Peak Resources delivers "robust" Ngualla PFS, maiden Ore Reserve
Peak Resources' (ASX: PEK)
should trade higher after it released an economically robust
Pre-Feasibility Study for its Ngualla Rare Earth Project in Tanzania
that lowers underlying capital costs by US$91 million and highlights NPV
of US$1.31 billion.
The company has also defined a maiden Ore Reserve of 20.7 million tonnes at 4.54% rare earth oxides.
Other highlights of the DFS include a 39% IRR for a base case project producing 10,000 tonnes per annum of separated high-purity rare earth oxides; payback in the third year of production; and average annual operating free cash flow of US$174 million for 58 years.
Notably, 83% of Ngualla’s forecast revenue is derived from high value, high demand neodymium – praseodymium along with mid and heavy rare earth products.
“We are extremely happy with the results from the PFS. These show the project to be robust with an extremely long mine life and attractive free cash generation,” managing director Darren Townsend said.
“From the detailed work completed we have identified opportunities for potential further operating cost reductions through the optimisation of the processing circuits and additional reagent recycling.
“With the positive outcome of the study we will step up our discussions with a number of potential strategic financial partners with a view to rapidly progressing the development of the Ngualla Project.”
He also noted the announcement of an Ore Reserve was an important milestone in the development of the Ngualla Project into a low cost producer of high quality separated rare earth products.
“The Ore Reserve is one of the world’s largest outside of China and is also high quality with over 86% in the highest JORC Proved category,” Townsend added.
The detailed PFS and economic assessment for Peak’s wholly-owned Ngualla project is based on extensive evaluation and metallurgical test work programs that confirmed the project as having low capital and operating costs along with a long project life.
Pre-tax and royalty NPV has being estimated at US$1.31 billion while post-tax and royalty is US$1 billion. IRR is expected to be about 39%.
Data from a high quality Resource and detailed mine planning schedule was fed into a processing flow sheet based on data from metallurgical test work completed for every stage of the overall extraction process from Ngualla’s mineralisation to high purity separated rare earth products.
Sophisticated engineering simulation and mass balance modelling of the demonstrated metallurgical process supports the detailed capital and operating cost estimates for the PFS.
The conventional open pit mine requires a simple, low cost, easy to operate acid leach extraction process.
This has reduced underlying capital cost by 24% from the May 2013 Revised Scoping Study to US$282 million while Capex is estimated at US$367 million (including a 30% contingency).
Operating costs are estimated at US$11.74 per kilogram.
In addition, the estimated 58 year mine life covers just the weathered Bastnaesite Zone alone, which hosts 22% of the overall 4.4 million tonnes REO Resource.
The Ngualla Mine and processing plant are expected to produce 10,000 tonnes per annum of >99% purity, separated rare earth oxide products.
This production rate is based on Proved (86%) and Probable (14%) Ore Reserves of 20.7 million tonnes at 4.54% rare earth oxides.
About 83% of Ngualla’s forecast revenue is derived from the high value, high demand neodymium – praseodymium as well as mid and heavy rare earth products.
The company has used conservative price assumptions with an average product price of US$29.29 per kilogram of high purity separated REO.
This is leveraged to any further increases in rare earth prices with potential for after tax and royalty NPV to increase to US$ 1.6 billion for an additional 25% increase in prices.
Maiden Ore Reserve
The Maiden Ore Reserve of 20.7 million tonnes at 4.54% REO, or 941,000 tonnes of contained REO, was estimated by independent mining consultancy Orelogy Group using the Measured and Indicated portions of the Resource for the weathered Bastnaesite Zone at a 3% REO cut-off grade.
Metallurgical test work has shown high rare earth recoveries can be expected from the weathered Bastnaesite Zone portion of the Ngualla Mineral Resource using the metallurgical process demonstrated.
A geometallurgical model was developed based on geology, geochemistry and leach variability test work that identifies this mineralisation.
Mining losses and dilution are expected to be minimal due to the thick blanket morphology of the deposit and the use of small mining equipment operating at a relatively slow total mining rate of 1.2Mt of waste plus ore per annum over the life of mine.
Mineralisation within the weathered Bastnaesite Zone occurs as a flat lying thick blanket with the highest grades at surface and material that is predominantly soft and friable.
The mine design was based on the pit shell selected during the optimisation exercise. Mining is through two successive 5 metres benches for a batter height of 10 metres with a face slope angle of 50 degrees and overall pit slope angle of 37 degrees.
This slope angle is conservative and expected to be improved on completion of the geotechnical investigations to be undertaken during the Definitive Feasibility Study.
Peak has developed and successfully demonstrated a metallurgical process for taking the weathered Bastnaesite Zone mineralisation through to high purity separated rare earth oxide products.
The relatively simple three stage process consists of:
- Beneficiation: physical concentration of the rare earth host minerals and rejection of gangue minerals;
- Recovery: chemical recovery, purification and concentration of the rare earths using a simple sulphuric acid leach; and
- Separation: purification and recovery of individual or grouped high purity rare earth oxides via solvent extraction.
Uranium and thorium levels are extremely low within the ore body and average 16ppm and 59ppm respectively. No deleterious elements have been identified.
The Ngualla Project comprises two Prospecting Licences, PL6079/2009 and PL9157/2013, located in southwest Tanzania, 55 kilometres west of the main north-south trunk road in the west of the country.
A 827 kilometre long bitumen highway and the TAZARA railway connect the city of Mbeya, 150 kilometres south of the site, to the deep water sea port of Dar es Salaam.
Ongoing major upgrades to the road and rail network are bringing this region’s infrastructure up to first world standards and is a major advantage for Ngualla’s logistics and site access.
Peak will undertake a required Environmental and Social Impact Assessment as part of the Definitive Feasibility phase of the project and submit the findings to the Tanzanian National Environment Management Council for review and approval by the Minister responsible for the environment.
The whole process is well established and will take between 6 to 12 months, so will be completed in parallel with the Definitive Feasibility study.
Ngualla is targeting a 2016 start for production.
Peak Resources has reached two key value accretive milestones for its Ngualla Rare Earth Project in Tanzania with the release of its Pre-Feasibility Study and maiden Ore Reserves.
The PFS establishes Ngualla as an economically robust project with a pre-tax and royalty NPV of US$1.31 billion as well as a post-tax IRR of 39%.
Notably, the project also offers low capital and operating costs, a long initial mine life of 58 years as well as leverage to rising rare earth prices.
We consider the study is share price accretive by 30-40%.
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