ree projects

Hi Guys,

As many will be aware, there are quite a few REE startups on the ASX, TSX and AIM. Many are planning first production in 2016, but the reality is that only a couple will reach production in the next 5 years. I have been reviewing these other projects in detail for 4-5 months now, and found that many look attractive at first glance – but turn out to be seriously lacking on closer inspection. I wonder whether it might be worthwhile discussing the leading REE projects and comparing them with Kvanefjeld?

I figure I’d start with Arafura Resources (AFU.ASX) as they have one of the most developed REE projects – if there is interest I will continue with some other projects. Some basic stats on the AFU Nolans Project are below (mostly off memory – so DYOR). On the surface, it looks good with a well-developed DFS, great NPV and progressing to an investment decision over the next year. On closer inspection I found:
-The ore is difficult to concentrate through normal methods. The concentrate grade is only 5% resulting in high construction and operating costs in the Whyalla rare earth complex. They have announced project delays to revisit the concentrator design amongst other things - but it is a worry considering they have been working on the metallurgical design since 2005. It makes one appreciate the recent success of the GGG concentrator pilot plant.
-The pre-leach and purification flow sheets are very involved with many separate processing steps. The GGG process looks far simpler and requires no high temperature cracking.
-The NPV calculation is based on an extremely optimistic basket price of $60/kg. Current pricing for their basket is closer to $40 on my calculations.

Project Stats
-Project Stage: DFS
-Strategy: Mine and concentrate at Nolans, rail to new Whyalla refinery
-In-situ grade: Average – 2.5%
-Deposit size: Medium – 1.2mt, similar to Lynas
-HREEs: Almost exclusively light REEs. Project does contain 20.5% Nd – which is a higher value light REE
-Extraction costs: Low – open cut mining
-REO Conc grade: Poor – 5%
-Ease of refining: High temp cracking required. Process looks more complicated than other projects.
Saleable by-products: Not significant
-Waste Disposal: Low – waste returned to mine site
-Capacity: Large – 22ktpa
-NPV: $4.3b
-IRR: 30%
-Opex: Approx $20/kg
-Capex: High $1.4b+
-Process Risk: Well developed, but is complex and likely to be risky.
-Country / Political Risk: Low
-Off-take agreements: Links to Chinese companies.