Frontier Rare Earths provides an update on the Zandkopsdrift rare earth project
October 11, 2013 (Source: CNW) — Frontier Rare Earths Limited (TSX: FRO) (“Frontier” or the “Company”) is pleased to provide a progress update on the development of its Zandkopsdrift rare earth element project in the Northern Cape Province of South Africa (“Zandkopsdrift”). Zandkopsdrift is being developed by Frontier in partnership with Korea Resources Corporation, the wholly-owned mining and natural resource investment arm of the South Korean Government.
The proposed Zandkopsdrift project comprises mining and processing activities at Zandkopsdrift to produce a mixed rare earth product, a seawater desalination plant to be located 35 km from the mine and a rare earth separation plant to be located at the deep water port of Saldanha Bay in the Western Cape Province of South Africa approximately 300 km from Zandkopsdrift.
Zandkopsdrift is expected to be one of the first new major producers of high purity separated rare earth oxides outside China, with a target total production capacity of 20,000 tonnes per annum of separated rare earth oxides, and to become one of the largest producers of high demand critical rare earth oxides (“CREOs”), which comprise dysprosium, terbium, europium, neodymium and yttrium in separated, high purity form, outside China.
- PFS Update
- Individual consultants’ reports for input to the PFS completed in Q3 2013 and reviewed by the Company
- Capital and operating costs of mine, processing plant and related infrastructure estimated to be higher than for the PEA, partially offset by lower estimated capital and operating costs for the rare earth separation plant than for the PEA
- Significant process improvements identified by on-going feasibility study test work are planned to be integrated into the PFS and expected to materially improve current PFS cost estimates
- Value engineering and process optimization studies underway in parallel with several areas of additional improvement already identified
- PFS flow sheet expected to result in a higher proportion of higher value CREOs and higher purity products being produced, resulting in a basket price for Zandkopsdrift production at current FoB China prices of $44/kg, compared to an in-situ basket price of $36/kg
- PFS to be finalised after the current test work on process improvements is completed in Q1 2014
- Mining right application
- Application for 30 year mining right submitted to Department of Mineral Resources
- Review of mine environmental impact assessment and environmental management programme under way
- Issuance of mining right and environmental permits expected in 12-18 months
- Product strategy
- Focused on production of critical rare earths (CREOs) with highest demand and growth potential
- Zandkopsdrift flow sheet selected to optimise CREO recovery
- Separation plant process technology to produce higher purity and value rare earth products
- Infrastructure development
- Site identified and land acquired for seawater desalination plant
- Land covering entire Zandkopsdrift mine development footprint acquired
- Purchase option secured for rare earth separation plant site
- Environmental impact assessments for the mine access road, bulk power supply, sea water desalination plant, separation plant and separation plan waste water disposal progressing well
- Working capital position strong with c.$38m cash and no debt; sufficient to fund the Company through completion of PFS and FS
- Kores funding 10% of project evaluation and development costs and providing technical support
- Share buyback programme approved by the Toronto Stock Exchange is continuing
As previously reported, good progress has been made in 2013 on the various studies that are required to allow the preliminary feasibility study (“PFS”) report on Zandkopsdrift (the “PFS Report”) to be prepared as planned. These studies (the “PFS Studies”) cover all aspects of the proposed Zandkopsdrift development, including design of the Zandkopsdrift Processing Plant (“ZPP”) and Saldanha Separation Plant (“SSP”), power, water, roads, tailings, mining, reagent supply, logistics and environmental management.
The PFS Studies were completed and presented to the Company for review in Q3 2013. This review has now been completed and has identified several areas where engineering design and process improvements can be made that are expected to have a potentially significant positive impact on the estimated capital and operating costs of both the ZPP and the SSP. The process improvements, which are detailed below, were identified by metallurgical test work and studies that have been undertaken for the planned feasibility study (the “FS” and “FS Test Work”, respectively) since the flow sheet was ‘frozen’ in Q2 2013 for the PFS. While it was originally intended that any process improvements identified by the FS Test Work would be introduced during the FS, the Company has decided that the nature and potential impact of several of the improvements is significant enough that they should be incorporated into the PFS engineering studies for the ZPP and SSP and into the PFS Report. The test work required to do so is on-going and is expected to be completed in Q1 2014, after which the necessary revisions will be made to the PFS Studies and the PFS Report completed and results announced.
Current PFS Flow Sheet
As approximately 97% of the rare earths at Zandkopsdrift are contained in monazite, for which a sulphuric acid cracking process has been widely used on a commercial scale for many years, the sulphuric acid process has been used as the basis for the flow sheet for the ZPP. The following process configuration was initially selected for the PFS based on confirmatory pilot scale test work completed in Q1 2013:
- A front-end crushing and milling circuit. The selected milling technology will produce a sharply defined particle size distribution, with downstream handling benefits.
- An impurity pre-leach circuit, which provides a significant mass reduction with low rare earth losses, and a consequent reduction in both capital and operating costs of the cracking and other downstream processes.
- An acid contacting circuit in which concentrated sulphuric acid is mixed with the feed material to produce a free flowing feed for the cracking circuit.
- A low temperature cracking circuit in which the prepared feed is baked in a rotary kiln at 250℃ to decompose the rare earth minerals.
- A high temperature calcining circuit in which the cracked ore is baked in a rotary kiln at elevated temperatures to recover sulphur as SO2 and SO3, which is returned to the sulphuric acid plant, and to stabilize impurities.
- A water leach circuit, in which the calcine is water leached to produce a pregnant leach solution (“PLS”) containing rare earth elements (“REEs”) and residual un-stabilized impurities.
- An impurity removal circuit in which the PLS is purified by removal of the residual un-stabilized impurities through multiple stages of precipitation and filtration.
- A REE precipitation circuit in which the REEs are precipitated from the purified PLS as a hydroxide that is suitable for processing through a conventional solvent extraction separation plant.
- A final stage of waste neutralization and disposal to the tailings storage facility on site.
Improvements to the PFS Flow Sheet
The principal process improvements that have been identified by the FS Test Work and that the Company intends to introduce to the PFS Flow Sheet, subject to the completion of the current test work programmes, are as follows:
- An alternative process has been identified for REE recovery under which the REEs are precipitated and recovered from the PLS immediately after the water leach circuit, following which the remaining solution can proceed directly to the final stage of waste neutralization and disposal to tailings. The use of this process will allow a large portion of the impurity removal circuit, which is expected to be one of the most significant contributors to ZPP capital costs, to be eliminated. This REE recovery process has been successfully used in other rare earth projects and test work indicates its viability for Zandkopsdrift material and its ability to produce a mixed rare earth product that meets the typical requisite feedstock purity specifications for a rare earth separation plant. Additional test work is currently being conducted in order to provide the data required to utilise this process in the ZPP PFS design. This test work is expected to be completed in Q1 2014.
- The replacement of the high temperature kiln, which is one of the other most significant contributors to ZPP capital costs, with an alternative pyrometallurgical process that has been extensively used on a commercial scale for similar applications. This alternative pyrometallurgical process allows more rapid chemical reactions, heat transfer and heat recovery than rotary kilns, and test work conducted by one of the leading mineral processing technology companies that specialises in this process has confirmed this to be the case with samples of Zandkopsdrift material. Additional test work is currently being conducted in order to provide additional data so that this process can be utilised in the ZPP PFS design. This test work is expected to be completed in Q1 2014.
- Frontier has recently secured access to an improved rare earth separation plant process technology package that is expected to significantly reduce the capital and operating costs of the SSP and to allow the production of wider range of individual separated REEs and at higher purity levels. This improved process technology package is now proposed to be included in the SSP PFS design.
As outlined in more detail below, the improved PFS flow sheet is expected to result in a higher proportion of higher value CREOs and higher purity products being produced. Using current FOB China prices, this is expected to result in a basket price for Zandkopsdrift production of $44/kg, compared to a basket price of $36/kg for the in-situ relative distribution.
The Company is confident that, taking into account the higher expected capital and operating costs than those in the Preliminary Economic Assessment in Q1 2012 and the pricing premium that can be achieved with the proposed Zandkopsdrift production mix, Frontier remains well positioned to become a major new producer of high purity separated rare earths.
Mining Right Application Submitted
The Company is pleased to report that it has submitted an application to the Department of Mineral Resources (“DMR”) in South Africa for a 30 year mining right for Zandkopsdrift. The time required for consideration, approval and issuance of a mining right in South Africa is typically 12-18 months, and on that basis the process is not expected to delay the proposed Zandkopsdrift development schedule.
The consideration and processing of the mining right application by the DMR will include a review of the environmental impact assessment and environmental management programme proposed for Zandkopsdrift, including the open cast mine, tailings storage facility, processing plant and associated infrastructure, and the relevant environmental permits will be issued in conjunction with the mining right.
One of the key documents submitted by Frontier in support of the mining right application is a Social and Labour Plan (“SLP”), the objective of which is to ensure that the proposed development supports the social and economic development of the communities in which the mine is located in a sustainable manner throughout the life of the mine. The Zandkopsdrift mine SLP submitted by Frontier involves a commitment to implement a number of plans, including a human resource development plan, an employment equity plan, a mine community development plan and a plan to manage the ultimate downscaling and closure of the mine. These plans were drawn up following extensive consultation with local communities, municipalities, traditional leaders and interested and affected parties comprising over 240 meetings with over 2,300 individual attendees. As a result of this process, Frontier has secured widespread support from the local communities for the mining right application and proposed development.
The Company has also acquired the land covering the entire Zandkopsdrift mine development footprint, which will further assist in the timely development of the mine and related infrastructure.
Rare Earth Product Strategy
Frontier’s rare earth product strategy is focused on the use of process technology for the ZPP and SSP that will allow it to produce a higher volume of the CREOs that are used in magnets and phosphors, which are the highest growth and value applications for rare earths, and to produce the highest purity rare earth products, for which premium prices can be achieved.
Preferential CREO Recovery
The current Zandkopsdrift flow sheet has been demonstrated to recover a higher proportion of the higher value CREOs over the lower value REOs such as cerium and lanthanum. This results in a higher value for the Zandkopsdrift production “basket” compared to the in-situ geological distribution.
High Purity Output
The improved process technology package that Frontier intends to utilise in the SSP will allow the production of higher purity and higher value rare earth products than the typical standard purity level for which companies such as Metal Pages publish market prices. The proposed output from the SSP will comprise a considerably wider range of separated rare earth products and higher purity levels than any of the known current proposed new rare earth projects outside China, and is projected to be as follows:
|Price Premium to
Note: Standard purity product pricing is based on data from Metal Pages and other sources. High purity product price premiums are based on historic pricing data sourced by Frontier.
Improved Production Basket Price
The preferential CREO recovery process and the high purity product plan is expected to have a significant impact on the average price received per kg of output product from the SSP (the Production Basket Price or “PBP”) compared to the in-situ basket price (“IBP”), which is calculated using the relative in-situ distribution of REEs at Zandkopsdrift and prices for standard purity products. Using current FOB China prices (October 2013) from Metal Pages, the Zandkopsdrift PBP is estimated to be $44/kg, compared to an IBP of $36/kg. It is also expected that the availability of higher purity lanthanum and cerium products will assist Frontier in securing preferential market access for its standard, lower purity lanthanum and cerium products for which supply is expected to increase significantly in the coming years.
Reagent Supply Studies
As reagent costs will comprise a majority of total ZPP and SPP operating costs, the Company has undertaken significant work on reagent selection, supply and logistics studies as part of the PFS.
Elemental sulphur, which will be used to generate sulphuric acid at Zandkopsdrift, is expected to be the one of the largest components of ZPP operating costs. An importation and logistics study has recently been completed to identify suitable ports, mode of transport from port to mine (bulk vs. break-bulk) and transport routes for the elemental sulphur required.
Hydrochloric Acid and Sodium Hydroxide
Hydrochloric acid and sodium hydroxide are the principal reagents required for the operation of a rare earths separation plant and would be the largest contributors to SSP operating costs. Discussions have progressed well with an established chemical company in relation to the development and operation of a dedicated chlor-alkali plant to be located on a site secured by Frontier in Saldanha Bay adjacent to the SSP. The chlor-alkali plant will provide a dedicated, secure supply of hydrochloric acid and sodium hydroxide on an ‘over-the-fence’ basis. The necessary environmental studies have commenced and a draft scoping report was issued for comment in Q3 2013. The required environmental impact assessment is progressing well and public participation hearings have commenced. The formal environmental approval is expected by Q4 2014.
Lime and limestone
Lime and limestone, which are used as neutralising agents for the waste streams from the ZPP, are also expected to be significant contributors to ZPP operating costs. The Company has identified a producer of lime and limestone located approximately 150 kilometres from Zandkopsdrift, and discussions are under way with this producer in relation to the Zandkopsdrift requirements. The Company has also identified other potential alternative sources of limestone considerably closer to Zandkopsdrift, which it is currently evaluating.
The Company is working with a well-established South African chemical manufacturer and distributor to advise on procurement, transport, logistics and storage of the other reagents and chemicals that would be required at both the ZPP and the SSP.
Infrastructure and Services
Mine Access and Road Design
A preliminary design report for the access road to the Zandkopsdrift site has been completed and submitted to the Western Cape Provincial Roads Department for review and comment. The proposed road upgrading will see the improvement of approximately 20km of provincial roads and private roads to a standard that will meet the long-term transport and infrastructure requirements of the Zandkopsdrift mine.
An Environmental Basic Assessment and Water Use Licence application are currently being prepared for the proposed upgrade of provincial roads and associated infrastructure from the National Route N7 and the construction of a new private road and associated infrastructure to serve as access roads to the Zandkopsdrift Mine. The Company is currently expecting a formal record of decision on these matters by Q3 2014.
Bulk Power Supply
A formal application for the supply of electricity to both the SSP and the ZPP (including the desalination plant) has been submitted to ESKOM, the South African national power utility. Environmental impact assessments for both bulk power applications are progressing well and public participation hearings have commenced. The Company is currently expecting formal records of decision in relation to these applications to be received in H2 2014.
Sea Water Desalination Plant
One of the key components of the Zandkopsdrift project infrastructure is the dedicated sea water reverse osmosis desalination plant, which will provide process water to support mining and processing activities at Zandkopsdrift. Following the completion of a detailed review, a preferred site has been selected for the desalination plant at Volwater Bay, approximately 35 km southwest of Zandkopsdrift. The property on which the Volwater Bay site is located has now been acquired by the Company.
The preliminary design of the bulk water transfer infrastructure, power supply and access road from Zandkopsdrift to the desalination plant have now been completed and the environmental impact assessment for the plant has been submitted to the Department of Environment and Nature Conservation, Northern Cape Province. The Company is currently expecting the formal record of decision to be received in H2 2014.
Saldanha Bay Regional Marine Outfall Project
The Company has progressed discussions with the local Saldanha Municipality regarding a regional marine outfall project in the Saldanha area (the “SRMO” project). The SRMO will be used to dispose of the brine (salt water waste) generated from the SSP, treated effluent from a proposed municipal waste water treatment works and the effluent from the proposed chlor-alkali plant. A topographical survey has been completed on the preferred pipeline route between the selected marine disposal location and the SSP and a preliminary engineering design has been completed.
The Company has appointed specialist engineering and environmental consultants to assist with the engineering design and environmental permitting process. The EIA application for the SRMO project has been submitted to the Department of Environmental Affairs and Development Planning in the Western Cape Province and a draft scoping report was issued for public comment in Q3 2013. The EIA is progressing well and a formal record of decision is expected in H2 2014.
Geology and Resource Modelling
No further geological or resource drilling is required or anticipated by the Company prior to the completion of the FS. As previously advised a revised resource estimate has been prepared for Zandkopsdrift and will be incorporated into the PFS. It is expected that on completion of the PFS the majority of the Zandkopsdrift mineral resources will be converted into proven and probable mineral reserves.
Cash Position and Working Capital Adequacy
The Company’s working capital position is strong with approximately $38m in cash and no debt, and the Company remains fully funded through completion of both the PFS and FS. Kores currently holds a 10% interest in Zandkopsdrift and is responsible for a pro rata share of project operating costs.
The Company’s second share buyback programme was approved by the Toronto Stock Exchange in April 2013 and is continuing. The Company believes that the market materially undervalues the ordinary shares of Frontier and that the current share price range does not adequately reflect the value of such shares in relation to the business, assets and future prospects of Frontier. The Company has to date acquired approximately 1.25m shares under the two buyback programmes, representing approximately 7% of the share free float.
Korea Resources Corporation (“Kores”), the wholly-owned mining and natural resource investment arm of the South Korean Government, holds a 10% interest in Zandkopsdrift and is responsible for a pro-rata share of on-going evaluation and development costs. Kores is also currently providing other valuable inputs to Frontier including carrying out additional metallurgical test work on material from Zandkopsdrift at its facilities in Seoul.
This release has been approved by Dr. Stuart Smith BSc, PhD. who is a “Qualified Person” in accordance with National Instrument 43-101 – Standards of Disclosure for Mineral Projects.
About Frontier Rare Earths Limited (TSX: FRO): Frontier Rare Earths Limited (www.frontierrareearths.com) is a mineral exploration and development company principally focused on the development of rare earths projects in Africa. Frontier’s flagship asset is the Zandkopsdrift rare earth project, which is located in the Northern Cape Province of South Africa and is one of the largest, highest grade undeveloped rare earth deposits worldwide. Frontier has a direct 64% interest and a 85% economic interest in Zandkopsdrift following the acquisition by its strategic partner Korea Resources Corporation of an initial 10% interest in Zandkopsdrift. In March 2012 Frontier filed a Preliminary Economic Assessment (“PEA”) on the Zandkopsdrift project prepared in accordance with National Instrument 43-101. The results of the PEA indicate that the proposed development of the Zandkopsdrift Project is both technically feasible and economically robust with a low risk profile. In conjunction with the PEA a mineral resource estimate for Zandkopsdrift confirmed 42.5m tonnes at an average grade of 2.23% containing approximately 940,000 tonnes total rare earth oxides (applying a 1% cut-off) and with 78% of the mineral resource in the indicated category. Mineral resources that are not mineral reserves do not have demonstrated economic viability. Fiona Harper, Pr.Sci.Nat, was the independent qualified person from Venmyn Rand (Pty) Ltd responsible for the PEA.
Frontier is listed on the main board of the Toronto Stock Exchange and currently has 89,562,781 shares outstanding. Frontier is well funded, with approximately C$38 million in cash and no debt.
Forward Looking Statements – Certain information set forth in this news release may contain forward-looking statements that involve substantial known and unknown risks and uncertainties. Readers can identify many of these statements by looking for words such as “will”, “intends”, “projects”, “anticipates”, “estimates”, “achieving”, or similar words or the negative thereof. These forward-looking statements are subject to numerous risks and uncertainties, certain of which are beyond the control of the Company, including, but not limited to, the impact of general economic conditions, industry conditions, commodity prices, availability of financing for the Company and the Company’s ability to raise additional capital, results of feasibility studies, dependence upon regulatory approvals, the estimation of mineral resources and the realization of mineral reserves based on mineral resource estimates and estimated future development, if any, and possible variations of ore grade or recovery rates; the Company development, if any, and possible expectations regarding competition from other producers globally, possible customer and supplier relationships, anticipated trends and challenges in the Company regarding competition; mineral resource estimates and supply outlook and growth opportunities, the future price of and future demand for rare earth elements, title disputes or claims including Black Economic Empowerment initiatives, and the timing and possible outcome of pending regulatory and permitting matters.
Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements. There can be no assurance that the plans, intentions or expectations upon which these forward-looking statements are based will occur. The forward-looking statements contained herein are made as of the date of this news release and are expressly qualified in their entirety by this cautionary statement. Actual results may differ materially from those anticipated. Readers are cautioned not to put undue reliance on forward-looking statements due to the inherent uncertainty therein. Frontier disclaims any intent or obligation to update publicly any forward-looking statements, whether as a result of new information, future events or results or otherwise, except as required by applicable law.
SOURCE Frontier Rare Earths Ltd.
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