Frontier Rare Earth Completes C$23.8M Deal with Strategic Partner Kores
Last July Toronto listed Frontier Rare Earths (Frontier, TSE: FRO) announced that the Korean government owned Korea Resources (Kores) has invested C$23.8 million, acquiring a 10% stake, and 10% off-take agreement, in its flagship Zandkopsdrift (the ‘Project’) rare earths project in South Africa. This stake was just the beginning as Kores indicated a strong interest in acquiring an additional 10% stake in Frontier. The payment, had been expected at the end of November 30, but the deadline was extended to December 14. This morning Frontier confirmed that Kores completed the transfer of funds, completing the deal, and boosting the Company’s cash position to C$53 million.
Kores is very confident in the success of Zandkopsdrift. This confidence is not just based on ‘hunches’. Kores had originally proposed the agreement in late 2011; however, its terms stated that Frontier had to demonstrate favorable results in a NI 43-101 Preliminary Economic Assessment (PEA). The successful closing of the deal indicates that Frontier has met this important condition, which should go a long way to indicate the Project’s low risk profile, boosting investors’ confidence.
The deal confirms that Zandkopsdrift is technically and economically feasible. Moreover, Kores’ participation suggests that the Project’s development will accelerate, because apart from the welcome financial injection, Kores is also able to provide technical expertise and interest from other Korean companies. Moreover, the CEO said that Frontier had enough cash to take the Project to production phase even without input from its Korean partner.
The PEA that secured Kores’ participation showed a mineral resource estimate of 42.5 million tons of TREO (total rare earth oxides) at an average grade of 2.23% or 940,000 tons at 1% TREO, whereby 78% of the resource is labeled as ‘indicated’. Frontier noted that assays from its 2011 drilling program showed TREO grades as high as 19.5%. Thanks to Kores’ participation, Frontier can expect to begin 20,000 tons/year production of REE’s at Zandkopsdrift by 2015. Zandkopsdrift is located in South Africa’s Northern Cape Province and it is one of the most promising and emergent rare metals deposits in the world. The TREO mineralization occurs mostly through monazite, which typically contains lanthanum, cerium and neodymium, which are in demand for use in electric motors and batteries. Monazite is also popular because of the well developed REE extraction processes. In November, Frontier said that it will be releasing that its preliminary feasibility study should be released in early 2013 after completion of the final stage of metallurgical tests.
The fact that Frontier has secured, specifically, a Korean partner is very significant. Apart from the fact that thanks to Kores’ participation Frontier has essentially upgraded its status as a junior mining player, Korea has one of the most vibrant high-tech sectors in the world. Companies such as Samsung and Daewoo, to mention a few, are among the leaders in advancing materials science for the alternative energy industry, such as batteries and motors, and consumer electronics, which are highly reliant on rare metals. Kores has an option to raise its stake in Zandkopsdrift by as much as 50%, giving it full partnership and an offtake agreement with Frontier.
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