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.
Pre-Feasibility Study
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.
Processing Method
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.
Ngualla Project
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.
Analysis
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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