Quest Rare Minerals advances leading heavy rare earth project with release of positive Pre-Feasibility Study
Today, one of the most significant companies in the rare earths exploration and development business, Quest Rare Minerals Ltd. (TSX: QRM | NYSE MKT: QRM) achieved yet another milestone in becoming one of the world’s major producers of heavy rare earth minerals with the release of its economically robust Pre-Feasibility Study (PFS). The comprehensive PFS for its Strange Lake B-Zone Deposit, located in northern Québec (one of the most mining-friendly jurisdictions in the world), indicates positive cash flows, a strong internal rate of return (based on a minimum 30-year mine life) and would position Quest to be one of the world’s largest and highest-grade heavy rare-earth mining projects and one of the leading suppliers of HREE+Y globally. However, as Quest’s President and CEO Peter Cashin explained to me earlier today, this is much more than the development of a mine. “We’ve always been firmly of the belief that Strange Lake B-Zone rare earth development will allow Quest to be a catalyst for the development of a global enterprise,” explained Cashin. “We truly believe that. The mining is part of it, but if you look at the total investment required, this isn’t really a mine development anymore. This is truly an industrial development. It’s of a global nature and, more importantly, it is an opportunity for Canada (and Quebec) to take a lead role in the production and the technology related to rare earths. Our project represents a long-term, stable supply of super-critical rare earths (plus holmium and lutetium), addressing global demand in a growing market.”
Quest’s PFS provides for the construction of a hydrometallurgical plant in southern Québec to process whole ore shipped from Strange Lake and to produce four separated products – a mixed HREE+Y oxide concentrate, high-purity zirconium basic sulfate (ZBS, for further downstream processing), high-purity niobium oxide, and a mixed light rare earth double-sulfate concentrate. A mini-pilot metallurgical plant processing 100 kilograms per day of ore was commissioned in early 2012 to test certain separation processes. Quest is currently preparing for the construction of a full pilot mill, scheduled to commence operation in early 2014.
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Regarding Quest’s ability to address the stability of a North American supply of critical heavy rare earths, Cashin stated, “I cannot overemphasize that point enough. North American sustainability in these critical materials is critically important. These are issues of national importance. And our Strange Lake deposit is particularly well endowed with all of those super-critical rare earths, plus holmium and lutetium.”
“We’ve received some questions with regards to the CAPEX,” Cashin explains. “But one has to put into perspective what the true impact of Strange Lake will be on the Canadian economy – or Canada’s ability to have something that all its trading partners critically want. So what does it cost to establish a brand-new industry (or economic sector) in any sovereign state? The answer is billions and trillions of dollars. Quest is a small, but very critical piece of this. The actual investment required to realize Strange Lake is small in comparison in terms of what it could actually mean and bring to the economy. The wealth creation will be significant.”
In having high purity rare earths, particularly the critical rare earths, available, the governments see the industrial development virtues of ‘if you’ve got the material, they will come.’ The idea being that you want to attract some manufacturing capacity for those areas that require rare earths. And what better place to have them — for the stability of North American supply — right in mining-friendly Quebec? The Quebec government is in a position to lend support to attract manufacturing, whether it be through fiscal measures, hydro incentives, well-developed infrastructure and a very skilled workforce and with Quest’s proposed mineral processing, Quebec provides a plethora of favorable virtues for foreign entities.
Quest hopes the encouraging positive results from its PFS will speed up discussions with potential strategic partners and customers for needed financial and technical commitments to the Strange Lake project. “We are very pleased with the results of the Pre-Feasibility Study,” Cashin commented. “Our consultants have been conservative with the assumptions used and we are satisfied that the returns are very healthy for such a capital-intensive industrial plan. The Strange Lake project has the potential to provide an important base for establishing a major new North American industrial sector, able to address the chronic HREE+Y supply deficit over a long period of time.”
Quest has established a realistic timeline for executing on its development strategy. Several of these initiatives are underway with the goal of delivering first product from Strange Lake in 2018.
Highlights of the Quest Rare Minerals’ Strange Lake Rare Earth Mine & Quebec Processing Complex Pre-Feasibility Study:
- The PFS shows a robust internal rate of return (IRR) of 25.6% pre-tax and 21.2% post-tax. The net present value (NPV) of the project pre-tax unlevered with a 10% discount rate is $2.9 billion and $1.8 billion post-tax.
- Total project construction capital costs are $2.57 billion, based on a minimum mine life of 30 years.
- Cash operating costs average $432 million per year, $300 per/t milled.
- The project will generate on average $1.047 billion of revenue per year, comprised of 55.8% from the sale of HREE+Y concentrate, 17.3% from the sale of zirconium product, 12.9% from the sale of niobium product, and 13.9% from the sale of a light rare earth (LREE) concentrate.
- Average annual product output is a mixed HREE+Y oxide concentrate containing 2,100 t of HREE oxide and 4,250 t of yttrium oxide, 24,650 t of ZrO2 contained (as high-purity ZBS), 3,200 t of high-purity niobium oxide, and a mixed LREE double-sulfate concentrate containing 7,300 t of LREE oxide equivalent.
- The undiscounted REO basket price is $73.76 per kg. These price assumptions are based on consensus averages by industry peers from 2013 data, current published market prices from industry experts and key REE market analysts; the concentrate sale price used in the PFS includes a 30% concentrate discount to separated oxide pricing.
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