South African Project May Host Highest Grade Rare Earths Deposit Outside China

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"One of the largest known rare earth resources outside of China classified under international resource reporting standards could well be in production by mid-2015."

Frontier Rare Earths' Zandkopsdrift hosts one of the largest and highest-grade known rare earths deposits outside China, and could be on stream by mid-2015. It has a Korea Resources Corp. deal to help achieve this.

One of the largest known rare earth resources outside of China classified under international resource reporting standards could well be in production by mid-2015. Frontier Rare Earth's primary asset is the Zandkopsdrift project, containing 950,000 tons (t) TREO (total rare earth oxides, including the elements lanthanum to lutetium expressed as trivalent oxides). The Zandkopsdrift B Zone has the highest known TREO grade and the highest grade of high-value heavy rare earth oxides (HREOs) of significant advanced deposits (those with >200,000t TREO) outside of China.

Frontier plans to commence production of separated rare earths from Zandkopsdrift in 2015 at a rate of 20,000 tons per year (t/y). There are probably some 500 rare earth projects globally, but in all probability it's only going to be about 10 of them that become mines. Zandkopsdrift should be one of those successes. It has a number of advantages that single it out:
  • It is large and high grade, but with low radioactivity—thorium averaging 178 ppm and uranium 47 ppm—(which will make permitting simpler and reduces environmental concerns)

  • It will be simple to mine surface deposits located near significant infrastructure

  • Monazite is the principal host mineral that should simplify processing

  • It will produce and sell the individual elements rather than an HREO (high-value HREOs are europium, terbium and dysprosium) concentrate

  • It is positioned to be the answer to South Korea's rare earth needs.

Last December Frontier Rare Earths signed a definitive agreement with Korea Resources Corp. (KORES), the Korean government-owned mining and natural resource investment company, to form a strategic partnership designed to accelerate the development of Zandkopsdrift. KORES also announced its intention to form a consortium comprised of a number of leading Korean companies to join the Frontier joint venture, including Samsung Group, Hyundai Motors Group, GS Group, Daewoo Shipbuilding & Marine Engineering Group (DSME) and AJU Group.

"The signing of this definitive strategic partnership agreement is a compelling endorsement of Zandkopsdrift," said James Kenny, president and CEO of Frontier Rare Earths. "We are proud that the KORES, together with a consortium of leading Korean companies such as Hyundai Motors and Samsung, have identified Zandkopsdrift as a key source of future rare earth supply. The consortium companies have combined annual sales of approximately $300 billion (B), so their willingness to partner with Frontier is a strong statement about the economic potential of the Zandkopsdrift project, and the capabilities of our management team."

Kenny added, "Korea has an international reputation for world-class manufacturing, technological and financial capabilities. KORES is at the forefront of Korean industry's drive to secure stable supplies of natural resources, of which rare earths are considered to be one of the most critical. Working together with our Korean partners, we are confident that Frontier will achieve its objective of becoming one of the first new large-scale rare earth producers outside of China."

Shin-Jong Kim, president and CEO of KORES said, "In order to support Korea's high technology, automotive and other industries, the development of Zandkopsdrift will be a strategic priority project for the KORES consortium and a critical element of KORES's efforts to secure a long-term, stable source of rare earth supply for Korean industry."

Together with Frontier, the KORES consortium will also investigate other rare earth-related downstream businesses including rare earth metals, rare earth alloys and rare earth magnets.

The Zandkopsdrift project comprises an area of approximately 60,000 hectares (ha) in the Namaqualand region of South Africa's Northern Cape Province. It is well situated some 450 kilometers (km) north of Cape Town and 230km north of the deepwater port of Saldanha Bay. Access to and infrastructure surrounding Zandkopsdrift is generally excellent.

A Preliminary Economic Assessment (PEA) has just been completed and a prefeasibility study is under way, with completion expected by the end of the year. Highlights of the PEA include:

  • NPV of $3.65B, after tax and royalties, at an 11% discount rate

  • IRR of 52.5%, after tax and royalties, and two-year payback from start of production

  • Average production of 20,000 t/y of separated rare earth oxides (REOs), generating average annual revenues of $1.1B and an estimated operating margin of 78%

  • 20-year mine life, supported by the mining and processing of 19.5 million tons (Mt) of material with an average in-situ grade of 3.12% TREO and average metallurgical recovery of 67%

  • Capital costs of $910 million for a 1 Mt/y open-pit mining operation and concentration and rare earth separation plant facilities

  • Conventional metallurgical process, comprising comminution, flotation, sulphuric acid cracking and solvent extraction.

An REO "basket price" of $58.23/kilogram (kg) has been used for Zandkopsdrift production, based on an average of three-year China Free on Board average REO prices and Roskill's mid-point 2015 REO forecasts applied to Zandkopsdrift's in-situ REO relative distribution. The PEA estimated average operating costs at $13.09/kg of separated REOs.

There is potential for life of mine to be extended beyond the initial 20 years, as the PEA mine plan only exploits about 60% of the current estimated TREO resource at Zandkopsdrift.

"Frontier is now well positioned to achieve our objective of becoming one of the first significant new producers of separated rare earths outside China by 2015," said Kenny. "The results of our PEA demonstrate the economic attractiveness of our project, and we have a world-class partner in KORES. KORES intends to invest in Zandkopsdrift, provide technical and financial assistance, and secure off-take of up to 31% of Zandkopsdrift production."

John Chadwick, Mineweb

John Chadwick is editorial director/proprietor of International Mining magazine (www.im-mining.com), and recently visited Zandkopsdrift on behalf of IM and Mineweb as the guest of Frontier Rare Earths.

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