Avalon Rare Metals Inc. (TSX:AVL)(OTCQX:AVARF)(PINK SHEETS:AVARF) ("Avalon" or
the "Company") is pleased to announce the results of a positive Prefeasibility
Study ("PFS") on the Nechalacho Rare Earth Elements ("REE") deposit, Thor Lake
NWT, Canada (the "Project"). The PFS was completed by independent consultants
Scott Wilson Roscoe Postle Associates Inc. ("Scott Wilson RPA"). The results
demonstrate with a high degree of confidence that the project development model
as presently conceived is technically feasible and will provide satisfactory
returns on invested capital with acceptable risk. The complete report will be
posted on SEDAR by no later than July 29, 2010.
Summary of Financial Analysis
The PFS covers all aspects of project development, including mining, mineral
concentration, hydrometallurgical processing and all related infrastructure.
Scott Wilson RPA developed a financial model from first principle capital
quotations, estimates from suppliers, manufacturers, contractors and experience
based on similar operations in Canada and abroad. The resulting discounted cash
flow ("DCF") analysis summarized below shows a positive internal rate of return
("IRR") and a positive net present value ("NPV") by applying a range of discount
rates on both a pre-tax and after-tax basis. The net cash flow is based on an 18
year operating schedule. The CAD/USD exchange rate was assumed to be CAD$1.00
equals USD$0.90. The financial model assumes 100% equity financing, although the
Company plans to pursue various financing options upon completion of a bankable
feasibility study.
----------------------------------------------------------------------------
Financial Analysis Pre-Tax After-Tax
(CAD $) (CAD $)
----------------------------------------------------------------------------
IRR 14% 12%
----------------------------------------------------------------------------
Net Cash Flow $2.1 billion $1.5 billion
----------------------------------------------------------------------------
NPV @ 5% $826 million $540 million
----------------------------------------------------------------------------
NPV @ 8% $428 million $236 million
----------------------------------------------------------------------------
NPV @ 10% $246 million $97 million
----------------------------------------------------------------------------
Total Project construction capital costs inclusive of a 22% contingency were
estimated at CAN $899.7 million. Of the total capital costs, the mine, mill and
hydrometallurgical plant capital comprises CAN $589.3 million while the
remaining costs include contingency, sustaining capital, reclamation and
Engineering, Procurement, Construction and Management ("EPCM"). Average
operating costs over the 18 year life of the Project are estimated to average
CAN $267 per tonne of ore mined or $5.93 per kilogram of product. The 18 year
mine life is based on a National Instrument 43-101 compliant Probable Mineral
Reserve estimate of 12.0 million tonnes of 1.70% TREO(1), 3.16% zirconium oxide
(ZrO2), 0.41% niobium oxide (Nb2O5) and 0.041% tantalum oxide (Ta2O5). Combined
recoveries of TREO, ZrO2, Nb2O5 and Ta2O5 are 84.6% from the flotation plant and
90% from the hydrometallurgical plant. All four products will be concentrated
together and are only isolated into individual products in the final stages of
the hydrometallurgical process and therefore, their recovery costs have been
aggregated. Expected revenues are based on the following average price
assumptions in USD per kilogram: TREO equals $21.94, ZrO2 equals $3.77, Nb2O5
equals $45.00, Ta2O5 equals $130.00. Some of the price assumptions used are
above current prices, based on independent third-party long term forecasts.
Financial analyses prepared for pre-feasibility studies are designed to
determine if, after applying conservative assumptions on costs and revenues, the
project stands up as an economically viable development opportunity. In this
regard, management is pleased that, despite a higher capital cost estimate than
previously anticipated, the DCF analysis yielded positive results. Sensitivity
analyses demonstrate that profitability is most sensitive to total revenue,
exchange rate, operating costs and the metals prices. Commented President Don
Bubar, "We have reviewed our consultants' work carefully and we are satisfied
that they have been extremely thorough in their analysis of the project and have
not applied any overly optimistic assumptions in developing this economic
model."
Project Development Model
The development model proposed for the project has two site components: an
underground mine and flotation plant ("Nechalacho Mine and Flotation Plant
site"), to be located at the Thor Lake Property 100 kilometres southeast of
Yellowknife, NWT, and a hydrometallurgical plant ("Hydrometallurgical Plant
site") to be located at another site closer to existing transportation and
energy infrastructure. The PFS contemplates an existing brownfield site for the
hydrometallurgical facility at the former Pine Point Mine, 85 kilometres east of
Hay River, NWT on the south shore of Great Slave Lake, as its base case.
Construction would begin 24 to 30 months prior to operations, and reclamation
activities will commence following cessation of all operations and continue for
a period of approximately three years.
Rare earth elements ("REE") along with associated zirconium, niobium and
tantalum will be mined underground from the Nechalacho deposit. A decline ramp
(15% ramp grade) will be utilized to access the ore zone located at
approximately a 200 metre depth. Initial production will be approximately 1,000
metric tonnes per day ("tpd") and ramp up to 2,000 tpd in Year Four. At this
rate, approximately 12 million tonnes of Probable Mineral Reserves would be
mined from the Basal Zone of the Nechalacho deposit over a period of
approximately 18 years of operations. Mining will be conducted with a first pass
of primary stopes, followed by pillar extraction after the primary stopes have
been cement paste backfilled. Rubber-tired mechanized equipment will be utilized
to provide maximum flexibility. Primary crushing will be completed underground
and crushed ore and waste rock will be conveyed to the surface.
The process to produce the REE concentrate will involve conventional grinding,
crushing and flotation techniques. Processing facilities will include a
Flotation Plant that will produce a high-grade concentrate that will be barged
off-site to the proposed Hydrometallurgical Plant site for secondary processing.
A tailings management facility will be located up-slope from the Flotation Plant
and northeast of Thor Lake in a local catchment area.
The Nechalacho Mine infrastructure will include a 150 person camp, 1,000 metre
airstrip, diesel power generation for a maximum average consumption of 8.4
megawatts ("MW") at 2,000 tpd, administration, maintenance, warehouse and
concentrate loading and storage to accommodate an initial 180 tpd of concentrate
(at 1,000 tpd). All concentrates will be loaded into bulk transport containers,
hauled to the seasonal dock facility along the north shore of Great Slave Lake
and barged during the summer to the Hydrometallurgical Plant located
approximately eight kilometres from the south shore of Great Slave Lake.
The Hydrometallurgical Plant will further process the REE concentrates from the
Nechalacho Mine and Flotation Plant utilizing a flowsheet developed under the
direction of consulting metallurgist, J.R. Goode, P.Eng. The process will
include acid baking, caustic cracking, water washing, filtration, caustic
regeneration and evaporation, double salt precipitation, solvent extraction and
product drying to produce direct ship products. The proposed hydrometallurgical
tailings facility will be an engineered facility located within the existing
tailings facility that remains from the historic Pine Point Mine lead-zinc
mining operation. Using this location offers some significant potential benefits
in terms of reduced environmental impacts, operational efficiencies and enhanced
economic benefits for the Northwest Territories, however other alternatives in
southern Canada remain to be considered.
The Hydrometallurgical Plant as presently conceived will bus employees from
either Hay River or Fort Resolution on a daily basis. On average, approximately
7.3 MW of power is required for the Hydrometallurgical Plant which will be
supplied by excess hydroelectric power from the Taltson Dam most of the year
except during winter when supply is limited to about 6 MW and the remainder will
be generated by diesel power. Additional supplemental and replacement energy
alternatives are being investigated to include, wind, solar, biomass and
geothermal power. Local infrastructure will include administration, maintenance,
warehouse and product loading facilities capable of packaging and shipping up to
80 tpd of rare metal products 85 kilometres along an all season highway to a
railhead facility located in Hay River, NWT.
Avalon has developed a critical path project schedule to estimate a possible
start date for full capacity production in 2015. Construction activities are
predicted to last 24 to 30 months. The start of construction is assumed to be in
2013 upon receipt of land and water permits and financing. The schedule assumes
that the issuance of permits, financing and delivery of equipment are the only
external constraints that could modify the current schedule. This schedule is
illustrated in chart form at
http://www.avalonraremetals.com/projects/thor_lake/prefeasibility_study/.
Also, Avalon would like to recognize its Northern Aboriginal partners for their
constructive feedback and advice on minimizing environmental impacts and for
input on our mine development decisions. We value our relationship with all our
Northern communities and look forward to continuing positive future discussions
on partnerships and collaborative business opportunities.
A detailed Project Description Report filed in connection with the project
permitting process can be found on the Mackenzie Valley Land and Water Board's
public registry site at www.mvlwb.com.
Resources and Reserves
An updated Indicated and Inferred mineral resource estimate was prepared by
Scott Wilson RPA and disclosed in the Company's news release dated June 14,
2010. The summary table of resources from this release is reproduced below for
convenience but the reader is referred to the June 14, 2010 news release for
more complete disclosure of the resource estimation methodology employed and
other relevant context.
----------------------------------------------------------------------------
Tonnes % % % % ppm ppm
(millions) TREO HREO ZrO2 Nb2O5 Ga2O3 Ta2O5
----------------------------------------------------------------------------
Basal Zone
----------------------------------------------------------------------------
Indicated 14.48 1.82 0.40 3.38 0.437 144 430
Inferred 76.87 1.60 0.33 3.14 0.443 134 413
----------------------------------------------------------------------------
Upper Zone
----------------------------------------------------------------------------
Indicated 6.89 1.45 0.17 1.86 0.286 175 194
Inferred 99.06 1.29 0.12 2.44 0.364 172 210
----------------------------------------------------------------------------
Total Inferred 175.93 1.43 0.21 2.74 0.399 155 298
----------------------------------------------------------------------------
Notes:
1. CIM definitions were followed for Mineral Resources.
2. Mineral Resources are estimated using price forecasts for 2014 for rare
earth oxides (US$21.94/kg average), zirconium oxide (US$3.76/kg),
tantalum oxide (US$130/kg) and niobium oxide (US$45/kg), which are
significantly above current prices.
3. Mineral Resources are estimated using a Net Metal Return cut-off value of
CAD$260/tonne.
4. Resource densities in the block model are interpolated values averaging
2.87 t/m3.
Probable Mineral Reserves were estimated by Scott Wilson RPA as summarized
below. The Probable Mineral Reserves represent that portion of the Indicated
Resources in the Basal Zone that are included in the Mine Development plan.
Dilution included in the reserves has been calculated using values below the
cut-off value which resulted in an overall dilution of 15%.
Note: Details of individual REE grades in the Probable Mineral Reserves along
with a plan of the reserves and other relevant information are posted on the
Avalon website.
----------------------------------------------------------------------------
Tonnes % % % % %
(millions) TREO HREO ZrO2 Nb2O5 Ta2O5
----------------------------------------------------------------------------
Probable
Mineral
Reserves 12.01 1.70 0.38 3.16 0.41 0.041
----------------------------------------------------------------------------
Notes:
1. CIM definitions were followed for Mineral Reserves.
2. Mineral Reserves are estimated using price forecasts for 2014 for rare
earth oxides (US$21.94/kg average), zirconium oxide (US$3.76/kg),
tantalum oxide (US$130/kg) and niobium oxide (US$45/kg), which are
significantly above current prices.
3. Mineral Reserves are estimated using a Net Metal Return cut-off value of
CAD$260/tonnes.
4. Indicated Mineral Resources are inclusive of Mineral Reserves.
Production
Avalon's Hydrometallurgical Plant will produce four (4) saleable products in
hydrated oxide form - a total rare earth oxide, a zirconium oxide, a niobium
oxide and a tantalum oxide. These products will be packaged in sealed drums or
bulk bins for truck transport to Hay River, NWT. Canadian National Rail owns a
railhead facility immediately outside Hay River which would be utilized to ship
these products directly to customers.
At full production the Hydrometallurgical Plant will have an annual output
averaging close to 10,000 tonnes TREO, 18,000 tonnes ZrO2, 1,700 tonnes Nb2O5
and 100 tonnes Ta2O5. It is important to realize that the tantalum, niobium and
zirconium production does not involve significant extra costs as they occur in
the same mineral phases that contain the heavy rare earths (zircon and
fergusonite). They go into solution along with the rare earths and will be
separately recovered so that they do not report to the REE product.
Rates of recovery for each of these products are estimated as follows:
----------------------------------------------------------------------------
Product Flotation Plant Recoveries HydroMet Plant Recoveries
----------------------------------------------------------------------------
TREO 79.5% 93.0%
----------------------------------------------------------------------------
Zirconium (ZrO2) 89.7% 90.0%
----------------------------------------------------------------------------
Niobium (Nb2O5) 68.9% 80.0%
----------------------------------------------------------------------------
Tantalum (Ta2O5) 63.0% 50.0%
----------------------------------------------------------------------------
Combined Recovery 84.6% 90.0%
----------------------------------------------------------------------------
Capital & Operating Cost Estimates
The estimated total capital costs for the Project are summarized as follows and
are inclusive of engineering, construction and management. Over 80% of the
capital is allocated for start-up and an additional 8% is allocated after year
four for expansion to 2,000 tpd:
----------------------------------------------------------------------------
Activity Total Capital Cost Estimates
(CAD $ 000's)
----------------------------------------------------------------------------
Nechalacho Mine 99,607
----------------------------------------------------------------------------
Thor Lake Processing Facility 173,165
----------------------------------------------------------------------------
Hydro Metallurgical Plant 316,602
----------------------------------------------------------------------------
Primary Project Component Cost 589,374
----------------------------------------------------------------------------
Project EPCM 80,657
----------------------------------------------------------------------------
Contingency @ 22% 144,503
----------------------------------------------------------------------------
Sustaining Capital 73,000
----------------------------------------------------------------------------
Reclamation and Miscellaneous 12,200
----------------------------------------------------------------------------
Total Project Capital Costs 899,734
----------------------------------------------------------------------------
The operating costs for the Thor Lake Project have been calculated from first
principles based on actual quotations where possible, and from other similar
scale projects in Canada and elsewhere. The mine production is planned to ramp
up over a four year period from 1,000 tpd for the first three years increasing
to 2,000 tpd after Year Four. Operating costs will be higher at the lower
production rate and have been calculated at an all inclusive $311 per milled
tonne. Total operating costs at full production are expected to be $255 per
milled tonne for a total average operating cost over the life of the Project of
$267 per milled tonne.
Rare Metals Markets and Prices
The Nechalacho deposit contains a number of recoverable elements, the most
significant being REE. In addition, niobium, zirconium and tantalum will be
recovered. Gallium may also be recovered at a later stage. At the prices assumed
for this PFS, the rare earths represent 56% of the anticipated total project
revenues while niobium, zirconium and tantalum represent 44%. Niobium and
zirconium make up about 20% each and tantalum represents approximately 3% of
total project revenues.
Global demand for REE grew by 18% between 2006 and 2008 according to BCC
Research, but softened in 2009 to below 2007 levels due to the effects of the
worldwide recession. Demand has already shown signs of recovery and is expected
to continue its pre-recession trend and grow at a compounded average growth rate
of just over 9% between 2009 and 2014. Industrial Minerals Company of Australia
("IMCOA") forecasts demand (in terms of actual sales) to be 192,500 metric
tonnes in 2014.
It should be noted that high demand for the less available heavy rare earth
elements, europium through lutetium plus yttrium ("HREE"), (particularly
dysprosium europium, and terbium) is expected to exert greater pressure on
prices for these specific elements. The Nechalacho deposit contains an unusually
high concentration of HREE, with HREE comprising over 20% of its total rare
earth element content.
IMCOA forecasts that because of the imbalance in the primary distribution of the
REE a total of 205,000 tonnes of total rare earth production will be required in
2014 to meet the demand for the HREE and neodymium (implying that some lanthanum
and cerium production would be in excess of demand). China will continue to be
the dominant producer, but new projects in the US, Australia, and Canada, will
be needed to narrow the gap between demand and supply especially for the HREE.
A pricing model for the REE was developed by Avalon's consultants to take into
account these supply/demand factors and the nature of the mixed REE product that
will be produced by the hydrometallurgical facility. The methodology used for
developing REE price assumptions for the PFS involved first calculating a
"representative" price for individual rare earth oxides in China, then
estimating future price appreciation inside China to 2014 from various price
forecasts. Then a 2014 "outside China" price was estimated by including a
portion of the VAT and tariffs currently applied to exported product. Finally, a
formula was created to link concentrate pricing to prices for individual rare
earth oxides resulting in an average price assumption of US$21.94/kg TREO for
Avalon's mixed total rare earth oxide concentrate.
The model assumes that Avalon concentrate will be sold or toll-processed at one
or more separation plants outside China which will be established before 2014.
For the bankable feasibility study Avalon will evaluate if it should participate
in the establishment of such a separation plant outside of China. Product sales
volumes used in the PFS were supported by letters of interest from two potential
customers. For the bankable feasibility study, Avalon anticipates having product
off-take arrangements in place.
Avalon's market share of total rare earth demand is conservatively forecast to
be less than 3% initially at a 5,000 tonnes/year TREO production rate, and then
less than 5% at a 10,000 tonnes/year TREO production rate. Initial market share
for certain more valuable individual HREE, such as dysprosium and terbium, is
estimated at 8% and 6% respectively. Estimated production volumes for individual
rare earths are provided in the following table:
----------------------------------------------------------------------------
RE Oxide Tonnes Per Annum Tonnes Per Annum
(5,000 tpa) (10,000 tpa)
----------------------------------------------------------------------------
Lanthanum 792 1,583
----------------------------------------------------------------------------
Cerium 1,786 3,572
----------------------------------------------------------------------------
Praseodymium 226 451
----------------------------------------------------------------------------
Neodymium 892 1,783
----------------------------------------------------------------------------
Samarium 196 391
----------------------------------------------------------------------------
Europium 25 49
----------------------------------------------------------------------------
Gadolinium 186 371
----------------------------------------------------------------------------
Terbium 27 54
----------------------------------------------------------------------------
Dysprosium 136 271
----------------------------------------------------------------------------
Holmium 24 48
----------------------------------------------------------------------------
Erbium 63 126
----------------------------------------------------------------------------
Thulium 9 17
----------------------------------------------------------------------------
Ytterbium 51 101
----------------------------------------------------------------------------
Lutetium 7 14
----------------------------------------------------------------------------
Yttrium 585 1,169
----------------------------------------------------------------------------
Total 5,000 10,000
----------------------------------------------------------------------------
The niobium pentoxide price assumption of US$45 per kilogram is based on a
representative current price escalated for inflation and for the expected
increase in steel demand. The price assumptions of US$3.77 per kilogram for
zirconium oxide and US$130 per kilogram for tantalum oxide are based on a
representative current price, escalated for inflation.
Discussion
Avalon has identified many opportunities to further optimize the Project's
economics and add to the mineral resources on the property. Additional work by
Avalon and third party consultants/contractors will be ongoing to develop a
bankable feasibility level technical report upon which to obtain financing for
eventual construction and start-up of operations. Additional opportunities
identified by Avalon to reduce costs and/or timelines to full production
include:
-- Higher production rates and/or a shorter ramp-up period may be justified
if future demand forecasts prove conservative. Production rates are only
limited by the size of the available market, not the size of the mineral
resource.
-- Selective mining of higher grade sub-zones after start-up would increase
revenues in the early years of production.
-- Lower energy costs through reduced use of diesel power with the
potential availability of more hydro power from the Taltson River Dam
and availability of renewable energy alternatives such as wind, solar,
biomass and geothermal.
-- Alternative hydrometallurgical plant locations in southern Canada offer
potential for significant cost savings, as recently confirmed through an
internal review.
-- Higher product demand and pricing (for which there is virtually
universal agreement) due to emerging new clean technologies.
-- Improved metallurgical recoveries and more economical processes in the
flotation plant and hydrometallurgical plant.
-- Reduction of the long-term royalty burden through buy-outs.
-- Additional by-product revenues from gallium extraction.
Finally, the Thor Lake property offers much untested exploration potential. The
Nechalacho deposit remains open for expansion and, as discussed in the Company's
news releases dated May 12, 2010 and June 14, 2010, additions to the resource
estimates, and re-classification of parts of the current Inferred Resources, are
anticipated once all the results from the winter drilling are incorporated into
the block model. Further, other rare metal mineralized zones such as the
satellite T-Zone deposit are known to exist on the property and the Company's
geological model predicts that other such satellite deposits enriched in other
rare metals could be expected to occur elsewhere on the property. Commented
Vice-President, Exploration Bill Mercer, "Less than 10% of the property has been
drill-tested to date and the Company contemplates a long-term exploration
program to add to our resource inventory and make more new discoveries in this
truly remarkable rare metals mineralized system."
Qualified Persons
Jason Cox P.Eng., Supervisor of Mine Engineering, Christopher Moreton PhD,
P.Geo. (Ontario and New Brunswick), and Don Hains P.Geo. (Ontario) of Scott
Wilson RPA, and J.R. Goode, P.Eng, Consulting Metallurgist, are Qualified
Persons as defined by National Instrument 43-101 and have verified that the
technical information in this news release accurately reflects the technical
information in the PFS.
Investor Call
The management of Avalon will be hosting an investor call to discuss the results
of this prefeasibility study and to provide an opportunity for questions and
answers on Tuesday, June 22, 2010 from 10 a.m. to 11 a.m. Eastern Time. To
participate please dial-in at:
Local / International: 416-849-2698
North American Toll-Free: 1-866-400-2270
A full transcript of the call will be available on the Company's website at
least 48 hours after the call.
About Avalon Rare Metals Inc. (TSX:AVL), (OTCQX:AVARF)
Avalon Rare Metals Inc. is a mineral exploration and development company focused
on rare metals deposits in Canada. Its flagship project, the 100%-owned
Nechalacho Deposit, Thor Lake, NWT, is emerging as one of the largest
undeveloped rare earth elements resources in the world. Its exceptional
enrichment in the more valuable 'heavy' rare earth elements, which are key to
enabling advances in green energy technology and other growing high-tech
applications, is one of the few potential sources of these critical elements
outside of China, currently the source of 95% of world supply. Avalon is well
funded, has no debt and its work programs are progressing steadily. Social
responsibility and environmental stewardship are corporate cornerstones.
Avalon's performance on community engagement in the north earned it the 2010
PDAC Environmental and Social Responsibility Award.
Shares Outstanding: 78,990,670. Cash resources: approximately $10 million.
To find out more about Avalon Rare Metals Inc., please visit our website at
www.avalonraremetals.com. For questions and feedback, please e-mail the Company
at ir@avalonraremetals.com.
This news release contains forward-looking information and is subject to a
variety of risks and uncertainties and other factors that could cause actual
events or results to differ materially from those projected in the
forward-looking information. Forward-looking information is based on the
opinions and estimates of management at the date the information is given, and
is subject to a variety of risks and uncertainties and other factors that could
cause actual events or results to differ materially from those projected in the
forward-looking information. The forward-looking information contained herein is
given as of the date hereof and the Company assumes no responsibility to update
or revise such information to reflect new events or circumstances, except as
required by law.
(1) Total Rare Earth Oxides (TREO) refers to the elements lanthanum to lutetium,
plus yttrium, expressed as oxides. See Avalon's website for conversion factors
from elements to oxides. Heavy Rare Earth Oxides (HREO) refers to the elements
europium to lutetium, plus yttrium, expressed as oxides. Light rare earths
(LREO) refers to the elements lanthanum to samarium, expressed as oxides.
HREO/TREO refers to the proportion of heavy rare earth oxides as a percentage of
the total rare earth oxide content of the rock.
Coast Mountain Power Corp (TSXV:MW)
Historical Stock Chart
Von Mai 2024 bis Jun 2024
Coast Mountain Power Corp (TSXV:MW)
Historical Stock Chart
Von Jun 2023 bis Jun 2024
