Rightsizing as a Prelude to Project Liftoff for Peak Resources
For those needing reminding, Peak Resources Ltd’s (ASX: PEK) main asset is the Ngualla Rare Earth project that is located in southern Tanzania, some 147 kilometres from the city of Mbeya on the edge of the East African Rift Valley. The project is centred upon the Ngualla Carbonatite and was prospected for phosphates in the 1980s by a joint Tanzanian-Canadian university team. The rare earth element (REE) component is a relatively recent discovery with Peak having identified this in 2010. In the company’s opinion it is one of the highest grade of the large undeveloped rare earth deposits in the world.
Premises of the Revised PFS
A couple of weeks back Peak came out with its long-awaited revised PFS. In this day and age of “rightsizing” of projects for the new exigencies the “updated PFS” is becoming a more regular feature. While that is one of Peak’s motivations another is that it has rethought several of its key premises and changed it technological focus and as well as its processing location. A key element of the revised PFS involved a focus on the production of Neodymium and Praseodymium to meet demand for high powered permanent magnets.
With a focus on Neodymium and Praseodymium, the Study was based on extensive metallurgical flow sheet development work and pilot plant programs completed since delivery of the PFS The study also included engineering simulation and mass balance modelling conducted in conjunction with lead engineers, Amec Foster Wheeler.
The base-case scenario envisaged production of approximately 2,300 tonnes per annum of Neodymium and Praseodymium rare earth oxide, 250 tonnes per annum of mixed Samarium, Europium and Gadolinium Rare Earth carbonate and 5,900 tonnes per annum of Cerium/Lanthanum carbonate. Production forecasts are based on the weathered Bastnaesite Zone Mineral Resource estimate at a 1% Rare Earth Oxide lower grade cut-off (Measured and Indicated portions only).
Get our daily investorintel update
It would be useful to expand on the new process which the company sees as a key factor in reducing opex. The previous PFS leach recovery flowsheet was based on treating a medium grade (~17% REO) concentrate with a high content of acid soluble iron. A “Double Sulphate” route was employed to reject the dissolved iron whilst increasing the Rare Earth concentration in the feed to the solvent extraction (SX) separation feed solution. The new scenario employs Alkali Roasting which is a four-part process designed to eliminate the low value Cerium component early on. The Alkali Roast Process has been developed and optimised for Ngualla’s concentrate at both Nagrom and ANSTO test facilities and has been demonstrated at bench scale as a viable flowsheet.
The key advantages are:
- Reduced plant capital cost through a smaller plant of modular design
- Lower operating costs due to reduced reagent consumption
- Focus on the extraction and recovery of the high value magnetic metals praseodymium and neodymium
- Significant reduction in the extraction of low value cerium, further reducing reagent costs in the leach recovery circuit and also the size of the downstream separation plant
- Minimises the extraction of deleterious elements thereby simplifying the purification process
These four phases are:
Alkali Roasting – The bastnaesite concentrate is mixed with a common alkali and roasted in a standard tube furnace at approximately 700°C for one hour. This is a dry, free flowing process in contrast to the “sticky” acid baking process employed for monazite or xenotime hosted rare earth concentrates.
Water Wash – The fluorine present in the bastnaesite, which would be problematic to downstream purification and separation processes, has been converted to a soluble form during the alkali roast process and is removed using a simple water wash. The filtered solid is then suitable for selective leaching.
Selective Leaching – A low strength (<1%) hydrochloric acid leach selectively targets the desired high value rare earths (neodymium and praseodymium) whilst rejecting large amounts of the low value rare earth cerium along with gangue elements such as iron. The low leach temperature of 80°C and mild acidity means that low cost polymer tanks can be used both in the pilot plant and on a commercial scale.
Purification – Residual leach impurities are removed by precipitation using lime slurry. The waste precipitate is removed from the solution using simple filtration. The filtrate is depleted in cerium but high in neodymium and praseodymium and is suitable for direct feeding to the SX Separation circuit.
ANSTO has been selected for the piloting of approximately two tonnes of high grade (>40% REO) concentrate produced from the beneficiation pilot plant. The pilot plant setup at ANSTO is nearing completion.
Rightsizing the PFS
The Study has updated operating costs to US$97 million per annum, an 18% reduction (US$21 million per annum) compared with the PFS. The operating cost reductions have been achieved through optimisation of the flowchart using the aforementioned Alkali Roast process.
Capex was also reduced by just over 10% from $367mn to around $330mn. This still contains a mighty contingency factor which in these days of mining cost deflation would hopefully come down of be eliminated. Our back of the envelope estimate of how this might be apportioned looks like:
This is not the end to potential Capex reductions as a number of capital cost items currently included in the revised Capex estimate (Power Plant Gensets US$8mn, Accommodation Camp US$12mn and Mining Fleet US$10mn) will be reviewed as part of the Bankable Feasibility Study. The company claims that It is likely some or all of these capital costs could be moved into operating costs through Build, Own, Operate, Transfer (BOOT) style contracts. The site layout is shown below:
We gather the idea is that there will be some competition in European circles to achieve the plant siting in particular countries which should expedite the financing of that portion, leaving the company with the task of funding the minesite via offtakes. We would note the past history of the Japanese (JOGMEC) having funded REE exploration in East Africa. If one combines output from Ngualla with that of Lynas, then the Japanese would be pretty much free of Chinese dependence in the key magnet REOs.
The Resource & Mining Inventory
The latest total Mineral Resource estimate for the Ngualla Project using a 1% REO cut-off consists of 214.4 million tonnes at 2.15% REO, for 4,620,000 tonnes of contained REO. Included in the total Mineral Resource is the weathered Bastnaesite Zone which forms the core of the development study. At a 1% REO lower grade cut-off the Mineral Resource estimate for the weathered Bastnaesite Zone is 21.3 million tonnes at 4.75% REO, for 1,010,000 tonnes of contained REO.
The improved mine plan included a Mining Inventory which was essentially the material within the pit-shell outline.
This is shown below:
As can be noted the grades are exceptionally high within the pit-shell to maximize upfront revenues. It’s worth noting that, as well as being high-grade, Ngualla’s rare earth mineralisation has a high proportion of the important permanent magnet metals, Neodymium and Praseodymium, a significant advantage over other rare earth deposits.
Catching Some Big-Fish Partners
The winnowing of the Rare Earth space has meant that the few players standing are generally those that have found credible partners.
In the case of Peak, its strategic partnership is with the resources fund manager, Appian Natural Resources Fund LLP and the International Finance Corp. The latter in particular is quite a stamp of approval as this supranational investment fund backs very few mining ventures and has backed no Rare Earth ventures until now.
The first part of the relationship was put in place in February of 2015 as part of a transaction amounting to a total of AU$31.8mn. The goal of this was to finance the BFS. It was composed of:
- Stage 1: received AU$20mn
- Stage 2 & 3: to be received AU$11.8mn
The transaction involves staged investments at different levels of the project structure with Appian and IFC are investing on an 80:20 basis.
The arrangement (as visualized in the chart below) is that these partners have a total stake of 19.99% in the master listed vehicle, Peak and then 37.5% in the operating subsidiary, PAM and on top of this a 2% Gross Smelter Royalty.
These investors have formed a partnership to invest in African projects with Peak being the lead target at this time. The other investment they have made together is the Burkina Faso gold play, Roxgold (ROG.v).
Peak sees the partners as collaborative and long-term. We might also add that having the IFC is somewhat of a guarantee that one might have more “consideration” from local administrations due to the organisation’s international importance to emerging economies.
In Rare Earth circles these days, it is not only the quality of a company’s deposit that it is important, but also the quality of the company it keeps. Peak has bagged heavyweight shareholders in the form of Appian and the International Finance Corporation. This is a mighty endorsement in a mining sub-space where many have spoken of strategic investors but few have been able to actually get them onto their share registers. In Peak’s case they are present at both the listed vehicle and the project levels.
In summary certain fundamental geological aspects offer distinct advantages for development over other rare earth projects. These include:
- large size of the deposit
- outcropping high grade mineralisation amenable to open cut mining with low strip ratios
- favourable mineralogy amenable to a relatively simple, low cost processing route
- extremely low uranium and thorium levels
Again, in Peak, we find a case of “hare & tortoise” with a below-the-radar REE hunter moving further down the road to the end goal, verily as some of the household names of the REE space fold up their tents for the last time having burned through enormous piles of money with nothing to show. Instead the company has spent the “downtime” of the last two years, proving up its resource and getting its thoughts in order for a cogent production plan. With the team in place and the reformed capex plan in hand, the all-important funding phase begins.
To access the Hallgarten & Company research report titled – Peak Resources: Updated PFS puts African REEs in Picture — click here
InvestorIntel is a trusted source of reliable information at the forefront of emerging markets that brings investment opportunities to discerning investors.