View
1
Download
0
Category
Preview:
Citation preview
DRAFT
Zandkopsdrift – the next major western RE producer
TMS Conference
Toronto, April 2013
Frontier Rare Earths Limited
TSX:FRO
Safe Harbour Statement
Certain statements contained in or incorporated by reference into this presentation constitute “forward-looking statements”.
Officers and representatives of Frontier Rare Earths Limited (the “Company”) may, in their remarks or in response to
questions regarding this presentation, make certain statements which are “forward-looking statements” and are prospective.
Forward-looking statements are neither promises nor guarantees, but are subject to risks, uncertainties and assumptions
that may cause the actual results, performance or achievements of the Company, or developments in the Company’s
business or its industry, to differ materially from the anticipated results, performance, achievements or developments
expressed or implied by such forward-looking statements. Forward-looking statements are based on management’s beliefs
and opinions at the time the statements are made or presented, and undue reliance should not be placed on any of these
forward-looking statements. There should be no expectation that these forward-looking statements will be updated or
supplemented as a result of changing circumstances or otherwise, and the Company does not intend, and does not assume
any obligation, to update these forward-looking statements.
2 │
Forward-looking information
The Zandkopsdrift Rare Earth Project
The Zandkopsdrift rare earth project is
Frontier’s flagship project and is very well-
situated in the Northern Cape Province, South
Africa’s oldest mining region
Excellent mining and related infrastructure
available locally and regionally
Close to N7 highway from Cape Town (450 km)
35km to nearest railhead (Bitterfontein)
300km north of deep water port of Saldanha Bay
Strong support in local communities for the
development of the Zandkopsdrift
Frontier controls mineral rights over c.60,000haa
around Zandkopsdrift and owns the land in and
around where the deposit is located
3 │
Satellite Image of Zandkopsdrift Carbonatite
4 │
Zandkopsdrift
carbonatite
complex
Gravel road to N7
N7 tarred road
to Cape Town
Bitterfontein rail head
(c.35 km)
Exxaro Resources
Namakwa Sands Mine
(c.45 km)
Zandkopsdrift
5 │
The Zandkopsdrift Deposit
The Zandkopsdrift deposit is a REE enriched carbonatitic intrusion
Occurs as a 1km diameter circular intrusive rising 40 meters above the surrounding plain
One of the largest known rare earth deposits, containing approx. 950k tonnes TREO
The majority of rare earths in Zandkopsdrift (~ 97%) are contained in monazite for which
commercially proven metallurgical extraction processes exist
The majority of western rare earth projects being developed have their rare earths contained in host
minerals for which proven extraction process do not exist creating significant process risk
Potential for rapid development and production start-up
Good regional infrastructure available (road, rail, power and water) will also facilitate development
Targeting total annual production of 20,000 tonnes of separated rare earths commencing in 2016
6 │
Zandkopsdrift Geological Map and Drill Locations
7 │
Assay results from completed
final phase of resource drilling
(14,200 meters drilling) to be
incorporated into a revised
resource estimate for PFS, and
are expected to upgrade the
majority of the resource into
the Measured and Indicated
resource categories
Series of vertical to sub vertical REE-enriched dykes intruded into a
REE bearing carbonatitic phlogopite breccia phase
Weathered CPB intruded by weathered RE enriched REDs
8 │
Weathered CPB
1-3% TREO
Weathered REDs
6-8% TREO
Zandkopsdrift Resource Block Model
9 │
10
Zandkopsdrift Absolute and Relative RE Distribution
Element
Tonnes
Relative Distribution
Lanthanum 240,833 25.37%
Cerium 418,225 44.06%
Praseodymium 43,870 4.62%
Neodymium 150,723 15.88%
Samarium 21,538 2.27%
Europium 5,597 0.59%
Gadolinium 13,441 1.42%
Terbium 1,570 0.17%
Dysprosium 7,364 0.78%
Holmium 1,230 0.13%
Erbium 3,015 0.32%
Thulium 377 0.04%
Ytterbium 2,090 0.22%
Lutetium 283 0.03%
Yttrium 39,145 4.12%
TTt 949,301 100.00%
Bulk Sample Trench for Pilot Testwork (2012)
11 │
Average XRF TREO grade of 3% for 174 metre trench
Recent Developments
Preliminary Economic Assessment competed March 2012
confirmed Zandkopsdrift’s potential to become a major low cost RE producer
NPV11% of $3.7bn generating a post-tax IRR of 53% and 2 year payback
Pre-feasibility Study targeted for completion in Q3 2013 and Definitive Feasibility Study
scheduled 9-12 months thereafter
Strategic Partnership completed in December 2012 with Korea Resources Corporation
Initial Kores investment of $23.8m for 10% interest in Zandkopsdrift (December 2012)
Kores option to acquire up to a total 50% interest in Zandkopsdrift if it arranges project finance for the full
development and provides 50% of equity required (see page 21)
12 │
Preliminary Economic Assessment - March 2012
13 │
PEA Financial Highlights
Post-Tax NPV & IRR
Post-Tax Net Present Value @ 11% discount rate $3.65bn
NPV attributable to Frontier Rare Earths $3.60bn
Post -Tax Internal Rate of Return 52.5%
Pre -Tax NPV & IRR Pre-Tax Net Present Value @ 11% discount rate $4.3bn
Pre-Tax Internal Rate of Return 57.6%
Revenue and Cashflow Average annual revenue $1.1bn
Annual after-tax free cashflow in full production $711m
Capital Expenditure
Total construction Capex excluding contingencies $910m
Start-up costs excluding contingency $27m
Project payback from commencement of full production 2 years
Revenue/kg and cost/kg
xSeparated REO
“Basket price” per kg of separated REO from Zandkopsdrift $58.23
Total cash operating cost/kg separated REO $13.08
Location of Zandkopsdrift Project Components (PEA)
14│
Saldanha Bay Rare Earth
Separation Plant-20,000 tonnes
p.a. TREO
Mixed rare earth carbonate
transported 300kms by road (N7)
to Saldanha Bay
Mining, flotation and cracking
plants to produce mixed rare
earth carbonate
PEA Operating Assumptions and Parameters
15 │
PEA Operating Assumptions and Parameters
Mining
Target annual mining rate 1 m tonnes
Average stripping ratio* 3:1
Life of mine 20 years
Average production grade 3.1% TREO
Mining dilution 7.50%
Processing
Target annual production rate 20,000t separated TREO
Metallurgical recovery 67%
Production start-up H2 2015
Time to full production 1 year
* including all stockpiled <2% grade material and waste
Zandkopsdrift Preliminary Mine Pit Design (looking southwest)
16 │
• 19.5 mt to be mined over 20 years
• Average 3:1 stripping ratio
• Significant LoM extension possible, as only
60% of current resource is exploited
Pit Dimensions (approx.)
East -West extent 830m
North-South extent 900m
Maximum no. benches planned 12
Saldanha Bay- (300km from Zandkopsdrift)
17 │
Sichen to Saldanha iron ore export rail line
Exxaro ilmenite smelter-Saldanha Bay Arcelor Mittal Saldanha Steel Works
Saldanha Port
Saldanha Bay Industrial Development Zone
18 │
5,083
8,833
910
3,154
462 118 288 34 154
814
4,274
-
2,000
4,000
6,000
8,000
10,000
To
nn
es p
er
An
nu
m
Illustrative Projected Output of Separated Rare Earths
19│
Based on 20ktpa TREO target output
Revenue contributions are calculated using FOB China prices from Metal Pages as at 11 April 2013
No value is attributed to the five heavy rare earths from Holmium to Lutetium
CREOs comprise
22% of projected
output by
volume, but
contribute circa
70% of project
revenue**
Ce and La
contribute only
17% of potential
project revenue,
so the project’s
economics are
not significantly
sensitive to their
prices
Production – tonnes per annum
Relative contribution to revenue
6.2% 10.7% 9.6%
29.3%
1.3%
20.4%
1.7% 5.0%
12.1%
3.7%
70.4%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
Co
ntr
ibu
tio
n t
o v
alu
e
Korea Resources Corporation
Korea Resources Corporation (“KORES”) is wholly-owned by the Korean government
Objective of becoming a global top 20 mining company by 2020, principally through
international investments and joint ventures
Policy mandate to further Korea's access to strategically important mineral resources
Works with major Korean industry groups and assembles consortia of Korean companies to
participate with KORES in commercial ventures
Korean government has designated rare earths as a strategic raw material for Korea’s future
economic growth and selected Zandkopsdrift source of their future rare earth supply
“In order to support Korea’s high technology, automotive and other industries, the development of
Zandkopsdrift will be a strategic priority project for the KORES Consortium and a critical element of
KORES’ efforts to secure a long term, stable source of rare earth supply for Korean industry.”
Shin-Jong Kim, Kores President and CEO (Dec 2011)
20 │
KORES Joint Venture Summary Highlights
KORES acquired an initial 10% interest in Zandkopsdrift for $23.8m in cash (completed Dec 2012)
On completion of a positive Definitive Feasibility Study on Zandkopsdrift:
Kores may increase participation up to a 50% interest* in Zandkopsdrift, together with an off-take right
and obligation for up to 50% of production from Zandkopsdrift (the “50% Option”)
Kores required to arrange project finance for entire Zandkopsdrift development on best available market
terms and, provide its pro rata equity funding for the portion of Zandkopsdrift development costs not
covered by the project finance
Kores will provide technical and operating support for the design, construction and operation of the
Zandkopsdrift facilities
Frontier and Kores will cooperate in relation to downstream opportunities in the area of rare earth
metals, alloys and magnets
Frontier may introduce an Alternative Strategic Partner into Frontier/Zandkopsdrift prior to the
exercise of the option by Kores and in such event the 50% Option will be cancelled
Zandkopsdrift is Kores’ only investment in a rare earth mine development worldwide.
*Full details of the Frontier Kores JV are set out in the news release dated October 23 2012
21 │
Benchmarking Rare Earth projects
The use of “light vs. heavy” ratios is very misleading
and should not be the metric to rank/rate RE projects
Ratios do not reflect grade or value and is a flawed
metric
Not all LREOs are “bad” (low value & in oversupply)
There are 4 LREOs of which 2 are critical for magnets (Nd & Pr)
Not all HREOs are “good” (high value & in undersupply)
There are 11 HREOs
4 are critical for magnets (Dy & Tb) and phosphors (Tb, Eu & Y)
5 have negligible value as they are produced and used in
limited quantities (Ho, Er, Tm, Yb & Lu)
2 are non-critical and have relatively low values (Sm & Gd)
A better metric than a HREO/LREO ratio is needed
22 │
Rare Earth Oxide REO price *
($/kg)
LR
EO
Lanthanum $10
Cerium $10
Praseodymium $83
Neodymium $73
Samarium $23
HR
EO
Europium $1350
Gadolinium $47
Terbium $1150
Dysprosium $615
Holmium $0
Erbium $0
Thulium $0
Ytterbium $0
Lutetium $0
Yttrium $36
* Metal-Pages 11 April 2013
A better benchmark-Critical Rare Earth Oxides (CREOs)
Critical Rare Earths Oxide grade is a better metric to benchmark RE projects
Term was defined in the US Department of Energy “Critical Materials Strategy”, 2010
Similar to the ‘Critical REEs’ terminology employed by Gareth Hatch and Jack Lifton
CREOs defined as Nd, Eu, Tb, Dy & Y, with Nd being the largest of the CREOs by value and volume
Criticality of CREOs is based on their importance to sustainable clean energy and the supply risk of such
elements over the short (0-5yrs) and medium term (5-15yrs)
23 │
Absolute CREO grade is key
Use of relative grades (% HREO or % LREO or % CREOs) can be misleading
Absolute grade is more important than relative distribution .
A deposit with a high proportion of CREOs could have a very low grade, and as a result be less
attractive and produce less CREOs than a deposit that has a lower proportion of CREO but a higher
overall TREO grade
Some “LREO projects” will produce more CREOs/t ore processed than certain high profile, so called
“HREO projects”
Absolute CREO grade and projected CREO production levels ($m) provide more
meaningful metrics to compare RE projects and a better benchmark with which to rate
RE projects
Also useful to break down CREO into
Magnet CREOs - “MCREOs”
Phosphor CREOs – “PCREOs”
24 │
Rare Earth Oxide REO price
($/kg)**
Frontier Rare
Element Arafura Avalon Quest Tasman Matamec
Zandkopsdrift Bear Lodge Nolans Bore Nechalacho Strange
Lake Norra Karr Kipwa
LR
EO
Lanthanum $10 0.70% 0.80% 0.50% 0.20% 0.13% 0.06% 0.06%
Cerium $10 1.22% 1.31% 1.28% 0.46% 0.27% 0.14% 0.13%
Praseodymium $83 0.13% 0.15% 0.16% 0.06% 0.03% 0.02% 0.02%
Neodymium $73 0.44% 0.54% 0.54% 0.23% 0.11% 0.07% 0.06%
Samarium $23 0.06% 0.08% 0.06% 0.04% 0.02% 0.02% 0.01%
HR
EO
Europium $1350 0.02% 0.02% 0.01% 0.00% 0.00% 0.00% 0.00%
Gadolinium $47 0.04% 0.04% 0.03% 0.03% 0.02% 0.02% 0.01%
Terbium $1350 0.00% 0.00% 0.00% 0.00% 0.01% 0.00% 0.00%
Dysprosium $615 0.02% 0.01% 0.01% 0.02% 0.03% 0.03% 0.02%
Holmium* $0 0.00% 0.01% 0.00% 0.00% 0.01% 0.01% 0.00%
Erbium* $0 0.01% 0.00% 0.00% 0.01% 0.02% 0.02% 0.01%
Thulium* $0 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Ytterbium* $0 0.01% 0.00% 0.00% 0.01% 0.02% 0.02% 0.01%
Lutetium* $0 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Yttrium $36 0.11% 0.03% 0.04% 0.08% 0.23% 0.21% 0.09% Total – TREO 2.77% 3.00% 2.63% 1.15% 0.90% 0.60% 0.42%
Total – HREO 0.28% 0.20% 0.15% 0.20% 0.36% 0.32% 0.15%
Total – CREO 0.59% 0.60% 0.60% 0.33% 0.38% 0.31% 0.17%
Total – MCREO 0.46% 0.55% 0.55% 0.25% 0.15% 0.10% 0.08%
Total – PCREO 0.13% 0.05% 0.05% 0.08% 0.24% 0.21% 0.09%
In Situ Absolute REO Grade of Advanced Western Deposits
25 │
* No value attributed to Holmium, Erbium, Thulium, Ytterbium and Lutetium as these elements have small markets, are typically produced to
order and do not have regularly published prices.
** REO prices from Metal Pages 11 April 2013
Potential Western CREO Production
26│
Based on REO prices from Metal Pages in April 11 2013
Assumes all projects production distribution equals their in-situ distribution except Avalon which has recently
announced that 50% of its HREO cannot be extracted using their current process
Frontier would be the second
largest producer of CREOs by
value of any of the current or
prospective RE producers
outside China, including
Lynas and Molycorp
Note: Columns with solid
colours indicate projects
where the contained RE
minerals have a commercially
proven extraction process -
100
200
300
400
500
600
700
CREO $M/annum
Zandkopsdrift Current Estimated Project Timeline
27 │
PEA Resource
2011 2012 2013 2014 2015
PFS/DFS Resource
PEA
Pre Feasibility
Study
Definitive
Feasibility Study
Financing
Construction
Production
Start-up
Corporate Information
TSX:FRO
Shares Outstanding: 89,562,781
Market Cap c.$48m
Share Price $0.54 (52 week hi/low
$0.96 - $0.43)
Working Capital c.$50m
Research Coverage:
CIBC
Euro Pacific Capital
Cormark Securities
28 │
Frontier Relative Share Price (rebased)
0
20
40
60
80
100
Frontier Share Price
Peer Average (RER, Quest, Arafura & Avalon)
Industry Leader Average (MCP + LYC)
Summary
Zandkopsdrift is a world-class rare earth deposit
high grade, attractive REO and CREO distribution, large tonnage, on surface, low radioactivity
Well positioned to become the next major, low cost producer of separated rare earth
oxides Only advanced RE junior with proven metallurgy available
Lower capex and opex compared to many peers
Only RE junior with a completed strategic industry partner and off-take agreement (Kores)
One of the largest potential Western producer of separated CREOs
Experienced management and technical teams
Strong financial position (c.$50m in cash) and fully funded to complete PFS and DFS
Share price trading at significant discount to peers Share buy-back commenced Q2 2012 and is continuing
29 │
Cape Town – a first world destination
30 │
Appendices
31│
Senior Management Team
Senior Management team with extensive experience of exploration and development of
mineral projects in Southern Africa, rare earths, financing and corporate development
Philip Kenny B Eng, MBA Chairman
25+ years experience in natural resource sector.
Founder and former Executive Chairman and CEO of
Firestone Diamonds plc, an AIM-listed diamond mining
company focused which built and operated diamond
mines in South Africa, Botswana and Lesotho.
Derick de Wit B Tech, Chem. Eng. Vice President, Project Development
15+ years experience in minerals industry. Has managed
or prepared more than 30 independent reviews, scoping,
pre-feasibility and definitive feasibility studies in Africa
and Canada.
Ms Vivian Wu B Sc, EMBA Business Development Director- Greater China
20+ years experience in rare earth industry in senior
roles with China Minmetals Corporation, Rhodia (China)
Investment Co and Treibacher Industrie AG.
James Kenny B Comm, MBS Chief Executive Officer
20+ years experience in natural resources sector as an
executive, adviser and broker. Co-founder of Frontier and
centrally involved in all aspects of Frontier's
development, corporate, strategic and financing activities
since incorporation.
Paul McGuinness B Comm, ACA Chief Financial Officer
15+ years experience in investment banking and
financial control with Arthur Anderson, Salomon Brothers,
Schroders, Collins Stewart and MG Capital.
Dr. Stuart Smith B Sc, PhD Vice President, Exploration
30+ years experience in mineral exploration with
particular experience in rare earths, uranium, base
metals and diamonds.
32 │
Zandkopsdrift Resource Estimate
Large, high confidence resource estimate (c.950k tonnes TREO) with c.80% of the contained TREO at
the Indicated Resource level (2011)
Final phase of resource drilling (14,200 meters) at Zandkopsdrift completed in Q4 2011
Assay results from final phase of drilling expected to advance majority of the resource into the Measured
and Indicated categories and PFS will convert such resources to Proven and Probable reserves
Relative distribution of REOs in Zandkopsdrift is shown on page 10.The resource estimate is NI 43-101 compliant and presented in accordance with CIM definitions The mineral resource
estimates reflect 100% of the estimated resources at Zandkopsdrift. Frontier’s 64% owned subsidiary, Sedex, has complied with the BEE equity ownership requirements as laid down by the
Mining Charter and MPRDA, through shareholder agreements with historically disadvantaged South African individuals and entities that together hold the remaining 26% of the issued share
capital of Sedex. In addition to Frontier’s direct interest in the Zandkopsdrift Project through its 64% shareholding in Sedex, Frontier shall also be entitled to, in consideration for Frontier’s
funding of the BEE Shareholders’ share of Sedex’s expenditure on the Zandkopsdrift Project up to bankable feasibility stage, a payment from certain of the BEE Shareholders following the
completion of the bankable feasibility study equal to 21% of the then valuation of the Zandkopsdrift Project. This gives Frontier an effective 85% interest in the Zandkopsdrift Project until
such payment has been received.
33 │
Recommended