don't write off lree's, page-32

Unlike many here I see value in Longtermlegs input and questioning and think it is necessary as these questions will be asked by financiers. For background, I have worked with projects before from a financing and development perspective and will try to address some of your concerns.

The comments about the two companies not being in competition are also not exactly precise as will be discussed indirectly below.

First thing I will note is that projects are not simple to understand and contain many variables.

LTL: “The point simply is it makes no difference how good your deposit is if you can’t get it into production in time - - just ask Arafura”

With this I Agree.

LTL: “As for PEK completion of the metallurgical tests will take years (not months) – and by the time PEK have cracked the metallurgy others will have beaten them to market and stolen the lions share of the available contracts.”

With this I do not agree.

When you look at projects you have to look at the type of product demand and the way in which projects need to be financed. Much like LNG projects rare earth projects are capital intensive as I am sure you would agree.

What you also must recognise is that, much like LNG projects, certainty of long term supply security is sought after and as such end users tend to enter the financing market on up front long term offtake agreements (5 or 10 years plus).

Hence when you use the argument that others will ‘beat them’ and ‘steal the lions share’ I do not think that from a project viability and security of supply standpoint that this can be validated. End users put the issue of certainty above all especially when they are pouring big money into projects they want projects that will back their long term business plans not only for two or three years but decades.

Hence in this market for rare earths it is an off take based game where contracts are signed up front early in project development and for contracts you need a resource to commit funds to and to achieve economies of scale. To draw big customers you need a big resource. The bigger, the more certainty for them and their business plans, the better! Simple as that. Consider the JORC to be the security on your loan in mining. No JORC, No loan/offtake, big dilution. More in the measured category will get you better financing terms.

Now for a fact: NTU do not have a resource. And when they do have a resource they may not have one that is in line with longer term objectives of large end users as it is not likely to fulfil the larger mine life required. I was in NTU in the glory days and the very confident style of reporting always worried me.

Fact is as you have acknowledged PEK have a massive JORC resource and at a very good grade (which i'll get to next).

You also say: “When it comes to mining it’s “grade, grade, grade,” and NTU has it in spades”

I agree they have good grades no doubting that. However when it comes to mine development it is most definitely NOT “grade, grade, grade.”

The world’s most profitable mines are often low grade Copper gold deposits with grades of circa 1% Cu it all comes down to economics. Of course grade is a factor in opex/capex but a very small one at that when others don’t fall into line.

As I stated above and from my experience there are so many more important variables that affect capex and opex consideration. I can’t run through them all as I’ll be here forever but here are a few:

Comparative labour input costs: Tanzania looks cheap compared to Aus, real cheap. Australian Miners are facing a big problem here and many clients say it’s the biggest problem facing the industry they can’t compete on these costs anymore and need to rely on our infrastructure in place as only exceptional large scale deposits will make the cut. This is going to be increasingly important in a competitive RE market.

Tonnage and scale: PEK is huge. NTU not so large.
The nature of the ore body (weathered or hardrock, free dig or blast which is often expensive): PEK is a huge and rather consistent ore body, enough weathered material ‘at surface’ to last decades before they even touch the hard rock. Big alluvial and free dig component = big savings from blasting, digging and crushing.

NTU is a different ballgame not as favourable in this department. You guys are more sporadic and scattered, and in many cases over 100m below surface. You will be digging for a while before you get even get to the relevant ore bodies. Mining costs will be significant.

Utility costs & Infrastructure: Not 100% on NTU infrastructure but they may be able to source more reliable power cheaper than PEK. Not sure on water.

PEK has plenty of water, however power reliability needs to be addressed as the grid over there is not as reliable. Connecting road not too far from the deposit though.

Taxes and political stability: Tanzania one of the most stable and mining friendly economies with solid mining law. A friendly tax regime over there as well. As you say mine nationalisation could be an issue but Julia could just as easily introduce a new tax and are just as unpredictable on policy.

Financing rates: See above. Bigger tonnage JORC = More security on a loan = certainty = Better financing terms.

Equipment cost: Cheaper in Tanzaia.

Pit optimisation design: Ngualla open pit from surface and consistent body. Makes for an ideal open pit mine with good strip ratio. NTU is scattered pockets and at depth, somewhat lowers economic profile of the project.

Multi-commodity hedge: Ngualla has phosphate, Niobium and Tantalum all in high demand and which can generate complementary cash flow credits. Minimal thorium and uranium which no one really wants in their ore as ‘by products’ these days. Looking good here also.

And of course metallurgy (of which grade is one component): NTU have the higher grade and the supposed 'conceptual' flowsheet (which will still need work) that has a circa $90m capital (how they state this figure with the minimal resource data they have is beyond me). They still may run into inconsistent geology as well.

When you put it into perspective PEK has a more diverse product range and when the calcs are done will likely contain more volume of REE (even HREE due to its sheer enormity). Diversity of product offering is another big consideration in mineral offtake agreements with big players like sojitz etc. Hence my comment about the two being in competition to some degree.

PEK have a weathered profile which is showing very positive signs of high concentrate levels. From memory in 11 or 12% acid solution which is very dilute by peer standards and would be rather cheap to source which provides cost advantage.

Why won’t it take them 5 years just to work out metallurgy as you ask?

Well going off their track record they have proven up a deposit in a couple of years that would have taken other companies 5 plus years. They have achieved a very high concentrate level (circa 80-90%) on INITIAL studies of DAL that other companies haven’t achieved after many years of study.

Again it is 'promising' in PEK's words or in NTU’s exuberant wording it may be ‘World beating and definitively excellent.’

The time frame is affected by the nature of the deposit. Ours is weathered and differs from Avalon etc. The good initial results are the largest exponent of that. In the same way that NTU’s deposit is unique and thus benefited time frames as is PEK’s. However PEK management are very conservative while NTU are quite confident and this confidence may just as easily apply to their time frame.

NTU need to prove a resource then undertake DFS, PFS, BFS etc. just as PEK do in order to TRULY prove economics an finance. These studies will consider the above aspects but are heavily reliant on a solid JORC and tonnage. It has a massive effect on economics once you go beyond payback period. Until they are complete and we see a cost per tonne and NPV figures neither party can say ‘mine is better than yours’ definitively.

However in my experience with working on various resources based projects, if i was to write debt on these projects, the factors listed above encourage me to go with PEK. In saying that though PEK does have subtle flaws.


Financiers are a lot more savvy than HC posters and retail investors. You need convincing economics as they see through the promotional touches of management teams everyday.

NTU has the capacity to make it no doubt (I hope they do) and you are in an undervalued investment however they need that resource and the tonnage to be significant. They need the ‘security’ as such.

Sorry to all who have to scroll through that comment. My posts are way too long and boring for this forum. But just outlining 'some' of the considerations in projects. They are a complex beast and at the end of the day anything can happen. Always be critical of your own stocks. Good luck.