus or minus 50 per cent to plus or minus 10 per cent.
Qualified persons and 43-101 technical report
An NI 43-101-compliant report entitled preliminary economic assessment on the Lofdal rare earths project,
Namibia, will be filed on SEDAR within 45 days. The MDM Group is the principal
author under the supervision of David S. Dodd, BSc (honours), FSAIMM, who
is a qualified person in accordance with NI 43-101 -- standards of
disclosure for mineral projects.
Sections of the report dealing with property description and location,
accessibility, climate, local resources, infrastructure and
physiography, history, geological setting and mineralization, deposit
types, exploration, drilling, sample preparation, analyses, and security
and data verification were completed by the MSA Group under the
supervision of Peter Roy Siegfried, MAusIMM (CP geology), who is a
qualified person in accordance with NI 43-101 -- standards of disclosure
for mineral projects.
The section of the report dealing with mineral resource estimates was
completed by the MSA Group under the supervision of Michael R. Hall,
BSc (honours), MBA, MAusIMM, PrSciNat, MGSSA, who is a qualified person
in accordance with NI 43-101 -- standards of disclosure for mineral
projects.
Sections of the report, dealing with the tailings storage facility
design, capital and operating costs, were completed by MineTech
International Ltd. under the supervision of Patrick Hannon, MASc,
PEng, who is a qualified person in accordance with NI 43-101 --
standards of disclosure for mineral projects.
Sections of the report, dealing with mineral reserve estimates, mining
methods and mine capital and operating costs, were completed by MineTech
International Ltd. under the supervision of William Douglas Roy,
MASc, PEng, who is a qualified person in accordance with NI 43-101
-- standards of disclosure for mineral projects.
Donald M. Burton, PGeo, and president of Namibia Rare Earths Inc., is
the company's qualified person and has reviewed and approved this press
release. Each of David S. Dodd, Peter Roy Siegfried, Michael R. Hall,
Patrick Hannon and William Douglas Roy has also reviewed and approved
the technical disclosure in this press release.
Conference call and webcast
Senior management of Namibia Rare Earths, together with principal
authors of the PEA, will be hosting a conference call and webcast to
discuss the results of the PEA and to provide an opportunity for
questions and answers.
Call-in details for the conference call and webcast to be held on
Friday, Oct. 3, 2014, at 11 a.m. (Eastern Standard Time) are:
North American toll-free: 1-888-390-0546
Standard international dial-in: 1-416-764-8688
A replay of the conference call will be available from Friday, Oct. 3, 2014, at 1 p.m. (Eastern Time) to Friday, Oct. 10, 2014, at 11:59
p.m. (Eastern Time) by dialling:
Toronto or international: 1-416-764-8677
Toll-free North America: 1-888-390-0541
Playback passcode: 262269 (pound sign)
The webcast will be posted for one year on Namibia Rare Earths' website.
We seek Safe Harbor.
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