Wednesday, 11 July 2012

Frontier Rare Earths confirms $23.8 mln investment from Korea Resources for Zandkopsdrift

Frontier Rare Earths (TSE:FRO) said Wednesday that as of earlier this month, Korea Resources Corp. (Kores) has bought an initial 10 per cent interest in the Zandkopsdrift rare earth project for $23.8 million – payable to Frontier in cash by September 30.
The Korean government-owned mining and natural resources company is responsible for its share of all operating costs and expenses related to the Zandkopsdrift project, which is located in South Africa, proportionate to its initial 10 per cent interest in the rare earths property.
The news follows on from the initial strategic agreement announced between the two parties in December 2011.
"Frontier is the only junior company in the rare earths sector to have signed a definitive agreement with a significant strategic partner such as Kores, which we believe is a reflection of the potential of Zandkopsdrift," said Frontier president and CEO James Kenny.
"The matters confirmed today provide an indication of the positive and collaborative working relationship already established between our companies and we look forward to Kores’ continued involvement with Frontier and participation in the development of Zandkopsdrift."
Under the terms of the agreement, Frontier was required to file the NI 43-101 compliant positive preliminary economic assessment (PEA) for Zandkopsdrift on SEDAR by 30 March.
The company noted that it satisfied this condition and the results of the PEA indicated that the proposed development of Zandkopsdrift "is both technically feasible and economically robust with a low risk profile."
As part of the deal, along with an initial 10 per cent interest in the project, Kores has off-take rights for 10 per cent of the rare earth production from Zandkopsdrift.
The agreement also provides that Kores may acquire a further 10 per cent interest in Zandkopsdrift and/or up to a 10 per cent share ownership of Frontier following completion of a definitive feasibility study, which together, if acquired, would give Kores off-take rights for an additional 21 per cent of rare earth production.
Frontier said the definitive feasibility study is scheduled for completion in the third quarter of 2013.
Kores can also form a consortium of Korean companies to jointly participate with it and Frontier in the development of Zandkopsdrift.
Korea's high tech sector is a prime target for rare earth mining companies outside China looking for a financial partner to help develop their assets as rare earths demand is driven, in large part, by two fast-growing sectors - energy and high technology.
Frontier has said in the past that Kores is expected to form a consortium to participate in the joint venture including Samsung Group, GS Caltex and Daewoo Shipbuilding. Kores has until the end of September to finalize the details of the consortium.
The rare earth company's flagship asset is Zandkopsdrift, which is located in the Northern Cape Province of South Africa and is one of the largest, highest grade undeveloped rare earth deposits worldwide.
At the end of June, the company received final assay results from its 2011 drilling program at Zandkopsdrift that yielded total rare earth oxide (TREO) grades as high as 19.5 per cent.
Frontier said the results confirmed the presence of "extensive high grade rare earth mineralization and continuity of mineralization" from surface to an average depth of about 80 metres.
Among the highlights was 6.9 per cent TREO over 11 metres, including the highest grade interval of 19.5 per cent TREO at a minimum interval length of one metre.
Frontier said that the new assay results will be included into an updated mineral resource estimate for Zandkopsdrift, in which a majority of the mineral resources at the project would be upgraded to the measured and indicated categories.
The company’s PEA, released in February, reported that Zandkopsdrift is estimated to contain roughly 950,000 tonnes of TREO applying a one per cent TREO cut-off, and gave a whopping net present value of $3.65 billion, after tax and royalties, at an 11 per cent discount rate.
Internal rate of return for the project was seen at 52.5 per cent, after tax and royalties, with a two year payback from start of production.
Average production was pegged at 20,000 tonnes of separated rare earth oxides per year over a 20-year mine life with production due to start in the second half of 2015.
Zandkopsdrift's "key to success" is mineralogy - as the property contains conventional rare earth minerals, with 97 per cent being monazite, for which commercial extraction processes already exist.
Capital costs for the project were calculated at $910 million for a one million tonne per annum open-pit mining operation, along with concentration and rare earth separation plant facilities. Two thirds of the capex is related to the Saldanha separation plant, with mining and shipping costs low due to the high grade and the availability of infrastructure.

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