Tasman Metals (CVE:TSM) (AMEX:TAS) announced late Wednesday its preliminary economic assessment (PEA) results for its flagship heavy rare earth and zirconium Norra Karr project in southern Sweden, unveiling a low cost, and "stand out" asset.
The company, the holder of the only NI 43-101 compliant rare earths
resource in mainland Europe, said the project has a very high percentage
of the high value heavy rare earths, with little revenue exposure to
the light rare earths that risk oversupply in 2013.
The rare earth company's shares rose more than 3.5 percent in early morning trade Thursday, to $2.35.
Tasman's PEA report, completed by Pincock, Allen & Holt,
estimated a pre-tax net present value of $1.46 billion at a 10 percent
discount rate, with a 49.6 percent internal rate of return (IRR), and a
payback period of 2.6 years.
The project is also forecast to generate $5.3 billion in revenue over
the first 20 years, and $10.9 billion over the 40 year life of the
Initial capital expenditures are estimated at $290 million, including
a 30 percent contingency, which vice president of corporate development
Jim Powell says shows Norra Karr is expected to be one of the "lowest
initial capex cost, heavy rare earth assets out there".
Indeed, the $290 million initial capex compares to anywhere between
$600 million to $1 billion for peer projects, though Tasman ‘s Norra
Karr project is smaller in scale and well sized for the potential end
market it is serving, says Powell.
The capex estimate includes mining costs, metallurgical processing to
produce a rare earth element (REE) concentrate and a zirconium
carbonate product, as well as tailings.
Average annual operating expenses are seen at $74.3 million or $10.93
per kilogram of mixed total rare earth oxide (TREO) concentrate, the
majority of which is comprised of metallurgical processing costs.
If zirconium by-product credits are included at a $3.77 selling
price, cash costs are estimated at $2.72 per kilogram, the rare earth
Tasman also used a conservative price basket of US$51 per kilogram - versus the current China FOB basket price of US$184.85.
Increasing the basket price by 30 percent to US$66.30 per kilogram,
the net present value of the project jumps to $2.06 billion using a 10
percent discount rate, with an IRR of 63.4 percent.
The long-term discounted price used in the model was US$31.60 per
kilogram of rare earth oxide to account for separation costs, Tasman
said, with the company currently exploring a number of options for
separation, including new technologies, toll based separation and
Rare earths refer to a group of 15 specific elements, known as
lanthanides, plus scandium and yttrium, used for everything from
smartphones to guided missiles. While some rare earths are relatively
common, they are dispersed in a way that makes it difficult to find
deposits with high enough ore grades to economically exploit.
Demand for the metals is expected to continue to grow steadily as
China, which produces 97 percent of the world’s rare earths, has cut
exports by more than half of 2004 levels to 30,000 tons in 2010.
What makes the Norra Karr project a "stand out" is its significant
enrichment in dysprosium and yttrium, with the property believed to be
the highest grade dysprosium deposit in the world.
Demand for dysprosium is expected to soar over the next decade from
both the traditional automotive and emerging electric car and wind
Supply of the metal, which is a key contributor to high temperature
magnets, has become tight over the past year, with prices increasing
more than 600 percent since January 2011.
The largest contributor to Norra Karr's projected revenue is
dysprosium, accounting for 43 percent of rare earth oxide revenue, the
Critical rare earth elements, or those expected to be in the most
demand over the next several years, such as dysprosium, neodymium,
terbium, and yttrium, account for 70 percent of the project's total
revenue, or 86 percent of rare earth oxide revenue.
"The PEA clearly demonstrates the strong economics of this highly
strategic project, with the majority of the projected cash flow sourced
from the production of the critical heavy rare earth elements,
dysprosium, terbium and yttrium," said president and CEO, Mark Saxon, in
"Norra Karr is one of the largest and most economically robust
projects amongst its peers, due to the high contribution of the high
value critical rare earth elements, the substantial capital and
operating cost benefits provided by existing infrastructure, and the
simple mineralogy that allows ambient temperature and pressure
The low radioactivity project is located in southern Sweden, 300
kilometres southwest of the capital Stockholm and lies in mixed farming
and forestry land. The site is well serviced by power, roads, rail,
operating ports, and water, allowing all year round access, and is
situated within a "mining friendly" region with low mining costs and
This minimizes the need for offsite infrastructure to be built nearby the asset.
Since over 95 percent of rare earth element supply is sourced from
China, the European Union is also supporting policy to ensure the
domestic supply of the metals, which can only be helpful to Tasman.
The company also has no peers in mainland Europe, with its project
within an overnight driving distance to key markets. Saleable products
will be transported off site by existing road and rail networks.
The report released also includes two new resource updates for the
project, a global mineral inventory and an in pit resource. The global
mineral inventory represents the ore body as it is currently known in
its entirety at 69.1 million tonnes at 0.6% TREO and 1.82% zirconium,
with a 52% heavy rare earth oxide (HREO)/TREO ratio, at a 0.4% TREO
This represents an increase in both grade and total tonnage from the estimate in November 2010, said Tasman.
The in pit resource, which is included in the economics of the PEA
model, totals 41.6 million tonnes of 0.57% TREO and 1.7% zirconium in
the indicated category with a 51 percent HREO/TREO ratio, and 16.5
million tonnes at 0.64% TREO and 1.7% zirconium in the inferred category
with a 49% HREO/TREO ratio.
The mine life, based on the in pit resource and a 1.5 million tonne
per year mining rate, is seen at 40 years. At the full run rate, mixed
TREO concentrate output per year is estimated at 6,800 tonnes, including
290 tonnes of dysprosium, 43 tonnes of terbium and 2,360 tonnes of
Average annual production of zirconium carbonate concentrate, which
is a high value product used in the production of zirconium chemicals,
is seen at 15,000 tonnes. All zirconium carbonate is derived from the
cracking of zircon, and is primarily used in the production of
antiperspirant actives, paint driers, leather tanning products, paper
coatings and automotive catalysts.
REE recoveries are projected at 80 percent, with a by-product zirconium recovery of 60 percent, Tasman said.
Development of the project will be accomplished as an open pit mine,
with crushing, grinding, beneficiation and mineral dissolution occurring
in the immediate vicinity of the pit.
Powell says further metallurgical testing is planned for this year,
with the aim of starting up a pilot plant in the spring or summer of
this year. A completed pre-feasibility study is targeted for the middle
"When in production, the project will make a very significant
contribution to the availability of heavy rare earth elements outside of
China, and provide long term security of these metals for Europe,"
"With this encouraging independent assessment in hand, Tasman shall
accelerate progress during 2012, with additional drilling, further
refinement of our metallurgical process, extensive work on permitting
and initiation of a full Pre-Feasibility Study (PFS)."
Under the planned prefeasibility study, the company will undertake
process optimization, including testing of individual ore types, and
testing of additional digestion and precipitation mechanisms to reduce
reagent and effluent streams.
Tasman is also working on submitting a mine lease application in the second quarter of this year for the project.
Recent drilling results from the property, which is the fourth
largest heavy rare earths oxide deposit globally by contained metal,
include 221.4 metres at 0.63% total rare earth oxides (TREO), with 47.9%
heavy rare earth oxides (HREO).
The Scandinavian-focused miner also has the Olserum project, which it
acquired last October and is located 100 kilometres east of Norra Karr.
Drilling is due to start at this asset soon, to allow for an initial