Wednesday, 11 July 2012

Tasman Metals takes major step forward with submission of mining lease application for Norra Karr

Tasman Metals (CVE:TSM) (AMEX:TAS) said Wednesday that it has submitted its application for a mining lease for its heavy rare earth and zirconium Norra Karr project in Sweden, achieving a major step on the path toward development.

The junior rare earths explorer has indeed come a long way since starting the first drilling program at the property in December 2009. Shares rose more than 3.3 per cent this morning, to $1.55.

The company released in March a positive preliminary economic assessment for Norra Karr, detailing a project that boasts a pre-tax net present value in excess of $1.46 billion at a 10 per cent discount rate, and an almost 50 per cent internal rate of return, with a payback period of 3 years from the start of construction.

All these numbers are generated using 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.

VP of corporate development for Tasman, Jim Powell, says "a lot of work" behind the scenes went into the mining lease application, spanning around 18 months, including "extensive" environmental due diligence, social impact studies and community meetings.

The filing of the application also required that Tasman complete flora and fauna surveys, ground water testing, leach testing of the waste rock - which Powell says is benign with no harmful elements - and basic infrastructure planning for the Norra Karr site.

The mining lease, under the Swedish Mining Act, will be valid for 25 years, at which point it can be renewed.

Powell says the mining lease application will take about six months to process to completion, and is a major step prior to attaining the actual extraction permit, which is expected in late 2014.

"The location of this project in Sweden, with a simple and well tested Mining Act, easy all year round operating conditions and excellent existing infrastructure has allowed progress to be made at a fast pace," said Tasman's president and CEO, Mark Saxon, in a statement Wednesday.

Indeed, Norra Karr is one of the largest and most economical projects among its peers, due to the high contribution of the high value rare earth elements like dysprosium (Dy), yttrium (Y), neodymium (Nd), and terbium (Tb).

Demand for dysprosium is expected to soar over the next decade from both the traditional automotive and emerging electric car and wind turbine industries. 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 low radioactivity asset, with "trace levels of uranium and thorium", 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, local skilled personnel, and water, allowing all year round access and minimizing the need for offsite infrastructure, Saxon says, with the CEO taking note of the "mining friendly" region and low mining costs.

Since over 95 percent of rare earth element supply is sourced from China, the European Union is supporting policy to ensure the domestic supply of the metals.

The total capital cost estimate for the project is a relatively low $290 million over a one and a half year construction period, with the property also boasting simple mineralogy that "allows for ambient temperature and pressure processing", the company noted in a statement.

Combined magnetic separation and flotation tests yielded rare earth element recovery rates of 86.6 per cent into 37.6 per cent of the mineral mass, and 84.1 per cent into 26.5 per cent of the mineral mass.

Norra Karr is the only NI 43-101 compliant rare earth element resource in mainland Europe. The PEA was based on an open pittable recoverable resource of 58.1 million tonnes grading 0.59% TREO (total rare earth oxide) where 50.0 per cent of the TREO is the high value heavy rare earth oxide (HREO) and 1.70% ZrO2 (zirconium oxide) in the inferred and indicated categories.

The report assumes a mining rate of 1.5 million tonnes per year with average TREO recoveries of 80 per cent and average zirconium recovery of 60 per cent.

Average annual mixed TREO concentrate production is forecast to be 6,800 tonnes including 290 tonnes of dysprosium oxide, 43 tonnes of terbium oxide, 773 tonnes of neodymium oxide and 2,360
tonnes of yttrium oxide.

The application documents for the mining lease were prepared by consulting group Golder Associates AB and have been submitted to the Swedish Mining Inspectorate.

The Scandinavian-focused miner also has the Olserum project, which it acquired last October and is located 100 kilometres east of Norra Karr.

Last month, the rare earth explorer acquired three new rare earth element exploration properties in central Finland. The Korsnas South, Siilinjarvi and Laivajoki projects are being acquired from private Finnish company Magnus Minerals Oy.

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