Hi Anndy, Your estimate for the Browns Range REO basket price...

Hi Anndy,

Your estimate for the Browns Range REO basket price looks good to me, dusting off my RE spreadsheet and using recent SMM spot pricing less 13% PRC VAT, my estimate for the current Browns Range basket price is around US$65/A$100 per kg (@ A$1-US$.65c).

The ILU offtake agreement is for up to 5,500t per annum of contained TREO in xenotime concentrate over the initial 8+ years of the Wolverine mine life, so multiplying the 5.5kt of TREO x A$100 gives us a basket value for the contained REO's of A$550m per annum. Then you need to apply a concentrate processing discount factor. From the look of last year’s RE carbonate sales figures to thyssenkrupp, NTU were receiving 50%-60% of the contained REO’s basket price, however for a concentrate it will be lower. Mountain Pass and Rainbow RE sell bastnasite and monazite concentrate respectively to PRC processors reportedly priced at 30% of the contained REO’s, there may be a premium paid for xenotime conc. given it’s greater HREO weighting but as none is reported I’ll assume the 30%

So A$550 x 30% gives NTU potential revenues for Wolverine xenotime concentrate of A$165m per annum from the ILU offtake at current REO spot pricing. It's worth noting that there are adjustments for CPI under the pricing agreement so today's revenue estimate of A$165 is effectively indexed to CPI for the life of the offtake agreement, which derisks the deal considerably for NTU.

To estimate profitability you also need to have a good handle on the projects overall capital and operational costs, for which we need to see the updated FS, so I'm not going to have a stab at that for now. There are however two major cost factors in the proposal that have caused me some concern as possible deal breakers previously, being transport costs of concentrate from the mine to the processing facility and underground mining costs for Wolverine;

According to Google Maps the road distance from the Browns Range RE project to Eneabba is approx. 2,700ks. Looking at AUS road freight cost estimates for B-doubles capable of carrying 50t loads, the current Aus. Gov. estimate is 6.8c per tonne per kilometre. 5,500t of TREO contained in a 25% concentrate would require 22,000 tpa trucked 2,700ks from Browns Range to Eneabba at a cost of A$183 per ton. As the estimated mine gate price of the contained TREO in one ton of 25% concentrate is A$30 x 250kg = A$7,500, A$183/t in road freight cost would not appear to be deal breaker.

The UG mining costs are a bit harder to quantify, but simply googling "sub level cave costs per ton" gives you <US$20/ton. My estimate factoring in average TREO grade for Wolverine of .98% and beneficiation recoveries of 78% (but with no allowance for mining losses or dilution as you really need to see the mining study to estimate this) are for 447kt of ore mined per annum to produce 5,500tpa of concentrate. 447,000tpa x US$20 gives us US$8.94m/A$13.73m pa mining costs before dilution/losses. A considerable sum but still no deal breaker given potential revenues of $A165m pa, and it's not as if open cut mining is free!

Hopefully my assumptions and maths is reasonably correct, but to sum up I can't see anything that would lead me to believe that the proposed project is undoable, however to assess whether it would be profitable or not we really need to wait to see the revised feasibility study...GLTAH!