Rare Element Resources starts 2012 drilling and exploration at Bear Lodge

Rare Element Resources (NYSE:REE) (TSE:RES) said late Tuesday that it has started its 2012 drilling and exploration program at its Bear Lodge rare earth element project in Wyoming.

Three core drill rigs and one reverse circulation drill rig are currently at the site, with the aim of expanding and upgrading the current reserve and resource base at the Bull Hill deposit with infill and step-out drilling.

Infill and step-out drilling will also be taking place at the growing Whitetail Ridge deposit, designed to expand the current resource and upgrade a portion of the resource to the measured and indicated categories, the company said. The Whitetail Ridge deposit is enriched in the more valuable heavy rare earth elements (HREE) relative to the Bull Hill deposit.

Rare Element will also be embarking on exploration drilling this year to establish inferred resources at the Carbon and East Taylor target areas, both of which show "significant HREE-enrichment", the company said, as reported in May. 

In addition, condemnation drilling will be done on the Physical Upgrade plant site, and on state section 16, the proposed stockpile and waste facility site.

In total, around 15,000 metres of drilling are budgeted for the year's program, which aside from drilling, will also include geological mapping, soil and rock chip surveys, and bulk sampling for metallurigcal testing.

Indeed, the company said metallurgical test-work of bulk sample material from the Whitetail Ridge, Carbon and East Taylor areas is currently underway in Vail, Arizona.

The test-work is focused on determining the best process to recover the rare earth elements from these ores, which are significantly enriched in heavy rare earths compared to the Bull Hill deposit material.

Based on the metallurgical results, the company will make a decision in the fourth quarter as to whether to integrate the development of one or more of these heavy rare earths deposits into the definitive feasibility study and permitting timeline for the project.

Including significant zones of heavy rare earths in the study would provide "substantial upside" to the project, Rare Element said, as well as bring additional shareholder value. The goal is to ramp-up to production sometime in 2016.

"We believe that by expanding our drilling program into the Whitetail Ridge, Carbon and East Taylor deposit areas, we will provide additional benefits for Rare Element to increase its heavy rare earth element profile," said president and CEO, Randall Scott.

"We are dedicated to the advancement of the Bear Lodge project and maximizing the value for shareholders."

Rare earth elements are key components of green energy technologies and other high-tech applications such as hybrid automobiles, plug-in electric automobiles, advanced wind turbines, computer hard drives, metal alloys in steel, additives in ceramics and glass, and many others.

China currently produces more than 96 per cent of the 124,000 tonnes of rare-earths consumed worldwide annually, with the country continually reducing its exports of rare earths each year.

In April, the company unveiled a revised preliminary feasibility study (PFS) for Bear Lodge, giving a net present value of $1.27 billion, at a 10 per cent discount rate after state taxes but before federal income taxes, and an internal rate of return of 47.8 per cent with two-year payback of initial capital.

The PFS outlined initial capital costs of $334 million, with life-of-mine capital estimated at $404 million.

The company said that it sees average annual operating costs of $61.8 million and operating costs of $194 per tonne mined and $2.94 per kilogram of bulk mixed rare earth carbonate concentrate.

Less than a month later, Rare Element released an updated NI 43-101-compliant mineral resource estimate for the three deposits located in the Bull Hill area of the Bear Lodge project.

The company registered a 10 per cent increase in measured and indicated resources and a 61 per cent increase in oxide and oxide-carbonate inferred mineral resources.

Rare Element's updated resource estimate for its Bull Hill deposit consists of 7.5 million tons (6.8 million metric tonnes) grading 3.79% Rare Earth Oxides (REO) in the measured and indicated categories, using a 1.5% REO cutoff grade.

The inferred oxide and oxide carbonate stands at 25.7 million tons (23.3 million metric tonnes) at a grade of 2.86% REO.