Frontier Rare Earths Reports Prefeasibility Study for Zandkopsdrift Project in South Africa

Tuesday May 12, 2015, 10:49am PDT

Frontier Rare Earths Limited (TSX:FRO) announced the results from a prefeasibility study on its Zandkopsdrift project in South Africa, which is being developed in partnership with Korea Resources Corporation, which owns 10 percent interest in the project.
As quoted in the press release:

The results of the PFS indicate that the proposed development of Zandkopsdrift to produce a range of high purity, separated rare earths is both technically feasible and economically robust. In addition, the production of a saleable manganese sulphate by-product has been proven both technically and economically feasible and has been incorporated into the process flow sheet and economic analysis for the PFS.

Highlights from the prefeasibility study:

The economic evaluation of the Project resulted in the following
Internal rate of return of 30%, after tax and royalties
Net Present Value (“NPV”) of $2.98 billion, after taxes and royalties, at an 8% discount rate
NPV of $2.2 billion, after tax and royalties, at a 10% discount rate
NPV of $1.58 billion, after taxes and royalties at a 12% discount rate*
Production capacity of 8,000 tonnes per annum (“tpa”) of high purity, separated total rare earth oxides (“TREO”) for the first four years of operation (Phase 1), doubling to 16,000 tpa TREO from year five onwards (Phase 2)
Proven and Probable Reserves of 788,700 tonnes TREO, sufficient for a 45 year Life of Mine (“LoM”)
Production of 48,000 tpa of manganese sulphate during Phase 1, doubling to 96,000 tpa for Phase 2
Annual revenues of approx. $440m at Phase 1 capacity and approx. $880m at Phase 2 capacity
Average operating costs of $11.87/kg TREO (pre-contingency and net of by-product revenue credit) for the first 20 years of operations
Average annual operating margin of 69% for the first 20 years of operations
Total Phase 1 capital expenditure (pre-contingency) of $809m, comprising:
Zandkopsdrift Mine, excluding manganese sulphate plant - $523m
Manganese sulphate plant - $38m
Rare earths separation plant - $238m
Phase 2 capital expenditure (pre-contingency), which is planned to be financed from Phase 1 operating cash flow, of $645m
Approximately 76% of Project revenues are derived from critical rare earth oxides and 75% from magnet related REOs

James Kenny, president and CEO of Frontier Rare Earths, commented:

Frontier is pleased to have completed a positive PFS on Zandkopsdrift which confirms the significant economic potential of Zandkopsdrift and the opportunity for Frontier to become a major new producer of high purity separated rare earths and manganese sulphate.