Ann: High-Grade Rare Earth & Niobium Zones at C3 & C5 - Mangaroon, page-66

@3blindmonkeys, last part of that last post was replying to @TheDragonfly obviously. When I say "1% TREO isn;t going to fly at C3" that's a broad brush prediction, based on lots of unknown variables of course, some like RE-Pricing that will make any deposit economic if it's high enough. The market isn;t going to price in highly unlikely, if possible outcomes, so we can ignore the unlikely and focus on the probable because that will heavily influence the share price today. I say with great confidence the West Coast Eagles won;t win next years AFL premiership, even though the season hasn;t started and it's possible they will...

What price makes it economical to mine and sell this stuff? Some ask, everyone should want to at least have the conversation. The simplest way to get a sight on what results DRE are aiming for at C1-C5 is to at least put some upper and lower boundaries on what that might be. HAS came out with yet another feasibility recently, updating costs and a 2-stage strategy because the market simply won;t finance or fund Yangi anywhere near current REO prices despite $320M of cheap government loans. So at the minimum, a new carb deposit must do better than HAS Yangi margins per tonne or ore. Mining costs at Yangi are 33% of $190M annual opex, and based on variable mining costs and some energy reduction milling softer ore it's fair to say a lower strip, free dig carb laterite pit would have opex ~80% of Yangi, or ~$150M annual avg. Maybe 75% of Yangi opex if enough fixed overheads are reduced leveraging off an existing ironstone operation.

Any laterite REE plant would need to be built separate to an ironstone plant, mixing up all the different laterite minerals would be a disaster for the float etc. There would be synergies in expanding a hydromet plant to take both ironstone and carb feed, but 805 of hydromet opex is variable per tonneof feed. There would be significant infrastructure capex savings, but the bulk of plant and hydromet expansion capex are proportional to extra tonnes of a new mine/plant. In summary, a new carb mine would need to operate at 75% the revenue of Yangi ironstone to match Yangi's currently uneconomic margins, thus this is the minimum hurdle for DRE carb to overcome.

Likewise, I happy to assume any new DRE carb mine, leveraging off an existing ironstone operation, will be sufficiently profitable with the same revenue per tonne ore as Yangi to get up, given the substantial savings in mining and other shared fixed costs etc. That is, at 100% of Yangi revenue per tonne, a DRE carb mine is ahead 20-25% of that revenue going to profits and not costs like Yangi. So, 100% of Yangi revenue per tonne is the maximum hurdle to say DRE is on a carb winner (assuming the ironstone gets developed first and the carb can piggyback). Now we have min and max revenue per tonne targets to bookend answering the question of what 'TREO grade/NdPr/tonnes/recoveries' will likely be economic (depending on a future price yet to be determined).

What TREO grade/NdPr/tonnes/recoveries are the first critical variables to consider, because they are certainly going to be different to the ironstone veins which are a very different geological deposit. Laterite supergene hosted REE deposits are notoriously difficult to achieve high, clean recoveries due to the alteration and intergrowth of re-precipitated monazite (in Mangaroons case) and other non-recoverable REO minerals in the laterite clay profile. Mt Weld laterite monazite recover's ~65% TREO into a 33.5% TREO concentrate, Longonjo laterite monazite recover's ~40% TREO into a ~25% TREO concentrate, and Cummins laterite monazite recover's ~60% TREO into a 15% TREO concentrate as current producer/developer laterite RE deposits i know of. It's possible C3 carb laterite recovers to the very high levels of Gifford Ck ironstones they are world famous for (like Dean said in his last interview), but it's simply low probability. You have to realistic...

Putting this all together in a logical spreadsheet, I worked through the NdPr and recoveries, payability, basket-value of Yangi, Yin and C3 carb over multiple iterations to show a range of realistic possible outcomes. If you've read this far might as well push on, I think it worked out pretty well. First table compares C3 at the current 300m x 300m x30m average depth (4.3Mt @ 1.6SG btw) that averages approx 1.1% TREO and 22% NdPr:TREO ratio from eyeballing. None of the combinations of recoveries or basket value (ie how much DyTb in addition to the NdPr, lower % = higher ore revenue) produce our 75% of Yangi revenue minimum hurdle. Not even with the high ironstone recoveries as is. Supports my claim that 1% carb in laterite probably won't do it. (note, NdPr price is irrelevant to this comp table exercise, although it's a longterm 2023 REAL price assumption better margin deposit are using).


Next I increased the C3 grade to 1.5%. A few of the upside outcomes reached my minimum 75% revenue/tonne hurdle to match Yangi margins, but only just. Given Yangi is uneconomic, even reaching 75% revenue with lower opex doesn't really generate a lot of NPV you'd think, even if it gets up. Obviously a higher NdPr price puts 1.5% carb TREO into the game, but i wouldn;t get too excited.


Next I goal-seeked the carb grades that met out maximum 'in the money' hurdle of matching Yangi for 100% revenue/t ore. Obviously poor recoveries etc require higher grades and vica verca. Assuming good laterite-ore recoveries to concentrate and then into MREC and reasonable Gifford Ck basket-value the minimum grade that says this is a step up on Yangi margins and thus economic is 2% TREO. Not that surprising when you consider the grades of competing REO laterites elsewhere. Longonjo = 2.5% TREO avg over 20y LOM, Cummins 2% TREO avg over 12y (neither of those deposits I consider 'economic' btw). Mt weld is in a class of it's own.


I used US$125,000/t NdPr as a LT price that probably won;t be enough for Yangi to get up based on latest DFS Update, but may be enough for a new carb deposit with much higher margins. If you're a RE-price bull then everything looks like winner, but there are good reasons imo to avoid backing projects that require much hogher prices than US4125/kg NdPr 2023 REAL, despite what some industry experts predict. 2ic with a different view to the 'experts'... queue surprise Well there you have it. Lots of drilling and met work to be done, early days, but i think it's instructive as well as interesting to have a crack at quantifying what might be economic in a new carb discovery, thus what DRE are aiming for, and thus what ongoing results mean to DRE's valuation. It goes without saying, only time will tell.

GLTAH