Frontier Rare Earths Up Over 15 Percent on Zandkopsdrift Prefeasibility Study

Tuesday May 12, 2015, 3:20pm PDT

Frontier Rare Earths Up Over 15 Percent on Zandkopsdrift Prefeasibility StudyFrontier Rare Earths (TSX:FRO) first announced the prefeasibility study for its Zandkopsdrift project in South Africa in May 2014, stating at the time that results would come later that year.

Though the study took longer than expected to complete, when the results came out Tuesday, it became evident that it was worth the wait. The study shows that the project holds proven plus probable reserves of 788,700 tonnes total rare earth oxides (TREO) — that’s sufficient for a 45-year life of mine.

The prefeasibility study also proves Zandkopsdrift’s financial worth, revealing that the project has a net present value of $2.98 billion after taxes and royalties and an internal rate of return of 30 percent.

In terms of production, the project’s capacity is an estimated 8,000 tonnes per year of high-purity, separated TREO for the first four years of operation (Phase 1); from year five onwards, that will double to 16,000 tonnes per year. Zandkopsdrift is also expected to produce 48,000 tonnes per year of manganese sulfide during Phase 1, with that amount doubling to 96,000 tonnes per year by year five.

Frontier’s director and CEO, James Kenny, told InvestorIntel in December that the intention was for the prefeasibility study to “reflect a development of a mining operation and a stand-alone rare earth separation plant all to be located in South Africa; two locations approximately 300 kilometers apart.”

The company’s plan to develop both a mine and a separation plant shouldn’t be too difficult financially speaking considering Frontier has a decent bankroll under its belt.

“We are in a fortunate position. Equity markets are obviously quite challenged at the moment and the appetite for junior explorers and developers is much more limited then what it was several years ago. At present we have just under $30 million of cash and no debt and so that serves Frontier well to complete our prefeasibility study and our definitive feasibility study and I think that is a pretty unique position. Certainly among our rare earth junior peers,” Kenny added.

And indeed, the next step at Zandkopsdrift will be the initiation and completion of a definitive feasibility study.

“It would be our hope that they can undertake a significant portion of the work required to allow the drawdown of project finance for the development of the Zandkopsdrift project in parallel with the DFS and thereby shorten the lead time between completion of the DFS and the commencement of construction,” Kenny told the news outlet.

That said, he did admit, “we aren’t the determining factor as to whether or not the equity capital markets or the debt capital markets are open for business. But what I do believe is that there remains a very clear and obvious demand and requirement for the development of several new rare earth mines and I think with our prefeasibility study and the support from our partners in Kores and with others, we will be very well-positioned to be one of those companies.”

The positive news was reflected in Frontier’s share price on Tuesday. It was up 16.67 percent by the end of the day, at $0.28.