EDITOR: | August 14th, 2013 | 6 Comments

Frontier Rare Earths well-funded and debt free as it heads toward feasibility study

| August 14, 2013 | 6 Comments

Frontier and KoresFrontier Rare Earths Limited (‘Frontier’, TSX: FRO) announced that it has filed its Q2 2013 Management Discussion and Analysis (MD&A) and Financial Statements today. Frontier highlighted the following achievements in the MD&A, showing “continued  positive progress has been made on the Zandkopsdrift preliminary  feasibility study (“PFS”) since the update issued by the Company in March 2013”. The MD&A reflects the fact that Frontier has not suffered any slowdowns in activity from the market weakness of rare earth companies last spring – a rebound is certainly underway. The ‘highlight among the highlights’ is that Frontier is well-funded and has no debt leading up to the completion of the Feasibility Study. Apart from this financing advantage, Frontier has also clearly identified the main ore, monazite, from which it will extract its rare earth products. Monazite offers well known and cost effective processing possibilities because the ore contains cerium, neodymium, praseodymium and lanthanum – sometimes it contains thorium. The other highlights of the MD&A include:

  • Most of the PFS studies have been completed, and the remaining studies are      expected to be completed on schedule in Q3 2013
  • Mining Right Application for the Zandkopsdrift Mine to be submitted in September 2013
  • Results  of the PFS expected to be announced in October 2013
  • The Zandkopsdrift definitive feasibility study (“DFS”) is expected to commence      in H1 2014
  • As of June 30, 2013 Frontier had a cash balance of US$41m and no debt
  • Frontier remains fully funded through completion of the DFS.

Monazite is a soap-like sand that is particularly light and helps to reduce overall production costs. It also can be rich in heavy rare earths such as dysprosium, erbium, gadolinium and yttrium. The well known mineralization at Frontier’s flagship Zandkopsdrift, project, in the Northern Cape, has certainly played its role in securing financing, given that the relevant financing institutions have become more demanding when it comes to processing methods and their willingness to lend.

For all the glory of science and exploration, the market situation of the past year has put an emphasis on the importance of cost structure and savings in order to secure the financing needed to advance even the most promising – from a geological perspective – projects. Exploration for new materials is certainly necessary and tightening Chinese rare earth sector regulations will make it even more so. However, exploration is also expensive and as the old adage goes: “the money has to come from somewhere”.

Frontier Rare Earths is one of those companies that have found a logical solution to the money problem. The first advantage comes from its choice of project: Zandkopsdrift. Both capital costs and operating at Zandkopsdrift are significantly lower than in many other rare earth projects and it can be assumed that the labor costs will be lower compared to North America while its open pit mining makes it cheaper than underground mining.

Previous work on Zandkopsdrift showed that it holds large reserves of rare earths. The Preliminary Economic Assessment (PEA) 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’ – with assays from its 2011 drilling program showed TREO grades as high as 19.5%. Such prospects helped Frontier secure its partnership with the Korean government owned Korea Resources (Kores), which has invested USD$ 53 million, acquiring a 10% stake (as of last December, but expected to grow to reach 50% upon completion Kores has an option to raise its stake in Zandkopsdrift by as much as 50%, giving it full partnership and an off-take agreement in Zandkopsdrift).

Frontier can expect to begin 20,000 tons/year production of REE’s at Zandkopsdrift by late 2015/early 2016. The fact that Frontier has secured, specifically, a Korean partner is very significant, given that 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.


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  • bourque

    And the $billion needed to get to mine production, benefication, separation etc. is not relevant? That’s more than 2 billion shares at todays price, or will they have to give up a whole lot more ownership to get there. Might be nothing left. All these juniors are debt free until the rubber hits the road, ….then lots of money is needed to actually develop and build the mine and equipment for production.

    August 15, 2013 - 6:49 AM

    • Tracy Weslosky

      We understand this Bourque, and FRO and many of the leaders in the REE game have been forecasting production by 2016 – not 2013. Let’s not throw the baby out with the bathwater just because you are frustrated. Hang in there with long term vision and understanding of the growth of demand from technology applications…if you believe that for instance, an increase in consumer demand for items like flat screen TVs, PDAs will continue to grow….

      August 16, 2013 - 10:08 AM

  • Joeri Van hee

    I have read it so many times here: rare earths are going upwards, it’s the end of the rare earth bear market…

    and again, as usual, lots of the writers of articles are wrong… cause I see them go down, again…

    So stop those silly articles!!!

    August 15, 2013 - 4:40 PM

    • Johnson

      Then please, I beg you, be a bygone and stop these silly comments.

      August 15, 2013 - 6:15 PM

    • Robin Bromby

      In light of your point, you might like to read my latest post (Confessions of a Rare Earth pundit wannabe) which shows just how wrong you can be (as, in this case, me)

      August 15, 2013 - 7:04 PM

  • REEs & Critical Minerals Week-in-Review: Molycorp stock trends north and Northern Minerals $58-million funding package | InvestorIntelInvestorIntel

    […] Frontier Rare Earths Limited (TSX: FRO) ended the week up +8.11% without any announcements, but if your recall — the week before (August 14) they released the news that they were on track with: Frontier Rare Earths well-funded and debt free as it heads toward feasibility study as they focus on advancing their flagship asset, the Zandkopsdrift Rare Earth Project in South Africa. […]

    August 27, 2013 - 10:49 AM

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