Avalon Rare Metals retains SNC-Lavalin to complete Nechalacho feasibility study

Avalon Rare Metals (TSE:AVL)(AMEX:AVL) said Wednesday it has retained SNC-Lavalin to complete a feasibility study for its Nechalacho rare earth elements (REEs) project, located in Thor Lake, Northwest Territories.

The feasibility study, which is expected for completion at the end of 2012, will build on the updated prefeasibility study, which the company published in July.

It will support raising the capital required to bring the project into commercial operation by confirming the technical and economic viability of the Nechalacho project, Avalon said.

Avalon COO Brian Chandler commented: "This is an important milestone for Avalon as we move into the final stage of project evaluation and preparation before we formally commence construction at Nechalacho.

"SNC-Lavalin's capacity and broad experience in all aspects of project development from engineering to, procurement, logistics, contracts administration, safety and risk management, as well as tendering for construction, will be invaluable to successfully developing the project."

The July 2011 prefeasibility study estimated that the project will yield a 34 percent internal rate of return, on an after-tax basis, compared to the prior estimate of 12 percent. The after-tax net present value also rose to $1.27 billion, at a 10% discount rate, versus the earlier $97 million.

The deposit's 20-year mine life was based on a new probable mineral reserve estimate of 14.5 million tonnes of 1.53 percent total rare earth oxides (TREO), 2.90 percent zirconium oxide (ZrO2), 0.38 percent niobium oxide (Nb2O5) and 0.04 percent tantalum oxide (Ta2O5).

Indeed, the average TREO price used for the mine plan was also $46.33 per kilogram, a significant boost from the $21.94 per kilogram price used in June of last year.

The 100 percent-owned Nechalacho Deposit is emerging as one of the largest undeveloped rare earth elements resources in the world. It consists of an underground mine and backfill past plant, as well as tailings facilities, a power plant, accommodations, an airstrip and docking facilities, and an REE separation plant.

The mine's enrichment in the more valuable 'heavy' rare earth elements, which are key to advancing green energy technology, is one of the few potential sources of these elements outside of China, currently the source of 95 percent of world supply.

Avalon expects to put the project into production by 2015, with an anticipated year one 1,833 tonne per day production schedule, ramping up to 2,000 tonnes per day in year two. Total capital costs are estimated at $902 million.

In Toronto, Avalon shares were in line with the metals and mining sector, shedding 1.93 percent to $2.54, as of 2:24 pm EDT.