"PEA Indicates $555 Million After-Tax NPV, 66% After-Tax IRR for Steenkampskraal Project"
TSX Venture Symbol: GWG
CUSIP: 39141Y 10 3
SASKATOON, March 18, 2013 /PRNewswire/ - Great Western Minerals Group Ltd. ("GWMG" or the "Company", TSX:V - GWG) today announced positive results from a Preliminary Economic Assessment ("PEA") of the Company's Steenkampskraal rare earth element ("REE") project that indicates strong potential for GWMG's integrated business model.
Project highlights (all amounts in this news release are in $ Cdn. unless otherwise indicated):
- $555 Million after-tax net present value ("NPV") applying a 10% discount rate and a 28% South African corporate tax rate
- 66% after-tax internal rate of return ("IRR")
- 4.3 year estimated Project payback period, on an after-tax basis, from start of underground mining production.
- 11 year potential life of mine
GWMG President and Chief Executive Officer Marc LeVier said, "The PEA conducted on the Steenkampskraal project confirms our internal projections of a high grade and excellent distribution of the critical rare earth elements. The impressive, high-grade nature of Steenkampskraal translates into lower tonnages for processing, which in turn, results in low capital cost requirements relative to other REE projects. The work undertaken on the project to date and the accelerated metallurgical testing program is intended to enable GWMG to advance the project rapidly. This 'early mover' status, combined with GWMG's existing alloy manufacturing capacity, positions GWMG very favourably."
Financial and Operating Highlights
|After Tax at 10% discount rate and 28% tax rate|
|Total Rare Earth Oxides ("TREO") basket price per kilogram||$53.13|
|Total revenue over life of mine||$2.65 Billion|
|Average steady state annual revenue at full production (approximately 5,000 tonnes/year)||$257.2 Million|
|Operating Costs: (per kilogram of contained rare earth oxide "REO")|
|Rare earth chloride ("RECl")||$5.98|
|Mining operations and RECl Plant - pre-production of RECl||$44.53 Million|
|Mining operations and RECl Plant - post-production of RECl||$40.76 Million|
|Sustaining capital - post-production of RECl||$10.51 Million|
|RE Separation Plant||$62.06 Million|
|Cash on hand at December 31, 2012, exclusive of US$7.2 million segregated and escrowed for interest payments on bonds||$51.4 Million|
|Life of Mine:|
|Tonnes of Run of Mine ("ROM") in potential mining inventory in situ (excluding tailings)||578,130|
|Tonnes TREO content in situ (excluding tailings)||70,532|
|Inclusive of 124 drill holes reported, exclusive of 84 drill holes as yet unreported||11 years|
The PEA is preliminary in nature and includes an economic assessment of Indicated Mineral Resources and Inferred Mineral Resources (terms which have the meanings ascribed to them by the Canadian Institute of Mining, Metallurgy and Petroleum, CIM Definition Standards on Mineral Resources and Mineral Reserves).
The Inferred Mineral Resources are quantified based on the potential viability of the Resource Estimate of the Steenkampskraal project and are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as Mineral Reserves (CIM Definition, Standards on Mineral Resources and Mineral Reserves).
Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability and there is no certainty that the results of the preliminary economic assessment will be realized.
The PEA contains a sensitivity analysis which demonstrates that the Project valuation is most sensitive to changes in REO prices. The Project valuation is least sensitive to changes in capital expenditures.
GWMG has selected the midpoint of the Roskill 2015 forecast of rare earth prices for the PEA. The forecast prices are the averages of the high and low ranges to a midpoint.
Midpoint of Roskill 2015 Forecast
NPV Sensitivity to Change in
Basket Price at 10% Discount Rate
|REO Price||NPV ($ Million)|
Production of mixed RECl (concentration and hydrometallurgical stages) is projected to commence within 24 months of the completion of required Project financing, at a design capacity of approximately 5,000 tonnes per year of contained REOs.
Production of separated REOs is projected to commence within 12 months of the commencement of RECl production at a design capacity of approximately 5,000 tonnes per year of separated REOs per annum.
Resource Estimate Highlights
The PEA is based on the Resource Estimate for the Project, as filed on SEDAR on March 7, 2013, which reports 278,000 tonnes of Inferred Mineral Resources at an average grade of 15.2% TREO and 176,000 tonnes of Indicated Mineral Resources at an average grade of 18.2% TREO, each using a 1% TREO cut-off grade. The Resource Estimate includes the historic mine area (the "Monazite Mine Area"), and the exploration areas to the east and west of the past producing Monazite Mine Area (the "EXP Area") as well as the historic upper tailings and lower tailings.
|Monazite Mine Area|
EXP Area within
Existing Mining Right
Category Totals for
Previous (May 2012) estimate
Total (Monazite Mine Area,
Upper and Lower Tailings)
(1) For the Resource Estimate, "tonnes" and "grades" were rounded to 3 significant figures. Apparent errors in the totals may occur due to rounding.
(2) "LREO" means lanthanum (La2O3), cerium (CeO2), praseodymium (Pr6O11), neodymium (Nd2O3) and samarium (Sm2O3). "HREO" means europium (Eu2O3), gadolinium (Gd2O3), terbium (Tb4O7), dysprosium (Dy2O3), holmium (Ho2O3), thulium (Tm2O3), ytterbium (Yb2O3) lutetium (Lu2O3) and yttrium (Y2O3). "TREO" includes yttrium.
For a complete description of the Resource Estimate and Technical Report please refer to the Resource Estimate, as filed on SEDAR on March 7, 2013, at www.sedar.com.
Steenkampskraal Project Overview
The Project is comprised of three activities, as part of GWMG's overall five-part integrated business model, namely (i) the underground mine and future reprocessing of tailings; (ii) the RECl Plant that produces mixed RECl; and (iii) the solvent extraction separation plant (the "RE Separation Plant") that produces separated REOs. Thereafter, GWMG's integrated business model includes installation of metal making capacity and expansion of current alloy production capacity at Less Common Metals Limited ("LCM"), GWMG's subsidiary located in the United Kingdom.
The Project is based on a high grade / narrow vein underground mine, which was successfully operated by Anglo American to recover thorium between 1952 and 1963. GWMG's proposed mining method, ventilation and overall operations consist of common and conventional processes and procedures, of which there are numerous analogues throughout South Africa. The Project is estimated to hoist approximately 165 tonnes per day of ROM material.
In addition, and very importantly to the directors and management of GWMG, the Project has been designed to, concurrently with production, rehabilitate historical environmental impacts caused by former operators.
Steenkampskraal Monazite Mine (Pty) Ltd ("SMM"), a subsidiary of GWMG, was awarded a New Order Mining Right (the "Mining Right") permitting mining operations in an area of approximately 474 hectares for a 20-year period commencing June 2, 2010. SMM also holds a Certificate of Registration ("COR") with the South African nuclear regulators, which authorizes processing of radioactive material with respect to the Steenkampskraal site, including the long term storage of the thorium by-products that will be produced. The COR also allows SMM to apply for and obtain specific approvals for proposed methods of storage of by-products.
Through its subsidiary Rare Earth Extraction Co. Limited, GWMG has embarked on a mine refurbishment program which includes establishment of surface infrastructure, rehabilitation of the existing shaft, opening underground access and main haulages, the re-survey of existing underground workings, and the installation of temporary ventilation to facilitate preliminary activities. Furthermore, the general refurbishment has permitted extensive in-fill and exploratory diamond drilling on surface, as well as several campaigns of underground sampling for assay and metallurgical testwork, and geotechnical investigations. These undertakings and investigations have facilitated the Resource Estimate and the preparation of the PEA. In the interest of health and safety, and to ensure efficient operations, a program of re-vamping the raises, drives, cross-cuts and re-equipping of services such as compressed air lines, water lines, power supply, rails and ground handling box fronts has commenced.
|Production Statistics||Main mine||
|TREO Grade for Base case (40% dilution of ROM)||12.77%||11.75%||8.84%||11.99%||percent|
|RECl Plant Flotation TREO recovery||85.0%||85.0%||85.5%||N/A||percent|
|RECl Plant Hydromet TREO recovery||85.0%||85.0%||77.8%||N/A||percent|
|RECl Plant product TREO content||23,492||27,467||2,220||53,179||tonnes|
|Weighted Average RE Separation Plant recovery||93.62%||93.62%||93.62%||93.62%||percent|
|RE Separation Plant Production||21,993||25,714||2,078||49,786||tonnes|
Mining, RECl and RE Separation Summary
The underground host rock demonstrates notable competence as even after 50 years the majority of the excavated and remaining old mining area shows no visible signs of stress or instability.
The underground Monazite Mine Area will use a combination of conventional and shrinkage stoping for flat and steeply dipping sections of the mine, respectively. Conventional jack leg drilling and blasting will be used, with cleaning being done by winches scraping the broken rock down the raises to main haulages.
The underground EXP Area is immediately adjacent to the underground Monazite Mine Area, both contained within the New Order Mining Right. Access to the EXP Area is planned to be through a new separate shaft for personnel and materials. This shaft will also be used for the intake ventilation to the workings and there will be a separate exhaust return air raise. For the purpose of the PEA, it has been assumed that the EXP Area mine layout will be similar to the existing Monazite Mine Area.
The ultimate objective of the RECl Plant is to extract the REE's from the hoisted ROM material and convert them to a purified mixed RECl. This will be performed via comminution processes, followed by concentration, and then several stages of leaching to remove impurities.
The RECl Plant is being designed to treat 70,000 tonnes per annum, or approximately 192 tonnes per day, of hoisted ROM feedstock, which is estimated to be sufficient to produce RECl containing up to 6,000 tonnes of REOs per annum. The ROM will be stockpiled on surface to be conveyed to the RECl Plant. Preparation of ROM will include primary and secondary crushing followed by ball milling. The milled material will then be floated to remove copper and iron sulphides, followed by a monazite float to concentrate the REE-containing monazite. This will be cracked and followed by water and acid leaching to remove impurities and convert the REEs to a mixed RECl. Flotation tails and precipitated impurities will be stockpiled under controlled conditions pending re-use or recycle. The mixed RECl will be hauled to the RE Separation Plant at Vredendal in the Western Cape of South Africa, located approximately 100 kilometres from the Steenkampskraal mine site.
There exists the potential to produce an alternative product in the form of a RE carbonate from the RECl Plant, subject to process development and proof of economic feasibility. Operations at the Steenkampskraal site are designed to remediate historical environmental impacts from previous operators.
The mixed RECl will then be separated and converted into individual REOs using a series of solvent extraction steps. Metals from the purified solutions will subsequently be precipitated and calcined to convert to REOs. No waste products will be stored at the RE Separation Plant.
Certain individual REOs (mainly those used in magnet alloys) will be shipped to and utilized by LCM for further processing into metals and alloys for its customers, while the balance of the REOs produced will be sold into the spot market. This comparatively short-term spot market approach is the industry norm. However, GWMG is investigating the potential for off-take arrangements.
Human Resources Summary
The Company's project management team will deal with an EPCM contractor who will manage all contractors during the planning, construction and operations phases of the Steenkampskraal operation. Led by the Project Director, the team will include a cross-section of experience and skills to ensure that appropriate expertise is available for comprehensive review of all areas of the mine, RECl Plant and RE Separation Plant.
It is anticipated that approximately 450 employees will be required throughout the operation including the mining, chloride production and separation components. It is also anticipated that the Company will engage in a significant level of staff training in order to ensure that sufficient multi-skilling and cross-training are achieved in order to minimize staffing levels.
Mineral Processing and Metallurgical Testing
Various mineral processing and metallurgical investigations have been undertaken on samples from the Project, including test work by SGS South Africa (Pty) Ltd. The current testing program consists of accelerated parallel testing at Mintek (South Africa) in respect of optimization of flotation and hydrometallurgical leaching tests, as well as by the Saskatchewan Research Council. Conceptually, processing of the monazite-rich concentrate will consist of two basic components. Beneficiation, which produces a mineral concentrate and consists of crushing, milling, and concentration technology such as gravity, magnetic, and flotation techniques and leaching which takes the mineral concentrates and produces a liquid chloride solution of mixed RECl.
The mixed RECl Plant will be constructed at the Steenkampskraal mine site, where thorium will be separated from the concentrate to meet the required specifications for the RE Separation Plant and to meet regulations to allow shipment.
Design work for the mine and processing plants commenced under the guidance of DRA Mineral Projects of South Africa ("DRA"). DRA has an excellent track record of utilizing world class standards in its design work and is well qualified for the Project.
The monazite concentrate has been successfully tested to create a mixed RE chloride solution, with the potential to produce an alternative product, namely an RE carbonate, currently being evaluated as an opportunity to advance cash flow. The testwork continues to further optimize process conditions and reagent consumptions for all stages of treatment.
The Steenkampskraal Project is being advanced under an existing and valid Environmental Management Programme and Environmental Impact Assessment that has been reviewed and accepted by the applicable governing bodies of the Government of South Africa. As changes in Company plans or government regulations arise, the Company will take all necessary steps to ensure it remains fully compliant with current regulatory requirements.
On site, secure, fortified, long term storage will be authorized under the Company's COR, and consequently there will be no requirement for off-site transportation of any radioactive materials. The final storage procedure is to be assessed and confirmed according to National Nuclear Regulator and international standards.
Options under Evaluation
Although the PEA focuses on the Steenkampskraal Project, the Company is convinced it is uniquely positioned within the rare earth sector due its ownership of LCM. The alloy manufacturing capability of LCM provides the Company with ready access to international markets. The Company's fully integrated business model and the long established business relationships earned by LCM over a 21 year time frame, provide a high level of competitive advantage.
In the course of evaluating its strategic options for the development of rare earth separation capacity, the Company has focused on the construction of the RE Separation Plant at Vredendal in the Western Cape of South Africa, located approximately 100 kilometres from the Steenkampskraal mine site. In addition to constructing the RE Separation Plant, and as a means to achieve revenue in the shortest timeframe, the Company continues to evaluate the potential for entering into a tolling arrangement whereby the mixed rare earth product produced at the RECl Plant could be separated through the facilities of a third party. This strategy, if followed and successful, would significantly reduce initial capital requirements for the Project, thereby positively impacting the Net Present Value.
There also exists the potential to produce an alternative product in the form of a RE carbonate from the RECl Plant, subject to further examination of chemical and economic feasibility.
The Company recognizes the funding requirements to deliver the project and the primary objective of generating cash flow at the earliest date possible, and is aggressively pursuing its options with the following priorities:
Reductions in capital requirements through the additional studies
currently underway as recommended by the Company's advisors and
building to the standard of "fit for purpose" and
- Investigating the potential for an off-take arrangement leveraging off of our existing knowledge of downstream customers and the interest in securing a long term supply of metals.
The PEA is based on a Mineral Resource estimate and Technical Report (the "Resource Estimate") prepared in accordance with National Instrument 43-101 - Standards of Disclosure for Mineral Projects ("NI 43-101"), as announced and filed on SEDAR on March 7, 2013. The current Resource Estimate indicates a material increase in resources at the Steenkampskraal project (the "Project") as compared to the May 31, 2012 resource estimate. The Company will file a technical report in respect of the PEA within the next 45 days on SEDAR under GWMG's profile at www.sedar.com. The PEA was prepared by Snowden Mining Industry Consultants (Pty) Ltd. ("Snowden") of Johannesburg, South Africa.
The PEA was prepared by Mr Bill McKechnie, BSc. (Hons), Pr.Sci.Nat, MSAIMM, MGSSA, the General Manager, Africa Region of Snowden Mining Industry Consultants (Pty) Ltd. Mr. McKechnie consents to the inclusion in this news release of the matters based on his information in the form and context in which it appears. Mr. McKechnie has sufficient experience relevant to the activity which he is undertaking to qualify as a Qualified Person as defined under NI 43-101 and supervised the preparation of the contents of the PEA disclosure in this news release.
The Resource Estimate was prepared by Mr. Ivor Jones, B.Sc. (Hons.), MSc, FAusIMM, CP Geo., the Group General Manager - Geosciences of Snowden Mining Industry Consultants (Pty) Ltd. Mr. Jones consents to the inclusion in this news release of the matters based on his information in the form and context in which it appears. Mr. Jones has sufficient experience relevant to the activity which he is undertaking to qualify as a Qualified Person as defined under NI 43-101 and reviewed the contents of the Resource Estimate disclosure in this news release.
Snowden was assisted by Dr. John Hancox, Pr.Sci.Nat., General Manager, Africa of Caracle Creek International Consulting (Pty) Limited of Johannesburg in the preparation of the Resource Estimate. Dr. Hancox provided geological interpretations and the drillhole and underground channel sampling database for the Resource Estimate. Dr. Hancox has sufficient experience relevant to the style of mineralization and type of deposit under consideration and to the activity which he is undertaking to qualify as a Qualified Person as defined under NI 43-101 and has reviewed the contents of the Resource Estimate sections of this news release.
Brent C. Jellicoe, B.Sc. (Hon.), P.Geo., Director of International Exploration for GWMG, is the Qualified Person responsible for supervising the preparation of the technical content of this news release.
A Conference Call to discuss the results of the PEA news release with President & CEO Marc LeVier as well as members of the GWMG management team is scheduled for Wednesday, March 20 at 1:00 p.m. Eastern Standard Time, 5:00 p.m. London Time.
Participants can sign up for the conference call as follows:
- Conference ID: 23429365
- Participants are advised to dial in 10 minutes prior to start time and use the URL below if you wish to view the presentation during the call. To view presentation use link: http://www.newswire.ca/en/webcast/detail/1128523/1230937
|Conference call numbers:|
|North American Toll Free:||1-888-231-8191|
|Local Dial-In #:||(647) 427-7450|
|International Toll-Free Dial-In Number(s):|
|Encore presentation of conference call:|
|Toll Free Dial-in Number:||1.855.859.2056|
|Local Dial-in Numbers:|
|Encore Password: 23429365|
|Encore Dates: March 20, 2013 at 16:00 ET to March 27, 2013 at 23:59 ET|
Great Western Minerals Group Ltd. is engaged in becoming an integrated rare earth producer. Its specialty alloys are used in the battery, magnet and aerospace industries. Produced at the Company's wholly owned subsidiaries Less Common Metals Limited in Ellesmere, U.K. and Great Western Technologies Inc. in Troy, Michigan, these alloys contain transition metals including nickel, cobalt, iron and rare earth elements. As part of the Company's vertical integration strategy, GWMG also holds 100% equity ownership in Rare Earth Extraction Co. Limited, which controls the Steenkampskraal monazite mine. In addition to an exploration program at Steenkampskraal, GWMG also holds interests in four active rare earth exploration and development properties in North America.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Certain information set out in this News Release constitutes forward-looking information. Forward-looking statements (often, but not always, identified by the use of words such as "expect", "may", "could", "anticipate" or "will" and similar expressions) may describe expectations, opinions or guidance that are not statements of fact and which may be based upon information provided by third parties. Forward-looking statements are based upon the opinions, expectations and estimates of management of GWMG as at the date the statements are made and are subject to a variety of known and unknown risks and uncertainties and other factors that could cause actual events or outcomes to differ materially from those anticipated or implied by such forward-looking statements. Those factors include, but are not limited to, the successful and timely completion of its preliminary economic assessment at Hoidas Lake; the assumptions and estimates in the preliminary economic assessment of the Steenkampskraal project proving to be accurate over time; the construction, commissioning and operation of the proposed monazite processing facility and separation facility within estimated parameters; mine refurbishment activities; reliance on third parties to meet projected timelines and commencement of production at Steenkampskraal; risks related to the receipt of all required approvals including those relating to the commencement of production at the Steenkampskraal mine, delays in obtaining permits, licenses and operating authorities in Canada, South Africa and China, environmental matters, water and land use risks; risks associated with the industry in general, commodity prices and exchange rate changes, operational risks associated with exploration, development and production operations, delays or changes in plans, including those estimated in the preliminary economic assessment of the Steenkampskraal project; risks associated with the uncertainty of resource estimates; health and safety risks; uncertainty of estimates and projections of production, costs and expenses; risks that future Hoidas Lake or Steenkampskraal and region exploration results may not meet exploration or corporate objectives; the adequacy of the Company's financial resources and the availability of additional cash from operations or from financing on reasonable terms or at all; political risks inherent in South Africa and China; risks associated with the relationship between GWMG and/or its subsidiaries and communities and governments in Canada and South Africa, radioactivity and related issues, dependence on one mineral project; loss of, and the inability to attract, key personnel; the factors discussed in the Company's public disclosure record; and other factors that could cause actions, events or results not to be as anticipated. In light of the risks and uncertainties associated with forward-looking statements, readers are cautioned not to place undue reliance upon forward-looking information. Although GWMG believes that the expectations reflected in the forward-looking statements set out in this press release or incorporated herein by reference are reasonable, it can give no assurance that such expectations will prove to have been correct. Except as required by law, GWMG does not assume any obligation to update forward looking statements as set out in this news release. The forward-looking statements of GWMG contained in this News Release, or incorporated herein by reference, are expressly qualified, in their entirety, by this cautionary statement and the risk factors contained in GWMG's Professional Securities Market listing particulars available at www.sedar.com.
Cautionary Note For US Investors Concerning Estimates of Indicated and Inferred Resources
This press release uses the terms "Indicated" and "Inferred" resources. United States investors are advised that while such terms are recognized and required by Canadian regulations, the United States Securities and Exchange Commission does not recognize them. "Inferred" mineral resources have a great amount of uncertainty as to their existence, and as to their economic and legal feasibility. It cannot be assumed that all or any part of an Inferred mineral resource will ever be upgraded to a higher category. Under Canadian rules, estimates of Inferred mineral resources may not form the basis of feasibility or other economic studies except in limited circumstances and with specific notification to the reader. United States investors are cautioned not to assume that all or any part of any mineral resources will ever be converted into mineral Reserves (as defined under NI 43-101). United States investors are also cautioned not to assume that all or any part of an Inferred mineral resource exists, or is economically or legally mineable.
SOURCE Great Western Minerals Group Ltd.