Operational and technical improvements support a long-life Project
with after-tax Internal Rate of Return of 29% and a payback period of
2.9 years
Significant opportunities for further upside
Company Website:
http://www.rareelementresources.com
LAKEWOOD, Colo. -- (Business Wire)
Rare Element Resources Ltd. (the âCompanyâ)(NYSE MKT: REE and TSX:
RES), a mineral resource company advancing development of the Bear
Lodge Critical Rare Earth Project (the âProjectâ) located in northeast
Wyoming, is pleased to announce that it has incorporated the significant
resource expansion and numerous operational improvements announced over
the last several months into a positive 2014 Pre-Feasibility Study (PFS)
for the Project. All references in this news release to â$â are to
United States Dollars and certain numbers have been rounded.
PFS Highlights
-
Low initial capital cost of $290 million.
-
Mining of high-grade zone in Years 1 â 9 boosts initial cash flows and
results in a 2.9-year payback from the start of production.
-
After-tax net present value (NPV) of $330 million at a 10% discount
rate, and after-tax internal rate of return (IRR) of 29%.
-
45-year Project life based on the expanded Measured and Indicated
(M&I) mineral resource â additional upside possible from Inferred
mineral resource, including the potential delineation of additional
high-grade mineral resource, and heavy rare earth (HRE)-enriched
exploration targets.
-
A proprietary recovery process that consistently produces a 97+% pure,
near thorium-free, total rare earth oxide (TREO) concentrate.
-
Average annual production of over 7,500 tons (6,800 tonnes) of TREO
concentrate.
Various activities undertaken by the Company in connection with the PFS
have significantly de-risked the Project, including:
-
Successfully completed additional pilot plant studies and further
refined the process technology,
-
Sized the Project to balance initial capital cost with meaningful
market penetration while preserving ability to accelerate production
when market conditions warrant,
-
Advanced the permitting process, most significantly with the progress
on the draft Environmental Impact Statement (EIS), and
-
Provided concentrate product to potential customers/partners for
evaluation where the initial feedback has been positive.
âWe have made great progress over the last two years by significantly
expanding the mineral resource at Bear Lodge, developing a proprietary
recovery process that consistently produces a 97+% pure, near
thorium-free TREO concentrate in repeated pilot plant testing, and
advancing permitting with the formal start of the EIS process,â said
Randall J. Scott, President and Chief Executive Officer. âDuring this
same timeframe, we have seen the rare earth marketplace change
significantly and have gained a better understanding of customer needs.
The PFS incorporates all this and demonstrates the potential for solid
returns for our shareholders even in the current weak rare earth price
environment. The Projectâs low initial capital cost reflects the
advantages of our location near existing infrastructure and in
communities supportive of responsible natural resource development. The
strength of our mineral resource is demonstrated by a greater than
40-year Project life and the ability of a high-grade core to accelerate
payback. Importantly, there remains further upside opportunity from the
Inferred mineral resources within the pit boundary, the exploration of
identified additional targets with heavy rare earth enrichment,
operating cost reductions from further optimization of our proprietary
technology, monetization of potentially valuable by-products within the
deposit, and our continuing evaluation of downstream separation.â Mr.
Scott concluded, âBear Lodge is a world-class rare earth district that,
for over 40 years, is expected to supply raw materials critical to new
technologies, including the key magnet materials of neodymium,
praseodymium, dysprosium and terbium, for industries that are still
growing and developing. When you consider all the Projectâs strengths
and the opportunities we have identified, we think it is clear that the
Bear Lodge Project has substantial value to all of our stakeholders even
beyond what is being captured in the current IRR.â
Roche Engineering, Inc., an independent engineering company, prepared
the PFS in cooperation with a number of specialized consultants on
behalf of the Company. The PFS evaluates the Project as outlined in the
Plan of Operations as accepted by the U.S. Forest Service (USFS), the
lead agency involved in the preparation of the Projectâs EIS. The PFS
findings are based upon a selective mining approach developed in
connection with work on the preparation of the draft EIS to minimize the
Projectâs overall environmental footprint on public lands. The PFS
contemplates selectively mining at a rate consistent with ore processing
capacity and thereby stages the mining impact while reducing the need
for extensive stockpiling.
Key metrics of the PFS include:
PFS Key Metrics |
|
Â
|
Â
|
Â
| |
Initial capital costs (M)
| | | |
Â
|
Â
|
$290
|
Life-of-mine (LOM) capital costs (M)*
| | | | | |
$453
|
Payback period
| | | | | |
2.9 years
|
Pre-tax / After-tax IRR
| | | | | |
32.7% / 28.6%
|
Pre-tax / After-tax NPV at 10% discount rate (M)
| | | | | |
$426 / $330
|
Mine life / Project life
| | |
Â
|
38 years / 45 years
|
Lower-grade stockpile processing
| | | | | |
Years 39-45
|
Assumed discounted basket price/kg
| | | | | |
$24.60
|
* Including sustaining capital | | | | | | |
Operating Metrics |
| | | High Grade Processing Years 1 - 9 | | | LOM Average* |
Average annual mining rate (M tons/M tonnes)
| | |
3.72 / 3.37
| | |
3.72 / 3.38
|
Annual production TREO (tons/tonnes)
| | |
8,523 / 7,732
| | |
7,510 / 6,813
|
Mining average grade, % TREO
| | |
4.7%
| | |
2.8%
|
Strip ratio (waste to ore)
| | |
8.0:1
| | |
8.7:1
|
Physical Upgrade Plant average annual feed rate (tons/tonnes)
| | |
220,000 / 199,600
| | |
345,000 / 313,000
|
Physical Upgrade Plant recovery rate
| | |
92.8%
| | |
87.9%
|
Hydrometallurgical average annual feed rate (tons/tonnes)
| | |
178,760 / 162,100
| | |
206,300 / 187,100
|
Hydrometallurgical recovery rate
| | |
88.3%
| | |
89.9%
|
Overall recovery rate
| | |
81.9%
| | |
79.0%
|
Operating cost per ton processed
| | |
$413.32
| | |
$296.93
|
Operating cost per kg TREO
| | |
$11.75
| | |
$15.05
|
Average annual operating cash flow (after-tax) (M)
| | |
$84.5
| | |
$52.4
|
* LOM includes 7 years of low-grade stockpile processing | | | | | | |
The Company anticipates filing a National Instrument 43-101 of the
Canadian Securities Administrators (âNI 43-101â) compliant technical
report reflecting the results of the PFS under its profile at www.sedar.com
within 45 days of the date of this news release.
Project Description
The Bear Lodge Project is located in northeast Wyoming. In 2011, the US
Geological Survey determined that the Project contains one of the
largest disseminated rare earth deposits in North America. This
world-class mineralized district is rich in the critical rare earths
that are essential for electronics, high-strength permanent magnets,
fiber optics, laser systems and evolving green technologies. The Company
controls 100% of the mining rights in the Project area.
The Project consists of three principal components: 1) a small open-pit
mine operation that will include the Bull Hill and Whitetail Ridge
deposits and associated support facilities, located approximately 12
miles (19 kilometers) by road north of Sundance, Wyoming; 2) a physical
upgrading (PUG) plant for mineral pre-concentration located adjacent to
the mine; and 3) a hydrometallurgical (Hydromet) plant, located near
Upton, Wyoming for further concentration of the rare earth elements into
a mixed TREO concentrate. The Upton site is approximately 40 miles (64
kilometers) south from the Bull Hill Mine site. This site is accessible
by existing county and state roads. It is also adjacent to an active
transcontinental rail line, which will make possible efficient delivery
of equipment during construction and lower shipping costs for supplies
used during operations, as well as delivery of the final product to
customers. Using the current NI 43-101 mineral reserves, the expected
Project life is 45 years.
Mining at Bull Hill is planned as a small, conventional truck and
shovel, open-pit operation that accesses near-surface mineralization.
Mining will selectively recover, for immediate processing at the PUG
plant, the high-grade ores from the Bull Hill deposit in Years 1 â 9.
This will allow the Company to maximize early cash flows and accelerate
the payback of capital. In Years 10 â 38, ore from both the Bull Hill
and Whitetail deposits will be mined and processed. Lower-grade ores
mined during initial cap years 1 - 15 will be stockpiled for processing
in years 39 â 45. The initial processing rate at the PUG plant is
expected to average 220,000 tons (199,600 tonnes) per year in years 1 â
9. After a planned expansion of both the PUG and the Hydromet in Year
10, the PUG processing rate is expected to increase in years 10 â 38 to
an average rate of 366,000 tons (332,000 tonnes) per year to offset the
decline in ore grade. The PUG processing of ore from low-grade
stockpiles would begin in Year 39 and continue until Year 45 at a rate
of 423,000 tons (383,700 tonnes) per year. Waste rock will be stored at
an adjacent waste rock facility located on private land and will be
reclaimed and re-contoured concurrently with mine operations. The
portion of the Inferred mineral resource already delineated within the
pit boundaries provides the potential opportunity to improve economic
returns, however, Inferred mineral resources have a greater amount of
uncertainty. Please see the footnote associated with the Inferred
Mineral Resource table on page 6 for more detail.
In years 1 â 9, the PUG plant is scheduled to process high-grade ore,
expected to average 4.7% TREO. In years 10 â 38, the mining rate is
expected to increase as the grade drops, with ore grades averaging 2.6%
TREO. The expected LOM average grade is estimated at 2.8% TREO. The
increase in production rate is planned to coincide with the start of
processing mid-grade and Whitetail deposit ores. The PUG plant is
designed to use a combination of crushing, screening and gravity
separation, depending on the ore type being treated, to reduce the
physical mass of the ore by reducing gangue and concentrating the rare
earth-bearing fines for shipment to the Hydromet plant. The Bull Hill
deposit contains varying proportions of weathered high-grade oxide and
oxide-carbonate ores, along with variable grades of stockwork
mineralization adjacent to the higher-grade ores. Each of these ore
types will have a different mass reduction and upgrade percentage in the
PUG circuit. On average, the PUG recovery is expected to be 92.8% in
years 1-9 and 87.9% over the LOM. The mineral pre-concentrate produced
at the PUG will be transported by covered truck to the Hydromet plant in
Upton.
The Hydromet plant is designed to process the pre-concentrate through
acid leaching followed by the Companyâs proprietary recovery technology.
This process uses a chloride solution to extract the rare earth elements
(REE) into a liquid, then uses oxalate reagents to facilitate the
selective precipitation of the REE (please see the Companyâs news
release dated November 11, 2013 for additional details). The benefits of
this process are that it achieves a high-purity, near thorium-free, bulk
TREO concentrate and has the ability to regenerate and recycle a
majority of the water and reagents used in the process.
The rare earth recovery rate in the Hydromet process in years 1 â 9 is
expected to be 88.3 % and approximately 89.9% over the LOM. The average
annual LOM nominal TREO production rate is anticipated to be
approximately 7,510 tons (6,813 tonnes), with years 1 â 9 averaging
8,523 tons (7,732 tonnes). The tailings produced from the processing
will be neutralized, dewatered and stored in an engineered, lined
tailings storage facility located on private land adjacent to the
Hydromet plant.
The Project was sized to balance initial capital requirements and still
be a meaningful supplier for current market demand while minimizing the
environmental footprint of the Project. Both the PUG and the Hydromet
plant are being designed to have sufficient flexibility to produce
higher tonnages of rare earth concentrates when market conditions
warrant with only minor modifications and optimization of operating
parameters.
Mineral Resource and Reserve
The Company previously announced a Measured and Indicated (M&I) mineral
resource of 17.3 million tons (15.7 million tonnes) averaging 3.11%
TREO, and an Inferred mineral resource of 29.3 million tons (26.6
million tonnes) averaging 2.58% TREO (see the Companyâs news release
dated March 17, 2014). The additional work to prepare the PFS resulted
in an increase in the M&I mineral resource tons by approximately 4% and
a slight reduction of the average grade, from 3.11% to the current 3.05%
(using a 1.5% cutoff grade). The breakout of the current mineral
resource is as follows:
Measured and Indicated Mineral Resource*
(using a 1.5% cutoff grade)
| |
Â
|
|
Â
|
Deposit |
Â
|
Â
| Tons (M) |
Â
|
Â
| Tonnes (M) |
Â
|
Â
| Grade TREO % |
Â
|
Â
| Contained TREO lbs (M) |
Â
|
Â
| Contained TREO Kg (M) | |
Bull Hill
| | | |
Â
|
Â
| |
Â
|
Â
| |
Â
|
Â
| |
Â
|
Â
| | |
Measured
| | |
3.0
| | |
2.7
| | |
3.77
| | |
226
| | |
102
| |
Indicated
| | |
10.7
|
Â
|
Â
|
9.7
| | |
3.09
| | |
661
|
Â
|
Â
|
300
| |
Total
| | |
13.7
| | |
12.4
| | |
3.24
| | |
887
| | |
402
| |
Whitetail Ridge
| | | | | | | | | | | | | | | | |
Measured
| | |
--
| | |
--
| | |
--
| | |
--
| | |
--
| |
Indicated
| | |
4.3
|
Â
|
Â
|
3.9
| | |
2.47
| | |
212
|
Â
|
Â
|
96
| |
Total
| | |
4.3
| | |
3.8
| | |
2.47
| | |
212
| | |
96
| |
| | | | | | | | | | | | | | | |
Â
|
Project-wide M&I Mineral Resource | | | 18.0 |
Â
|
Â
| 16.3 |
Â
|
Â
| 3.05 |
Â
|
Â
| 1,099 |
Â
|
Â
| 498 | |
*The mineral resource estimate is classified as Measured
mineral resources and Indicated mineral resources, as defined by
Canadian Institute of Mining, Metallurgy and Petroleum (âCIMâ)
Definition Standards on Mineral Resources and Mineral Reserves, as
of June 30, 2014 using a discounted basket price of $24.60/kg and
is inclusive of proven and probable reserves. Resources, reserves
and economics were all calculated using a $24.60/kg basket price,
however, elemental distribution and prices vary between resource
models and the PFS economic model. Please see the âRare Earth
Pricing and Marketsâ section of this news release for a discussion
of the applicable discount. Mineral resources were estimated by
Alan C. Noble, P.E. of Ore Reserves Engineering (O.R.E.), an
independent Qualified Person as defined by NI 43-101. Readers are
cautioned that mineral resources that are not mineral reserves do
not have demonstrated economic viability. The terms âMeasured
mineral resourceâ and âIndicated mineral resourceâ are terms
recognized by Canadian regulations but not by the United States
Security and Exchange Commission (SEC). U.S. investors are
cautioned not to assume that any part or all of the mineral
deposits in these categories will ever be converted into mineral
reserves under SEC regulations. |
The mine plan used in the PFS is expected to access areas of
significantly higher grade within the M&I mineral resource in years 1 â
9 of the Projectâs life. This both reduces the environmental footprint
of the Project and reduces the amount of stockpiling necessary, bringing
cash flows forward and resulting in an attractive payback period of 2.9
years. A breakout of this high-grade material is as follows:
Contained High-Grade in Measured and Indicated Mineral Resource*
(using a 3.0% cutoff grade)
| |
Â
|
|
Â
|
|
Â
|
Â
| Tons (M) |
Â
|
Â
| Tonnes (M) |
Â
|
Â
| Grade TREO % |
Â
|
Â
| Contained TREO lbs (M) |
Â
|
Â
| Contained TREO Kg (M) | |
Contained High-Grade | | | |
Â
|
Â
| |
Â
|
Â
| |
Â
|
Â
| |
Â
|
Â
| | |
Measured
| | |
1.7
| | |
1.5
| | |
4.92
| | |
167
| | |
76
| |
Indicated
| | |
4.3
|
Â
|
Â
|
3.9
| | |
4.45
| | |
383
|
Â
|
Â
|
174
| |
Total | | | 6.0 |
Â
|
Â
| 5.4 |
Â
|
Â
| 4.58 |
Â
|
Â
| 550 |
Â
|
Â
| 250 | |
*The contained high-grade material is a subset of the M&I
mineral resource as of June 30, 2014 and identified above. |
Mineral Reserve
The mineral reserve is derived from, and included in, the M&I mineral
resource. Mineral reserves take into consideration mineability,
selectivity, mining loss and dilution and identify that portion of the
M&I mineral resources which are economically recoverable under the
current development scenario outlined in the PFS. The mineral reserve
was determined in accordance with NI 43-101 standards and do not
constitute mineral reserve under SEC Industry Guide 7.
Mineral Reserve Estimate*
(using a 3.0% modified TREO cutoff for high-grade and a 1.5%
cutoff for mid-grade)
|
Â
|
|
Â
|
Â
| Grade % TREO |
Â
|
Â
| Tons (M) |
Â
|
Â
| Tonnes (M) |
Â
|
Â
| lbs (M) |
Â
|
Â
| Kg (M) |
| | | Proven Mineral Reserves | | | Contained TREO |
High-Grade
| | |
5.17
|
Â
|
Â
|
1.4
|
Â
|
Â
|
1.3
| | |
145
|
Â
|
Â
|
66
|
Mid-Grade
| | |
2.36
| | |
1.2
|
Â
|
Â
|
1.1
| | |
57
|
Â
|
Â
|
26
|
Average / Total | | | 3.87 | | | 2.6 | | | 2.4 | | | 202 | | | 92 |
| | |
Â
|
Â
|
Â
|
Â
|
Â
|
Â
|
Â
| | | | | | |
| | | Probable Mineral Reserves | | |
Â
|
Â
|
Â
|
Â
|
High-Grade
| | |
4.13
| | |
3.9
| | |
3.5
| | |
322
| | |
146
|
Mid-Grade
| | |
1.89
| | |
9.1
|
Â
|
Â
|
8.3
| | |
343
|
Â
|
Â
|
156
|
Average / Total | | | 2.56 | | | 13.0 | | | 11.8 | | | 665 | | | 302 |
| | | | | | | | | | | | | | |
Â
|
| | | Total Proven & Probable | | |
Â
|
Â
|
Â
|
Â
|
High-Grade
| | |
4.41
| | |
5.3
| | |
4.8
| | |
467
| | |
212
|
Mid-Grade
| | |
1.94
| | |
10.3
|
Â
|
Â
|
9.4
| | |
400
|
Â
|
Â
|
182
|
Average / Total | | | 2.78 |
Â
|
Â
| 15.6 |
Â
|
Â
| 14.2 |
Â
|
Â
| 867 |
Â
|
Â
| 394 |
*Proven and Probable mineral reserve estimates were determined
by William Rose, P.E. of WLR Consulting, an independent qualified
person as defined by NI 43-101, as part of the Bull Hill Mine
design, effective June 30, 2014, and are based on a discounted
basket price of $24.60/kg. Resources, reserves and economics were
all calculated using a $24.60/kg basket price, however, elemental
distribution and prices vary between resource models and the PFS
economic model. Reserves are for the ultimate pit, which includes
both the Bull Hill and Whitetail Ridge resources, and are based on
the Measured and Indicated Mineral Resource model developed by
O.R.E. |
The mineral resources referenced above for the Bear Lodge Project
were estimated by Alan C. Noble, P.E. of Ore Reserves Engineering
(O.R.E.), an independent Qualified Person as defined by NI 43-101.The
mineral resource estimate is the basis for the engineering studies that
estimate mineral reserves and determined in accordance with NI 43-101
standards.SEC Industry Guide 7 does not address reporting of
mineral resource estimates.
Mineral reserves are calculated from an open-pit mine plan prepared
by William Rose, P.E., WLR Consulting, an independent Qualified Person
as defined by NI 43-101. Proven and probable mineral reserves are
determined in accordance with NI 43-101 standards.The mineral
reserves stated herein are calculated in accordance with the CIM
Standards on Mineral Resources and Mineral Reserves as contemplated in
NI 43-101 but are not recognized as reserves under SEC Industry Guide 7.
Inferred Mineral Resource
Both the Bull Hill and Whitetail Ridge deposits have a significant
amount of drill-indicated Inferred mineral resource, of which about
one-third is contained within the current pit outline. While this
portion of the resource has greater uncertainty than the M&I mineral
resource and is assigned no economic value in the PFS, it represents
significant potential upside opportunity for the Project as it could
result in lower stripping ratios and more material to be processed and
recovered during mining operations than is currently contemplated in the
PFS.
Inferred Mineral Resource
(using a 1.5% cutoff grade)* | |
|
Â
|
Deposit |
Â
|
Â
| Tons (M) |
Â
|
Â
| Tonnes (M) |
Â
|
Â
| Grade TREO % |
Â
|
Â
| Contained TREO lbs (M) |
Â
|
Â
| Contained TREO Kg (M) | |
Bull Hill
| | |
23.9
|
Â
|
Â
|
21.7
|
Â
|
Â
|
2.54
|
Â
|
Â
|
1,212
|
Â
|
Â
|
550
| |
Whitetail Ridge
| | |
7.9
|
Â
|
Â
|
7.2
| | |
2.71
| | |
429
|
Â
|
Â
|
194
| |
Inferred Mineral Resource | | | 31.8 |
Â
|
Â
| 28.9 |
Â
|
Â
| 2.58 |
Â
|
Â
| 1,641 |
Â
|
Â
| 744 | |
*Inferred mineral resources consist of oxide and oxide
carbonate mineralization only and were estimated by Alan C. Noble,
P.E. of O.R.E, an independent Qualified Person as defined by NI
43-101. While the term âInferred Mineral Resourcesâ is recognized
and required by NI 43-101, the SEC does not recognize it. Inferred
mineral resources have considerable uncertainty as to their
existence, and greater uncertainty as to their economic
feasibility. It cannot be assumed that all or any portion of
Inferred mineral resources will ever be upgraded into a higher
category or recovered and therefore, they are not included in the
PFS evaluation. |
Total Rare Earth Oxide Composition
The Bear Lodge Project is rich in âcriticalâ rare earths, defined by the
U.S. Department of Energy as those most essential to the âclean energyâ
economy and at the highest risk of supply disruption1. These
elements include neodymium, dysprosium, europium, terbium and yttrium.
The Company also includes praseodymium as it believes it is a critical
REE because of its use with neodymium in high-intensity, permanent
magnets. These elements are expected to experience higher demand growth,
as green technologies advance in concert with increasing environmental
standards worldwide. The distribution of the different REE in the
mineral reserve is outlined below:
Composition of TREO in Proven & Probable Mineral Reserves* |
|
Â
|
Â
| |
Â
|
Â
| |
| | | Relative Distribution | | | % REO in Proven & Probable Mineral
Reserve |
Neodymium (Nd)
| | |
17.88%
| | |
0.496%
|
Praseodymium (Pr)
| | |
4.90%
| | |
0.136%
|
Europium (Eu)
| | |
0.68%
| | |
0.019%
|
Cerium (Ce)
| | |
43.02%
| | |
1.194%
|
Lanthanum (La)
| | |
26.83%
| | |
0.745%
|
Dysprosium (Dy)
| | |
0.45%
| | |
0.012%
|
Terbium (Tb)
| | |
0.14%
| | |
0.004%
|
Gadolinium (Gd)
| | |
1.64%
| | |
0.045%
|
Samarium (Sm)
| | |
2.99%
| | |
0.083%
|
Yttrium (Y)
| | |
1.30%
| | |
0.036%
|
Erbium (Er)
| | |
0.08%
| | |
0.002%
|
Other rare earths
| | |
0.09%
| | |
0.003%
|
TREO | | | 100.00% |
Â
|
Â
| 2.775% |
* Table does not break out estimates for holmium, lutetium,
thulium and ytterbium because they occur in negligible amounts.
Values based on mineral reserve estimates listed above and a
discounted basket price of $24.60/kg as of June 30, 2014.
Resources, reserves and economics were all calculated using a
$24.60/kg basket price, however, elemental distribution and prices
vary between resource models and the PFS economic model. Please
see the âRare Earth Pricing and Marketsâ section of this new
release for a discussion of the applicable discount and price
assumptions. |
Attractive Project Location
The mine site is located northwest of the town of Sundance, Wyoming
(WY), which is situated along US Interstate Highway 90, 60 miles (96
kilometers) east of Gillette, WY. Gillette is a major business center
for the natural resources industry. The existing road system will
support pre-concentrate trucking with some upgrades required for safety.
The Hydromet plant in Upton, WY, is located adjacent to an active
transcontinental rail line, which is expected to results in lower
transportation costs for supplies to the site and in respect to the
distribution of the final product to end users. Nearby towns can provide
a majority of the necessary infrastructure, including housing, food,
fuel, power and skilled labor. Community support is strong, with local
polling completed in 2013 indicating 76% support for the Project.
Water rights at the mine site are available through permits from the
Wyoming State Engineerâs Office. The water supply at the Hydromet plant
is available from the Town of Upton. During the Projectâs life, a power
line will be extended to support operations at the mine. Power for the
Hydromet plant will be fed from a sub-station at the nearby industrial
park. Published power costs are some of the lowest in the United States.
The mine site footprint, including the PUG plant, is relatively small,
with less than 900 acres (364 hectares) of total disturbance over its
life â approximately 460 acres (186 hectares) on Forest Service land and
438 acres (177 hectares) on private land. The Hydromet plant and
tailings disposal site will be located on approximately 840 acres (339
hectares) of private land, for which the Company currently holds
purchase rights.
Capital Expenditures
In part because of the extensive existing infrastructure, initial
start-up capital is estimated to be a relatively low $290 million. The
life-of-mine capital cost for the Project, including sustaining capital,
later phases of tailings construction, PUG and Hydromet expansion in
Year 10 and closure costs, is estimated at $453 million. This includes
start-up capital and a capital cost contingency that averages 18.8% on
initial capital and 14.6% on sustaining capital. Initial expenditures of
approximately $12 million are anticipated for infrastructure, including
improving access roads, upgrading power and constructing the water
supply facilities.
Capital Expenditures* |
|
Â
|
Â
| |
Â
|
Â
| |
Â
|
Â
| |
(USD Millions)
| | | Initial Capital | | | Sustaining Capital | | | LOM Capital |
Mining
| | |
$57.9
| | |
$45.4
| | |
$103.4
|
PUG plant
| | |
8.0
| | |
36.8
| | |
44.8
|
Hydromet & tailings storage
| | |
126.2
| | |
20.9
| | |
147.0
|
Engineering and commissioning
| | |
30.1
| | |
12.2
| | |
42.3
|
Infrastructure
| | |
11.9
| | |
6.0
| | |
17.9
|
Owners costs & other
| | |
9.2
| | |
4.3
| | |
13.5
|
Closure costs
| | |
-
| | |
16.5
| | |
16.5
|
Total Direct and Indirect Costs | | |
243.3
| | |
142.1
| | |
385.4
|
Contingency
| | |
47.1
| | |
20.8
| | |
67.9
|
Total | | | $290.4 |
Â
|
Â
| $162.9 |
Â
|
Â
| $453.3 |
*Capital expenditures do not include $24.6M of working capital,
which is included in the Project economics. |
Operating Costs
In years 1 â 9, the average total annual operating cost is estimated at
$91 million, assuming a nominal processing rate of 220,000 tons (199,600
tonnes) per year of high-grade feed to the PUG plant at an average grade
of 4.7% TREO. This would produce an average of 8,523 tons (7,732 tonnes)
per year of bulk TREO concentrate. In years 10 â 38, the average total
annual operating cost is estimated at $111 million assuming a nominal
production rate of 366,000 tons (332,000 tonnes) per year of feed to the
PUG plant at an average grade of 2.8% TREO. Because of the economy of
scale experienced with the increased tonnage being processed in years 10
â 38, the mining cost per ton of ore processed decreases. During this
same period, the lower grade of the ores being processed will result in
the average cost per kg of TREO increasing. Estimated production during
years 10 â 38 would average 7,700 tons (6,985 tonnes) per year of bulk
TREO concentrate per year. Previously stockpiled ores will be processed
in years 39 â 45, with an average total annual operating cost estimated
at $83 million assuming an average feed rate of 423,000 tons (383,700
tonnes) at an average grade of 1.7% TREO. The average annual TREO
concentrate production rate during these years would be 5,423 tons
(4,920 tonnes) per year. While included in the economic evaluation,
estimated applicable property and severance taxes are not included in
the operating costs table below:
Operating Costs |
Â
|
Â
|
Â
|
Â
|
Â
| |
|
Â
|
Â
| Years 1 - 9 |
Â
|
Â
| LOM |
Â
|
Â
| |
| | | Cost/Ton Ore Processed |
Â
|
Â
| Average Cost/Kg TREO | | | Cost/Ton Ore Processed |
Â
|
Â
| Average Cost/Kg TREO | | | LOM Total (M) |
Mining
| | |
$69.83
| | |
$1.99
| | |
$42.98
| | |
$2.18
| | | |
$668
|
PUG
| | |
20.39
| | |
0.58
| | |
21.56
| | |
1.09
| | | |
335
|
Hydromet & tailings storage
| | |
292.03
| | |
8.30
| | |
212.68
| | |
10.78
| | | |
3,306
|
G&A & road maintenance
| | |
31.08
|
Â
|
Â
|
0.88
| | |
19.71
|
Â
|
Â
|
1.00
| | | |
306
|
Total | | | $413.32 |
Â
|
Â
| $11.75 |
Â
|
Â
| $296.93 |
Â
|
Â
| $15.05 |
Â
|
Â
|
Â
| $4,615 |
Environmental & Permitting
The Company continues to support the USFS efforts to prepare an EIS on
the Project in accordance with the National Environmental Policy Act
process. This process is key to securing the permits and approvals
necessary to move into production. In early 2012, the Company submitted
the Plan of Operations for the Project, which was accepted by the USFS
as complete in May 2013. Since then, the USFS has selected a Project
Manager and prime contractor for preparation of the EIS, published
notice in the Federal Register and completed necessary scoping work. The
USFS is currently working on the evaluation of the public comments,
identification of alternatives and preparation of the draft EIS. The US
Army Corps of Engineers and the appropriate state and local government
agencies are involved in the EIS process as cooperating agencies. The
schedule, as distributed by the USFS in its scoping documents, calls for
completion of the draft EIS in the first quarter of 2015 and the final
EIS by mid-2015. The final Record of Decision (ROD) for the EIS, the
decision document that establishes the acceptable operating conditions,
is expected in the fourth quarter of 2015.
The Company will need to obtain a mining permit from the Wyoming
Department of Environmental Quality â Land Quality Division.
Additionally, the Company will need various permits, including a license
to possess source material from the Nuclear Regulatory Commission, and
other approvals from a number of other federal, state and local
agencies. The Company is pursuing those permits/approvals on a parallel
path with the work currently being done on the EIS, where possible.
Production Timeline
The Company will incorporate the results of the PFS, as well as Project
engineering, budgets, schedules and other information into a Feasibility
Study (FS), expected to begin, pending board approval, before the end of
2014. Given the anticipated timing of the FS commencement, construction
could be completed and commissioning commenced on the Project as early
as late 2016. This timeline is subject to the timely completion of
permitting, financing and additional development activities directed at
continuing to de-risk the Project. The Company is reviewing all Project
variables and expects to have updates to the anticipated schedule for
the Project in the fourth quarter of 2014.
Rare Earth Pricing and Markets
Because of their unique magnetic, catalytic and phosphorescent
characteristics, rare earths are expected to be essential elements in
the next generation of technological advancements. Current projections
from a variety of leading industry analysts call for an average of 7% to
8% per annum growth in demand from 2013 to 2020, with the fastest demand
growth coming from magnet, metal alloy and catalyst uses of rare earths2.
The Company anticipates that this expected growth in demand, coupled
with the factors listed below, will support a case for higher rare earth
prices, both in the near- and long-term:
-
Recent financial results from several of the six firms now
consolidating the rare earth industry in China have been poor,
suggesting there may be some pressure for these dominant producers to
raise prices;
-
Chinese production costs are escalating, particularly for labor and
environmental protection, with some industry observers estimating that
prices need to rise by 20% to offset environmental cost increases
alone;
-
The Chinese government has announced purchase prices for a domestic
stockpiling program of certain rare earths that could reduce available
supplies. The premiums to current market prices vary by element, but
reports indicate that the Chinese government is expecting to pay an
overall premium of approximately 10% above current prices;
-
Demand growth projections indicate that China, which currently
consumes approximately two-thirds of the global rare earths supply,
may be a net importer of many rare earths by 2020;
-
Geopolitical considerations, increasing environmental regulations,
remote locations and high capital requirements for many potential new
rare earth projects may serve to limit new supply; and
-
Research and development efforts for new uses of rare earths are
expected to accelerate, driven in part by manufacturers having access
to secure, non-Chinese rare earth sources, like the Bear Lodge Project.
To establish the assumed prices for the PFS, the Company used the
trailing 12 months (TTM) Chinese export values for individual rare earth
oxides, derived from latest available customs statistics through June
2014, as reported by Metal-Pages, a UK-based firm that reports on metals
trading across numerous sectors. Customs statistics report the value of
goods exported based on actual market transactions and, as a result,
provide empirical data on the underlying market prices. The assumed
prices for gadolinium and samarium are based on published spot âFOB
Chinaâ prices as reported by Metal-Pages, because no custom statistics
are available. These spot prices are based on Metal-Pagesâ survey of
market participants and, according to some market sources, can differ
significantly from realized prices, since most rare earths sales are
done under private contracts.
For the PFS, the Company discounted certain of these individual rare
earth oxide export values further (including cerium, europium and
praseodymium) to account for current market conditions. Most
significantly, the Company reduced the reported value for dysprosium by
66% to temper the impact of significant spikes in export values that
occur in periods of high seasonal demand and could be expected to
diminish when alternative sources of dysprosium are developed.
The PFS prices then assume a 25% discount to the weighted average basket
price of the Projectâs planned production to account for further costs
to separate the high-quality, mixed TREO concentrate into individual
rare earth oxides. Most of the transactions within the rare earth
industry are done under private contract, and pricing information is of
limited transparency, thus exact information on separation costs is
unavailable. To arrive at the discount used in the PFS, the Company
surveyed a number of market sources that suggested a discount of 20% to
30% was appropriate for the Companyâs 97+% pure TREO concentrate. As
another reference point, the Company calculated a blended tolling
charge, based on reported tolling charges in the rare earth market of
$5.00/kg for light rare earth concentrate and $20 - $25/kg for heavy
rare earth concentrates. Based on the Companyâs rare earth distribution,
this blended charge is estimated at approximately $5.50 - $5.70/kg.
As a final data point, the Company investigated the historical monthly
average pricing differential between rare earth concentrate and oxide,
using the limited publicly available pricing data. Metal-Pages regularly
quotes prices for only one rare earth concentrate, a 45% TREO cerium
carbonate concentrate. The Company compared this with the 99% cerium
oxide price using FOB China prices from the same source. Using the
historical quoted prices for the two-year period ending June 2014, the
average monthly price differential was 25.2%.
Based on the evaluation methods identified above, the prices and rare
earth distribution used in the PFS are outlined below:
TREO Product Pricing Used in PFS |
Based on average LOM Project Output
|
|
Â
|
Â
| |
Â
|
Â
| |
Â
| | |
Element | | | Recovered Distribution / Kg TREO (g/kg)* | | | Adjusted TTM Export Value / kg | | | Value / kg |
Neodymium (Nd)
| | |
182
| | |
$71.26
| | |
12.97
|
Europium (Eu)**
| | |
7
| | |
$948.23
| | |
6.64
|
Praseodymium (Pr)**
| | |
50
| | |
$96.97
| | |
4.85
|
Dysprosium (Dy)**
| | |
4
| | |
$654.87
| | |
2.62
|
Lanthanum (La)
| | |
283
| | |
$6.77
| | |
1.91
|
Cerium (Ce)**
| | |
416
| | |
$4.54
| | |
1.89
|
Terbium (Tb)
| | |
1
| | |
$745.32
| | |
0.75
|
Gadolinium (Gd)
| | |
16
| | |
$46.50
| | |
0.74
|
Yttrium (Y)
| | |
10
| | |
$22.14
| | |
0.22
|
Samarium (Sm)
| | |
30
| | |
$5.50
| | |
0.17
|
Erbium (Er)
| | |
1
| | |
$50.36
| | |
0.05
|
| | | | | | | | |
Â
|
| | | 1,000 g | | | Price / kilogram | $32.81 |
| | | | | | | | |
Â
|
After Discount 25% | | | | | | | | | $24.60 |
*Reflects concentrate grade, adjusted for anticipated
recoveries, and is based on a discounted basket price of
$24.60/kg. Resources, reserves and economics were all calculated
using a $24.60/kg basket price, however, elemental distribution
and prices vary between resource models and the PFS economic
model. Excludes ytterbium, holmium, thulium and lutetium that
occur in negligible amounts and were not considered in the
calculation of a basket price. |
Â
|
**Adjusted downward to reflect current market conditions | |
âGiven Bear Lodgeâs long Project life, the fact that it is expected to
deliver a solid after-tax return using the low average rare earth prices
over the past year is only part of the story,â said Paul Zink, Senior
Vice President and Chief Financial Officer. âLooking beyond the IRR, one
has to appreciate the more than 40-year Project life, the low capital
cost, the short construction cycle, the ability to mine a high-grade
core for an extended time, the benefits of being located in
resource-friendly Wyoming near existing infrastructure, and the upside
to the Projectâs resource. As we move toward the Feasibility Study, we
believe we have numerous opportunities to improve the economics further,
including work currently advancing to optimize the metallurgical
process. We are also pleased that all the Project improvements,
including the production of a very pure TREO concentrate with a high
percentage of critical rare earth, resulted in an initial capital cost
below $300 million â a direct reflection of the benefits of our
proprietary technology, superior location and existing infrastructure.â
Sensitivity Analysis
The Projectâs sensitivity to certain factors is listed below:
NPV Sensitivity Analysis (Based on pre-tax NPV) |
Â
|
(USD Millions)
|
Â
|
Â
| Rare Earth Prices |
Â
|
Â
| Operating Costs |
Â
|
Â
| Capital Cost |
| | | |
Â
|
Â
| |
Â
|
Â
| | | | |
Â
|
Â
| |
Â
|
Â
| | | | |
Â
|
Â
| |
Â
|
Â
| |
NPV
| | | -20% | | | Base | | | +20% | | | -20% | | | Base | | | +20% | | | -20% | | | Base | | | +20% |
@ 8% Discount
| | |
$176
| | |
$563
| | |
$949
| | |
$771
| | |
$563
| | |
$355
| | |
$624
| | |
$563
| | |
$502
|
@ 10% Discount
| | |
$117
| | |
$426
| | |
$735
| | |
$587
| | |
$426
| | |
$264
| | |
$483
| | |
$426
| | |
$368
|
@ 12% Discount
| | |
$73
| | |
$327
| | |
$581
| | |
$456
| | |
$327
| | |
$197
| | |
$381
| | |
$327
| | |
$272
|
Further Project Opportunities
The Company has identified additional areas to evaluate and consider in
order to seek to optimize both the Projectâs technological and economic
upside. The PFS identifies these, and the Company plans to incorporate
them into the FS. Some of these opportunities include:
Thorium Removal/Lower Costs from Proprietary Processing Technology
â Subsequent to establishing the parameters for the PFS, bench-scale
testing demonstrates the ability to eliminate detectable thorium within
the final product by adjusting certain variables within the Companyâs
proprietary process. The Company continues to evaluate this work and is
looking at conducting larger-scale testing in the coming months.
Additional opportunities to reduce costs include the adjustment of
process variables and the investigation of selective removal of the
lower-valued rare earths early in the Hydromet process.
Rare Earth Separation as a Means to Participate More Fully in the
Value Chain â Initial studies have indicated that the very high
purity of the Companyâs concentrate should lend itself to lower cost
separation by eliminating the need for the circuits required to remove
impurities. The Company is investigating available alternatives to
determine the costs/benefits of incorporating downstream separation into
its business model.
Inferred Mineral Resource â The 31.8 million tons (28.9 million
tonnes) of Inferred mineral resource with an average grade of 2.58% TREO
(using a 1.5% cutoff) was not considered in the economic evaluation in
the PFS. Of this resource, a significant portion (approximately
one-third) falls within the boundaries of the designed pit and may be
recoverable during mining. This material is currently defined as waste
in the Project model. Recovery of any portion of this Inferred mineral
resource, if it exists, could reduce the stripping ratio and improve
Project economics.
Additional Exploration Targets â Geological, geochemical and
geophysical work, along with limited drilling have identified a number
of additional targets within the Project boundaries. Two of the most
promising are the Taylor and Carbon targets. These targets have
demonstrated enrichment in heavy rare earth elements (HREE) and warrant
further evaluation. Their higher HREE content could have a positive
impact on revenues because HREEsâ generally have a higher price per
kilogram. Further exploration on these and other identified targets is
not currently planned until mining operations are established.
Capturing By-Product Value - Mineralization at the Project
contains potentially valuable by-products, such as manganese, iron,
magnesium and gold. If some or any of these can be economically
recovered through the Hydromet plant, they could represent additional
revenue for the Project.
Contributors
-
Roche Engineering, Inc. is the principal author of, and is an
independent engineering company that prepared, the PFS on behalf of
the Company. Pete Dahlberg, P.E., is the independent Qualified Person
from Roche Engineering, Inc. responsible for the PFS, as well as
process engineering and process capital and operating cost estimation.
He reviewed and approved this news release and will review all
sections of the related NI 43-101 Technical Report.
-
Alan C. Noble, P.E., of Ore Reserves Engineering (O.R.E.), is the
independent Qualified Person responsible for resource estimation. The
drill-hole database was verified independently by Ore Reserves
Engineering, which frequently undertakes mineral property studies.
O.R.E. is familiar with the CIM mineral resource/reserve definitions
and the disclosure requirements of NI 43-101, to which the mineral
resource and mineral reserve classifications in this news release
conform.
-
William Rose, P.E. of WLR Consulting prepared the mine plan and is
responsible for the design of the mine plan and estimation of mineral
reserves.
-
Golder Associates is responsible for providing mine capital and
operating cost estimates, designing the waste rock storage facility
and water structures, and designing the tailings storage facility at
the Hydromet site.
-
Jaye T. Pickarts, P.E. and Chief Operating Officer of Rare Element, is
a metallurgical engineer and a Qualified Person responsible for the
metallurgy and process development.
Rare Element Resources Ltd. is a publicly traded mineral resource
company focused on exploration and development of rare-earth element
deposits, specifically those with significant distribution of critical
rare earths. The Company is advancing development of the Bear Lodge
Project, located in northeast Wyoming. Bear Lodge is a significant
mineralized district containing many of the less common, more valuable
critical rare earths that are essential for electronics, fiber optics,
laser systems for health and defense, as well as many evolving green
technologies, like hybrid cars, solar panels and wind turbines.
Permitting and feasibility work on the Project is currently underway.
For additional information, please visit the Companyâs website at www.rareelementresources.com
or contact Robbin Lee at 720-278-2462 or rlee@rareelementresources.com.
1U.S. Department of Energy - Critical Materials Strategy
Report - December 2011
2Curtin-IMCOA Rare Earths Quarterly Bulletin #7, 6/15/14,
Professor Dudley J. Kingsnorth / Curtin Graduate School of Business &
Industrial Minerals Company of Australia Pty Ltd.
Forward Looking Statements
This news release contains forward-looking statements within the meaning
of securities legislation in the United States and Canada. Except for
statements of historical fact, certain information contained herein
constitutes forward-looking statements. Forward-looking statements are
usually identified by our use of certain terminology, including "will",
"believes", "may", "expects", "should", "seeks", "anticipates", "plans",
"has potential to", or "intends" (including negative or grammatical
variations thereof) or by discussions of strategy or intentions. Such
forward-looking statements include statements regarding: the estimated
Project economics and parameters, including capital costs, NPV, IRR,
after tax returns, mine and Project life, mining plan including grades
of ore expected to be processed during various periods of mining,
payback period, anticipated production rates and costs, rare earth
prices, recovery rates and the impact of the Companyâs proprietary
technology on production, the impact of the Hydromet plantâs location on
costs, the timing of the ROD, matters regarding the rare earths
industry, including demand growth, rare earth prices and the impact of
rare earths on technological advancements; mineral resource and reserve
estimates; the timing and expected results of a definitive Feasibility
Study including the potential for upside as a results of the
incorporation of Project opportunities into the definitive Feasibility
Study; the timing for the Company to update the schedule for the
Project, processing test work and expected results; permitting process
and progress; the expected commissioning of the Project and Project
development plans for the future. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors which
may cause our actual results or achievements to be materially different
from any future results or achievements expressed or implied by such
forward-looking statements.
Factors that could cause actual results to differ materially include,
but are not limited to, the progress of our Bear Lodge Project;
fluctuations in demand for, and price of, rare earth products; success
of process technology under testing or development; results from
geological evaluations and programs; timing of and unexpected events at
the Bear Lodge property; delay or failure to receive government
approvals and permits; our ability to obtain financing for the Project
on acceptable terms or at all; changes in U.S. and Canadian securities
markets; and general economic conditions. There can be no assurance that
future developments affecting the Company will be those anticipated by
management. Please refer to the discussion of these and other factors in
our Annual Report on Form 10-K for the year ended December 31, 2013. We
expect that the above estimates as to development plans, technology and
other processes, time frames and financial needs will change as new
information is received and that actual results will vary from these
estimates, possibly by material amounts. While we may elect to update
these estimates at any time, we do not undertake to update any estimate
at any particular time or in response to any particular event. Investors
and others should not assume that any forecasts in this news release
represent management's estimate as of any date other than the date of
this news release.
Cautionary Note to U.S. Investors
Cautionary Note to US Investors Concerning Estimates of Measured and
Indicated Mineral Resources. This news release uses the terms "Measured
mineral resources" and "Indicated mineral resources". The Company
advises US investors that while these terms are recognized and required
by Canadian National Instrument 43-101, the US Securities and Exchange
Commission ("SEC") does not recognize them. Also, disclosure of
contained tonnage is permitted under Canadian regulations; however the
SEC generally requires mineral resource information to be reported as
in-place tonnage and grade. US investors are cautioned not to assume
that any part or all of the mineral deposits in these categories will
ever be converted into mineral reserves.
Additionally, this news release uses the term "Inferred mineral
resources". The Company advises US investors that while this term is
recognized and required by National Instrument 43-101, the SEC does not
recognize it. "Inferred mineral resources" have a great amount of
uncertainty as to their existence, and great uncertainty as to their
economic and legal feasibility. It cannot be assumed that all or any
part of Inferred mineral resources will ever be upgraded to a higher
category. In accordance with Canadian rules, estimates of Inferred
mineral resources cannot form the basis of feasibility or other economic
studies. US investors are cautioned not to assume that any part or all
of the Inferred mineral resource exists, or is economically or legally
mineable. - US investors are urged to consider closely the disclosure in
our Form 10-K which may be obtained from us, or from the SEC's website
at http://www.sec.gov.
SEC Industry Guide 7 does not address the reporting of the Mineral
Reserve estimates reported in this news release.
Contacts:
Rare Element Resources
Robbin Lee, 720-278-2462
rlee@rareelementresources.com
Source: Rare Element Resources
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