Shock horror, a semi-reasonable comment from LTL. My world view has been utterly shattered.
Taking my tongue out of my cheek to give a serious response: the short of it is, you're overcomplicating things.
There are, fundamentally, two dollar figures that really matter (and a third that is relevant once we know the first two.) These apply to any mine.
The first: how much will it cost, per kilogram of finished product, to dig the stuff out of the ground and ship it to the buyer?
The second: how much will the finished product, per kilogram, bring in?
The third figure: how much will it cost to set everything up so that production can begin?
The article I linked to states explicitly: "... low operating costs of U$10.09/kg REO product ..." (which gives us the first figure), and "... capital costs of US$400m excluding contingency for the baseline case production level of 10,000 tonnes of rare earth oxide per year" (which gives us the third figure.) From that same article we have 27.1% lanthanum, 48.3% cerium, 4.74% praseodymium, 16.3% neodymium, 1.65% samarium, and relatively low percentages (<0.8% in all cases) of heavy REOs.
Looking up rare earth prices and plugging them into a spreadsheet, cutting metal prices in half where the oxide price isn't disclosed to get an estimate of the oxide value, and setting the value of Ho, Tm, Yb, and Lu to zero (since mineralprices doesn't give prices for those) gives an average value per kilo of $US38.125, for an initial operating margin of $US28.04 per kilo.
If we drop the cerium and lanthanum to nothing, the average value per kilo becomes $US28.8065, and the operating margin $18.71/kg. This assumes that we get full value for each and every element in the mix - I doubt that that will hold for the Nd-Pr mix, nor for the mid-heavy REO mix. So, let's have a look at the products Peak is talking about. There are four: a mid-heavy RE oxide; a Nd-Pr oxide; cerium oxide; and lanthanum oxide. Let's assume >99.5% purity for all of those (Peak says 99%+; this assumption simplifies matters, since mineralprices quotes >99.5% purity values.)
A quick look for Nd-Pr pricing says 400-405 thousand RMB/tonne, or $65/kg. Cerium oxide is quoted at $US12/kg. Lanthanum oxide is quoted at $US13/kg. Multiplying those figures by 48.3% and 27.1%, respectively, gives a contribution of $US5.796 and $US3.523 to the "basket price" (ie: for every kilo of finished product, the cerium and lanthanum portions will be worth that much, when you take into account their percentages within the Ngualla resource.) The Nd-Pr price, when multiplied by the total percentage that those two elements appear in the resource, gives a contribution of $US13.676 to the per kilo basket price.
The mid to heavy rare earth mix? That's harder to estimate. If I discount the per kilo values of the oxides by 50% (to allow for the fact that it's a mix, rather than the pure elements), it gives a $US5.876 contribution to the per kilo basket price.
All of these figures are calculated by taking the percentage of the element in the Ngualla resource (per that announcement I've already linked to), multiplying it by the oxide price (per metalprices or metal.com, as linked above), with a 50% discount from the metal price where the oxide price is not given), and either taking it straight across (for a pure elemental oxide product, or where a mix product price has been found), or discounting by 50% (where a mix product price has not been found).
Total per kilo basket price, based upon these assumptions: $US28.87. Take out the Ce/La products, and you still have $US19/kg (roughly).
So putting all of that long winded diatribe together, we have:
Operating cost per kilo of finished product: $US10.09.
Revenue per kilo of finished product: $US19 (discounting the Ce/La that you hate so much.)
Total operating profit: $US8.91/kg.
Cost to setup the mine: $US400 million.
Product per annum: 10,000 tonnes.
Total annual operating profit (ignoring salaries and other such matters, I'm guessing): 10,000 tonnes * 1000 kg/tonne * $8.91/kg = $US89.1 million.
Do you think that a mine that costs $US400 million to build can pay back its construction costs at a net operating profit of $US89.1 million? I reckon it's not unrealistic.
Now. The negatives. All of the above is predicated on the assumption that funding will be forthcoming. No funding? No mine. No mine? No revenue. It also assumes that the overall "basket price" will hold reasonably steady - but I reckon that the discounted value for the cerium and lanthanum (of zip) offers a more than reasonable margin of safety. Finally, it assumes that the company can find offtake partners to actually buy the product (if the company can get that, the funding should be an absolute doddle.)
It also bears repeating: that 89.1 million dollar figure is based upon the cost of operating the mine, subtracted from the revenue from selling the product. I suspect that other costs - transportation, licensing charges, and similar - may not be a part of the costs, and need to be factored in. As always, if there's anything I've missed, by all means speak up.
So, the final disclaimer: this is very much back of the envelope, rough and ready stuff. Apart from anything else, there may be factors I've missed. If you are using this as anything other than a jumping off point for your own research, you're an absolute and utter lunatic, and I refuse to accept responsibility.
Or, in other words: do your own research; don't just take my word for it.
(I've spent way too much time on this comment - I really need to get a life...)
PEK Price at posting:
9.5¢ Sentiment: Hold Disclosure: Held
(20min delay)