First Floor, Block G D990R ... - Frontier Rare Earths · FRONTIER RARE EARTHS LIMITED’S ZANDKOPSDRIFT RARE EARTHS PROJECT, LOCATED IN THE NORTHERN CAPE PROVINCE OF SOUTH AFRICA

Directors: A N Clay (British); S E Conquest, E de V Greyling; N McKenna; C A Telfer

First Floor, Block G

Rochester Place

173 Rivonia Road

Sandton 2146

PO Box 782761

Sandton 2146

Republic of South Africa

Tel: +27 11 783 9903

Fax: +27 11 783 9953

www.venmyn.com

Venmyn Rand (Pty) Ltd. trading as VenmynReg. No. 1988/004918/07

D990R

AMENDED

INDEPENDENT TECHNICAL REPORT

ON THE RESULTS

OF A

PRELIMINARY ECONOMIC ASSESSMENT

OF

FRONTIER RARE EARTHS LIMITED’S

ZANDKOPSDRIFT RARE EARTHS PROJECT,

LOCATED IN THE

NORTHERN CAPE PROVINCE

OF

SOUTH AFRICA

Authors - Qualified Persons

Fiona Harper Venmyn Rand (Pty) Ltd Minerals Industry Analyst Pr.Sci.Nat

Mike Venter The MSA Group

Regional Consulting Geologist Pr.Sci.Nat

Mike Hall Consulting Geologist Resources Pr.Sci.Nat

Peter Siegfried GeoAfrica Prospecting Services cc

Consulting Geologist MAusIMM

James Brown SGS Mineral Services, Canada Snr Metallurgist MASc. Pr.Eng

Graham Stripp Sound Mining Solutions (Pty) Limited

Snr. Mining Engineer FSAIMM

Craig de Jager SNC-Lavalin (Pty) Limited

Project Manager Pr.Eng

Jansen Scheepers Senior Process Engineer Pr.Eng

Guy Wiid Epoch Resources (Pty) Limited Snr. Civil & Environmental Engineer Pr.Eng

Koos Vivier Africa Geo-Environmental Services (Pty) Ltd

Snr. Geohydrologist Pr.Sci.Nat

Michael Grobler Environmental Assessment Practitioner

Pr.Sci.Nat

Venmyn Ref.: D990R- V6 ITR2 Report Date: 30th March 2012 Effective Date: 15th December 2011

Frontier – Zandkopsdrift PEA – December 2011

i

AMENDED

PRELIMINARY ECONOMIC ASSESSMENT

IN THE FORM

OF AN


ON

FRONTIER RARE EARTHS LIMITED’S


LOCATED IN THE


OF

SOUTH AFRICA

The Directors Frontier Rare Earths Limited 9 Allée Scheffer L-2520 Luxembourg Luxembourg Dear Sirs

EXECUTIVE SUMMARY (NI 1)

The directors of Frontier Rare Earths Ltd (“Frontier”) requested that Venmyn Rand (Pty) Ltd (“Venmyn”) prepare an independent Canadian National Instrument 43-101 Technical Report and Valuation Statement (ITR) on the results of a Preliminary Economic Assessment (PEA) of the Zandkopsdrift Rare Earth Element Project (“Zandkopsdrift Project” or the “Project”), located in the Namaqualand region of the Northern Cape Province of South Africa. Frontier is a Toronto Stock Exchange (“TSX”) (TSX:FRO)(TSX: FRO.WT) listed mineral exploration and development company focused exclusively on the development of rare earth element (“REE”) projects in Africa. Frontier is registered in the British Virgin Islands and is resident in Luxembourg. Frontier holds a 74% shareholding in Sedex Minerals (Pty) Ltd (“Sedex”), a South African incorporated company that holds a prospecting right for the area that contains the Zandkopsdrift carbonatite. The remaining 26% of Sedex is held by Historically Disadvantaged South Africans (“HDSAs”), as required under South African Black Economic Empowerment (“BEE”) requirements. The shareholders’ agreement between Frontier and the HDSA shareholders gives Frontier a current effective economic interest of 95% in the Zandkopsdrift Prospecting Right until completion of a Definitive Feasibility Study (“DFS”) and the receipt by Frontier from the HDSA shareholders of payments required under the shareholders’ agreement. The PEA has been undertaken as a preliminary study to evaluate the technical and economic parameters of the Zandkopsdrift Project as the precursor to and basis for, a planned future Preliminary Feasibility Study (“PFS”). The PEA was conducted by a group of specialist independent consultants (the “Specialist Consultants”), who were retained by Frontier to examine the technical, logistical, legal, environmental and economic aspects of the Project. Contingent upon the successful outcome of the PFS, a DFS will be undertaken as part of a development and implementation plan. This 2011 ITR on the Zandkopsdrift Project was prepared in accordance with the requirements of:-

disclosure and reporting requirements of the TSX as stipulated in the TSX Company Manual;

Canadian National Instrument 43-101, ‘Standards of Disclosure for Mineral Projects’, Form 43-101F1 and Companion Policy 43-101CP (April 2011); and

Canadian Institute of Mining, Metallurgy and Petroleum (“CIM”) Definition Standards (2005).

1. Property Description (NI 1)

The Zandkopsdrift Project comprises three separate but integral components, namely:-

an open cast mine and processing plant on the REE enriched Zandkopsdrift carbonatite, located southwest of the town Garies, in the Northern Cape Province of South Africa. The mine, processing plant (the “Process Plant”) and associated infrastructure have collectively been named the Zandkopsdrift Mine and the property comprising the Prospecting Right on which the Zandkopsdrift Mine will be located, is termed the Zandkopsdrift Prospect, for the purposes of the


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PEA. A desalination plant (the “Desalination Plant”), located southwest of the town of Kotzesrus on the west coast of South Africa, will supply process water to the Zandkopsdrift Mine;

a finance, technology, trading, sales and marketing company registered outside of South Africa (“Tradeco”), which will source finance and technical expertise for the development and operation of a REE separation plant, arrange long term off-take agreements for the REE products produced by the separation plant and provide general sales and marketing services; and

a REE separation plant located at Saldanha Bay (the “Saldanha Separation Plant”), which will toll treat the REE product supplied by Tradeco from the Zandkopsdrift Mine and, potentially, other rare earth mines that may be developed by Frontier. The mixed REE carbonate produced at Zandkopsdrift Mine will be transported by road 302km to the Saldanha Separation Plant.

2. Ownership (NI 1)

The Zandkopsdrift Prospect comprises Prospecting Right 869/2007 over a total area of over 58,862ha in the extreme southwest portion of the Northern Cape Province, directly on the boundary with the Western Cape Province. The Prospecting Right is held by Sedex and exploration on the Prospecting Right is carried out on behalf of Sedex by Frontier’s South African operating company, Frontier Rare Earths SA (Pty) Ltd. Sedex plans to mine the REE deposit and beneficiate the run of mine (“RoM”) material to produce mixed rare earth carbonates (“MREC”). The proposed Saldanha Separation Plant will be operated through Odvest 196 (Pty) Ltd (“Sepco”). Tradeco will purchase the MREC from Sedex and engage Sepco to undertake the separation of the MREC into individual separated rare earth oxides (“SREO”). The Desalination Plant will operate through a subsidiary of Sedex, namely Desco (K201100451 SA (Pty) Ltd). The Zandkopsdrift Prospecting Right was granted by the South African Department of Mineral Resources (“DMR”) to Sedex for a period of 5 years, until 4th September 2012 and covers all minerals other than diamonds, kaolin and heavy minerals. The Prospecting Right was issued over several farms and farm portions, including the farm Zandkopsdrift 357 Portion (Ptn) 2, which is known as the farm Pan Vlei and is owned by Sedex, on which the Zandkopsdrift carbonatite is located. In terms of the Mineral and Petroleum Resources Development Act 28 of 2002 (“MPRDA”), Sedex has the right to renew the Prospecting Right for an additional three years, subject to compliance with the requirements for renewal set out in the MPRDA. Sedex will retain its Prospecting Right if it maintains its HDSA status and adheres to the exploration programme submitted with the original Prospecting Right application, which requirement has already been satisfied by the exploration conducted to date. The MPRDA provides that a prospecting right in respect of which a renewal application has been lodged prior to expiry is deemed to continue to exist post expiry until a decision has been made in respect of the renewal application. An application for renewal of the Zandkopsdrift Prospecting Right was made to the DMR in February 2012, and an application for a Mining Right over the Zandkopsdrift carbonatite and proposed mine site is expected to be made on or before completion of the PFS later in 2012. Sedex, as the holder of the Prospecting Right, is entitled to all rights set out in Section 5(3) of the MPRDA, which permits it to prospect, use the surface and to bring plant, property and equipment onto site for prospecting purposes. Furthermore, with regards to the proposed site of the Zandkopsdrift Mine on the farm Pan Vlei, Sedex is also the owner of the surface rights. Independent legal opinion confirms that there is no litigation or potential litigation which could affect the surface rights of Sedex within the Prospecting Right.

3. Material Agreements (NI 1)

Sedex has complied with the HDSA equity ownership requirements as laid down by the South African Mining Charter and MPRDA, through shareholder agreements with HDSA individuals and entities that together hold 26% of the issued share capital of Sedex. The Sedex HDSA shareholding comprises a 21% shareholding owned by the Namaqualand Empowerment Trust, a broad-based community trust established for the benefit of HDSAs in the Namaqualand region where Frontier principally operates and 5% by Mr Martin van Zyl (collectively the “BEE Shareholders”). Frontier announced on the 5th December 2011 that it had concluded a definitive agreement with the Korea Resources Corporation (“KORES”), a Korean Government-owned mining and natural resource investment company, to form a strategic partnership designed to accelerate the development of the Zandkopsdrift Project. KORES will form and lead a consortium of Korean industrial and corporate groups (the “KORES Consortium”) to partner with Frontier in the development of the Zandkopsdrift Project. The definitive agreement involves an investment in the Zandkopsdrift Project and, potentially, in Frontier, with an off-take arrangement that could commit up to 31% of the future production, contingent upon the completion of a positive DFS.


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4. Geology and Mineralisation (NI 1)

The Zandkopsdrift Prospect is located within the Namaqua-Natal metamorphic belt which forms an arcuate belt along the southern and western margins of the Southern African Archaean Kaapvaal craton. The western Bushmanland sub-terrane within this metamorphic belt covers an area of 60,000km2 and is a tectono-stratigraphic suite represented by 2,000Ma granitic gneisses, 1,600Ma to 1,200Ma amphibolite to granulite grade supracrustal units and 1,200Ma to 1,000Ma granitoids. A Cretaceous age alkaline intrusion, the Koegel Fontein Complex, is located in the extreme southern region of the Bushmanland sub-terrane and the complex is considered to include the Zandkopsdrift carbonatite. The Sedex Prospecting Right is located on the northern margins of the Koegel Fontein Complex and is covered by surficial Quaternary sands and unconsolidated sediments, with exposures of basement granites and gneisses restricted to the eastern and northern areas of the Prospecting Right. The Zandkopsdrift carbonatite intrusion is ovoid in shape, approximately 1.3km x 900m in dimension and forms the low Swartkop Hill in the southeastern portion of the Prospecting Right, which rises to an elevation of 40m above the surrounding plain. Outcrop of the carbonatite is limited but information from various historic and current drilling programmes indicates that the carbonatite complex is a multi-phase, multi-facies pipe-like intrusion comprising predominantly carbonatite breccias, micaeous glimmerites and calcite carbonatite. Weathering of the carbonatite has obscured the detailed geology of the intrusion. The results of Frontier’s drilling programmes completed up until September 2011 have been included in this 2011 ITR, however the results of drilling programmes completed after September 2011 have clarified the geology to a large extent and the results will be incorporated in an updated geological model and Mineral Resource estimate for the planned PFS. Laterally, the complex is intensely brecciated with country-rock brecciation discernible at distances of 1km from the complex. The various 2011 drilling programmes have identified possible hydrothermal, late stage dykes with REE enrichment. These possible primary igneous structures vary in width from <1m to 20m (as indicated by Frontier’s drilling programmes) and exhibit sub-vertical, dyke-like features. The influence of these primary structures on the geological model is being evaluated with the current ongoing detailed drilling programme. The intrusion of coeval or later stage, vertical to sub-vertical dykes/dyke swarms, are not uncommon during the intrusive history of carbonatite magmatism. The primary REE mineralisation at Zandkopsdrift is considered to be associated with the progressive concentration of the incompatible REEs as the various carbonatite phases crystallised. The REEs are theoretically known to concentrate into the late stage ferruginous fluids and current exploration gives some indication that such late stage, high REE grade fluids formed dykes at Zandkopsdrift. Some possible late-stage remobilisation of the REEs may have occurred but superimposed upon these primary concentration mechanisms is the supergene enrichment within the highly altered, upper 80m of the complex, whereby the REEs have been enriched through leaching and replacement of the carbonate phases. Extensive replacement by secondary iron and manganese oxides produced a surface cap of ferruginous-manganiferous material, previously known as the ‘Fe-Mn wad’ and which is classified as limonitic Fe-Mn saprolite. The limonitic Fe-Mn saprolite, together with fragmental glimmerite and manganese laterite, comprises a major component of the deposit. The limonitic Fe-Mn saprolite forms irregularly shaped outcrops at Zandkopsdrift. The mineralisation has no discernible dip according to current understanding and is considered to be largely disseminated. The REE enrichment has been concentrated in the western and southwestern arcuate shaped weathered portion of the carbonatite, where grades range from 1.0% to >10% total rare earth oxide (“TREO”). Within the REE enriched portion of the carbonatite, areas with TREO contents exceeding >2.0% TREO have been defined and have been termed the Central Zone by Frontier. Mineralogical studies of the weathered carbonatite show that 95% or more of the REE-bearing minerals consist of late stage, probably supergene members of the monazite group of minerals. The primary, unweathered carbonatite and breccia phases of the carbonatite, have REE grades generally close to or below 1.0% TREO cut-off grade selected for the Mineral Resource estimation.

5. Status of Exploration (NI 1)

Historic exploration over the Zandkopsdrift Prospect area included geological, mineralogical and metallurgical investigations of the Zandkopsdrift carbonatite complex by academics, as well as exploration companies, over the past 40 years. The carbonatite was initially investigated for its manganese potential in the 1950s, followed by investigations into the phosphate and niobium potential, and finally for the REE potential. The majority of the exploration was carried out by the Anglo American Corporation (“Anglo American”) and after Frontier was granted the Prospecting Right over the Project area in 2007, it acquired all of the Anglo American historic data and samples including diamond core, reverse circulation (“RC”) drilling chips and sample pulps.


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Frontier’s exploration and evaluation activities during 2009 and 2010 comprised the following and the data from the exploration programmes formed the basis of the 2010 Mineral Resource estimate by The MSA Group (MSA 2010):-

a geophysical ground magnetic survey to delineate the carbonatite surface extent;

a ground radiometric survey;

petrographic and X-ray diffraction (“XRD”) mineralogical studies; and

an 11 borehole drilling programme, totalling 820m, undertaken in 2009 to validate the historical Anglo American borehole drilling programmes and provide assay samples for those original boreholes where assay data was unavailable.

Frontier’s exploration programmes are ongoing and the exploration information available as at September 2011 which is reported in this ITR, consisted of the following:-

a Phase 1 61 borehole vertical RC drilling and sampling programme totalling 3,414m for Mineral Resource definition;

a 12 borehole vertical diamond drilling programme for metallurgical sampling; and

ground magnetic surveys to sterilise areas for the proposed surface mine and process plant infrastructure sites at Zandkopsdrift Mine.

The results of the 61 borehole RC drilling programme were incorporated into the 2011 Mineral Resource estimate presented in this ITR. The results of the geophysical surveys, together with those from the 2009 surveys, were consolidated to generate composite magnetic and radiometric images of the Zandkopsdrift carbonatite and surrounds. The surface expression of the main Zandkopsdrift carbonatite is characterised by a strong magnetic response relative to the gneissic country rock. Both radiometric and magnetic surveys proved efficacious in informing the drilling programmes, in identification of targets for follow-up field validation and possible drill testing, and identification of possible extensions to the deposit. Frontier has completed additional diamond and RC drilling programmes post September 2011, that were aimed at further clarification of the geological and mineralisation models for the Zandkopsdrift carbonatite. The results of these programmes are expected to provide additional confidence for future Mineral Resource classification in the planned PFS.

6. Development and Operations (NI 1)

The mine design and costing assessment for the Zandkopsdrift Project were undertaken by Sound Mining Solution (Pty) Ltd (“SMS”). The 2011 Mineral Resource estimate at a cut-off grade of 1.0% TREO, formed the basis of the mine design. For the purposes of the PEA the mine design was based on a selected portion of the 1.0% TREO Mineral Resource, which is a high grade zone, termed the Central Zone, consisting of the mineralisation above a cut-off grade of 2.0% TREO. The average in situ grade of the Central Zone within the proposed mine plan is 3.12% TREO, excluding mining dilution. The mine design for the Zandkopsdrift carbonatite consists of a conventional open pit layout with a single entry access ramp. The carbonatite is highly weathered and consequently excavation will consist of a mix of free digging, ripping and conventional drill and blasting methods. Mining will be undertaken by excavator loading of ore and waste on Articulated Dump Trucks (“ADT”) and haulage via the planned access ramp to the Process Plant. The mine geotechnical study resulted in the proposal that mining should progress from surface from the southwest at bench heights restricted to a maximum height of 6m. The mining area within the mineralisation will be continuous to a depth of at least 70m to 90m below surface. Possible underground extensions of the mine design were not included in the PEA mine design. The mineralisation is classified into the following categories for the mine design purposes:-

the Central Zone, which comprises material with in situ TREO contents of >2.0% TREO, which will form the RoM feed to the Process Plant;

the Outer Zone, which comprises material with TREO contents ranging between 1.0% TREO and 2.0% TREO. Some of the Outer Zone material will be mined to provide access to the Central Zone material and will be stockpiled close to the Process Plant. For the purposes of the PEA, the Outer Zone material is not treated, but represents possible RoM plant feed for consideration in the PFS; and

the Low Grade Zone, which comprises material with TREO contents of <1.0% TREO, which will be considered waste material.


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The waste material produced at the Zandkopsdrift Mine has been categorised into various types including, barren country rock, weathered and fresh carbonatite with sub-economic grades (<1.0% TREO) and topsoil. Each of the waste categories will be stockpiled separately and the stripping ratio calculations include not just these waste categories, but also the Outer Zone and Low Grade Zone material. The pit optimisation defined a life of mine (“LoM”) of 20 years based solely on the exploitation of the Central Zone material and the LoM could be significantly extended by the inclusion of the Outer Zone material into the mining schedule. The mining schedule has been guided by the following design criteria:-

an output of 20,000tpa of recovered SREO based on an average overall metallurgical recovery of 67%;

the recovery of the 20,000tpa SREOs to be restricted to the Central Zone material only;

Outer Zone material to be stockpiled separately for potential future processing and extension of LoM;

steady state mining conditions achieved in Year 2;

an approximate steady state mining production rate of 1.0Mtpa of Central Zone material;

dilution at 0%; and

TREO mining losses of 7.5%.

The target 20,000tpa of SREO is achieved throughout the LoM with an intentional production build-up from 80% in Year 1 to full steady state by Year 2. The waste to mineralised material ratio changes throughout the LoM, with the initial stages during which the mineralisation is above ground level, having low waste tonnages. The stripping ratio progressively increases as the mine matures and more waste must be removed to access the mineralisation. The pit optimisation estimates that 19.5Mt of Central Zone material (>2.0% TREO) will be mined over the LoM with 563,000t contained TREO, which will convert to 378,000t saleable SREOs.

7. Recovery and Beneficiation (NI 1)

The metallurgical testwork for the Zandkopsdrift Project PEA was undertaken by SGS Minerals Services, Canada (“SGS”) on composited samples of the Central Zone material and based on these results the process design was undertaken by SNC-Lavalin (Pty) Limited (“SNC”). The process flow assessment was based on Fronteir’s requirement to produce 20,000tpa of SREO at purities between 99.0% and 99.999% for the final product produced at the Saldanha Separation Plant. The final purity levels will be confirmed by additional testwork planned for 2012. The initial phase of metallurgical testwork completed by SGS has indicated that from the deslimed <15μm fraction at least 60% REE recoveries can be achieved to 40% of the feed material mass by rougher flotation. Based on these results, the process route for the PEA was selected based on this testwork. The preliminary design of the Process Plant at the Zandkopsdrift Mine comprises a front-end physical upgrading section (the “Concentrator Plant”), which includes a crushing and milling section and beneficiation of the deslimed fraction through a flotation circuit. The concentrate is then recombined with the slime fraction and fed to the acid leach section, termed the Acid Cracking Section. It may be possible to simplify the Concentrator Plant by the exclusion of the flotation section, thereby eliminating the flotation concentrate and resulting in a ‘Whole Ore Cracking’ process flow option. However, the process option which includes the flotation circuit (‘Flotation and Cracking’) has the advantage of a lower total acid requirement to achieve the required TREO, with resultant logistic and environmental residue disposal benefits. The overall TREO recovery of the ‘Flotation and Cracking’ option selected for the PEA is 67%. The PEA was based on the ‘Flotation and Cracking’ option with an Acid Cracking Section sized to handle the required throughput for the ‘Whole Ore Cracking’ option, so that the process design remains sufficiently flexible for either process option to be ultimately adopted. The Acid Cracking Section is supplied with concentrated sulphuric acid produced in an onsite Sulphuric Acid Production Plant. Concentrated sulphuric acid is mixed with the plant feed and the acidified concentrate is baked in a rotary kiln to decompose the rare earth minerals. The roasted concentrate is subsequently water leached and REE carbonates are anticipated to be precipitated as a 99% pure MREC and dried. Thorium, uranium and iron contaminants are removed by precipitation and disposed of to the tailings disposal facility (“TDF”). The environmental study shows that the implementation of a Radiation Management Programme to identify and manage any potential issues from run-off and seepage control from the TDF is expected to be sufficient to mitigate the risk and reduce the impact of the radionuclides to negligible. A portion of the Process Plant site has been allocated for potential future removal of uranium by solvent extraction to produce a saleable by-product.


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Following the bulk precipitation of the MREC at the Zandkopsdrift Mine, it will be transported to the Saldanha Separation Plant where it will undergo solvent extraction to produce high purity SREOs.

8. Project Infrastructure (NI 1)

The total 10.0MW (million watts) (12.5MVA) bulk power requirement of the Zandkopsdrift Mine will be supplied by co-generation from the steam produced in the exothermic Sulphuric Acid Production Plant. The power supply to the Saldanha Separation Plant will be sourced from the South African National power authority Eskom. The Desalination Plant will be supplied by diesel generated power and the booster pumps at Kotzesrus will be diesel driven. The total water requirements for the Zandkopsdrift Mine will be supplied from a desalination plant located on the west coast and demineralised water will be transported by pipeline through Kotzesrus to the mine. The possibility exists that a significant portion of the Zandkopsdrift Mine water requirements may be able to be supplied from groundwater, which will be investigated during a ground water drilling campaign scheduled to commence during the first quarter of 2012. The Zandkopsdrift TDF was designed by Epoch Resources (Pty) Ltd for the expected LoM of 20 years, with a total capacity of 1.0Mt of dry tailings products per annum and a rate of rise of 1m/yr. The Zandkopsdrift Mine metallurgical extraction processes are complex and will result in the production of two tailings streams, one of which is expected to be contaminated with thorium, uranium and high levels of salts and metals, referred to as the contaminated tailings, and the other consisting of uncontaminated tailings. A preliminary safety and environmental hazard classification of the proposed Zandkopsdrift TDF has been carried out in terms of the requirements of the South African National Standards (“SANS”) Code of Practice for Mine Residue Deposits (SANS 0286:1998). The results indicate that whilst the TDF could constitute a significant risk to the environment given the expected production of a contaminated tailings product, the various mitigating controls proposed in the environmental study would result in the TDF being considered a Low Hazard facility. The TDF is designed as a concentric structure with a lined inner compartment for the contaminated tailings and an outer structure for the uncontaminated tailings. The lined portion of the TDF into which the contaminated tailings are deposited would be supplied with a leakage detection and collection system, whilst the portion of the TDF into which the uncontaminated tailings are deposited is not expected to require lining. The proposed run-off and seepage control measures will mitigate the risk associated with radionuclides and therefore the environmental impacts associated with the implementation of the Project can be effectively reduced to negligible.

9. Mineral Resource and Mineral Reserve Estimates (NI 1)

Frontier’s exploration programmes were independently designed, monitored and managed by MSA and a set of industry standard operating procedures was adopted, which ensured best practice and the integrity of the data. The analytical methods adopted for the assay samples and laboratories employed are considered appropriate. MSA concluded that appropriate QA/QC procedures were applied by Frontier and that analytical issues were identified and appropriate remedial action taken. Industry standard practices were followed and the quality of the Frontier database meets NI 43-101 standards and CIM best practice guidelines. The Mineral Resource estimate for the PEA was conducted by MSA and independently reviewed by Venmyn. A Mineral Resource estimate was undertaken by MSA in 2010 and the 2011 Mineral Resource estimate used in the PEA, which incorporates results from the first phase 2011 exploration programmes up to the end of September 2011, represents an update and consequential refinement of the understanding of the morphology of the carbonatite and mineralisation model. Venmyn is satisfied that the Mineral Resource estimate is globally unbiased and fairly reflects the deposit. The geological and mineralisation model is sufficiently understood at this stage to permit the generation of a mineralised envelope for the purposes of the PEA. Lithologies within the mineralised envelope were not modelled and a TREO grade-only approach was adopted. The Mineral Resource estimate is presented in the table below for the selected economic cut-off grade of 1.0% TREO and the 2.0% TREO, Central Zone.

NI 43-101 Compliant Mineral Resource Estimate for Zandkopsdrift (Oct 2011)

TREO CUT-OFF GRADE (%)

TONNAGE (Mt)

GRADE TREO (%)

CONTAINED TREO (t)

Indicated Mineral Resources 1.0 32.35 2.28 738,881 2.0 16.01 3.09 495,056

Inferred Mineral Resources 1.0 10.13 2.08 210,420 2.0 4.53 2.85 129,162


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Source: MSA 2011 Mineral Resources reported inclusive of Mineral Reserves (no Mineral Reserves have been reported for Zandkopsdrift Project) Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability In situ estimation with no geological losses estimated Frontier 95% effective interest attributable The PEA on the Zandkopsdrift Project includes approximately 27% of the total Mineral Resource in the Inferred category. The inclusion of such Inferred Mineral Resources in the PEA is permissible in accordance with Canadian National Instrument 43-101 Section 2.3 (3)(a), however it must be noted that the Inferred Mineral Resources are considered too speculative geologically to have economic considerations applied to them that would enable them to be categorised as Mineral Reserves and there is no certainty that the preliminary economic assessment will be realised. Results from the 2011 exploration programmes completed since the end of September 2011 will be incorporated in an updated Mineral Resource estimate for the planned PFS in 2012. The Mineral Resources have not been converted to Mineral Reserves and this conversion will be an integral component of the PFS.

10. Environmental Studies (NI 1)

Preliminary Environmental Assessments of the Zandkopsdrift Mine and the Saldanha Bay Separation Plant were completed by African Geo-Environmental Services (Pty) Ltd and included several environmental specialist fatal flaw analyses and impact assessments in terms of botany, archaeology, air quality, water baseline, human health risk and radiology impact. An independent legal opinion assessed the environmental legal requirements for the Zandkopsdrift Project and concluded that, whilst the Zandkopsdrift Project needs to comply with a number of legislative requirements, no legal fatal flaw was identified. The pathways of potential radiation exposure were identified but the potential radiological impact to members of the public in the vicinity of the Zandkopsdrift Mine is not expected to be above the public dose limits of 1mSv per annum. The environmental impacts associated with the implementation of the Project can be effectively avoided or mitigated which reduces the impact to negligible. Effective environmental management throughout the Project phases will mean that the environmental risks identified are not significant enough to be considered a fatal flaw.

11. Capital and Operational Expenditure (NI 1)

The estimated total capital expenditure (capex) of USD910m for the Zandkopsdrift Project (excluding contingencies) includes capex requirements for the Zandkopsdrift Mine, related infrastructure and services, land purchases, mine closure and rehabilitation provision, upgrading of local district roads, the Social and Labour Plan (“SLP”) provision, the Saldanha Separation Plant and related infrastructure and services. The average operational expenditure (“opex”) for the Zandkopsdrift Project is USD13.08/kg saleable SREO (USD291/t RoM) which is determined from the opex of each Project component. The estimated capital and operating costs for the metallurgical plant and infrastructure and services is at an accuracy of ±30 %. The total financial liability for the closure of Zandkopsdrift Project without progressive environmental rehabilitation is estimated to be USD10.1m. If the recommended progressive rehabilitation is performed over the LoM, then the remainder of the total liability required at closure is estimated at USD5.5m. An initial rehabilitation fund contribution is estimated to be USD1.9m and the concurrent rehabilitation contribution to the Rehabilitation Fund will be USD0.3m.

12. Economic Analysis (NI 1)

For the purposes of the REO price forecasts in the PEA, the Zandkopsdrift ‘basket price’ was estimated at USD58.23/kg SREO, based on the average of:-

the three year historic average free on board China (“FoB”) prices to 1st December 2011 (USD64/kg); and

the midpoint of Roskill’s forecast price range for 2015 (USD52/kg).

The basket price excludes current REO prices which are considered to be biased by the recent inflated rare earth market. The USD58.23/kg TREO basket price used in the PEA represents a 58% discount to the current FoB price and a 20% discount to the current China domestic price.


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The Zandkopsdrift Project has been independently valued by Venmyn using the Cash Flow valuation and the Market Comparison methods. Venmyn selected the results of the Cash Flow valuation as being the most representative of the Project value. A valuation range of USD3,007m to USD4,454m was determined, with a Preferred Value of USD3,646m. The estimated Project payback period is 2 years from start of production, with a post–tax IRR of 52.48%. The Net Present Value (“NPV”) of the Project becomes negative at a separated TREO basket price of USD23.23/kg (a discount of 58% to the projected Zandkopsdrift basket price), and cash flow breakeven is reached at a separated REO basket price of USD13.08/kg (a discount of 78% to the projected Zandkopsdrift basket price). Venmyn’s sensitivity analysis of the individual Project components, as well as the whole Project, demonstrates that negative NPVs only arise as the result of the combination of low income and high cost factors, which would include low REO prices and high opex which work in parallel to depress the NPV. The Project is not sensitive to variation in the capex and Venmyn concluded that the Zandkopsdrift Project is robust.

13. Conclusions and Recommendation (NI 1)

The results of the PEA conducted on the Zandkopsdrift Project indicate that a viable open pit mining and processing operation can be undertaken to produce 20,000tpa SREO for a LoM of 20 years subject to further metallurgical testwork and confirmation of the anticipated capex and opex costs during the subsequent PFS and DFS phases of the Project. The required infrastructure in terms of power and water can be adequately provided, for the most part, independently of national supply. Viable process design options have been identified and some participation and off-take agreements concluded. Potential environmental risks have been identified and can be managed or successfully mitigated. No environmental or legal permitting fatal flaws have been identified. The PEA mine design has been limited to the exploitation of the Central Zone material at a >2.0% TREO cut-off grade. Upside potential therefore exists for treating the Outer Zone material, with TREO grades between 1.0% and 2.0% TREO, which was mined to provide access to the Central Zone and stockpiled on surface for potential future processing. Furthermore, the mining operation can be extended to include the remainder of the Outer Zone material which was not mined for the purposes of the PEA. Exploration efforts have identified satellite bodies to the main carbonatite which may represent upside potential for the Project. Venmyn concludes that the PEA has been conducted well within industry and National Instrument standards and comprehensively examines at a PEA accuracy level or higher, all the necessary components of the Project. Venmyn considers that the costs and price estimates are realistically conservative and that the Zandkopsdrift Project is economically robust. The TREO basket price would have to fall to half of its current projected value and opex increase considerably to produce a negative Project NPV. An independent risk assessment confirms that the Project is low risk, and given these conclusions Venmyn considers that further evaluation is warranted and recommends that the proposed PFS be undertaken.


ix

DISCLAIMER AND RISKS This Independent Technical Report and valuation statement has been prepared by Venmyn. In the preparation of the report, Venmyn has utilised information provided to it by the Specialist Consultants and Frontier. Where possible, Venmyn has verified this information from independent sources after making due enquiry of all material issues that are required in order to comply with Canadian National Instrument 43-101 and the Toronto Stock Exchange (“TSX”) regulatory requirements. Venmyn has utilised information from the public domain, which, whilst it could not be verified, is considered to be from reliable sources.

OPERATIONAL RISKS The business of mining and mineral exploration, development and production by their nature contain significant operational risks. The business depends upon, amongst other things, successful prospecting programmes and competent management. Profitability and asset values can be affected by unforeseen changes in operating circumstances and technical issues.

POLITICAL AND ECONOMIC RISK Factors such as political and industrial disruption, currency fluctuation, commodity prices and interest rates could have an impact on future operations, and potential revenue streams can also be affected by these factors. The majority of these factors are, and will be, beyond the control of Frontier or any other operating entity.

FORWARD LOOKING STATEMENTS

The Independent Technical Report contains forward-looking statements. These forward-looking statements are based on the opinions and estimates of Venmyn, the Specialist Consultants and Frontier at the date the statements were made. The statements are subject to a number of known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from those forward-looking statements anticipated by Venmyn, the Specialist Consultants and Frontier. Factors that could cause such differences include changes in world Rare Earth Element markets, equity markets, costs and supply of materials relevant to the Zandkopsdrift Project, and regulatory changes. Although Venmyn believes the expectations reflected in the forward-looking statements to be reasonable, Venmyn does not guarantee future results, levels of activity, performance or achievements.


x

AMENDED


ON THE RESULTS OF A PRELIMINARY ECONOMIC ASSESSMENT

OF FRONTIER RARE EARTHS LIMITED’S


LOCATED IN THE


OF

SOUTH AFRICA

TABLE OF CONTENTS

1 INTRODUCTION (NI 2) ............................................................................................................................. 1

1.1 Issuer and Purpose (NI 2a, 2b) ............................................................................................................. 1

1.2 The Rare Earth Elements and Generic Ore Processing Requirements ............................................... 4

1.3 Use of the Term “Ore” ........................................................................................................................... 5

1.4 Zandkopsdrift Project PEA Concept ..................................................................................................... 6

1.5 Sources of Information (NI 2c) .............................................................................................................. 8

1.6 Personal Inspections (NI 2d) ................................................................................................................ 8

1.7 Statement of Independence .................................................................................................................. 9

2 RELIANCE ON OTHER EXPERTS (NI 3) ................................................................................................. 9

3 PROPERTY DESCRIPTION AND LOCATION (NI 4) ............................................................................... 9

3.1 Property Description, Location and Area (NI 4a, 4b) ............................................................................ 9

3.2 Legal Aspects and Tenure for the Zandkopsdrift Mine and Prospects (NI 4c) ................................... 10

3.3 Material Agreements (NI 4e) ............................................................................................................... 12

3.4 Royalties (NI 4e) ................................................................................................................................. 13

3.5 Environmental Liabilities (NI 4f) .......................................................................................................... 13

3.6 Legislative and Permitting Requirements (NI 4g) ............................................................................... 13

3.7 Known Factors and Risks (NI 4h) ....................................................................................................... 13

4 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES AND PHYSIOGRAPHY (NI 5) .............................. 13

4.1 Access (NI 5b) .................................................................................................................................... 13

4.2 Topography, Elevation and Vegetation (NI 5a) .................................................................................. 14

4.3 Infrastructure, Population and Local Resources (NI 5c, 5e) ............................................................... 14

4.4 Climate and Operating Season (NI 5d) .............................................................................................. 15

4.5 Surface Rights (NI 5h) ........................................................................................................................ 15

5 HISTORY (NI 6) ....................................................................................................................................... 15

5.1 Prior Ownership (NI 6a) ...................................................................................................................... 15

5.2 Historical Exploration for Manganese (NI 6b) ..................................................................................... 15

5.3 Historical Exploration for Phosphate (NI 6b) ...................................................................................... 15

5.4 Historical Exploration for REEs (NI 6b)............................................................................................... 16

5.5 Historical Exploration by Frontier for REEs 2007 – 2010 (NI 6b) ....................................................... 16


xi

5.6 Historical Mineral Resource Estimates (NI 6c) ................................................................................... 18

5.7 Historical Production (NI 6d) ............................................................................................................... 20

6 GEOLOGICAL SETTING AND MINERALISATION (NI 7) ...................................................................... 20

6.1 Regional Geology Geological Setting (NI 7a) ..................................................................................... 20

6.2 Property Geological Setting (NI 7a) .................................................................................................... 20

6.3 Mineralisation (NI 7b) .......................................................................................................................... 25

7 DEPOSIT TYPE (NI 8) ............................................................................................................................. 25

8 EXPLORATION (NI 9) ............................................................................................................................. 28

8.1 Procedures and Parameters (NI 9a) ................................................................................................... 28

8.2 Sampling Methodology (NI 9b, 9c) ..................................................................................................... 30

8.3 Exploration Results (NI 9d) ................................................................................................................. 32

9 DRILLING (NI 10) .................................................................................................................................... 32

9.1 RC and Diamond Drillhole Programmes (NI10a, 10b, 10c) ............................................................... 32

9.2 Metallurgical Diamond Drillhole Programmes (NI10a, 10b, 10c) ....................................................... 33

9.3 Drillhole Database ............................................................................................................................... 33

10 SAMPLE PREPARATION, ANALYSES AND SECURITY (NI 11) .......................................................... 33

10.1 Sample Preparation and Submission Procedures (NI 11a) ................................................................ 33

10.2 Sample Analysis (NI 11b) ................................................................................................................... 35

10.3 Metallurgical Testwork Sample Preparation (NI 11b) ......................................................................... 35

10.4 Quality Assurance and Quality Control (NI 11c, 11d) ......................................................................... 36

10.5 Adequacy of Procedures (NI, 11d) ..................................................................................................... 36

11 DATA VERIFICATION (NI12) .................................................................................................................. 36

12 MINERAL PROCESSING AND METALLURGICAL TESTWORK (NI 13) .............................................. 37

12.1 Nature and Extent of Testwork (NI 13a, 13c) ..................................................................................... 37

12.2 PEA Testwork Outcomes (NI 13b, 13c) .............................................................................................. 40

13 MINERAL RESOURCE ESTIMATES (NI 14) .......................................................................................... 41

13.1 Key Assumptions (NI 14a to 14d) ....................................................................................................... 41

13.2 Database Validation and Data Preparation (NI 14a) .......................................................................... 41

13.3 Variography (NI 14a) .......................................................................................................................... 42

13.4 Geological Model (NI 14a) .................................................................................................................. 42

13.5 Mineral Resource Block Model Parameters (NI 14a) ......................................................................... 42

13.6 Estimation Methodology, Validation and Bias (NI 14a) ...................................................................... 44

13.7 Distribution of Individual REOs ........................................................................................................... 44

13.8 Mineral Resource Classification (NI 14a) ........................................................................................... 44

13.9 Uranium and Thorium ......................................................................................................................... 46

13.10 Mineral Resource Checklist ................................................................................................................ 46

14 MINERAL RESERVE ESTIMATES (NI 15) ............................................................................................. 47

15 MINING METHODS (NI 16) ..................................................................................................................... 47

15.1 Geotechnical Engineering and Resultant Design Criteria (NI 15a to 15d) ......................................... 47

15.2 Mine Design, Mining Methodology and Pit Optimisation (NI 16b, 16d) .............................................. 49


xii

15.3 Production Rates and Mine Schedule (NI 16b, 16d) .......................................................................... 53

16 RECOVERY METHODS (NI 17) .............................................................................................................. 53

16.1 Concentrator Plant (NI 17a, 17b) ........................................................................................................ 54

16.2 Acid Cracking Section (NI 17a, 17b) ................................................................................................... 54

16.3 Saldanha Separation Plant ................................................................................................................. 56

17 PROJECT INFRASTRUCTURE (NI 18) .................................................................................................. 57

17.1 Zandkopsdrift Mine Sulphuric Acid Production Plant .......................................................................... 57

17.2 Zandkopsdrift Mine Infrastructure ....................................................................................................... 58

17.3 Zandkopsdrift Project Power Requirements ....................................................................................... 58

17.4 Zandkopsdrift Mine and Saldanha Separation Plant Water Requirements ........................................ 61

17.5 Zandkopsdrift Mine Road Infrastructure ............................................................................................. 61

17.6 Zandkopsdrift Mine TDF ..................................................................................................................... 62

17.7 Saldanha Separation Plant ................................................................................................................. 64

17.8 Desalination Plant ............................................................................................................................... 64

18 MARKET STUDIES AND CONTRACTS (NI 19) ..................................................................................... 64

18.1 International Trade in Rare Earths ...................................................................................................... 66

18.2 Rare Earth Supply ............................................................................................................................... 66

18.3 Rare Earth Demand ............................................................................................................................ 66

18.4 Supply/Demand by Element ............................................................................................................... 67

18.5 Rare Earth Pricing............................................................................................................................... 68

19 ENVIRONMENTAL STUDIES (NI 20) ..................................................................................................... 69

19.1 Statutory Framework and Legal Requirements for the overall Zandkopsdrift Project (NI20c) ........... 70

19.2 Baseline Environmental Description for the Zandkopsdrift Mine (NI20a) ........................................... 72

19.3 Baseline Environmental Description for the Saldanha Separation Plant (NI20a) .............................. 72

19.4 Stakeholder Engagement for the Zandkopsdrift Mine and Saldanha Separation Plant (NI20d) ........ 73

19.5 Environmental Risk Identification and Evaluation for the Zandkopsdrift Mine (NI20a, 20c)............... 73

19.6 Environmental Risk Identification and Evaluation for the Saldanha Separation Plant (NI20a, 20c) .. 74

19.7 Mitigation and Closure Costs for the Zandkopsdrift Mine (NI20e) ...................................................... 74

19.8 Mitigation and Closure Costs for the Saldanha Separation Plant (NI20e) ......................................... 74

19.9 Environmental Studies Conclusion ..................................................................................................... 74

20 PERMITTING, SOCIAL AND LABOUR (NI 20) ....................................................................................... 74

20.1 Permitting, South African Mining Law and the MPRDA ...................................................................... 74

20.2 Labour ................................................................................................................................................. 74

20.3 Social and Labour Plan ....................................................................................................................... 75

21 CAPITAL AND OPERATING COSTS (NI 21) .......................................................................................... 75

22 ECONOMIC ANALYSIS (NI 22)............................................................................................................... 77

22.1 Valuation Methodology (NI22a) .......................................................................................................... 77

22.2 Cash Flow Approach .......................................................................................................................... 77

22.3 Concluding Remarks on the Valuation Results .................................................................................. 82

23 ADJACENT PROPERTIES (NI 23) .......................................................................................................... 82


xiii

24 OTHER RELEVANT DATA (NI 24) .......................................................................................................... 82

24.1 Risk Analysis ....................................................................................................................................... 82

25 INTERPRETATION AND CONCLUSIONS (NI 25) ................................................................................. 83

26 CONCLUDING REMARKS AND RECOMMENDATIONS (NI 26) ........................................................... 87

27 REFERENCES (NI 23) ............................................................................................................................ 89

28 DATE AND SIGNATURE PAGE .............................................................................................................. 90


xiv

LIST OF TABLES

Table 1 : Independent Specialist Consultants Contributing to the PEA ............................................................................... 4

Table 2 : Rare Earth Elements and Uses ............................................................................................................................ 5

Table 3 : Reliance on Other Experts ................................................................................................................................... 9

Table 4 : Zandkopsdrift Mine and Exploration Prospects – Legal Tenure ......................................................................... 10

Table 5 : Historic Ownership and Exploration History ....................................................................................................... 15

Table 6 : Historical Exploration for REEs .......................................................................................................................... 16

Table 7 : Historic 2010 Mineral Resource Estimates for Zandkopsdrift Project ................................................................. 20

Table 8 : Metallurgical Testwork Boreholes ....................................................................................................................... 31

Table 9 : Liberation of REE Bearing Fresh and Altered Monazite ..................................................................................... 39

Table 10 : Deslime Cyclone Test Results ......................................................................................................................... 39

Table 11 : Flotation Testwork Results ............................................................................................................................... 40

Table 12 : REE to REO Conversion Factors ..................................................................................................................... 41

Table 13 : Relative Abundance of the REEs at Zandkopsdrift ........................................................................................... 44

Table 14 : Zandkopsdrift NI 43-101 Compliant Mineral Resources at Various Cut-off Grades (Dec 2011) ....................... 45

Table 15 : Contributions of the Individual REOs to the Mineral Resource Estimate ......................................................... 45

Table 16 : CIM Mineral Resources Reporting Compliance Checklist ................................................................................ 46

Table 17 : Geotechnical Core Logging Results and Preliminary Slope Design Recommendations .................................. 49

Table 18 : Lithologies Mined at Zandkopsdrift ................................................................................................................... 50

Table 19 : Economic and Technical Parameters used in the Pit Optimisation .................................................................. 50

Table 20 : Summary of Results of the Pit Optimisation ..................................................................................................... 50

Table 21 : Percentage Oxide Purity .................................................................................................................................. 53

Table 22 : Power Supply Requirements for the Zandkopsdrift Project .............................................................................. 58

Table 23 : Rare Earth Global Supply Estimates ................................................................................................................ 66

Table 24 : Global Rare Earth Demand by Application ....................................................................................................... 67

Table 25 : REO Historic, Current and Forecast Prices ...................................................................................................... 68

Table 26 : Specialist Environmental Studies Informing the Preliminary Environmental Assessments for Zandkopsdrift Mine and Saldanha Separation Plant ............................................................................................................ 69

Table 27 : Statutory Framework and Legal Requirements for the Zandkopsdrift Project .................................................. 71

Table 28 : Preliminary Estimate of the Skills Development Programme for the Zandkopsdrift Mine ................................. 75

Table 29 : Summary Capital Expenditure for the Zandkopsdrift Project ............................................................................ 76

Table 30 : Operational Expenditure for the Zandkopsdrift Project ..................................................................................... 76

Table 31 : Technical and Economic Input Parameters for the Zandkopsdrift Project DCF ................................................ 78

Table 32 : Summary of the Cash Flow Valuation for the Zandkopsdrift Project ................................................................ 78

Table 33 : NPV post-tax of the Zandkopsdrift Project at Various Discount Rates ............................................................. 78

Table 34 : Value per Unit Mineralisation for Mount Weld .................................................................................................. 80

Table 35 : Value per Unit Mineralisation for Zandkopsdrift Project .................................................................................... 82

Table 36 : Market Comparative Valuation Results for the Zandkopsdrift Project .............................................................. 82

Table 37 : NI43-101 Compliant Mineral Resource Estimate for Zandkopsdrift (Dec 2011) ............................................... 84

Table 38 : Estimated Future Costs for the PFS ................................................................................................................. 88

Table 39 : Acid Bake and Leach Test Results ................................................................................................................... 98

Table 40 : Whole-Ore Atmospheric Leaching .................................................................................................................... 98


xv

Table 41 : Whole-Ore Caustic Leaching ........................................................................................................................... 99

Table 42 : Concentrate Acid Bake and Leach Results ...................................................................................................... 99

Table 43 : Internationally Accepted Methods of Mineral Project Valuation ...................................................................... 103


xvi

LIST OF FIGURES

Figure 1 : Regional Locality of the Zandkopsdrift Project .................................................................................. 2

Figure 2 : Ownership of the Zandkopsdrift Project ............................................................................................ 3

Figure 3 : Scope of the Zandkopsdrift Project PEA ........................................................................................... 7

Figure 4 : Legal Aspects and Tenure of the Zandkopsdrift Prospect .............................................................. 11

Figure 5 : Historical Drilling at Zandkopsdrift ................................................................................................... 17

Figure 6 : Historic 2010 Mineral Resource Block Model ................................................................................. 19

Figure 7 : Regional Geological Setting of the Zandkopsdrift Prospect ............................................................ 21

Figure 8 : Geology of the Koegel Fontein Complex ........................................................................................ 22

Figure 9 : Local Geology of the Zandkopsdrift Prospect and Surrounds ........................................................ 24

Figure 10 : Geological Cross Sections and Grade Distribution for the Zandkopsdrift Carbonatite ................. 26

Figure 11 : Frontier Current Exploration Programmes .................................................................................... 27

Figure 12 : Ground Magnetic and Radiometric Surveys over Zandkopsdrift .................................................. 29

Figure 13 : Metallurgical Testwork Sample Drilling Programme ..................................................................... 34

Figure 14 : Mineral Resource Block Model for Zandkopsdrift at Cut-off Grades of 1% and 2.0% TREO ....... 43

Figure 15 : Grade Tonnage Curves for the Zandkopsdrift Mine ...................................................................... 48

Figure 16 : Zandkopsdrift Optimised Pit Shell ................................................................................................. 51

Figure 17 : Life of Mine Tonnage Schedule and Waste--Plant feed Profile .................................................... 52

Figure 18 : ‘Flotation and Cracking’ Process Flow Design .............................................................................. 55

Figure 19 : Zandkopsdrift Mine Site Plan ........................................................................................................ 59

Figure 20 : Zandkopsdrift Process Plant Site Plan .......................................................................................... 60

Figure 21 : Saldanha Separation Plant Site Plan ............................................................................................ 65

Figure 22 : Consolidated DCF for the Zandkopsdrift Project........................................................................... 79

Figure 23 : AtRisk™ NPV Distribution Graph and Sensitivities for the Zandkopsdrift Project ........................ 81

LIST OF APPENDICES

Appendix 1 : Qualified Persons Certificates ...................................................................................................................... 92

Appendix 2 : Glossary and Technical Terms, Units of Measurement, Acronyms and Abbreviations ................................ 93

Appendix 3 : Hydrometallurgical Testwork Results ........................................................................................................... 97

Appendix 4 : South African Mining Law and Mining Charter ........................................................................................... 100

Appendix 5 : Valuation Methodologies Applied to Mineral Assets ................................................................................... 103


1

1 INTRODUCTION (NI 2)

1.1 Issuer and Purpose (NI 2a, 2b)

The directors of Frontier Rare Earths Limited (“Frontier”) requested that Venmyn Rand (Pty) Ltd (“Venmyn”) prepare an independent Canadian National Instrument 43-101 Technical Report and Valuation Statement (“ITR”) on the results of a Preliminary Economic Assessment (“PEA”) of the Zandkopsdrift Rare Earth Element Project (the “Zandkopsdrift Project” or the “Project”), located in the Namaqualand region of the Northern Cape Province of South Africa (Figure 1). Frontier is a Toronto Stock Exchange (“TSX”) (TSX:FRO)(TSX: FRO.WT) listed mineral exploration and development company focused exclusively on the development of rare earth element (“REE”) projects in Africa. Frontier is a British Virgin Islands registered company (Registration No 525111) which is resident in Luxembourg (Figure 2) and has several subsidiary and wholly owned subsidiary companies, as illustrated in Figure 2. Frontier holds a 74% shareholding in Sedex Minerals (Pty) Ltd (“Sedex”), which is a South African incorporated company, compliant with the South African Black Economic Empowerment (“BEE”) legislated required shareholding of 26% (Figure 2), and which holds a prospecting right for the area that contains the Zandkopsdrift carbonatite. The Sedex shareholders’ agreement gives Frontier a current effective economic interest of 95% in the Zandkopsdrift Prospecting Right until successful completion of a Definitive Feasibility Study (“DFS”) and the receipt by Frontier from the HDSA shareholders of payments required under the shareholders’ agreement. The Zandkopsdrift Project comprises three separate but integral components, namely:-

an open cast mine and processing plant on a REE enriched carbonatite, located southwest of the town Garies, in the Northern Cape Province of South Africa. The proposed mine, processing plant and associated infrastructure have collectively been named the Zandkopsdrift Mine and the property comprising the Prospecting Right on which the Zandkopsdrift Mine will be located, is termed the Zandkopsdrift Prospect, for the purposes of the PEA. A desalination plant (the “Desalination Plant”), located southwest of the town of Kotzesrus on the west coast of South Africa, will supply potable water to the Zandkopsdrift Mine. The Zandkopsdrift Mine will produce a mixed rare earth carbonate (“MREC”);

a trading, sales, marketing and finance company registered outside of South Africa (“Tradeco”), which will source finance and technical expertise for the development of a REE separation plant and following the establishment of the facility, purchase MREC from Sedex for processing at the separation plan and execute long term off-take agreements for the REE products produced by the separation plant; and

a REE separation plant located at Saldanha Bay (the “Saldanha Separation Plant”), which will toll treat the MREC supplied by Tradeco from the Zandkopsdrift Mine and, potentially, other rare earth mines that may be developed by Frontier.

The Prospecting Right, which constitutes the Zandkopsdrift Prospect area, is held by Sedex and operated through the South African operating company Frontier Rare Earths SA (Pty) Ltd, whilst the Desalination Plant and Saldanha Bay Separation plants will operate through subsidiaries, namely Desco (K201100451 SA (Pty) Ltd) and Sepco (Odvest 196(Pty) Ltd) respectively, as illustrated in Figure 2. The PEA has been undertaken as a preliminary study to evaluate the technical and economic parameters of the Zandkopsdrift Project as the precursor to and basis for, a planned future Preliminary Feasibility Study (“PFS”). Contingent upon the successful outcome of the PFS, a DFS will be undertaken. The PEA was conducted by a group of independent specialist consultants (“Specialist Consultants”) retained by Frontier to examine the technical, logistical, legal, environmental and economic aspects of the Project. The results of the specialist studies have been independently reviewed by Venmyn and collated in this Canadian National Instrument (“NI”) 43-101 compliant ITR on the PEA. A list of the Specialist Consultants is presented in Table 1. The ITR was prepared in accordance with the requirements of:-

disclosure and reporting requirements of the TSX as stipulated in the 2007 TSX Company Manual;

Canadian National Instrument 43-101, ‘Standards of Disclosure for Mineral Projects’, Form 43-101F1 and Companion Policy 43-101CP (April 2011); and

Canadian Institute of Mining, Metallurgy and Petroleum (“CIM”) Definition Standards (2005).

This diagram and the information herein may not be reproduced or transmitted in any form without prior written permission from Venmyn Rand (Pty) Ltd. Graphics by Interaction.

Independence you can trust

FIGURE 01

Zandkopsdrift Project - PEA

D990M_Frontier Rare Earths_2011

REGIONAL LOCALITY OF THE ZANDKOPSDRIFT PROJECT

Vaal

Tugela

Orange

22°E 30°E 30°S

0 450kmScale

NAMIBIA

BOTSWANA

MO

ZA

MB

IQU

E

LESOTHO

SWAZILAND

Saldanha

Cape Town

Durban

Johannesburg

Pretoria

Musina

O 32 55’ S

40km0 Scale

ATLANTIC OCEAN

Nababeep

SpringbokKleinsee

Hondeklipbaai

Kamieskroon

Garies

Loeriesfontein

NieuwoudtvilleCalvinia

Klawer

Vredendal

Uitspankraal

ClanwilliamLamberts Bay

Citrusdal

Veldrif

Stompneusbaai

Paternoster

Vredenburg

Langebaan

Hopefield

Piketberg

Porterville

Moorreesburg

Rietpoort Bitterfontein

NORTHERN CAPE

WESTERN CAPE

Saldanha Bay

LEGEND:

Towns and Cities

Railway

Main Roads

River

Provincial Boundary

O 18 E

O32

54’S

DESALINATION PLANT

SALDANHA SEPARATION PLANT

Zandkopsdrift MineO17 57’57”EO30 51’57”S

N14

N7

N7

Kotzesrus

ZANDKOPSDRIFT MINE

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uced

or tran

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Ven

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Ran

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ty) Ltd

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y Interactio

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D990M

_Fro

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are Earth

s_2011

OWNERSHIP OF THE ZANDKOPSDRIFT PROJECTIn

de

pe

nd

en

ce

yo

u c

an

trust

Zan

dko

psd

rift Pro

ject - P

EA

FIG

UR

E 0

2Source: Frontier 2011

100% 100%

Saldanha SeparationPlant Company

LEGEND

South Africa

Existing Subsidiary

Proposed Subsidiary

Notes: (1) Frontier Rare Earths SA (Pty) Ltd (formerly Yolani Minerals (Pty) Ltd.) provides technical, management and related services to certain of Frontier's subsidiaries in South Africa.(2) In accordance with South African Black Economic Empowerment legislation, Frontier has introduced Black Economic Empowerment partners to the Zandkopsdrift Project. A 26%

shareholding in Sedex Minerals (Pty) Ltd is held by Black Economic Empowerment partners and is split between Mr. Martin van Zyl (5%) and the Namaqualand Empowerment Trust (21%).

100%

SA Operating Company

Frontier Rare Earths SA(Pty) Ltd (SA Resident)

(1)Frontier Corporate

Services Ltd(Irish Resident)

100%

Odvest 196 (Pty) Ltd

(SA Resident)

Tradeco*

(Non SA Resident)*To be incorporated

ZandkopsdriftProspecting RightHolding Company

DesalinationPlant Company

DescoK2011100451

(Pty) Ltd (SA Resident)

74%

SedexMinerals

(Pty) Ltd (SA Resident)

(2)

100%

Frontier Rare EarthsLtd (Lux resident)


4

Each section of the ITR is designated with the relevant NI 43-101 Item number (NI Item) and the guidelines are considered by Venmyn to be a concise recognition of the best practice due diligence methods and accord with the principles of open and transparent disclosure that are embodied in internationally accepted resource reporting, technical and corporate governance codes. The PEA on the Zandkopsdrift Project includes approximately 27% of the total Mineral Resource in the Inferred category. The inclusion of such Inferred Mineral Resources in the PEA is permissible in accordance with Canadian National Instrument 43-101 Section 2.3 (3)(a), however it must be noted that the Inferred Mineral Resources are considered too speculative geologically to have economic considerations applied to them that would enable them to be categorised as Mineral Reserves and there is no certainty that the preliminary economic assessment will be realised.

Table 1 : Independent Specialist Consultants Contributing to the PEA

CONSULTING COMPANY RESPONSIBILITY

Africa Geo-Environmental Services (Pty) Ltd (“AGES”)

Preliminary Environmental Assessment which included the following: archaeological, botanical, air quality, human health risk and radiological impact assessments Mine closure plan and estimate of financial provision Water fatal flaw analysis and water baseline study

Africa Remediation Technologies (Pty) Ltd (“ART”)

Sea water desalination plant scoping study

Benchmark Risk Advisory Independent Risk Assessment Cameron Cross Incorporated (“Cameron Cross”)

Environmental permitting legal opinion

Corli Havenga Transportation Engineers Cc

Access routes and logistics surveys

EHL Consulting Engineers (Pty) Ltd (“EHL”)

Eskom bulk power supply application

Epoch Resources (Pty) Limited (“Epoch”)

Tailings Disposal Facility design

GeoAfrica Prospecting Services cc Geology and mineralisation KPMG Services (Pty) Ltd (“KPMG”) Tax and corporate structure Metallurgical Development Services (MDS) Limited (“MDS”)

Independent process consultant

The MSA Group (“MSA”) Geological model and Mineral Resource estimation

SGS Mineral Services (“SGS”) Mineralogical studies and bench scale flowsheet development (beneficiation and hydrometallurgical studies)

SNC-Lavalin (Pty) Limited (“SNC”)1 Design of the concentrator, acid cracking, sulphuric acid and separation plants including associated on-site infrastructure and services, and the capital and operating cost estimates for this scope

Sound Mining Solution (Pty) Limited (“SMS”)

Geotechnical assessment and mine design

Source: Venmyn 2011, Frontier 2011 1. SNC‐Lavalin’s responsibilities included the metallurgical process plant, mine access road, booster pumps at

Kotzesrus and housing at Garies and excluded the desalination plant and upgrade of the local provincial roads

In the execution of its mandate, Venmyn undertook a technical and economic valuation of the Zandkopsdrift Project, in order to identify all the factors of both a technical and economic nature which could impact the future viability of the Project. Venmyn also considered the strategic merits of the Project and defined the valuation outcomes on an open and transparent basis. The ITR has been compiled in order to incorporate all currently available and material information that will enable the reader to make a reasoned and balanced judgement regarding the economic merits of the Project.

1.2 The Rare Earth Elements and Generic Ore Processing Requirements

The REEs (also known as the rare earth metals) comprise a suite of seventeen elements in the periodic table, specifically the fifteen lanthanoids together with scandium and yttrium, as summarised in Table 2. Scandium and yttrium are classified together with the REEs since they tend to occur in the same deposits as the lanthanides and exhibit similar chemical properties. The REEs, with the exception of the unstable, radioactive promethium, are relatively abundant in the earth’s crust, with cerium present in concentrations similar to those of copper. However, because of their geochemical properties, REEs are typically dispersed throughout the crust and are rarely found in economically exploitable concentrations. The lanthanoids display uniform chemical characteristics and mostly form X+3 ions except for Eu and Ce, which occur as Eu+3 and Eu+2 and Ce+3 and Ce+4, respectively. The REE concentrations in any given ore deposit generally exhibit ‘jagged’ distributions, as a consequence of elements with even atomic


5

numbers occurring in higher concentrations relative to adjacent odd atomic numbered elements. To smooth this distribution, the REEs are typically normalised to chondrite values. The current dominant end uses for the REEs are automobile catalysts, phosphors for flat screen displays in colour television and cell phone displays, permanent magnets, rechargeable batteries, powerful permanent magnets for defence applications and wind turbines (Harmer 2011) as summarised in Table 2. Generally, REE enriched ore requires multi-stage hydrometallurgical ore processing which can be generically described as physical upgrading of the ore, followed by chemical beneficiation (acid or alkaline leaching), removal of impurities and final separation of the individual REEs or compounds through selective oxidation/reduction, fractional precipitation, solvent extraction and/or ion exchange. The generic hydrometallurgical process route is summarised as follows:-

multi-step physical upgrading of the run-of-mine (RoM) material to produce an approximately 60% to 90% concentrate. The physical upgrade generally includes some or all of the following: comminution, screening, flotation, density, gravitation, electrostatic and electromagnetic separation;

acidic or alkaline leaching, often at raised temperatures, to produce metallic chlorides, hydroxides, sulphates or carbonates;

impurity removal;

separation of the individual metallic compounds through processes that exploit the slight differences in chemical behaviour of REEs adjacent in the Periodic Table, through selective oxidation, selective reduction, fractional precipitation, solvent extraction or ion exchange; and

final pyrometallurgical refining to produce single element metals or multiple element alloys as specified by the end-users.

Table 2 : Rare Earth Elements and Uses

ELEMENT SYMBOL LIGHT/HEAVY USES APPLICATIONS Lanthanum La

Light

LaNiH batteries, phosphors, fluid cracking catalysts, auto catalysts, glass additive, polishing powders

LaNiH batteries for hybrid vehicles, alloys for rechargeable batteries Cerium Ce

Praseodymium Pr Permanent magnets, LaNiH batteries, phosphors Permanent magnets for wind turbines,

hybrid electric vehicles, computer hard drives, mobile phones, medical scanners and power tools Neodymium Nd

Permanent magnets, LaNiH batteries, fluid cracking catalysts, auto catalysts, glass additive

Promethium Pm Radiation source, phosphor Thickness gauges, atomic batteriesSamarium Sm Permanent magnets SaCo batteries, chemical reagentsEuropium Eu

Heavy

Phosphors, fibre optics Phosphors for Light Emitting Crystal Diodes (LCD), Light Emitting Diodes (LEDs) fluorescent lights Gadolinium Gd Phosphors

Terbium Tb Permanent magnets, phosphors, fibre optics

Fibre optics; used for signal amplification

Dysprosium Dy Permanent magnets, phosphors Permanent magnets, phosphors

Holmium Ho Permanent magnets Colourant for cubic zirconium, solid state lasers, optical spectrophotometer

Erbium Er Glass additive, fibre optics

Is important as a doping agent in optical fibres, where it enables the fibre to be optically pumped to act as an amplifier for passing signals.

Thulium Tm Lasers, portable X-ray sources, high temperature superconductors

Lasers, X-Ray sources

Ytterbium Yb Gamma ray source, doping of stainless steel, stress gauges

Gamma ray source

Lutetium Lu Catalysts, petroleum cracking, Catalysts, optical lenses Scandium Sc Phosphors

Yttrium Y Phosphors

Source: Harmer 2011

1.3 Use of the Term “Ore”

The Canadian National Instrument Companion Policy 43-101 (Section 2.3) states “We consider the use of the word “ore” in the context of mineral resource estimates to be misleading because “ore” implies technical feasibility and economic viability that should only be attributed to mineral reserves”. In compliance with Section 2.3 of the Companion Policy, the term “ore” is not used in the Mineral Resource context of this ITR (Section 13).


6

However, there are places throughout this ITR where for clarity purposes, the term “ore” is used in the normal historical geological sense and is hereby defined as describing “material containing REEs in potential economic quantities, with no implication that the material is a Mineral Reserve for which economic and technical feasibility studies have been completed”.

1.4 Zandkopsdrift Project PEA Concept

The Zandkopsdrift Project PEA was commissioned by Frontier with the purpose of defining and quantifying the technical and economic merits of each of the components of the Project. The scope of the PEA is summarised below, and the components of the Project and their interrelationships are illustrated in Figure 1 and Figure 3:-

the Zandkopsdrift Mine comprises the open cast mine and processing plant on the Zandkopsdrift REE enriched carbonatite in the Northern Cape Province of South Africa. The processing plant consists of several sections, which include a front end comminution and flotation section and an acid cracking and leaching concentrator plant, which are collectively defined as the Zandkopsdrift Process Plant (the “Process Plant”);

the property comprising the Prospecting Right on which the Zandkopsdrift Mine, Process Plant and associated infrastructure and services will be located is held by Sedex and the property area is defined for the PEA as the Zandkopsdrift Prospect. Sedex will mine the REE deposit and beneficiate the RoM ore into MREC, which is sold to Tradeco;

the Desalination Plant is to be located southwest of the town of Kotzesrus on the west coast of South Africa (Figure 1). Desco is the holding company for the proposed Desalination Plant which will supply potable water to the Zandkopsdrift Mine;

the Saldanha Separation Plant is a REE separation plant located at the port of Saldanha Bay. Sepco is the company holding the proposed Saldanha Bay Separation Plant that will separate the MREC carbonate into individual separated rare earth oxides (“SREO”);

Tradeco is a trading company registered outside of South Africa, which will supply the MREC product from the Zandkopsdrift Mine to the Saldanha Separation Plant for the toll treatment of the MREC to produce SREOs;

the Zandkopsdrift Mine is planned to be a stand-alone, open cast mine, which will be mined by conventional free-dig and/or drill, blast and haul techniques, with minimal drilling and blasting required. The steady state mining production target is 1.0Mtpa and the total SREO target production rate is 20,000tpa;

the infrastructure associated with the Zandkopsdrift Mine and Process Plant includes upgrading of existing district roads from surrounding towns to the mine. The water supply to the Zandkopsdrift Mine will be provided by Frontier from demineralised water piped 35km from the Desalination Plant. The power supply for the Zandkopsdrift Mine will be fully provided by turbo-generators utilising the on-site exothermic reactions within an on-site Sulphuric Acid Production Plant. The Desalination Plant will be powered by diesel generators and the Saldanha Separation Plant will be supplied by the South African national electricity generation and distribution authority, Eskom;

for the purposes of the PEA, the Mineral Resource cut-off grade selected is 1% TREO at a TREO basket price of USD58.23/kg TREO. The ZAR:USD exchange rate assumed is 7.80;

in terms of the mine design, the deposit is delineated into the following categories:-

o a Central Zone, which consists of material with in situ TREO contents of >2.0% TREO, and which will form the RoM feed to the Process Plant;

o an Outer Zone, which consists of material with TREO contents ranging between 1.0% TREO and 2.0% TREO. Some of the Outer Zone material will be mined to provide access to the Central Zone material and will be stockpiled close to the Process Plant. For the purposes of the PEA, the Outer Zone material is not treated, but could represent possible RoM plant feed for consideration in the PFS; and

o a Low Grade Zone, which consists of material with TREO contents of <1.0% TREO, and which will be considered as waste for purposes of the PEA;

the waste material produced at the Zandkopsdrift Mine has been categorised into various types including barren country rock, weathered and fresh carbonatite with sub-economic grades (<1.0% TREO) and topsoil. Each of the waste categories are stockpiled separately and the calculation of the stripping ratio includes, not only these waste categories, but also the Outer Zone and Low Grade Zone material;

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THE ZANDKOPSDRIFT PROJECT PEA CONCEPTIn

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Desco

Tailings Disposal Facility

ZANDKOPSDRIFT MINEDESALINATION PLANT

Desalination Plant HCl Redissolution


Water supply

pipelinevia

Kotzesrus

Th, U, Fe precipitation

Trucked to Saldanha Bay

Tradeco

Sedex Sepco

TRADECO

Open Pit Mine

ZANDKOPSDRIFT PROJECT COMPONENTS

Concentrator Plant

Comminution

Flotation

Acid Cracking Plant

Leaching

Filtration

REE Carbonate precipitation

Turbo Power Generation

Sulphuric Acid Production Plant

Multiple solvent extraction

Calcination

Precipitation of +99% separated REO

Sales toInternational

Clients

Diesel generatorpower supply

Tradeco

Toll

tre

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en

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Bulk power supply from Eskom

Water supply from local municipality

Filtration

Brine evaporation ponds

Stripping and precipitation

Power supply

Demineralised water

Steam supply

Material flow

Services flow

Ownership flow

Holding company

LEGEND


8

mining of the carbonatite will be undertaken with conventional open pit mining equipment and the open pit will be developed in 6m benches;

the Process Plant comprises the typical components of a REE processing plant as outlined in Section 1.2, namely, a front-end physical upgrading section, which includes a crushing and milling section and a flotation circuit, collectively termed the Concentrator Plant, followed by an acid leach section, termed the Acid Cracking Section, which also includes the impurity removal, filtration and purification sections. The Concentrator Plant can be simplified to exclude the flotation section resulting in a “Whole-Ore” process flow, should ongoing metallurgical test work indicate that this would be a better alternative;

the RoM will be crushed/milled and screened through the front-end section which includes primary and secondary crushers, screens and milling circuits. The flotation circuit comprises cyclone classification, rougher and scavenging flotation and concentrate thickening;

the flotation concentrate undergoes acid and thermal cracking with sulphuric acid produced in an onsite Sulphuric Acid Production Plant. Thorium, uranium and iron are removed by neutralising the leach solution with a portion of the flotation tailings, resulting in the co-precipitation of the thorium, uranium and iron to the tailings disposal facility (“TDF”). A portion of the Process Plant site has been allocated for the potential future removal of uranium by solvent extraction to produce a saleable by-product. The REEs are precipitated as a bulk MREC prior to filtering, drying and transportation to the Saldanha Separation Plant;

the MREC is trucked by road to the Saldanha Separation Plant for multiple solvent extraction, stripping and precipitation. The REEs will be recovered as >99% pure oxides for Y, La, Ce, Pr, Nd, Sm, Eu, Gd, Tb and Dy. The remaining REEs namely Ho, Er, Tm, Yb and Lu will be bulk precipitated as carbonates and stored for potential future sale. The SREOs are dried and exported for sale; and

the SREO basket price and exchange rate forecasts were independently derived by Venmyn for input into the Zandkopsdrift cash flow model and full sensitivity analyses. In addition, a risk assessment has been undertaken on the Project.

1.5 Sources of Information (NI 2c)

The 2011 Zandkopsdrift ITR has been based primarily on the exploration, technical and financial information supplied by the Specialist Consultants, with supplementary information provided by Frontier. In compiling the ITR, Venmyn reviewed and made use of the documentation outlined in Section 27, for which either written consents were obtained from the independent consultants, or the consultants directly contributed to the ITR and are signatories to the ITR. The 2011 Mineral Resource estimate undertaken by MSA as reported in this ITR, was based on information available as at September 2011 from the following exploration programmes.

a 61 vertical reverse circulation (“RC”) borehole drilling (3,414m) and sampling programme by Frontier conducted between March 2011 and the third quarter of 2011;

an 11 borehole RC drilling (820m) and sampling programme by Frontier conducted in 2009 that validated historic Anglo American Corporation (“Anglo American”) drilling; and

the results from 29 RC boreholes (2,188m) and two diamond drillholes (276m) from the previous Anglo American drilling campaign, as well as re-assays of the Anglo American samples undertaken by Activation Laboratories in Ontario, Canada for Frontier in 2010.

The total drilling included in the Mineral Resource estimate is 6,698m, of which 5,558m was sampled and assayed. The database included lithology, assays for all REEs, a selection of major element oxides and downhole survey data for some boreholes. Information from the 2011 exploration programmes that only became available post September 2011 will be included in an updated Mineral Resource estimate as part of the planned PFS.

1.6 Personal Inspections (NI 2d)

Site visits were conducted by the various signatories and Qualified Persons throughout 2011, as summarised below:-

AGES: Senior Geohydrologist; Mr. J. Vivier, visited the site on 17th May 2011;

AGES: Environmental Assessment Practitioner; Mr. M. Grobler, 17th May 2011;

Epoch: Senior Civil and Environmental Engineer; Mr. G. Wiid, 17th May 2011;


9

MSA: Geologists; Mr. M. Hall, Mr. M. Venter and independent consultant Mr. P. Siegfried (GeoAfrica Prospecting Services cc): several site visits were undertaken throughout 2011, the last of which was on 16th September 2011;

SMS: Senior Mining Engineer; Mr. G. Stripp, 17th May 2011;

SNC-Lavalin: Project Manager; Mr. C. de Jager, 17th May 2011; and

Venmyn: Independent Consulting Geologist and Minerals Industry Analyst; Ms. F. Harper, 17th May 2011.

1.7 Statement of Independence

Venmyn and the Specialist Consultants contributing to this ITR are independent advisory companies. Venmyn and its consultants have extensive experience in preparing Technical Reports, technical advisers’ and valuation reports for mining and exploration companies. Venmyn’s consultants have, collectively, more than 100 years of experience in the assessment and evaluation of mining projects and are members in good standing of appropriate professional institutions. The Venmyn signatories to this report are qualified to express their professional opinions on the technical aspects and values of, the mineral asset described. The Qualified Persons Certificates are presented in Appendix 1. Neither Venmyn nor its staff, have or have had any interest in this Project capable of affecting their ability to give an unbiased opinion, and, have not and will not, receive any pecuniary or other benefits in connection with this assignment, other than normal consulting fees at an agreed commercial rate. The payment of these fees is in no way contingent upon the results of this report. Frontier has warranted in writing that it has openly provided all material information to Venmyn, which, to the best of its knowledge and understanding, is complete, accurate and true. Sections of the ITR have been compiled by Specialist Consultants and Qualified Persons as indicated in Table 1. Each Qualified Person has warranted that they are independent of Frontier and qualified to express their professional opinions and have received no pecuniary or other benefits in connection with this assignment, other than normal consulting fees at an agreed commercial rate. The Qualified Persons Certificates for the signatories to this ITR are presented in Appendix 1. Venmyn reserves the right to, but will not be obliged to, revise this report or sections therein, and conclusions thereto, if additional information becomes known to Venmyn subsequent to the date of this report.

2 RELIANCE ON OTHER EXPERTS (NI 3)

In compiling the ITR, Venmyn reviewed and made use of the documentation outlined in Section 1.5 and Venmyn has relied upon the independent opinion of the experts, Qualified Persons and Specialist Consultants to the extent and in the context outlined in Table 3:-

Table 3 : Reliance on Other Experts

CONSULTING COMPANY TYPE OF STUDY EXTENT OF RELIANCE

Cameron Cross Incorporated Environmental Authorisation Application Process and Preliminary Legal Requirements Assessment: Zandkopsdrift Project

Full reliance for legal opinions in Section 19.1

Tabacks Corporate Law Advisors Independent legal opinion on the Prospecting Right held by Sedex Minerals (Pty) Ltd

Full reliance for legal opinions in Section 3.2

KPMG Services (Pty) Ltd Tax and corporate structure Full reliance for tax inputs in Section 18

Source: Frontier 2011

3 PROPERTY DESCRIPTION AND LOCATION (NI 4)

3.1 Property Description, Location and Area (NI 4a, 4b)

The Zandkopsdrift Project is a REE Project located in the Northern Cape and Western Cape Provinces of South Africa and is planned to consist of the three main physical components located as described in Section 1.1 and Section 1.4 (Figure 1 and Figure 4) and summarised below:-

the Zandkopsdrift Mine, which includes the Process Plant and associated infrastructure will be located on the farm Zandkopsdrift 537, Ptn 2 (known as Pan Vlei), southwest of the town Garies in the Northern Cape Province of South Africa (Figure 1, Figure 4). The Zandkopsdrift Prospect comprises a prospecting right (Prospecting Right No. 869/2007 PR) over a total area of over 58,862ha in the extreme southwest portion of the Northern Cape Province, directly on the boundary with the Western Cape Province to the southeast (Figure 4).


10

The Zandkopsdrift Mine is located 450km north of Cape Town, 130km from Springbok, the regional capital and 25km southwest of the nearest town, Garies.

a Desalination Plant to supply water to the Zandkopsdrift Mine, will be located in the Northern Cape Province, southwest of the town of Kotzesrus on the west coast of South Africa; and

a REE separation plant to be located in the Western Cape Province at Saldanha Bay.

3.2 Legal Aspects and Tenure for the Zandkopsdrift Mine and Prospects (NI 4c)

The authors of this report are not qualified to provide extensive commentary on legal issues associated with Frontier’s and/or its subsidiaries’ right to the mineral properties. Venmyn has reviewed the legal title documentation and, whilst this does not constitute a legal opinion, the authors have satisfied themselves that the information presented herein is materially correct. No warranty or guarantee, be it express or implied, is made by the authors with respect to the completeness or accuracy of the legal aspects of this document. In addition, Venmyn has relied on the legal opinion by Tabacks and Associates (Pty) Ltd (“Tabacks”) (Table 3) on the status of the mineral rights. 3.2.1 Issuers Title and Tenure (NI 4d)

A Prospecting Right for all minerals other than diamonds, kaolin and heavy minerals was granted to Sedex by the original South African Department of Minerals and Energy (“DME”) on 5th September 2007, as summarised in Table 4. Since July 2002 the DME has been known as the Department of Mineral Resources (“DMR”).

Table 4 : Zandkopsdrift Mine and Exploration Prospects – Legal Tenure

PROSPECTING RIGHT

PROPERTY AREA (ha)

MINERALS EXPIRY DATE

HOLDING COMPANY

Prospecting right 869/2007PR

Roodeheuvel 502; Ptns 2,8

58,862.18

All minerals expecting diamonds, kaolin and heavy minerals

04-Sep-12 (application for renewal submitted in Feb. 2012. The tenure remains valid until the application has been processed)

Sedex Minerals (Pty ) Ltd Registration Number 2006/003993/07

Hawerland 503; RE, Ptns 2,3 Groen Riviers Valley 504; Ptns 1, 3, 5 Waterval 536; RE, Ptns 1, 2, 3, 4, 5 Zandkopsdrift 537; RE, Ptns 1, 2, 3, 4 Klipheuwel 538; RE, Ptns 1, 2, 3, 4, 5 Rooidam 540; RE, Ptn 1 De Dam 541; RE, Ptns 1, 3, 4 Rondabel 542; Ptns 1, 2, 3 , 4 Brandduin 543; RE, Ptn 1, 2, 3, 4, 5 De Witflacte 551; RE, Ptns 2, 3 Brakfontein 553; RE, Ptns 1, 2, 3 Varsfontein 554; RE, Ptns 2, 3 Rondawel 638; RE, Ptn 1

Source: Prospecting Right (DMR) 2007 Note: The Farm Zandkopsdrift 537, Ptn 2 is known as Pan Vlei

The Prospecting Right was granted for a period of 5 years, until 4th September 2012, over the farms and farm portions outlined in Table 4, and was granted based on a specific work programme delineated in the Prospecting Right application. A minimum exploration expenditure of USD420,000 over the five year tenure of the Prospecting Right was committed by Sedex and the expenditure commitment has already been satisfied. In terms of the Mineral and Petroleum Resources Development Act 28 of 2002 (“MPRDA”), Sedex has the right to renew the Prospecting Right for an additional three years, subject to compliance with the requirements for renewal set out in the MPRDA. The MPRDA provides that a Prospecting Right in respect of which a renewal application has been lodged prior to expiry is deemed to continue to exist post expiry until a decision has been made in respect of the renewal application. An application for renewal of the Prospecting Right was made to the DMR in February 2012 and an application for a Mining Right over the carbonatite and proposed mine site, will be made on or before completion of the PFS. Sedex will retain its Prospecting Right if it successfully:-

maintains its historically disadvantaged South African (“HDSA”) status, which has not changed since the application for the original Prospecting Right was made; and

adheres to the exploration programme submitted with the original Prospecting Right application. This requirement has already been satisfied by the exploration conducted to date.



FIGURE 04



LEGAL ASPECTS AND TENURE OF THE ZANDKOPSDRIFT PROSPECT

Source: Frontier 2011, 1:250 000 Topo map

Scale0 10km

O17 40’E O17 50’EO18 E

O30

50’S

SATELLITE IMAGE OF PROJECT BOUNDARY

Note: The Sedex Prospecting Right is called the Zandkopsdrift Prospect for the PEA.

O30

55’S

O30

50’S

O18 E O18 05’EO17 55’E

Swart Doringrivier

Swar

t Dor

ingr

ivie

r

N7

Zandkopsdrift537

Waterval536

Rooidam540

Klipheuwel538

Brakkefontein533

Moordenaars Kraal41

Stof Kraal42

Riet Poort43

Bruintjes Hoogte40

234

299

447

418

INFRASTRUCTURE MAP OF PROJECT AREA

Scale0 2.5km

Rivers

Surface expression of

the Zankopsdrift Carbonatite

Sedex Prospecting Right

Zandkopsdrift 537

LEGEND

LEGEND

Farm Boundaries

Zandkopsdrift 537 Ptns

Zandkopsdrift 537 Ptn 2 (Pan Vlei)

Zandkopsdrift 537

Surface expression of

the Zankopsdrift Carbonatite

Main Roads

Secondary Roads

Other Roads

Non-perennial River

Magisterial District Boundary

50m Contour lines

Beacon with height234


12

The MPRDA also provides for a Retention Permit that is granted for a period of up to three years with one renewal of an additional two years, after the end of the eight year Prospecting Right tenure. The Retention Permit may only be granted on condition that the holder of the Prospecting Right has completed the required exploration programme to a DFS level, defined a Mineral Reserve and can corroborate that the mining of the mineral in question would be uneconomic due to prevailing market conditions.

3.2.2 Surface Rights (NI 4d)

Tabacks confirms that there is no litigation or potential litigation which could affect the surface rights of Sedex within the Prospecting Right. In terms of South Africa law it is not necessary for an exploration or mining company to own the surface rights of a potential development property and as the holder of the Prospecting Right, Sedex is entitled to all rights set out in Section 5(3) of the MPRDA, which permits it to prospect, use the surface and to bring plant, property and equipment onto site for prospecting purposes. Furthermore, with regards to the site of the Zandkopsdrift Mine, Sedex is also the owner of the surface rights. Sedex obtained approval of its Environmental Management Plan (“EMP”) for the Prospecting Right in accordance with Section 39 of the MPRDA, and a deposit of USD25,000 is held in trust with the DMR for rehabilitation. An amendment to the EMP which provided for amendments to the drilling programme and financial provision has been approved. Tabacks confirms that there are no breaches, fines or investigations relating to the EMP.

3.3 Material Agreements (NI 4e)

3.3.1 BEE Shareholding Agreements (NI 4e)

Frontier has a 74% shareholding in Sedex, which is the holder of the Prospecting Right for the Zandkopsdrift carbonatite. Frontier has complied with the BEE equity ownership requirements in respect of Sedex as laid down by the Mining Charter and MPRDA, through shareholder agreements with HDSA individuals and entities that together hold the remaining 26% of the issued share capital of Sedex (Figure 2). The Sedex BEE shareholding comprises a 21% shareholding owned by the Namaqualand Empowerment Trust, a broad-based community trust established for the benefit of HDSAs in the Namaqualand region and 5% by Mr Martin van Zyl (collectively termed the BEE Shareholders). In terms of the Sedex shareholders’ agreement, the BEE Shareholders will receive a free carried interest in Sedex until the completion of a DFS, at which point the Namaqualand Empowerment Trust will be required to pay market value for its 21% interest in Sedex and to contribute a pro rata share of the capital and operating costs of Sedex post the completion of the DFS. Mr van Zyl will be required to contribute a pro rata share of the capital and operating costs of Sedex post the completion of the DFS. The agreement thereby gives Frontier a current effective 95% economic interest in Sedex until such payments are concluded. Frontier holds 100% interests in Tradeco and Sepco (Figure 2).

3.3.2 Korea Resources Corporation Strategic Partnership Agreement (NI 4e)

Frontier announced on the 5th December 2011 that it had concluded a definitive agreement with the Korea Resources Corporation (“KORES”), a Korean Government-owned mining and natural resource investment company, to form a strategic partnership designed to accelerate the development of the Zandkopsdrift Project. Furthermore, KORES will form and lead a consortium of Korean industrial and corporate groups (the “KORES Consortium”) to partner with Frontier in the development of the Zandkopsdrift Project. The proposed members of the KORES Consortium are the Samsung Group, GS Group, Daewoo Shipbuilding & Marine Engineering Group (“DSME”), and AJU Group. The definitive agreement involves an investment in both the Zandkopsdrift Project and Frontier, with an off-take arrangement that could commit up to 31% of the future production. Under the terms of the agreement, the KORES Consortium will acquire an initial 10% interest in the Zandkopsdrift Project on completion of a PEA and thereby secure off-take rights for 10% of the production. The cash consideration for the acquisition will be based on the Zandkopsdrift Project valuation that will be calculated using Frontier’s enterprise value (“EV”) and attributable interest in the Project. The EV will utilise the volume weighted average share price for Frontier for the 15 trading days following the filing on System for Electronic Document Analysis and Retrieval (“SEDAR”) of the ITR, subject to a minimum share price of Canadian dollar (“CD”) CD2.39 per Frontier share for the purpose of calculating EV. The EV is calculated as market capitalisation less cash and cash equivalents.


13

The agreement further provides that, the KORES Consortium can also acquire a further 10% interest in the Project and up to a 10% share ownership of Frontier on completion of a DFS, which, if both were acquired, would give KORES off-take rights for an additional 21% of rare earth production from the Zandkopsdrift Project. All of the rare earth production to be purchased by the KORES Consortium will be based on the prevailing international rare earth market prices at the time of purchase. Frontier will have full flexibility to seek other customers for the balance of production.

3.3.3 The Saldanha Separation Plant (NI 4e)

Frontier signed a Memorandum of Understanding (“MoU”) with Rare Metals Industries (Pty) Ltd (“RMI”) known as the Saldanha Infrastructure Sharing Agreement on 5th April 2011, which includes provisions for Frontier to acquire from RMI:-

approximately 30ha in extent of the Farm Uyekraal 189/0 upon which to locate the Saldanha Separation Plant;

the total process water requirement of 200,000m3 per annum for the Saldanha Separation Plant;

the total bulk power requirement of 6.25MVA at 11KV for the Saldanha Separation Plant; and

Frontier and RMI would either enter a contract to jointly construct and operate an integrated speciality metals complex or RMI would enter an off-take agreement with Frontier to purchase the product from the Saldanha Separation Plant and operate the complex on its own.

The agreement is subject to both parties successfully completing feasibility studies and deciding to proceed with raising finance and construction.

3.4 Royalties (NI 4e)

The Mineral and Petroleum Resources Royalty Act (“MPRRA”) came into effect on 1st May 2009 following extensive public sector review. The royalty rate for refined minerals is capped at a maximum of 5.0% of revenue whereas the rate for unrefined minerals is capped at 7.0%. According to the MPRRA, REEs are classified as unrefined minerals and would be subject to the royalty payments for unrefined minerals capped at 7.0%, as calculated by the formula discussed in detail in Appendix 4.

3.5 Environmental Liabilities (NI 4f)

The environmental liabilities pertaining to the Zandkopsdrift Project are discussed in detail in Section 19.

3.6 Legislative and Permitting Requirements (NI 4g)

The legislative and permitting requirements pertaining to the Zandkopsdrift Project are discussed in detail in Section 19.

3.7 Known Factors and Risks (NI 4h)

Neither Venmyn, the Specialist Consultants nor Frontier are aware of any significant factors or risks that would affect access, legal tenure, the right or ability to continue exploration and development of the Project. Benchmark Risk Advisory, a division of QuantiMetrics (Pty) Ltd, was requested by Frontier to carry out a scoping risk assessment on the Zandkopsdrift Project, as outlined in Section 24.1. The overall finding of the risk assessment is that the Zandkopsdrift Project is a low risk project.

4 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES AND PHYSIOGRAPHY (NI 5)

4.1 Access (NI 5b)

The Zandkopsdrift Project is accessed by the tarred national highway (N7) connecting Cape Town with Namibia (Figure 1). The Project can be accessed through the towns of Garies or Bitterfontien, both of which are located directly adjacent to the N7 highway. Garies is located approximately 450km, and Bitterfontein approximately 370km, north of Cape Town, respectively. Several small towns and settlements including Kotzesrus, Lepelsfontein, Stofkraal and Rietpoort are located within 15km of the Project area (Figure 1). Access to the Zandkopsdrift Prospect area from the N7 is via all-weather gravel roads, which connect Garies (approximately 41km by road to the northeast of the Project) and Bitterfontein (37km by road to the southeast).


14

The nearest railhead is located at Bitterfontein (approximately 60km southeast of Garies) and this railway line connects with the Sishen Saldanha bulk iron ore railway line that terminates at Saldanha Bay 230km to the south. A smelter processing ilmenite from Exxaro’s Namakwa Sands heavy mineral sands mining operation and an ArcelorMittal steel mill are located at Saldanha Bay and the port handles the bulk of South Africa’s iron ore exports. The closest airport is located at Springbok, 113km north of Garies. No commercial/scheduled flights currently operate into Springbok, but charter flights are readily available from Cape Town and Johannesburg.

4.2 Topography, Elevation and Vegetation (NI 5a)

The regional area is characterised by an undulating landscape with vegetated sand dune systems that align parallel to the prevailing north-south wind direction. The terrane rises steeply from the coastal plain which consists of a complex sequence of marine and windblown sands. Outcropping metamorphic rocks of the Namaqualand granite-gneiss suite form low hills and hardpans of calcareous and siliceous material occur throughout the region. The Zandkopsdrift Prospect area is dominated by Tertiary to Quaternary sand dunes that cover most of the western parts of the Prospecting Right. The elevation varies from 100 metres above mean sea level (mamsl) in the west to a maximum height of 302mamsl in the southwest. The western and northern portions of the Prospect area are dissected by the westerly flowing Groen and Swartdoring Rivers. The Zandkopsdrift carbonatite complex occurs as an gently sloping, isolated hill known as Swartkop Hill, that rises approximately 40m from the surrounding plain (Figure 4).

4.3 Infrastructure, Population and Local Resources (NI 5c, 5e)

The Zandkopsdrift Project area is a sparsely populated, dominantly rural region with economic activities limited to livestock farming (sheep and goats), with wheat farming in areas of higher and more regular rainfall. Tourism, mainly centred on the spring flower season, is becoming an increasingly important source of revenue for the Namaqualand region. Electricity generation and reticulation in the region is provided by Eskom. The most proximal high voltage (400kV) powerline is located at the Juno substation near Vredendal, approximately 100km to the south of the Project area. Eskom plans to develop an 800MW Combined Cycle Gas Turbine (“CCGT”) power station at Oranjemund, which would result in the construction of a 400kV powerline close to the Zandkopsdrift Project area, however the implementation date of this project is unknown. In addition, the Koeberg nuclear power station, approximately 200km south of Saldanha Bay, comprises two large turbine generators with a combined rating of 1,800MW. In order to ensure sufficient power supply to cater for ongoing and planned economic growth in Southern Africa, Eskom has been required to increase electricity prices significantly. It is anticipated that electricity prices will be increased on average 25% per annum over each of the next two years in order for Eskom to develop new generative capacity and infrastructure. Namaqualand has limited surface and groundwater resources. However, several westerly flowing rivers are present within or near to the Project area, including the seasonal Groen and Swartdoring Rivers that form a confluence to the northwest of the Zandkopsdrift Project. A detailed hydrographical survey has been completed in order to delineate and assess existing and new water sources required for development of the Project. A groundwater drilling program is scheduled to commence in the first quarter of 2012, however for the purpose of the PEA it has been assumed that all water required for the Project will be provided by the Desalination Plant, located approximately 35km southwest of the Project, on the coast, southwest of Kotzesrus. Telecommunication infrastructure comprises landlines serving the local farming community and cellular/digital telephone coverage is currently available at the Project site, however the service will have to be upgraded to accommodate the higher call volumes and data transmission speeds required for the Zandkopsdrift Mine. The regional centre, Springbok, is located 113km north of Garies (Figure 1), and is a source of local technical and skilled labour as a result of former base metals and diamond mining operations in the region. The nearest large scale mining facilities are at Exxaro’s Namakwa Sands Facility at Brandsebaai, approximately 40km to the southwest of the Zandkopsdrift Project. Fuel is readily available in Garies, Bitterfontein and Kotzesrus.


15

4.4 Climate and Operating Season (NI 5d)

The Zandkopsdrift Project area is located within the Namaqualand-Namib desert region which receives approximately 113mm of rain per annum and given that most of the precipitation occurs in the winter months (May to September), is classified as having a Mediterranean type climate. The driest months are the summer months with the lowest rainfall (0mm) occurring in January and the highest (22mm) in June. The average midday temperatures for the area range from 18.4° C in July to 29.5° C in February. The region is the coldest during July, when the temperature drops to 5.8° C on average during the night. Seasonal variations in the local climate are not expected to impact the proposed mining activities at the Project.

4.5 Surface Rights (NI 5h)

The legal aspects and tenure of the surface rights with regards to the Zandkopsdrift Project are described in Section 3.2.2. The surface rights of the farm Pan Vlei (3,340.49ha in extent) are held by Sedex and are sufficient for the proposed mining operation, construction of the TDF, mine residue disposal areas, the Process Plant, and all other associated infrastructure required by the Zandkopsdrift Mine.

5 HISTORY (NI 6)

5.1 Prior Ownership (NI 6a)

Several geological, mineralogical and metallurgical investigations of the Zandkopsdrift carbonatite complex by academics, as well as exploration companies, have been undertaken over the past 40 years. The carbonatite was initially investigated for its manganese (Mn) potential in the 1950s, followed by investigations into the phosphate (P2O5) and niobium (Nb2O5) potential, and finally for the REE potential, as summarised in Table 5. The majority of the exploration was carried out by the Anglo American Corporation (“Anglo American”) during two phases of detailed exploration over Zandkopsdrift Prospect area, as summarised in Table 5:-

Table 5 : Historic Ownership and Exploration History

COMPANY/STUDY DATE EXPLORATION de Villiers, Cornelissen 1955, 1959 Grab samples for manganese evaluation Anglo American Corporation 1973-1975 Exploration for Nb, phosphate, uranium and thorium Verwoerd 1977 Geological and mineralogical study of the carbonatite Phelps Dodge 1977 Exploration for phosphate Moore and Verwoerd 1985 Publication on the Zandkopsdrift carbonatite Anglo American Corporation 1985-1988 Exploration for REEs Frontier 2007-current Exploration for REEs

Source: MSA 2011, Frontier 2011

5.2 Historical Exploration for Manganese (NI 6b)

Manganiferous material, with grab sample MnO2 values of 9.3% to 63.9% was described by De Villiers (1955) and Cornelissen (1959), however no records of drilling or Mn Mineral Resource estimation was undertaken on the mineralisation, which was attributed to hydrothermal activity associated with shear zones.

5.3 Historical Exploration for Phosphate (NI 6b)

Anglo American acquired the Prospecting Rights over two portions of the farm Zandkopsdrift 537 for the purposes of evaluating the phosphate potential of the property (Table 5). The phosphate exploration programme included the following:-

aerial photograph target delineation;

ground radiometric study;

rock chip and soil sampling geochemical surveys;

drilling 14 boreholes (549m) on a 200m x 200m grid, to 50m depth;

bulk sampling from two pits for metallurgical testwork including gravity separation, magnetic separation and flotation; and

assessment of the uranium (U) and thorium (Th) potential, however grades were considered too low, (52g/t U3O8 and 140g/t ThO2).

The metallurgical testwork concluded that the phosphate ore was not amenable to beneficiation and the uranium and thorium grades were considered too low for economic extraction.


16

Subsequently, Verwoerd (1977) undertook a surface sampling programme that confirmed a multiphase carbonatitic intrusion comprising highly altered material surrounding a central core. Minerals identified included apatite, churchite, betafite and pyrochlore. Phelps Dodge drilled a 245m deep, single diamond drillhole into the central parts of the carbonatite, which revealed a vertical breccia zone located between fenitised country rock and the intrusive carbonatite. Phelps Dodge elected not to continue exploration at Zandkopsdrift and offered the property to Union Carbide Exploration in 1978, which elected not to continue exploration and all rights were permitted to lapse.

5.4 Historical Exploration for REEs (NI 6b)

Anglo American re-acquired the Zandkopsdrift Project Prospecting Right in 1985 and the details of the exploration programmes undertaken and their results are summarised in Table 6 and illustrated in Figure 5:-

Table 6 : Historical Exploration for REEs

COMPANY DATE EXPLORATION UNDERTAKEN RESULTS

Anglo American

1985-1988

Ground scintillometer, magnetic, Resistivity and Induced Polarity (“IP”)

Confirmed REE mineralisation

Rock chip sampling, geological mapping and drilling

Identified Klipheuvel intrusion southwest of Zandkopsdrift

1986

Six borehole percussion drilling programme, with samples composted over 5m and analysed by X-ray Fluorescence (“XRF”) for La and Ce

Average (La+Ce) of 4.8% to 25m and between 0.2% to 0.5% (La+Ce) over the average depth of 50m

1988

To delineate the margins of the mineralisation a short-hole drilling programme was undertaken comprising 92 drillholes on a 50mx200m grid to a depth of 5m. Analyses were undertaken by in-house XRF.

Delineated high grade near surface mineralised zones.

1988

31 RC and 2 diamond drillholes on a 100m x 100m grid, with most holes drilled vertically. A total of 2,522 m was drilled. Sampling was carried out over 1m intervals, with samples composited into 2m to 4m composites.

Elevated La and Ce grades intersected in most holes, with higher grades associated with a very fine grained Fe-Mn wad and “melnoite” lithologies. La and Ce grades displayed a marked decrease as fresher carbonatite was intersected at depth. The depth of weathering and grade profiles across the carbonatite extremely variable. Anglo American generated basic cross sections which provide limited information as to the lithologies and morphology of the mineralised zone but do provide vertical grade profiles (La+Ce only).

1988 Mineralogical studies on 52 borehole samples

Mineralogy of the samples was assessed and REE mineralisation correlated with secondary monazite contained within a residual micaceous goethitic zone located directly above relatively fresh, unaltered carbonatite. This discovery was critical to understanding the REE enrichment processes at Zandkopsdrift.

1988 Several phases of metallurgical testwork on composited borehole samples*

Significant concentration of the REE minerals could not be achieved using heavy mineral separation utilising bromoform, a superpanner and magnetic separation. Results from this H2SO4 leach testwork on the highly weathered samples were encouraging with >90% recoveries and acid consumption of 40kg– 60kg/t of material. Lower grade and fresher carbonatite samples displayed a dramatic increase in acid consumption.*

*SGS (August 2011) could not repeat the >90% REE recoveries at an acid consumption of 40kg– 60kg/t

5.5 Historical Exploration by Frontier for REEs 2007 – 2010 (NI 6b)

Frontier acquired the Prospecting Right over the Zandkopsdrift Project area in 2007. Following the award of the Prospecting Right, Frontier acquired all of Anglo American’s available data including diamond core, RC chips and sample pulps, and this data, together with work completed by Frontier to date, forms the basis for Frontier’s ongoing evaluation and resource estimation of the REE potential of the Zandkopsdrift Project. Frontier’s exploration and evaluation activities up to the end of 2010 comprised the following:-

a geophysical ground magnetic survey to delineate the carbonatite surface extent. The survey was undertaken with a G5 Proton Magnetometer on a 100m grid, with readings every 10m;

a ground, total count, radiometric survey utilising a handheld RadEye PRD scintillometer;

petrographic and X-ray diffraction (“XRD”) mineralogical studies by P. Siegfried on selected samples from boreholes ZKD38 and ZKD39;


FIGURE 05


HISTORICAL DRILLING AT THE ZANDKOPSDRIFT PROSPECT

This diagram and the information herein may not be reproduced or transmitted in any form without prior written permission from Venmyn Rand (Pty) Ltd. Graphics by Interaction. D990M_Frontier Rare Earths_2011

Source: MSA 2011

Frontier validation drilling

Re-assay of original Anglo American

drillholes

Surface Geology Lithology

Sand Cover

Fe-Mn Wad

Carbonatite outline

River

2m Contour lines

LEGEND

783,500 784,000 784,500 785,000

6,5

82,0

00

6,5

81,5

00

Scale0 500m

VALIDATION DRILLING 2009

783,500 784,000 784,500 785,000

6,5

82,0

00

6,5

81,5

00

HISTORICAL DRILLING PRIOR TO 2009

Scale0 500m

LEGEND

Anglo 1986 Percussion Drilling

Phelps Dodge 1977 Diamond Drilling

Anglo 1988 Wagon Drilling

Anglo 1988 Diamond Drilling

Anglo 1988 RC Drilling

Anglo 1974 Drilling

Sand Cover

Fe-Mn Wad

Carbonatite outline

River

2m Contour lines


18

REE analysis of 17 surface samples and selected borehole core by Geological Survey of Japan (“JOGMEC”) and the Council for Geosciences. Samples were analysed by Activation Laboratories in Canada for the full REE suite by Inductively Coupled Plasma (“ICP”) Mass Spectrometry (“MS”), XRD as well as Scanning Electron Microscope (“SEM”) and Energy Dispersive X-ray Spectrometry (“EDX”);

a drilling programme in 2009 designed by MSA, comprising 13 RC boreholes, totalling 1,050m to validate the historical Anglo American drilling programmes and provide assay samples for those original boreholes where assay data was unavailable, and the reassay of all available Anglo American samples;

the Frontier validation drilling programme was undertaken by independent contractor Hayes Drilling (Springbok) and independently monitored by MSA. All boreholes were surveyed by a professional surveyor (Mr C. Venter) using a Differential Global Positioning System (“DGPS”). A high resolution digital elevation model was completed together with downhole gamma density and magnetic susceptibility logging for all boreholes, including two historical holes;

a metallurgical review by SGS Minerals Services, Lakefield, Ontario, Canada;

preparation of a 2010 NI 43-101 and CIM compliant Mineral Resource estimate by MSA; and

a scintillometer survey which proved effective in delineating the main pipe and some of the peripheral pipes.

The exploration programme validated the historic Anglo American drilling programmes, defined the extent of the weathered profile of the carbonatite and identified some peripheral carbonatite pipes. The weathered profile included a lithologically distinct and deeply weathered iron-manganese rich wad, which was REE enriched compared to the relatively fresh carbonatite intersected at depth. The REE enrichment is envisaged to be a multi-phase process with the formation of late stage, hydrothermal REE bearing fluids associated with the carbonatite intrusion and subsequent and/or contemporaneous supergene enrichment of REE within the upper, weathered portions/phases of the Zandkopsdrift carbonatite. Secondary supergene monazite and crandallite (calcium REE hydrated phosphate) as well as the late stage hydrothermal mineral gorceixite (barium REE hydrated phosphate) were identified as being present.

5.6 Historical Mineral Resource Estimates (NI 6c)

Venmyn is unaware of any historic REE Mineral Resource estimation prior to the exploration programme undertaken by Frontier in 2009. An ITR on the Zandkopsdrift Project was published in 2010 (“2010 ITR”). The 2010 Mineral Resource estimation was undertaken in Datamine Studio 2 and Studio 3™ software to produce three-dimensional (“3D”) Mineral Resource block models. Ordinary Kriging was selected as the grade estimation method and a block size of 50m (easting) x 50m (northing) and exact wire frame boundary fitting for the Z height, was used. A geological wireframe model was not created but a mineralised envelope was generated from the outline of the main carbonatite body, further constrained by the ground surface generated from the surveyed topography and from borehole collars (Figure 6). The 2010 Mineral Resource modelling exercise identified high grade zones within the Zandkopsdrift deposit in which the TREO grade remained above the 1% cut-off grades, and these were referred to as the A Zone (with a cut-off of 1.5% TREO), the B Zone (with a cut-off grade of 2.5% TREO) and the C Zone (with a cut-off grade of 3.5% TREO) respectively, as presented in Table 7. The spatial distribution of the zones is illustrated in Figure 6, with the 3D Mineral Resource block model. The 2011 Mineral Resource estimate (Section 13) includes the Central Zone (with a 2.0% TREO cut-off grade), which encompasses the B Zone from the 2010 Mineral Resource Estimate.



FIGURE 06



HISTORIC 2010 MINERAL RESOURCE BLOCK MODEL

2010 MINERAL RESOURCE BLOCK MODEL AT A CUT-OFF GRADE OF 1% TREO (VIEW FROM BELOW, LOOKING SOUTHWEST)

Source: MSA 2011

10.00

9.00

8.00

7.00

6.00

5.00

4.00

3.00

2.00

1.00

0.00

TREO %

PLAN VIEW OF 2010 MINERAL RESOURCE BLOCKMODEL - ZONE A (1.5% TREO CUT-OFF GRADE)

PLAN VIEW OF 2010 MINERAL RESOURCE BLOCKMODEL - ZONE B (2.5% TREO CUT-OFF GRADE)

Scale0 200m

Scale0 200m

Scale0 200m

PLAN VIEW OF 2010 ZONES IN HISTORICMINERAL RESOURCE BLOCK MODEL

Scale0 200m

PLAN VIEW OF 2010 MINERAL RESOURCE BLOCKMODEL - ZONE C (3.5% TREO CUT-OFF GRADE)


20

Table 7 : Historic 2010 Mineral Resource Estimates for Zandkopsdrift Project

ZONE TREO CUT-OFF GRADE (%)

TONNAGE (Mt) TREO GRADE (%) CONTAINED TREO

(‘000t) Indicated Mineral Resources

A 1.5 16.55 2.74 453 B 2.5 7.83 3.67 287 C 3.5 3.23 4.57 148

ZONE TREO CUT-OFF GRADE (%)

TONNAGE (Mt) TREO GRADE (%) CONTAINED TREO

(‘000t) Inferred Mineral Resources

A 1.5 12.89 2.48 319 B 2.5 4.52 3.61 163 C 3.5 1.54 4.72 73

Source: MSA 2010 Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability Mineral Resources are reported inclusive of Mineral Reserves (no Mineral Reserves have been reported for the Zandkopsdrift Project)

5.7 Historical Production (NI 6d)

No historic REE production from the Zandkopsdrift carbonatite is known.

6 GEOLOGICAL SETTING AND MINERALISATION (NI 7)

6.1 Regional Geology Geological Setting (NI 7a)

The Zandkopsdrift Prospect is located within the Namaqua-Natal metamorphic belt which forms an arcuate belt along the southern and western margins of the Southern African Archaean Kaapvaal craton, as illustrated in Figure 7 (Hartnady et al., 1985; Thomas et al., 1994, Eglington 2006). The genesis of the Namaqua-Natal belt is complex, with numerous structural, metamorphic and intrusive events, but generally is considered to have formed in three phases with significant reworking of older Palaeo-Proterozoic lithosphere and at least two Mesoproterozoic intrusive phases. The western Bushmanland sub-terrane of the Namaqua-Natal belt (Figure 7) covers an area of 60,000km2 and is a tectono-stratigraphic suite represented by 2,000Ma granitic gneisses, 1,600Ma to 1,200Ma amphibolite to granulite grade supracrustal units and 1,200Ma to 1,000Ma granitoids (Cornell et al., 2006 and Moore 1998). In the western regions, the Bushmanland sub-terrane sequences are overprinted by the Pan African age (500Ma) Gariep Orogeny. In the south, younger Vanrhynsdorp and Karoo Group sediments overlay the Bushmanland sequences. In the extreme southern parts, the Bushmanland Terrane is intruded by the Cretaceous age Koegel Fontein Complex, which is considered to include the Zandkopsdrift carbonatite. The Koegel Fontein Complex is a Cretaceous age, alkaline complex intruded during the 130Ma year rifting phase preceding the opening of the South Atlantic Ocean (De Beer et al., 1998, 2002). The complex comprises a suite of alkali granites, syenites and intrusives of a carbonatitic affinity including the Zandkopsdrift carbonatite, as illustrated in Figure 8. The Koegel Fontein Complex is considered an equivalent of similar Cretaceous alkaline complexes in Damaraland, Namibia such as Brandberg, Messum, Okonjeje and Grosse Spitzkoppe (De Beer et al., 1998, 2002).

6.2 Property Geological Setting (NI 7a)

The Sedex Prospecting Right is located on the northern margins of the Koegel Fontein Complex within the Bushmanland granite-gneiss terrane (Figure 7 and Figure 8). The Project area is covered by surficial Quaternary sands and unconsolidated sediments with exposures of basement granites and gneisses restricted to the eastern and northern areas of the Prospecting Right, particularly exposed in the Groen and Swartdoring River beds. The Zandkopsdrift carbonatite intrusion is ovoid in shape, approximately 1.3km x 900m in dimension and forms the low Swartkop Hill in the southeastern portion of the Prospecting Right, which rises to an elevation of 40m above the surrounding plain (Figure 4, Figure 9). An initial detailed surface geological mapping exercise was undertaken by Moore and Verwoerd (1985), followed by Anglo American exploration programmes in the 1980s. Detailed mapping of the area for the 1:250,000 (3017) Garies Sheet was completed by the Council for Geoscience in 2010 and this has been supplemented by recent mapping by P. Siegfried. REE mineralisation, positive radioactive anomalies and elevated zinc (Zn) and niobium (Nb) contents are characteristic of the intrusive.



FIGURE 07



REGIONAL GEOLOGICAL SETTING OF THE ZANDKOPSDRIFT PROSPECT

SCALE:

22°E 30°E 30°S

0 450kmScale

NAMIBIA

BOTSWANA

MO

ZA

MB

IQU

E

LESOTHO

SWAZILAND

Saldanha

Cape Town

Durban

Johannesburg

Pretoria

Musina

ZANDKOPSDRIFT PROSPECT

O17 EO19 E O21 E

O23 E

Scale0 100km

NAMIBIA

BOTSWANA

HRT

BoS

Z

TS

ZN

SZ

BS

Z

DT

PSZ

GT

Springbok

Pofadder

Upington

Prieska

Bitterfontein

Alexander Bay

Garie

p F

ront

Nam

aqua F

ront

Kheis

Fro

nt

West C

oast beltP

an-A

frican F

ront

Atlantic Ocean

LEGEND:

Archaean Kaapvaal Craton

Namakwa-Natal Metamorphic Belt

Phanerozoic Cape Fold Belt

O32 S

O30 S

O28 S

Source: MSA 2011

LEGEND

GARIEP PROVINCE

KHEIS PROVINCE

KAAPVAAL CRATON

Post-Gariep cover rocks

Koras Group

Areachap Terrane

Kakamas Terrane

Bushmanland Terrane

Kaaien Terrane

Richtersveld Subprovince

Marydale Terrane

Thrust fault


FIGURE 08


GEOLOGY OF THE KOEGEL FONTEIN COMPLEX


0 10kmScale

018 E

031 S

Kotzesrus

Biesiesfontein

Zout Rivier45

Atlantic Ocean

Brandsebaai

Bitterfontein

Garies

Koekenaap

f f f

f

f

f

f

f

f

f

f

f

ff

f

f

f

031 S

018 E

LEGEND:

f

Soil and sand cover

Zandkopsdrift Carbonatite

Rietpoort Granite

Zout Rivier Basalt

Sandkop and Brakfontein syenites

Nama Group

Gariep Supergroup

Spektakel Suite

Little Namaqualand Suite

and supracrustals

Kruisvlei Quartz Porphyry

False Bay Dolerite Suite

Faults

Pan-African refoliation

Major roads

Zandkopsdrift Carbonatite

Source: MSA 2011

Map Area

Kotzesrus

Garies

BitterfonteinBitterfontein


23

Outcrop of the carbonatite is limited but information from various historic and recent drilling programmes, indicates that the carbonatite complex is a multi-phase, multi-facies pipe-like intrusion comprising predominantly carbonatite breccias, micaeous glimmerites and calcite carbonatite (Figure 9). The detailed geology of the intrusion is still to be finally resolved and this has been one of the primary objectives of Frontier’s exploration programmes in 2011. Interpretation of additional results from the 2011 exploration programmes is at an advanced stage and will be incorporated into a revised Mineral Resource estimate for the PFS. Laterally, the complex is intensely brecciated with country-rock brecciation discernible at distances of 1km from the complex. The breccia contains blocks of fenitised country-rock gneiss and material originally termed olivine melilite in the Anglo American records. The primary carbonatite comprises vertical intrusion/s of brecciated hypabyssal carbonatite and glimmerite with quartz-calcite and lamprophyre cross-cutting veins. The glimmerite occurs as both coarse fragmental and fine grained fragmental varieties as follows:-

coarse fragmental glimmerite comprises a dark grey, fine grained vesicular groundmass (pitted appearance) containing 0.5mm to 10mm scattered grains of calcite, biotite, magnetite and country rock, with disseminated pyrite. The glimmerite has a hardness <3, and reacts strongly to hydrochloric acid (“HCl”) in fresh and partially weathered material; and

fine fragmental glimmerite comprises a homogeneous light brown to orange brown, medium to fine grained carbonatite with >25% mica content and a variable reaction to HCl.

Petrographic studies show that the most common brown, banded to pisolitic carbonatite is composed of rounded clasts, usually 1mm to 2mm in size, comprising fine grained carbonate and magnetite, set in a matrix of banded limonite and magnetite-bearing ferro-carbonatite and calcite. Rare, coarse grained zircon is also present. Recent drilling programmes have identified possible hydrothermal late stage dykes with REE enrichment. These possible primary igneous structures vary in width from <1m to 20m (as indicated by Frontier’s drilling programmes) and exhibit sub-vertical, dyke-like features. The influence of the dykes on the geological model is being evaluated with the current ongoing detailed drilling programme. The intrusion of coeval or later stage, vertical to sub-vertical dykes/dyke swarms, are not uncommon during the intrusive history of carbonatite magmatism. The multiple phase carbonatite intrusion is extensively altered at surface and although the depth of the weathered profile is highly variable, the average depth to fresh carbonatite is 80m. The primary vertical structure, with its vertical facies changes with depth, is overprinted by deep weathering, possible metasomatic processes and supergene REE enrichment in a horizontal modality. The primary REE mineralisation has been enriched in the weathered profile through supergene enrichment processes which entailed the leaching of the primary carbonates and extensive replacement by secondary iron and manganese oxides to form a surface cap of ferruginous-manganiferous material, previously known as the ‘Fe-Mn wad’. The ‘Fe-Mn’ wad forms several irregularly shaped outcrops at Zandkopsdrift and together with the fragmental glimmerites and other lithologies, comprises one of the principle components of the deposit. The orange brown to black ‘Fe-Mn wad’ consists of extremely porous, heterogeneous, highly weathered, magnetite-bearing ferro-carbonatite that has undergone significant surficial and supergene alteration. Petrographic studies suggest that the fine grained material is a hygroscopic limonitic Fe-Mn saprolite in which carbonates are almost entirely replaced by ferrous oxides. The material is classified as “limonitic Fe-Mn saprolite” for drillhole lithological classification purposes but in many cases, the extent of the secondary replacement is such that detailed lithological identification in RC chips is extremely difficult. The primary calcite is often enriched in manganese to a Mn content of 1% to 2% in the carbonate lattice. The limonitic Fe-Mn saprolite contains an unusual suite of REE bearing minerals such as churchite, goyazite-gorcexite, pyrochlore and carbonate-apatite. In addition to the limonitic Fe-Mn saprolite, silicified and manganiferous laterite occurs as isolated intersections in the RC drilling chips. The silicified laterite comprises orange brown to black, very fine grained, magnetite rich secondary material with occasional pisolitic and banded textures, with no to slight reaction to HCl. The manganese rich laterite is black to dark grey, very fine grained, with a distinctive conchoidal type of fracture, disseminated pyrite, and no reaction to HCl. Calcrete is usually identified close to surface and is difficult to distinguish from fragmental glimmerite. The carbonatite complex has been interpreted as the deeply weathered, root zone of a carbonatite type volcano (Verwoerd et al., 1995).


FIGURE 09


LOCAL GEOLOGY OF THE ZANDKOPSDRIFT PROSPECT AND SURROUNDS


Scale0 10 km

STRATNAME

Quartenary System

Koegel Fontein Complex

Knersvlakte Sbgrp. Vanrhynsdorp Grp

Flaminkberg Fm. Vanrhynsdorp Grp

Bitterfontein Fm. Hardeveld Sbgrp

Concordia Granite, Spektakel Sui

Kliphoek Granite, Spektakel Sui

Nabapeep Gneiss, Little

Namaqualand Sui

Kamieskroon Gneiss

Rivers

Major Road

Secondary Road

Sedex Minerals Prospecting Right =

Zandkopsdrift Prospect

LEGEND

O31

00’S

O’

30

45

S

O17 45’EO18 00’E O ’18 15E

Y -87,500 Y -90,000 Y -92,500 Y -95,000

x 3,4

20,0

00

x 3,4

17,5

00

x 3,4

15,0

00

x 3,4

12,5

00

x 3,4

10,0

00

Shear Zone

Shear Zone

Shear Zone

Scale0 2.5km


LOCAL GEOLOGY OF THE ZANDKOPSDRIFT PROSPECT AND SURROUNDS


GEOLOGICAL MAP OF THE ZANDKOPSDRIFT CARBONATITE COMPLEX

Frontier Sampling and Processing Facility

Sand Cover

Zandkopsdrift Carbonatite Fe-Mn Wad

Carbonatite Pipes

Possible Carbonatite Pipes

Farm Boundary

Zandkopsdrift 537

Zandkopsdrift 537 Ptn 2 (Pan Vlei)

River

Major Road

Other roads

Cultivated Land

Fe-Mn Wad Outcrops

Regional Fabric

3

LEGEND

Zandkopsdrift537

Klipheuwel538


25

6.3 Mineralisation (NI 7b)

The primary REE mineralisation at Zandkopsdrift is considered to be associated with the progressive concentration of incompatible REEs as the various primary carbonatite phases crystallised. The REEs are theoretically known to concentrate into the late stage ferruginous fluids (Section 7) and current exploration gives some indication that such late stage, high REE grade fluids formed dykes at Zandkopsdrift. Some possible late-stage remobilisation of the REEs may have occurred but superimposed upon these primary concentration mechanisms, is the supergene enrichment within the upper 80m of the complex, whereby the REEs have been enriched through leaching and replacement of the carbonate phases. The presence of sulphides such as the pyrite and pyrrhotite noted in the unaltered diamond drillhole core, would have further accelerated the breakdown of the primary carbonatite. The mineralisation has no discernible dip according to current understanding and is considered to be largely disseminated. The REE enrichment has been concentrated in the western and southwestern arcuate shaped portion of the carbonatite where grades of up to 10% TREO are encountered. The lower grade primary carbonatite in the east was explored by early drilling programmes but Frontier has focused on the definition of a Mineral Resource in the supergene enriched portion of the intrusive, as illustrated in Figure 11. The primary, unaltered carbonatite and breccia phases at Zandkopsdrift have a REE grade generally below or close to the 1% TREO cut-off grade. Mineralogical studies of Zandkopsdrift carbonatite (Siegfried, 2008; Watanabe et al, 2009) show that the majority of REE-bearing minerals consist of late stage, probably supergene, REE-bearing members of the monazite group of minerals, although a number of other minerals such as crandallite and cheralite also occur:-

gorceixite (Ba,REE)Al3(PO4)2(OH5.H2O),

goyazite (Sr,REE)Al3(PO4)2(OH5.H2O), and

crandallite (Ca,REE)Al3(PO4)2(OH5.H2O),

To date, the REE bearing minerals have been identified as fine grained and often exhibiting intergrown textures. The ongoing metallurgical studies are focused on the extraction, beneficiation and processing of these minerals that generally occur within the upper, near surface, deeply weathered parts of the Zandkopsdrift carbonatite. The orientation of mineralisation within the Zandkopsdrift carbonatite has not yet been determined in detail due to the developing understanding of the geometry and nature of the carbonatite intrusions, although interpretation of the results from Frontier’s 2011 exploration programmes is expected to provide the information required to do so. The lithological contacts and structural features may be sub-vertical to vertical, as is typical for carbonatite intrusive events. Possible high REE grade, vertical to sub-vertical features have been identified at Zandkopsdrift and can be interpreted as late stage dykes or mineralised structures/shears. Such late stage structural features could have been the conduits for the introduction of oxidising/weathering fronts into deeper parts of the carbonatite. An extended period of deep weathering and supergene enrichment has resulted in a broad horizontal REE enrichment overprint across the carbonatite intrusive. The varied weathering profiles are assumed to be controlled by the mineralogy and grain size of the progenitor carbonatite, possibly also influenced by pre-existing REE-enriched vertical dyke phases. The historic and current drilling programmes have enabled the construction of geological cross-sections and grade distribution profiles, as illustrated in Figure 10.

7 DEPOSIT TYPE (NI 8)

Carbonatites are defined as igneous rocks composed of greater than 50% carbonate minerals, usually calcite (CaCO3), dolomite MgCO3 and ferruginous carbonate minerals such as ankerite and siderite (FeCO3). Carbonatites occur as intrusive pipe-like bodies or extrusive volcanic occurrences, often geographically, but not necessarily genetically, associated with zoned alkali intrusive complexes, such as Phalaborwa in South Africa. Carbonatites are almost exclusively associated with continental rift-related tectonic settings and the majority are Proterozoic or Phanerozoic in age. The unusual chemistry of these carbonate rich magmas has suggested derivation from a very low degree of partial melt in the mantle, from liquid immiscibility between a carbonate and a silicate melts or extreme crystal fractionation. Most carbonatites appear to evolve from carbonate magmas in which the presence of alkalis has acted as a flux, permitting a liquidus phase at crustal pressures. Carbonatite complexes are characterised by early calcite carbonatite magmas followed by later magnesium rich dolomite carbonatites. The magnesium rich magma becomes progressively more iron rich with decreasing temperatures, accounting for the late stage ferruginous vein development (Harmer 2011).



FIGURE 10



GEOLOGICAL CROSS SECTIONS AND GRADE DISTRIBUTION FOR THE ZANDKOPSDRIFT CARBONATITE

Limonitic Fe-Mn Saprolite

Silicified Laterite

Maganese Rich Laterite

Coarse Fragmental Glimmerite

Fine Fragmental Glimmerite

Calcrete

BOREHOLE LITHOLOGIES

1086420

86420

6420

6420

420

420

420

20

64206420

420

420

420

6420

1086420

18

16

14

12

1086420

12

1086420

20m

40m

60m

80m

20m

40m

60m

80m

20m

40m

60m

20m

40m

20m

40m

20m

40m

20m

40m

60m

20m

100m

20m

40m

20m

40m

20m

40m

60m

20m

40m

20m

40m

20m

40m

60m

20m

40m

60m

20m

80m

A

B

F

E

10876543210.5

1086420

BAR GRAPHSTREO%

783,500 784,000

6,5

81,5

00

E

A

B

HISTORICAL AND PHASE 1 RC DRILLING

2009 Validation drilling

2011 Phase 1 RC drillholes

Carbonatite outline

LEGEND

Scale0 250m

F

ZKRC0030ZKRC0024 ZKRC0025

ZKRC0021 ZKRC0022ZKRC0018 ZKRC0019

ZKRC0014

ZKRC0005

ZKRC0011ZKRC0016

ZKRC0021ZKRC0026 ZKRC0032

ZKRC0043ZKRC0050

ZKRC0057


FIGURE 11


FRONTIER CURRENT EXPLORATION PROGRAMMES


SAMPLING METHODOLOGY FOR RC DRILLING PROGRAMME


783,500 784,000 784,500 785,000

6,5

82,0

00

6,5

81,5

00

Scale0 500m

PHASE 1 RC DRILLING (VENTER, 2011)

2-45-6

TREO

Cut-off Grade(%)

Sample collection from cyclone Splitting with a three tier riffle splitter

2009

2011 Phase 1 RC drillholes

Fe-Mn Wad

Carbonatite outline

River

2m Contour lines

Validation drilling

LEGEND


28

Carbonatite intrusions are characteristically associated with distinct metasomatic aureoles known as fenite, and both fenites and the primary carbonatite, may contain economic or anomalous concentrations of non-carbonate minerals such as magnetite, apatite, barite and vermiculite. Carbonatites are also characterised by the presence of REEs, phosphorous, niobium, tantalum, uranium, thorium, copper, iron, titanium, vanadium, barium, fluorine, zirconium, and other rare or incompatible elements. Vein deposits of thorium, fluorite, or REE may be hosted within the primary intrusive or the metasomatised aureole. Superimposed upon these primary characteristics is the role of secondary enrichment and supergene weathering in the development of an economic carbonatite deposit. Typical eluvial, as well as supergene processes, can cause upgrading of niobium and phosphorous bearing minerals of 4 to 5 times the concentration in the primary carbonatite. Generally however, such upgrading of the REEs demands a more specialised weathering process or processes and only a small number of enriched REE deposits are known. The majority of these deposits have developed through lateritic weathering processes and the climatic regime, either present day or past, is therefore an important aspect in the understanding of the main controls in the formation of such deposits. Such deposits include Araxa and Catalao 1 in Brazil, and Mount Weld in Australia. In these deposits, monazite is produced from the release of REEs contained within calcite, dolomite and apatite during weathering and its subsequent reconstitution with the ion PO4

3- into the phosphate mineral. Separate deep weathering events, possibly separated by millions of years, contribute to the grade increase and complexity of this process. The higher solubility and migratory capacity of yttrium and heavy REEs in certain environments of supergene weathering appears to be important in the isolation of these elements from light REE dominant sources and their subsequent precipitation as xenotime and churchite mineralisation, such as recorded at Mount Weld, Australia. The REE bearing members of the crandallite group at Mount Weld are all confined to the weathered zone of the carbonatites and a similar scenario exists at Zandkopsdrift.

8 EXPLORATION (NI 9)

8.1 Procedures and Parameters (NI 9a)

The historic exploration programmes completed by Frontier between 2007 and 2010 are discussed in Section 5.5 and illustrated in Figure 5. Subsequent to the completion of the validation drilling programme in 2009 and publication of the 2010 ITR in 2010, Frontier’s 2011 exploration programmes as reported in this ITR, have comprised the following:-:

ground magnetic and radiometric surveys;

Phase 1 infill vertical RC validation drilling (Section 9); and

drilling of vertical diamond drillholes and metallurgical sampling (Section 9).

As an adjunct to the existing high resolution ground magnetic and radiometric survey over the Zandkopsdrift carbonatite, a series of surveys was commissioned by Frontier to increase the coverage of the geophysical information and to sterilise the areas allocated to the proposed Process Plant, TDF and water storage facilities. The geophysical ground surveys were undertaken by Remote Exploration Surveys (Cape Town) in 2010 and 2011. The 2010 radiometric survey was conducted at approximately 1m above surface, with a Radiation Solutions Inc-RS-230 BGO Spectrometer, calibrated to record total count every second in survey mode and potassium, thorium, uranium and ‘dose rate’ every 10 seconds in assay mode. Positional information was obtained by means of a GARMIN™ GPS (Figure 12). The 2011 ground magnetic surveys to sterilise areas for the proposed surface infrastructure sites was undertaken with GSM-19W magnetometers manufactured by GEMSys. The surveys were conducted at 50m line spacing with a reading density of approximately 2m per grid line. Navigation and positional control of the magnetic data was completed using a hand-held GPS. The results of these surveys, together with those from the 2009 surveys, were consolidated to generate composite magnetic and radiometric images of the Zandkopsdrift carbonatite and surrounds (Figure 12). The surface expression of the main Zandkopsdrift carbonatite is characterised by a strong magnetic response and a very rough magnetic fabric. The radiometric data indicates that the carbonatite has a high total count signature and a higher thorium and uranium concentration and lower potassium concentration relative to the gneissic country rock (Figure 12). Both radiometric and magnetic surveys are extremely efficacious in informing the drilling programmes through the identification of potential extensions to the deposit. The masking effect of the overburden limited the usefulness of radiometric surveys for the sterilisation of the proposed infrastructure sites, however the magnetic surveys delineated isolated targets for follow up field validation and possible drill testing, as illustrated in Figure 12.



FIGURE 12



GROUND MAGNETIC AND RADIOMETRIC SURVEYS OVER ZANDKOPSDRIFT

6,5

80,0

00

6,5

82,0

00

780,000 782,000 784,000

6,5

80,0

00

6,5

82,0

00

780,000 782,000 784,000

U CHANNEL

ZANDKOPSDRIFTCARBONATITE

ZANDKOPSDRIFTCARBONATITE

Alternative case infrastructure

Base case infrastructure

Drainages

Carbonatite outline

LEGEND

Alternative case infrastructure

Base case infrastructure

Drainages

Carbonatite outline

LEGEND

MAGNETICS - RTP

Source: Frontier 2011, MSA 2011

TAILINGS DISPOSAL FACILITY OPTIONS

Scale0 1km

Scale0 1km

PLANT SITE OPTIONS

TAILINGS DISPOSAL FACILITY OPTIONS

PLANT SITE OPTIONS


30

8.2 Sampling Methodology (NI 9b, 9c)

The Frontier exploration programme reported in this ITR required several sampling methodologies depending upon the source of the material and the objectives of the sampling, as summarised below:-

sampling of RC chips from the Phase 1 vertical RC drilling programme; and

sampling of diamond drillhole core from the metallurgical diamond drilling programme.

8.2.1 RC Drillhole Sampling Methodology (NI 9b)

The RC sampling was undertaken according to strict, industry standard protocols, the implementation of which was independently monitored by MSA. The RC drilling programme was supervised by MSA and suitably qualified geological staff from Frontier. The Frontier geological staff was responsible for the assay sampling. The RC drilling was undertaken in daylight hours only, using a truck mounted reverse circulation drill rig with a 130mm diameter bit. Sample cuttings were collected from the cyclone every metre, placed into a large 200micron (“µm”) thick plastic bag, weighed and transported to the Frontier sample processing facility located approximately 1km from drilling operations. Following receipt of samples at the preparation facility, the samples were split using a three tier riffle splitter in order to produce a representative sample of approximately 2kg to 2.5kg for sample preparation and analyses at the laboratory (Figure 11). A duplicate sample, consisting of 5% of the sample stream was taken from the 2kg sample, by means of a single riffle splitter. Each sample was visually inspected and logged by the MSA geologist, who also recorded magnetic susceptibility and total gamma readings from every metre sampled. The riffle splitter was cleaned with compressed air and a rubber mallet after every sample to minimise contamination and the cyclone was cleaned with compressed air after every rod drilled. In order to achieve the requisite recoveries for compliant Mineral Resource estimation, RC drilling was terminated when recoveries consistently dropped below 80%, which was generally due to intersecting the local water table. Each sample batch included specific quality assurance and quality control measures, in particular blank samples to monitor contamination, sample duplicates to measure precision and Certified Reference Material (“CRM”) to measure accuracy. The sample batches were transported directly by road from Frontier’s sample preparation facility at Zandkopsdrift to the Genalysis Laboratory Services (“Genalysis”) laboratory in Johannesburg. The drilling method and sample recovery/methodologies implemented during Phase 1 of the RC drilling at Zandkopsdrift are deemed appropriate for the objectives and purposes of updating the 2010 Mineral Resource of the Project. The efforts made to ensure representivity are acceptable and no sample bias is expected.

8.2.2 Metallurgical Diamond Drillhole and Sampling Methodology (NI 9b)

The focus of the initial phase of metallurgical testwork was the investigation of the metallurgical characteristics of the Central Zone supergene enriched material, as well as the vertical to sub-vertical REE enriched dyke swarm identified from the ongoing drilling and assay programmes. Approximately 6t of material representative of these various mineralised lithologies was recovered for the initial metallurgical testwork and mineralogical studies. A programme of 12 diamond drillholes for metallurgical sampling and testwork were drilled according to a specific pattern as described in Section 10.3. Table 8 indicates the sampling intervals for the nine boreholes finally selected from the suite of 12 diamond drillholes, for the metallurgical sampling.


31

Table 8 : Metallurgical Testwork Boreholes

BOREHOLE ID

HIGH GRADE INTERVAL LOW GRADE INTERVALS

FROM (m) TO (m) TREO (%)*

~MASS (kg)

FROM (m) TO (m) TREO (%)*

~MASS (kg)

ZKDHM002 0.0 45.0 4.4 306.0 45.0 81.0 1.9 245.0 ZKDHM003 0.0 56.0 4.2 381.0 56.0 80.0 1.7 163.0 ZKDHM004 ~ ~ ~ ~ 0.0 68.0 1.3 462.0

ZKDHM005 16.0 32.0 5.6 109.0 4.0 16.0 1.7 82.0

~ ~ ~ ~ 32.0 56.0 1.8 163.0

ZKDHM007 0.0 36.0 3.0 245.0 36.0 63.0 1.3 184.0 ZKDHM008 0.0 31.0 3.7 211.0 31.0 40.0 1.3 61.0 ZKDHM009 0.0 36.0 4.3 245.0 ~ ~ ~ ~

ZKDHM010 0.0 55.0 3.0 374.0 55.0 74.0 1.7 129.0

74.0 80.0 5.0 41.0 80.0 97.0 1.8 116.0

ZKDHM011 0.0 26.0 2.9 177.0 26.0 46.0 1.8 136.0

46.0 61.0 3.1 102.0 61.0 97.0 2.0 245.0 ~Total Mass 2,190.0 1,986.0

Source : MSA 2011 *TREO as determined by NITON XRF See Section 9.2 for description of the drilling programme

The samples were composited from the selected diamond drillholes and sampling was undertaken according to strict, industry standard protocols, the implementation of which was independently monitored by MSA. The metallurgical diamond drillhole programme was supervised by MSA and Frontier geological staff. A geologist from Frontier and an independent process consultant contracted by Frontier were responsible for selecting representative metallurgical samples. Drilling was undertaken in daylight hours only, from three trailer mounted drill rigs, using PQ3 diameter triple tube core barrels. Samples were taken of the higher grade REE dyke material, the supergene limonitic Fe-Mn saprolite and the fragmental glimmerite lithologies. Geological data including borehole logs, sampling details, magnetic susceptibility readings, Radeye scintillometer readings and NITON XRF results were recorded for each borehole. Individual intervals selected for testwork were packed separately into 98 clearly marked and labelled plastic drums and dispatched to SGS. The sampling methodologies and efforts made in the metallurgical drilling programme to ensure representivity of the Central Zone material are acceptable and no sample bias is expected.

8.2.3 Downhole Density Measurements (NI 9b)

Frontier independently contracted Terratec Geophysical Surveys (Namibia) to undertake downhole density surveys of the 61 RC boreholes drilled during 2011, to obtain accurate density and magnetic susceptibility measurements. In addition, Scientific Services Laboratories (Cape Town) (“Scientific Services”) carried out separate density measurements using the Archimedes Principle on diamond drillhole core from the ongoing Mineral Resource drilling at Zandkopsdrift. The downhole density logging was carried out using a gamma-gamma sonde, with a cesium 137 source, which generates gamma rays. The degree of scattering in the reflection of the gamma rays from the surrounding rock is used to provide a measure of density of the reflector material. The sonde has two sensors, offset from the gamma ray source, which provide two density measurements, namely a smaller/near and larger/far density sample measurement of the borehole sidewall. The two measurements are combined to yield a compensated density measurement. Based on the calibration sources, an accuracy of 0.1g/cm3 to 0.05g/cm3 can be achieved. Correction of the measurements for background uranium and thorium radiation was undertaken by taking measurements without the cesium source, determining the ambient background radiation and applying a correction factor to the data set.

8.2.4 Downhole Magnetic Susceptibility Measurements (NI 9b)

This method provides a measure of magnetic susceptibility using Bartington components at a frequency of 1.4KHz. The probe induces a current from an oscillating magnetic field in the probe, at a specific radial distance from the probe coils. The oscillating current produces a secondary field that is detected by the receiver coils. The ‘in phase’ signal is a measure of susceptibility in lithologies with magnetic properties due to the presence of magnetic minerals.


32

The logging was conducted at a speed of 3m to 5m per minute and provided magnetic susceptibility values in System International (“SI”) units.

8.2.5 Archimedes Principle Density Measurements (NI 9b)

A total of 187 core samples were submitted to Scientific Services for density determination using the water displacement method, or Archimedes Principle. The samples were oven dried upon receipt, split in half, with one half being retained for reference purposes. The sample was weighed and as a consequence of the high porosity, the sample was coated with wax and the weight recorded to determine the weight of the wax. The sample was then weighed whilst immersed in water, and the density calculated according to the following formula:- Specific Gravity (“SG”) = weight in air/weight in water

8.2.6 Density Measurement Accuracy (NI 9b)

Comparison of density measurement results utilising the Archimedes Principle and the downhole logging techniques, revealed that the former methodology produced lower average measurements than those obtained from the downhole gamma method. The average Archimedes Principle density is 2.06, whilst the average downhole gamma determination is 2.39. The discrepancy is attributable to the fact that the downhole method is surveying in situ material, which has a higher moisture content, as opposed to the Archimedes method where samples are oven dried prior to SG estimation. The average SG of 2.06 from the Archimedes Principle methodology has been used for the purposes of the Mineral Resource estimation, as both the assay data and SG were based on oven dried samples.

8.3 Exploration Results (NI 9d)

The results of the historic exploration programmes are discussed in detail in Sections 5, 6.2 and 6.3. The results of the 2011 exploration programme completed up to September 2011 have been incorporated into the 2011 Mineral Resource estimate.

9 DRILLING (NI 10)

9.1 RC and Diamond Drillhole Programmes (NI10a, 10b, 10c)

The 2009 and 2010 Frontier drilling programmes are discussed in detail in Section 5.5. The drilling programmes were undertaken according to strict, industry standard protocols, the implementation of which was independently monitored by qualified geologists employed by MSA and was supervised by qualified geologists in the full-time employment of Frontier. The drilling programme completed as of September 2011, comprised a detailed Phase 1 RC Mineral Resource delineation drilling programme and a metallurgical diamond drilling programme aimed at extracting suitable and sufficient material for metallurgical testwork. The 2010 Mineral Resource and 2010 geological block model identified three distinct zones primarily based on REE grade at TREO cut-off grades 1.5%, 2.5% and 3.5% respectively. The 2011 Phase 1 RC drilling programme was specifically aimed at further delineation of the higher grade Central Zone which encompasses the 2.5% zone identified in the 2010 Mineral Resource estimate and comprised 61 vertical RC drillholes staggered at 40m spacing for a total of 3,414m (Figure 11). The RC drilling was undertaken in daylight hours only, using a truck mounted reverse circulation drill rig with a 130mm diameter bit. Frontier engaged MSA to supervise logging, sampling and management of the drilling programme. Drilling was carried out by Geoserve Exploration Drilling (Johannesburg) independently contracted to Frontier. All drillholes were surveyed by a professional surveyor, Mr C. Venter, using a differential GPS. A high resolution digital elevation model was completed with downhole gamma density and magnetic susceptibility logging of all drillholes. Magnetic susceptibility and total count scintillometer readings were taken for every 1m sample interval and the data was entered into the database by the geologists on site. The target depth for the Phase 1 RC programme was 80m, however intersection of the local water table at depths varying from 40m to 100m from surface resulted in RC recoveries dropping from 90%-100% to below 80%. For the purposes of National Instrument 43-101 compliant Mineral Resource estimation, all holes were stopped as soon as recoveries consistently dropped below 80%.


33

9.2 Metallurgical Diamond Drillhole Programmes (NI10a, 10b, 10c)

Frontier considered metallurgical testwork on the various lithologies of the Zandkopsdrift carbonatite to be a priority and a series of representative metallurgical samples were recovered from the Central Zone, which was defined as the target area to be mined for the purposes of the PEA. In addition, samples of the high grade dyke material were included in the testwork programme. The samples for bench scale metallurgical testwork and mineralogical study were obtained from a 12 diamond drillhole programme using PQ3 triple tube. Four sites within the Central Zone were selected in the vicinity of historic Anglo American boreholes (Figure 13) which had previously been validated by Frontier, utilising the information from the 2010 Mineral Resource block model as a guide to borehole site selection. The selected Anglo American boreholes were ZKR36, ZKR08, ZKR15 and the fourth, interpolated between ZKR08 and ZKR15 as shown in Figure 13. In order to ensure representivity of the sample, three vertical, PQ3 diameter boreholes were drilled at each of the four sites, for a total of 794m, as illustrated in Figure 13. The three holes were drilled within a 3m radius of the historic borehole at roughly a 120° pattern (Figure 13). Strict adherence to drilling protocols was maintained and an average recovery of >96% was attained for the 12 holes drilled. Borehole ZKDHM012 was abandoned due to borehole collapse at 13m. The core from boreholes ZKDHM001 and ZKDHM006 was retained for reference purposes and consequently nine boreholes were finally sampled, as summarised in Table 8 and dispatched to SGS. The initial intention was to obtain core from three similar drillholes for each site for comparative metallurgical testwork at two separate laboratories, with the third drillhole providing material for reference purposes and possible additional testwork. The PQ3 core proved to be friable and only permitted limited core handling. Consequently, whole core was submitted for testwork, after geological logging and photography. In order to facilitate comparison of the boreholes in the field, a 2mm sliver of core (100g) was removed from each metre of core, crushed and stored in marked plastic bags. Magnetic susceptibility, RadEye scintillometer readings and portable Niton XRF analysis were recorded for each sample. The interpretation of the metallurgical testwork drilling programme indicated that the expected similarity in geology and REE grade of the closely spaced metallurgical drillholes was not in fact evident. The interpretation of these results suggested that vertical to sub-vertical primary controls on REE mineralisation were present, possibly due to the presence of REE enriched dykes or similar structures. Distinct, visually recognisable REE enriched lithologies were identified in the core intersections, which appear to be steeply dipping and dyke-like. The consequence of this interpretation is that the original mineralisation model of horizontally distributed REE enrichment similar to Mount Weld, will be modified to one that incorporates some primary enrichment in late-stage dykes and/or similar structures, in addition to the secondary Mount Weld type enrichment. The intensity and spatial distribution of these REE-enriched dykes/dyke swarms was insufficiently defined by the metallurgical and RC Phase 1 drilling programmes, and extensive diamond drilling has since been conducted to further evaluate the extent and significance of these dyke zones and their relevance on the evolving geological model. The results from this diamond drilling programme which was completed in late 2011 and the 2011 RC Phase 2 drilling programme, will be incorporated in an updated Mineral Resource estimate that will published with the results of the planned PFS later in 2012.

9.3 Drillhole Database

A digital relational exploration database was designed and implemented by MSA to incorporate the historical Anglo American and current Frontier data. Standard logging and sampling information sheets were prepared for the Zandkopsdrift drilling programmes and this information was uploaded into a custom-designed database by MSA. The database is capable of storing data from different sources and all input data was verified by a number of standard checks, including but not limited to, identifying sample overlaps, ensuring all data falls within the logged length of the drillhole and highlighting missing samples. .

10 SAMPLE PREPARATION, ANALYSES AND SECURITY (NI 11)

10.1 Sample Preparation and Submission Procedures (NI 11a)

Security in the case of a mineral exploration project is an assurance that geological and assay samples have been transported in such a manner as to be completely traceable from the field to a commercial laboratory. A chain of custody is designed to prevent unauthorised sample handling or tampering, and adds credibility to the exploration programme.



FIGURE 13



METALLURGICAL TESTWORK SAMPLE DRILLING PROGRAMME6,5

81,5

00

METALLURGICAL DRILLING SITES OVERLAIN ON THE 2010 RESOURCE ESTIMATE 2.5% TREO CUT-OFF BLOCK MODEL

10.00

9.00

8.00

7.00

6.00

5.00

4.00

3.00

2.00

1.00

0.00

TREO %

LEGEND

783,500 784,000

INTERPOLATED BETWEEN ZKR08 AND ZKR15

3m radius from mother hole.

Source:MSA 2011

ZKR36

ZKDHM001-003

ZKR08

ZKDHM004-006

INTERPOLATED ANGLO BOREHOLE

ZKDMM007-009ZKR15

ZKDHM010-012

METALLURGICAL DRILLSITE ZKDHM02 METALLURGICAL DRILLING AT ZANDKOPSDRIFT

Anglo Motherhole Frontier Metallurgical Borehole

Historic Mother hole with

assay information.

Metallurgical hole 3



Scale0 200m

2011 Metallurgical Drilling - ZKDHM

2011 Phase 1 RC Drilling

2009 RC Drilling

Anglo American Drilling

LEGEND


35

All RC and metallurgical drillhole samples from the Zandkopsdrift Project were sealed in plastic sample bags (RC) and plastic drums (metallurgical samples) at Frontier’s sample preparation facility at Zandkopsdrift and delivered directly by road to their respective testing/laboratory facilities. All RC and metallurgical drilling samples were kept under 24hr security at Frontier’s sample preparation facility. Frontier utilises an independent company, Dangerous Goods International (“DGI”) for the transportation of all the Zandkopsdrift samples. The RC samples were sent to Genalysis laboratories in Johannesburg for sample preparation and the metallurgical testwork sample to SGS Lakefield, Canada.

10.2 Sample Analysis (NI 11b)

The initial sample preparation at the Frontier sample preparation facility is described in Section 8.2. Thereafter, the following sample preparation procedure was applied at Genalysis, Johannesburg for the RC drillhole samples:-

samples received were sorted and weighed and any discrepancy between the samples and the accompanying sample consignment sheet was communicated immediately to Frontier;

samples were dried in an electric drying oven for approximately 8hrs at 121ºC;

samples were crushed (if required) to a nominal -2mm or -10mm size fraction;

samples greater than 3kg were split, pulverised to a nominal 85% passing through a -75µm sieve and a 120g to 150g sub-sample was split for export to Australia;

the pulp rejects and pulverised samples were stored and returned to Frontier (upon request); and

duplicates were taken from the pulveriser bowl upon completion of the grinding cycle.

Genalysis (Maddington, Western Australia) is an independent, accredited laboratory selected as the primary laboratory for the REE analyses of the Zandkopsdrift samples. Genalysis is accredited by The National Association of Testing Authorities Australia (NATA, Accreditation No 3244), as well as ISO/IEC accredited (ISO Accreditation No 17025), which includes the management requirements of ISO 9001: 2000. Genalysis’ internal quality control programme includes selected repeat analyses, insertion of standard reference samples and control blanks with each batch. These quality control sample results are reported with each batch assay certificate. The assays were carried out using a sodium peroxide fusion followed by ICP-MS analysis (method code DX/MS) for the 14 REEs, yttrium, thorium and uranium. Activation Laboratories Limited (“Actlabs”) in Ancaster, Ontario, Canada, was selected as the referee laboratory for the analysis of the Zandkopsdrift samples. Actlabs is accredited with the Canadian and International Organisations Standards Council of Canada (SCC) (ISO 17025), the Health Canada, National Environmental Laboratory Accreditation Conference (“NELAC”) and the Food and Drug Administration (“FDA”). Actlabs is totally independent of Frontier. The REEs were analysed at Actlabs using 4Litho Quant procedures, involving a lithium metaborate/tetraborate fusion of 0.2g of sample followed by ICP-MS analysis. This procedure provided results for 10 major elements plus loss on ignition (“LoI”) and 44 trace elements including the REEs, yttrium, thorium, uranium, and molybdenum As a P2O5 content of >0.3% was anticipated for most of the samples, niobium was determined by fusion XRF; which is an acceptable approach. MSA considers that there was little opportunity for sample tampering by an outside agent (MSA 2011).

10.3 Metallurgical Testwork Sample Preparation (NI 11b)

The complete metallurgical sample consignment was received at the SGS laboratory in Canada and a Frontier representative witnessed the intact sample seals, logging and weighing of the samples. The samples were weighed individually. Each sample was subsequently crushed and split into the following sub-samples:-

one set of the high grade Central Zone sub-samples was composited to provide a single high grade bulk composite, representing the high grade material that is the target for the economic assessment and future feasibility studies. The bench scale SGS testwork is currently being performed on this sample to develop a suitable process flowsheet;

samples of core from the Central Zone were selected to give a spread of 9 samples for variability analysis; and

one set of lower grade sub-samples was composited for a single medium grade bulk composite, to assess the amenability of the lower grade material to the selected flowsheet developed by SGS from the metallurgical testwork.


36

The remaining crushed and split interval samples will be retained uncomposited pending identification of any further metallurgical testwork requirements.

10.4 Quality Assurance and Quality Control (NI 11c, 11d)

Appropriate quality assurance and quality control (“QA/QC”) monitoring is a critical aspect of the sampling and assaying process in any exploration programme. Monitoring the quality of laboratory analyses is fundamental to ensuring the highest degree of confidence in the analytical data and providing the necessary confidence to make informed decisions when interpreting all the available information. Quality assurance (“QA”) may be defined as information collected to demonstrate that the data to be used further in the Project is valid. Quality control (“QC”) comprises procedures designed to maintain a desired level of quality in the assay database. Effectively applied, QC leads to identification and corrections of errors or changes in procedures that improve overall data quality. Appropriate documentation of QC measures and regular scrutiny of quality control data are important as a safeguard for project data and form the basis for the quality assurance programme implemented during exploration. In order to ensure quality standards are met and maintained, planning and implementation of a range of external quality control measures is required. Such measures are essential for minimising uncertainty and improving the integrity of the assay database and are aimed to provide:-

an integrity check on the reliability of the data;

quantification of accuracy and precision;

confidence in the sample and assay database; and

the necessary documentation to support database validation.

Frontier adopted a set of standard operating procedures which cover all aspects of the exploration programme, and which are designed to ensure best practice and, ultimately, integrity of the data. Each sample batch included the insertion of blank samples (5%), samples of CRM (5%) and duplicate samples (5%). Blanks, CRMs and duplicates were assigned sample numbers within the sample sequence. All samples/pulps submitted for analysis were accompanied by standard submission sheets listing only a unique sequential batch number, sample numbers and instructions on the analytical procedure. No information concerning the project name, drillhole number, depth, or any geological information was included with the samples. 10.4.1 Blanks, Standards and Duplicates (NI 11c)

Blank samples were submitted to monitor contamination of samples. The blank material was prepared from REE barren Magaliesburg quartzite chips. The CRMs comprised African Mineral Standards (AMIS 185) and TRM-2 supplied by Mongolian Central Geological Laboratory. Field duplicates (representing 5% of the sample stream) were created by Frontier through the splitting of RC samples and were submitted to monitor sampling and sample preparation precision. A summary of QA/QC results and plots from the Zandkopsdrift RC drilling programme was presented in a document entitled: “Updated NI43-101 Mineral Resource Estimate and Technical Report on Zandkopsdrift REE Project, located in the Republic of South Africa” (MSA, 2011). MSA is of the opinion that the QA/QC measures are adequate and appropriate for the mineralisation. Venmyn concurs that the QA/QC measures provide confidence in the quality of the analytical data and therefore concludes that the data is suitable for Mineral Resource estimation.

10.5 Adequacy of Procedures (NI, 11d)

The analytical methods adopted and laboratories employed are considered appropriate. Sampling methods, chain of custody procedures, sample preparation procedures and analytical techniques are considered appropriate and compatible with industry standards. The results from the CRM TRM-2 showed that the certified values were not replicated by either the primary or referee laboratories. However, AMIS 185 results are within the expected guidelines. Detailed and in depth work by Genalysis concluded that the XRF methodology adopted in certifying the TRM-2 CRM is not appropriate for REE concentrations. Consequently, future sampling programmes will continue to use AMIS 185 and additional CRMs will be included to ensure best practice QA/QC methodology. It is recommended that alternative blank material be sourced for future drilling programmes.

11 DATA VERIFICATION (NI12)

MSA undertook various data verification procedures throughout the drilling programmes at the Zandkopsdrift Project which included:-

several site visits throughout the RC and metallurgical drilling programmes;

review of Frontier’s sample preparation facility at Zandkopsdrift;

review of RC drilling, sampling and logging procedures at Zandkopsdrift; and


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audit of exploration databases being used for Mineral Resource estimation.

In MSA’s opinion, the exploration programmes have been successful in creating information necessary to increase confidence in the existing Mineral Resource estimates at Zandkopsdrift. The metallurgical sampling exercise provided suitable reference material for preliminary metallurgical testing, as well as important insights into the potential controls on mineralisation within the Zandkopsdrift carbonatite complex. MSA concludes that appropriate QA/QC procedures were applied by Frontier and that analytical issues have been identified and appropriate remedial action taken. Industry standard practices have been followed and the quality of the Frontier database meets NI 43-101 standards and CIM best practice guidelines. Venmyn has performed selected checks on the data input into the Mineral Resource block model and has interrogated the methodology and assumptions made in the generation of the Mineral Resource estimate. Venmyn is satisfied that the Mineral Resource estimation procedures are appropriate.

12 MINERAL PROCESSING AND METALLURGICAL TESTWORK (NI 13)

12.1 Nature and Extent of Testwork (NI 13a, 13c)

The nature and extent of the metallurgical drilling and sampling methodology is discussed in Sections 8.2.2, 9.2 and 10.3. The metallurgical testwork programme was independently undertaken by SGS and independently reviewed by MDS (Table 1). The results are reported in a document entitled “Metallurgical Testwork Programme-Zandkopsdrift Rare Earth deposit, South Africa” (MDS, September 2011). The principal metallurgical testwork on the Zandkopsdrift deposit for the purposes of the PEA has been independently carried out by SGS on a 700kg bulk composite sample prepared from approximately 6t of borehole core recovered in April 2011 (see Section 8.2.2). The composite sample is considered to adequately represent the Central Zone material which will be the focus of the planned mining operation at Zandkopsdrift as described in this ITR and will constitute the feed to the Process Plant. The remaining material has been retained as representative subsamples for variability testwork on the final selected processing route, or if required for any potential future testwork. Additional, alternative and complimentary testwork to improve and optimise the design of the Zandkopsdrift process flowsheet is being undertaken by Mintek in South Africa and also by a leading Chinese research institute. The metallurgical testwork for the Zandkopsdrift Project is ongoing and for the purposes of the PEA, the following critical metallurgical aspects have been tested and concluded as of December 2011. A flotation testwork programme on the composite Central Zone material sample has been undertaken to determine the degree to which the REEs may be concentrated and to quantify the recoveries achieved prior to acid cracking of the concentrate. A test acid cracking programme has also been undertaken on un-concentrated RoM material as well as on flotation concentrate. The results of these programmes are presented in Section 12.1.1 to Section 12.1.8. The testwork carried out by SGS for the PEA includes the following:-

mineralogical studies including quantitative evaluation by scanning electron microscopy (QEMSCAN) and electron microprobe analysis (EMPA) to characterise and determine the liberation profile, nature and occurrence of the REE, as well as the mineral composition of the material;

grindability testwork including the determination of crushing, grinding and abrasion indices;

preliminary physical beneficiation scoping testwork including:-

o large scale grinding and desliming tests;

o determination of the degree of fineness of primary grinding;

o degree of desliming before flotation;

o pulp pre-treatment before flotation;

o development of an appropriate reagent scheme; and

o evaluation and selection of an appropriate process flowsheet.

flotation studies including the determination of the number of flotation cleaning stages, intermediate product re-treatment before recycling to the flotation circuit, optimisation testwork, final locked cycle tests, and variability testwork on individual samples;

hydrometallurgical studies including:-

o characterisation of the concentrate;

o flotation concentrate mineralogy;


38

o acid bake/water leach tests, at various acid/ore ratios on the whole ore, flotation concentrate and removed slimes fraction prior to flotation; and

o determination of optimal baking temperature and grinding size.

evaluation of alternative process routes, including atmospheric leaching, pressure leaching and caustic cracking have also been tested.

The ongoing metallurgical testwork is outlined below, the results of which will be included in the PFS planned for 2012:-

trisodium phosphate recovery,

uranium/thorium/radium removal,

Iron removal testwork,

acid neutralisation testwork,

precipitation/alkali treatment,

re-leach testing,

solvent extraction testwork, and

solid liquid separation testwork.

12.1.1 Mineralogical Studies (NI 13a)

The results from the mineralogical studies completed thus far include the following:-

XRD analysis indicates that the Zandkopsdrift material is poorly crystalline and the mineralogical study of the sample indicates that the material is dominated by hydrated Fe oxides, hydrated Mn-Ba oxides, hydrated Mn-Fe oxides, micas and clays (3.3%), ilmenite (2.2%) and rutile (1.6%);

REE and potential REE carriers include monazite (2.2%), altered monazite (5.3%), pyrochlore (0.3%), apatite (2.6%), crandallite (0.5%) and gorceixite (3.8%). Monazite is the dominant REE bearing mineral;

monazite is strongly associated with the hydrated Mn-Fe-Ba oxides and is generally <50μm in size but occurs in grain sizes ranging from micrometric to approximately 100μm;

the monazite displays textural features indicative of a secondary origin including complex intergrowths with goethite (approximately 700μm in length); veinlets hosted by or intergrown with oxides (up to 50μm in size); compositional uneven zoning and homogenous as well as micro-porous textures;

electron-microprobe analyses of unaltered monazite indicate the presence of REEs in the following proportions: 17.66 wt% La2O3; 25.38 wt% Ce2O3; 9.11 wt% Nd2O3

with minor Pr2O3 2.55 wt%, Sm2O3 0.72 wt%, Gd2O3 0.46 wt%, Eu2O3 0.23 wt%, Y2O3 1.43 wt%, and ThO2 0.22 wt%;

altered monazite contains an average of 9.96 wt% La2O3; 21.53 wt% Ce2O3; 5.95 wt% Nd2O3 and minor Pr2O3 1.57 wt%, Sm2O3 0.46 wt%, Gd2O3 0.23 wt%, Eu2O3 0.14 wt%, Y2O3 0.78 wt%, and ThO2 0.15 wt%;

the Ce2O3 in the Mn-Ba oxides ranges from 0% to 0.37 wt%, while other REE are nil or below the detection limit of the electron microprobe;

the Ce2O3 in the Fe-oxy-hydroxides ranges from 0% to 0.10 wt%. A single analysis of a Fe-Mn-oxy-hydroxide yielded 0.15 wt% Ce2O3;

aluminium phosphate contains an average of La2O3 2.93 wt%, Ce2O3 4.17 wt%, Nd2O3 1.98 wt%, Sm2O3 0.23 wt%, Pr2O3 0.58 wt% and Y2O3 0.40 wt%; and

apatite contains an average of La2O3 0.20 wt%, Ce2O3 0.07 wt%, Nd2O3 0.22 wt% and Y2O3 0.27 wt%.

12.1.2 Liberation and Association of Monazite (NI 13a)

A preliminary mass balance of Ce, La and Nd shows that altered and fresh monazite contains more than 97% of the total deposit REE content. The monazite occurs as complex particles and liberation is relatively poor to moderate, even in the fine fractions. Approximately 36% of the fresh monazite is free and liberated, increasing to 55% when altered monazite is included. The percentage liberation of fresh and altered monazite in various size fractions is summarised in Table 9:-


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Table 9 : Liberation of REE Bearing Fresh and Altered Monazite

SIZE FRACTION (µm)

FREE AND LIBERATED MONAZITE

FREE AND LIBERATED ALTERED MONAZITE

PERCENTAGE (%) PERCENTAGE (%) 462 26 0 212 26 <1 150 23 3 106 23 3 25 26 8 -25 44 27 11 45 28 5 26 8

Source : MDS 2011

12.1.3 Grade Recovery of Monazite (NI 13a)

A recovery curve representative of the whole sample, indicates fresh and altered monazite contents of between 96% and 64% at recoveries of 41% to 81%, respectively.

12.1.4 Physical Beneficiation Testwork (NI 13a)

Preliminary beneficiation testwork on the composite sample included: magnetic separation, with and without prior roasting; gravity separation; as well as flotation. To date, desliming of the milled material followed by flotation of the coarse fraction appears to demonstrate the best potential for upgrading and pre-concentration of the REEs, although both wet high intensity magnetic separation (WHIMS) and stage grinding followed by desliming also show some potential, which will be investigated in the ongoing testwork.

12.1.5 Desliming Testwork (NI 13a)

Progressive desliming by cyclone of the milled ore indicates a REE upgrade to the fines fraction. At a primary grind of 200mesh, approximately 40% of the REEs reports to 25% of the original deslimed mass (at 15µm). Stage grinding and desliming testwork is currently being conducted. The typical results obtained across a three cyclone test series are presented in Table 10:-.

Table 10 : Deslime Cyclone Test Results

PRODUCTS W/W (%) % DISTRIBUTION

Nb2O5 Ce2O3 La2O3 Nd2O5 G6 Cyc u/f+75µm 16.70 10.50 10.00 9.70 10.30 G6 Cyc u/f+38µm 31.81 20.40 19.40 19.60 19.60 G6 Cyc u/f Sand 79.00 77.10 68.30 69.80 68.80 G6 Cyc o/f Slimes 21.00 22.90 31.70 30.20 31.20

12.1.6 Flotation Studies (NI 13a)

For the purposes of the PEA, a total of 48 bench scale rougher flotation batch tests were conducted using the Central Zone material in which variable types of collectors, activators, depressants and grind sizes were examined. Tests were conducted on the deslimed and undeslimed comminuted material. A composite sample of ore at -6mesh, was stage-ground to achieve a target grind size. The stage-ground material was subjected to rougher flotation. Prior to flotation, conditioning reagents were added to the pulp in the following order: pH modifier, depressants/modifiers, and collectors. Concentrates were removed at specific timed intervals from the rougher flotation stage. At the end of the flotation period, each of the rougher concentrates, as well as the tailings, were filtered, dried, and analyzed for Nb2O5, Ce2O3, La2O3, and Nd2O3 by XRF. The results isolated three effective collectors (CB110, NRS2 and SRBS-9) and proved the efficacy of Na2S as a modifier to improve froth conditions. The best flotation test results of the 48 flotation batch tests conducted are summarised in Table 11:-


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Table 11 : Flotation Testwork Results

CUMULATIVE PRODUCTS

W/W (%)

GRADES (%) DISTRIBUTION (%) Nb2O5 Ce2O3 La2O3 Nd2O5 Nb2O5 Ce2O3 La2O3 Nd2O5

Ro Conc 1 9.50 0.33 2.50 1.40 0.90 9.10 11.50 11.50 11.80 Ro Conc 1-2 22.00 0.32 2.90 1.80 1.10 20.20 30.90 33.70 33.60 Ro Conc 1-3 41.70 0.34 2.90 1.80 1.10 41.20 57.80 62.40 62.30 Ro Tail 58.30 0.35 1.50 0.80 0.50 58.80 42.20 37.60 37.70 Head (Calc) 100.00 0.35 2.10 1.20 0.70 100.00 100.00 100.00 100.00

Source : SGS 2011, MDS 2011

12.1.7 Hydrometallurgy and Separation (NI 13a)

Hydrometallurgical acid cracking testwork was performed on the unconcentrated ore to provide an alternative to cracking of a flotation concentrate as this was regarded as potentially providing a higher overall recovery. The testwork consisted of ‘contacting’ the composite ‘whole material’ sample with concentrated (98%) sulphuric acid, as well as performing two concentrated sulphuric acid tests with the flotation concentrates and slimes fraction removed before flotation. A limited number of additional scoping tests have been conducted to evaluate pressure acid leaching, atmospheric sulphuric acid leaching, atmospheric HCl leaching and caustic cracking, followed by water washing and acid leaching. To date, these alternatives routes have not shown superior REE extractions to the acid bake/water leach process, although testwork is continuing. The detailed results of these studies are presented in Appendix 3. For the purposes of the PEA the selected processing option will be sulphuric acid cracking.

12.1.8 Acid Bake- Water Leach Procedure (NI 13a)

The composite sample is ground in a ball mill to achieve a target grind size. The ground material is filtered, dried and ‘contacted’ with a measured quantity of concentrated sulphuric acid to form a homogenous paste. The acid paste is cured for 1hr before being placed in a furnace and baked at a temperature of ~200°C for 4hrs. The calcine is then removed, pulverized, and mixed with water into a slurry at up to 10% solids (w/w). The slurry is leached at 90°C for 4hrs, then filtered and the filtrate collected and washed with acidified deionised (“ADI”) water. The volume, pH, oxidation reduction potential and specific gravity of the filtrate are measured and the filtrate analysed. The leach residue is dried, weighed and analyzed for REE content by XRF or ICP-MS and Fe, Al, Mn, Ca, Si, P contents by XRF.

12.2 PEA Testwork Outcomes (NI 13b, 13c)

The metallurgical testwork conducted on the composite sample has indicated the following outcomes:-

desliming results have indicated that the fines at <15μm contain 40% of the REO recovered to a 26% mass fraction;

current flotation testwork results indicate that without further cleaning, at least 60% REE recoveries can be achieved to 40% of the feed material mass by rougher flotation;

the initial un-optimised cracking tests on the whole ore indicate that baseline extractions of 88% at acid consumptions of between 600kg/t and 750kg/t of material are possible. This is considered to represent the lowest likely extraction rate in the event of the acid cracking of an upgraded flotation concentrate;

after acid cracking and primary solution purification, the mineralogy becomes less relevant to the overall solution composition and hence, the confirmatory bench separation testwork will be conducted at SGS on synthetic REE solutions during the planned PFS. For the purpose of the PEA the Saldanha Separation Plant is expected to return REE recoveries of not less than 99%.

A preliminary process route for the PEA has been selected based on the available metallurgical testwork data, which comprises crushing, grinding, desliming, flotation, recombination of the slimes with the flotation concentrate, acid baking, water leaching, purification and bulk precipitation at the Zandkopsdrift Mine; followed by releaching, solvent extraction, precipitation and drying/calcining at the Saldanha Separation Plant (see Section 16).


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13 MINERAL RESOURCE ESTIMATES (NI 14)

13.1 Key Assumptions (NI 14a to 14d)

The Mineral Resource estimate for the PEA was conducted by MSA (Table 1) and published in a report entitled “Updated NI43-101 Mineral Resource Estimate and Technical Report on the Zandkopsdrift Rare Earth Element Project located in the Republic of South Africa” (October 2011). An historic Mineral Resource estimate was undertaken by MSA in 2010, as reported in Section 5.6. The 2011 Mineral Resource estimate represents an update of this estimate, which incorporates the results of the 2011 Phase 1 RC Mineral Resource delineation drilling programme (61 boreholes for 3,414m). The Mineral Resource estimate and block model were independently reviewed by Venmyn. The input database was audited at a high level, assumptions and methodology were interrogated and Venmyn is satisfied that the global Mineral Resource estimate will appropriately reflect the deposit and is globally unbiased. The Mineral Resource estimate for the planned PFS will include additional inclined RC and diamond drilling results, improved understanding of the mineralisation model and will consequently be more rigorously estimated. The Mineral Resource estimate is based on all phases of Frontier drilling and the re-assay of Anglo American pulps for the whole suite of REEs to NI 43-101 standards. The 2011 Mineral Resource estimate is based on borehole data as supplied by Frontier, and was generated from a database compiled and validated by MSA from the Frontier 2011 Phase 1 RC drilling programme completed in Q3 2011, as well as from all previous exploration, including re-assays of the sample pulps from Anglo American’s historical exploration programmes (Section 5). An internal MSA audit procedure and itemised checklist was utilised for the assessment of data quality and integrity. The methodology, assumptions and process for preparation of the 2011 Mineral Resource estimations are discussed in the following sections.-

13.2 Database Validation and Data Preparation (NI 14a)

The database which informed the 2011 Mineral Resource estimate consisted of information from the following exploration programmes:-

a 61 vertical RC borehole drilling (3,414m) and sampling programme by Frontier completed in Q3 2011;

an 11 borehole RC drilling (820m) and sampling programme by Frontier conducted in 2009 that validated historic Anglo American drilling; and

the results from 29 RC boreholes (2,188m) and two diamond drillholes (276m) from the previous Anglo American drilling campaign (2,464m), as well as re-assays of Anglo American samples undertaken by Activation Laboratories in Ontario, Canada for Frontier in early 2010.

The total drilling included in the Mineral Resource estimate is 6,698m, of which 5,558m was sampled and assayed. The database included lithology, assays for all REEs, a selection of major element oxides and downhole survey data for some boreholes. The individual elemental REE analyses in the database were converted to REOs by MSA, using the factors shown in Table 12 and then summed to produce a single total rare earth oxide value:-

Table 12 : REE to REO Conversion Factors

ELEMENT CONVERSION FACTOR OXIDE Ce 1.171 Ce2O3 Dy 1.147 Dy2O3 Er 1.143 Er2O3 Eu 1.157 Eu2O3 Gd 1.152 Gd2O3 Ho 1.145 Ho2O3 La 1.172 La2O3 Lu 1.137 Lu2O3 Nd 1.166 Nd2O3 Pr 1.170 Pr2O3 Sm 1.159 Sm2O3 Tb 1.150 Tb2O3 Tm 1.141 Tm2O3 Y 1.269 Y2O3

Yb 1.138 Yb2O3 Source : MSA 2011


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The borehole data was de-surveyed and the original 1m sample interval was retained. Only those boreholes contained within the mineralised envelope were included in the estimate. Statistical analysis of the data indicated that no data top capping was necessary. The deposit was not sub-divided into domains. Bulk density data was available for only two boreholes in the historical database. Subsequent drilling conducted in 2011 provided 187 SG determinations on core samples submitted to Scientific Services (Cape Town) and an overall average SG of 2.06 from these determinations was applied in the 2011 Mineral Resource estimate (see Section 8.2.6).

13.3 Variography (NI 14a)

Experimental variograms were estimated to assess the degree of spatial continuity exhibited by the REE values. A search ellipse was determined, which has rotations around the Z and X axes, producing an overall ellipse, the longest axis having a plunge to the southwest. The coefficient of variation (“CoV”) of the population is low (0.794). Search radii were set at 150% of the variographic range to nominally define Indicated Resources. The remainder of the model was filled at a further multiplier of the search radii and assigned Inferred status.

13.4 Geological Model (NI 14a)

Datamine Studio 3™ software was used for all 3D modelling and Mineral Resource estimation. Snowden Supervisor software was used for the geostatistics and univariate statistical analysis. The geological and mineralisation model is sufficiently understood at this stage to permit the generation of a mineralised envelope for the purposes of the PEA. The surface expression of the mineralisation envelope was generated from the surface morphology of the main carbonatite body, as determined from mapping and RC drilling. The modelled Mineral Resource area was 920m north-south x 700m east-west. A wireframe of the mineralisation envelope below surface was created for the main carbonatite body, assuming vertical contacts with the country rocks, truncated by the ground surface generated from the detailed topographic survey data (which had been linked with surveyed borehole collar data). The depth of the envelope varied between 70m and 200m. No dip is discernible and the mineralisation is considered to be disseminated to undulating. Lithologies within the mineralised envelope were not modelled, as based on the results available for the PEA there was insufficient data to specifically define a preferential host to the mineralisation. Consequently, a TREO grade-only approach was adopted for the purposes of the PEA and the 2011 Mineral Resource estimate. The 3D model of the mineralisation envelope defined to date for the Zandkopsdrift carbonatite at cut-off grades of 1.0% TREO and 2.0% TREO are presented in Figure 14 which indicates that the current geological model of the mineralisation at Zandkopsdrift is a series of stacked, irregular layers as applied during the 2010 estimates. It is expected that the extent and nature of the sub-vertical high grade dykes and/or similar structures will be determined from the results of the diamond drilling programme completed by Frontier in late 2011, and which will be incorporated into an updated Mineral Resource estimate for the planned PFS. The currently delineated resources at Zandkopsdrift remain the result of a grade-continuity, or grade shell approach.

13.5 Mineral Resource Block Model Parameters (NI 14a)

The wireframe of the mineralisation envelope was used to generate a 3D Mineral Resource block model for Zandkopsdrift. The following assumptions and parameters were used in the model:-

Datamine™ origin for the model is: Easting (X) 782 500 and Northing (Y): 6 580 500;

coordinates are in World Geodetic System (WGS) WGS84, Universal Transverse Mercantor (UTM) UTM Zone 33 South;

block size: 50m (easting) x 50m (northing) and exact wireframe boundary fitting for Z height;

sub-celling of the blocks was used in the east-west and north-south directions, creating 6.25m x 6.25m sub-blocks, to allow for limited volume/tonnage selectivity;

the average separation of boreholes was approximately 40m;

the model was truncated at depth by a wireframe surface representing the base of the boreholes plus half the TREO variographic range in the Z direction, approximately 16m below the borehole depth; and

a Central Zone with a cut-off grade of 2.0% TREO was identified in the Mineral Resource block model; this zone is of sufficient size to be exploited as a discrete unit and forms the basis for the initial 20 year LoM in the PEA. The in situ grade of the Central Zone within the mine plan is 3.12%TREO excluding mining dilution.



FIGURE 14



MINERAL RESOURCE BLOCK MODELS FOR ZANDKOPSDRIFT AT CUT-OFF GRADES OF 1% AND 2.0%

Source: MSA 2011

MINERAL RESOURCE BLOCK MODEL AT A CUT-OFF GRADE OF 1% TREO (VIEW FROM BELOW LOOKING SOUTHWEST)

>5.0

4.5 - 5.0

4.0 - 4.5

3.5 - 4.0

3.0 - 3.5

2.5 - 3.0

2.0 - 2.5

1.5 - 2.0

1.0 - 1.5

0.5 - 1.0

TREO %

MINERAL RESOURCE BLOCK MODEL AT A CUT-OFF GRADE OF 2.0% TREO (VIEW FROM BELOW)

>5.0

4.5 - 5.0

4.0 - 4.5

3.5 - 4.0

3.0 - 3.5

2.5 - 3.0

2.0 - 2.5

1.5 - 2.0

1.0 - 1.5

0.5 - 1.0

TREO %PLAN VIEW OF SEPTEMBER 2011BLOCK MODEL

Scale0 200m

PLAN VIEW OF SEPTEMBER 2011BLOCK MODEL

Scale0 200m


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13.6 Estimation Methodology, Validation and Bias (NI 14a)

The Zandkopsdrift mineralised envelope was modelled for TREO grade only, using Ordinary Kriging. A minimum of three and a maximum of five samples, were utilised for an estimate. No restriction was placed on the minimum number of boreholes used for an estimate. Sub-cell estimation was undertaken where appropriate. Comparison of the average grades of the input data relative to the average estimated block grades of the block model indicates that the block model grades are appropriately estimated, with acceptable local variability and/or smoothing and are conservative relative to the borehole data (generally an average of 7.2% lower than the borehole data).

13.7 Distribution of Individual REOs

The relative abundance of the REEs and their REOs in the mineralisation envelope at Zandkopsdrift is summarised in Table 13 and demonstrates the overall characterisation of the deposit as a light REE enriched occurrence. However, the highest value heavy rare earth oxide in current price terms, namely europium, terbium and dysprosium, are present in the Zandkopsdrift carbonatite at elevated levels compared to a number of similar REE-bearing carbonatite deposits globally and this has significance with regards to the potential economic viability of the Project.

Table 13 : Relative Abundance of the REEs at Zandkopsdrift

RARE EARTH ELEMENT (REE)

RARE EARTH OXIDE (REO)

PROPORTION (as percentage %)

Lanthanum La2O3 25.37Cerium Ce2O3 44.06Praseodymium Pr2O3 4.62Neodymium Nd2O3 15.88Samarium Sm2O3 2.27Europium Eu2O3 0.59Gadolinium Gd2O3 1.42Terbium Tb2O3 0.17Dysprosium Dy2O3 0.78Holmium Ho2O3 0.13Erbium Er2O3 0.32Thulium Tm2O3 0.04Ytterbium Yb2O3 0.22Lutetium Lu2O3 0.03Yttrium Y2O3 4.12TOTAL 100.00

Source : MSA 2011

13.8 Mineral Resource Classification (NI 14a)

The Mineral Resources are classified according to the guidelines and requirements of the Canadian National Instrument 43-101 code. The classification of the Mineral Resources reflects the prospects for eventual economic extraction and is based on the degree of confidence in the informing data. The Mineral Resource estimation of the Zandkopsdrift mineralised envelope has been specifically based on TREO grade only, as the geological controls have not yet been finally determined following the Phase 1 RC and historical drilling results. The understanding of the geological controls will be improved with the results of the diamond drilling programme completed in late 2011, but in the interim, the PEA Mineral Resource estimate is based on the TREO grade model. This basis for the estimate is appropriate in that only the upper, altered material is to be exploited in a simple open pit mining operation which is not anticipated to require detailed lithological and geological control. In this context, the following factors were taken into consideration in the classification of the 2011 Zandkopsdrift Mineral Resources:-

the informing drilling programme was conducted on a 40m x 40m grid with sufficient confidence in grade continuity for an Indicated Mineral Resource classification in many Mineral Resource blocks;

good vertical grade continuity of blocks with >3.5% TREO in the north (up to 60m vertical continuity) and eastern section (80m vertical continuity from surface);

complicated wireframe truncations on the data in some areas;

some areas have low drilling density especially in the east; and

uneven drillhole spacing from twinned holes.


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The 2011 Zandkopsdrift Mineral Resources were classified according to the above criteria into Inferred and Indicated categories within the total Mineral Resource at a cut-off grade of 1.0% TREO, as well as a Central Zone with a cut-off grade of 2.0% TREO (average in situ grade of 3.12% TREO within the mine plan area excluding dilution). The cut-off grade of 1.0% TREO was calculated on:-

a TREO basket price of USD58.23/kg;

an overall metallurgical recovery of 67%;

a ZAR:USD exchange rate of 7.80; and

a total operating cost of USD290.65/t RoM.

The calculation using the above parameters results in a cut-off grade of 0.74% TREO. Frontier selected a more conservative cut-off grade of 1.0% to accommodate potential currency, interest rate and REE price fluctuations and to be in keeping with the PEA design criteria and cost estimates, which have been made to an accuracy level of 30% or better. The 2011 Mineral Resource block model for the total Mineral Resource at a cut-off grade of 1.0% TREO and the Central Zone at a cut-off grade of 2.0% TREO (average grade of 3.12% TREO) are presented in Figure 14. The Mineral Resources estimated at 1.0% and 2.0% TREO cut-off grades are shown for comparison in Table 14. No geological losses were applied and the estimate is therefore an in situ estimate.

Table 14 : Zandkopsdrift NI 43-101 Compliant Mineral Resources at Various Cut-off Grades (Dec 2011)


TONNAGE (Mt)

GRADE TREO (%)

CONTAINED TREO (t)



Source: MSA 2011 Mineral Resources reported inclusive of Mineral Reserves (no Mineral Reserves are reported for Zandkopsdrift in the PEA) Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability In situ estimation with no geological losses estimated Frontier effective interest 95% attributable If the relative REE distributions shown in Table 13, are assigned to the Mineral Resource data, the resultant indicative individual REO contents can be calculated for the total Mineral Resource at a cut-off grade of 1.0% TREO, as shown in Table 15:-

Table 15 : Contributions of the Individual REOs to the Mineral Resource Estimate

INDICATED MINERAL RESOURCES

INFERRED MINERAL RESOURCES

Oxide Tonnes (000’s) Oxide Tonnes (000’s) La2O3 187.45 La2O3 53.38 Ce2O3 325.52 Ce2O3 92.70 Pr2O3 34.15 Pr2O3 9.72 Nd2O3 117.31 Nd2O3 33.41 Sm2O3 16.76 Sm2O3 4.77 Eu2O3 4.36 Eu2O3 1.24 Gd2O3 10.46 Gd2O3 2.98 Tb2O3 1.22 Tb2O3 0.35 Dy2O3 5.73 Dy2O3 1.63 Ho2O3 0.96 Ho2O3 0.27 Er2O3 2.35 Er2O3 0.67 Tm2O3 0.29 Tm2O3 0.08 Yb2O3 1.63 Yb2O3 0.46 Lu2O3 0.22 Lu2O3 0.06 Y2O3 30.47 Y2O3 8.68

TOTAL 738.88 TOTAL 210.42 Source: MSA 2011 Mineral Resources reported inclusive of Mineral Reserves (no Mineral Reserves have been reported for Zandkopsdrift Project) Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability In situ estimation with no geological losses estimated TREO cut-off grade 1.0% TREO Frontier effective interest 95% attributable


46

13.9 Uranium and Thorium

Uranium and thorium are both present in the Zandkopsdrift carbonatite deposit, at relatively low concentrations compared to many other carbonatite REE deposits being developed worldwide. The average grades within the Mineral Resource area range between 60ppm to 70ppm U and 215ppm to 235ppm, Th.

13.10 Mineral Resource Checklist

The CIM ‘Best Practise Guidelines for the Estimation of Mineral Resources and Mineral Reserves’ compliance checklist is presented in Table 16:-

Table 16 : CIM Mineral Resources Reporting Compliance Checklist

CIM 2011 MINERAL RESOURCE REPORTING CHECKLIST Drilling techniques Reverse circulation and PQ3 diameter diamond boreholes for metallurgical sampling

Logging All boreholes were geologically logged by qualified geologists. The logging was of an appropriate standard for grade estimation.

Drill sample recovery Recoveries are documented in borehole logs for the majority of the boreholes and are greater than 90% within mineralised zones.

Sampling methods

Percussion drilling chips and metallurgical core samples were collected with an average sample length of 1m. MSA’s observations indicated that the routine sampling methods were of a high standard and suitable for evaluation purposes.

Quality of assay data and laboratory tests

The Zandkopsdrift assay database displays industry standard levels of precision and accuracy and meets the requirements for use in a Mineral Resource estimate. Appendix 4 contains summaries of QA/QC data

Verification of sampling and assaying

Internal data verification is carried out as a standard. An external verification of approximately 10% of the Zandkopsdrift data from borehole collar positions to assay QA/QC was carried out by MSA.

Location of data points All of the borehole collars have been surveyed by a qualified surveyor using a differential GPS. All 61 of the 2011RC boreholes were downhole-surveyed.

Tonnage factors (in situ bulk densities)

Density determinations were made for borehole samples using downhole gamma logging methods. An average bulk density of 2.06 was assigned based on 187 determinations at an accredited laboratory.

Data density and distribution Reverse circulation boreholes were collared on a grid of approximately 40 m by 40 m grid. The level of data density, on this pattern is considered sufficient to assume grade continuity for an Indicated Mineral Resource estimate for this type of mineralisation.

Database integrity Data were stored in an acceptable, relational database. MSA has checked the integrity of the database and considers that the database is an accurate representation of the original data collected.

Dimensions

The Mineral Resource occurs over a length of 920 m north to south and 700 m east to west. Mineralisation varies in thickness between 70m and 200m. No dip is determinable and the mineralisation is considered to be disseminated to undulating. The Mineral Resource occurs from surface and has been constrained by a modelled surface representing an extent of 16 m below borehole depths.

Geological interpretation The currently geological model is an analogy of that at Mount Weld and is considered adequate for the current level of reporting.

Domains The deposit has not been sub-divided into zones;

Compositing Boreholes were retained at the 1 m length intervals as sampled and as appearing in the database.

Statistics and variography Anisotropic variograms were used to model the spatial continuity.

Data top cuts for grades Top cut analysis was completed that indicated that top cutting was not appropriate. No grade caps were applied

Data clustering Boreholes were drilled on an approximately regular grid in the western part of the deposit but inconsistent depth of drilling has led to distributional grade anomalies.

Block size 50 m N by 50 m E by 1 m three dimensional block models.

Grade estimation Metal grades were estimated using ordinary kriging. Grades were interpolated within a search ellipse representing the ranges of the anisotropic variograms.

Resource Classification

The classification incorporated the confidence in the borehole data, the current geological interpretation, data distribution, and variogram ranges. Blocks informed within the first search radius and within the wireframe were classified as Indicated Resources. Blocks informed by the second search radius were classified as Inferred Mineral Resources.

Cut-off grades A cut-off grade of 1.0% has been selected for the purposes of total Mineral Resource estimation.

Mining Cuts No mining cuts have been applied.

Metallurgical factors or assumptions Preliminary metallurgical results were considered in choosing the reporting cut-off grades and an overall metallurgical recovery of 67% was applied.

Audits and reviews

The following audit and review work was completed by MSA: a review of the database against the original borehole logs a review of borehole data collection protocols and QA/QC systems a site based review of the borehole data. QA/QC audits by Dr B Clarke of MSA

Source : MSA 2011


47

14 MINERAL RESERVE ESTIMATES (NI 15)

The Mineral Resource estimate has not been converted to Mineral Reserves for the purposes of the PEA. The conversion will be an integral facet of the PFS planned for the next phase of the Project and will be incorporated in the ITR to be reported on the planned PFS results.

15 MINING METHODS (NI 16)

Frontier commissioned SMS to undertake a mine design and costing assessment for the Zandkopsdrift PEA and the results of the study were reported in a document entitled “Zandkopsdrift Rare Earth Element Project Mining Study, Preliminary Economic Assessment” (SMS/042/11 November 2011). The study included:-

mine geotechnical evaluation;

development of mine design criteria;

selection of a suitable mining methodology;

optimised pit design;

mining equipment selection and costing;

design of surface engineering and infrastructure to support the mine design;

mine production scheduling and the estimation of total scheduled mine material;

mining capital cost estimation (“capex”);

estimation of the mining operating costs (“opex”); and

an assessment of the mining risk.

The 2011 Mineral Resource estimate at a cut-off grade of 1.0% TREO formed the basis of the mine design. For the purposes of the PEA mining study, a Central Zone within the 1.0% TREO Mineral Resource was selected which consists of the mineralisation above a cut-off grade of 2.0% TREO In utilising the Mineral Resource block model for the pit design, SMS reduced the Mineral Resource block sizes from 50m x 50m to 25m x 25m in order to better delineate the >2.0% TREO grade Central Zone. All modification parameters remained the same as the MSA 2011 Mineral Resource block model with search radii of 57m, 33m, 27m; search rotations of 110°,105°, 90° on the ZXZ axis, and using a minimum of three samples per borehole. The changes to the block cell size, results in a non-material, 0.27% decrease in tonnage compared to the MSA Mineral Resource estimate (Table 14). In order to create a practical pit design it was necessary to include some Outer Zone material (1.0% to 2.0% TREO) and Low Grade Zone material (<1.0% TREO) surrounding the Central Zone. Any Outer Zone material that is required to be mined in order to access the Central Zone material is stockpiled at the Process Plant as future potential plant feed, and any Low Grade Zone material that is mined is stockpiled close to the open pit as waste. Grade tonnage curves are presented in Figure 15 and for the purposes of the mine design, the material that was selected to be mined for processing at the Concentrator Plant was all material above a cut-off grade of 2.0% TREO. 15.1 Geotechnical Engineering and Resultant Design Criteria (NI 15a to 15d)

A geotechnical study was conducted by SMS in order to identify any geotechnical fatal flaws and provide early guidance on selection of mine design criteria. The geotechnical study included the geotechnical logging of six diamond drillholes and the excavation and logging of six trial pits for soil classification for the TDF site options, plant and office sites. The physical properties in the geotechnical logging exercise were recorded according to the Barton Q System (1990), the Bieniawski (1989), Rock Mass Rating (“RMR”) and the Laubscher Mining Rock Mass Rating (“MRMR”) (1990) for the following lithologies:-



FIGURE 15



GRADE TONNAGE CURVES FOR THE ZANDKOPSDRIFT MINE

Source: SMS 2011

GRADE TONNAGE CURVE - INDICATED RESOURCES 2011 BLOCK MODEL

GRADE TONNAGE CURVE - INFERRED RESOURCES 2011 BLOCK MODEL

4.0

3.5

3.0

2.5

2.0

1.5

1.0

0.5

0.0

20

18

16

14

12

10

8

6

4

2

0

18.0

10.1

6.8

4.5

2.8

1.51.0

2.08

2.48

2.85

3.20

3.58

3.74

1.49

TREO % CUT-OFF

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.5

4.0

3.5

3.0

2.5

2.0

1.5

1.0

0.5

0.0

Millio

n T

on

nes

TR

EO

%

TREO % CUT-OFF

TR

EO

%

Millio

n T

on

nes

39.3

32.3

23.8

16.0

10.6

7.4

4.5

40

45

35

30

25

20

15

10

5

0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

2.28

2.65

3.09

3.52

3.87

4.27

2.01


49

Table 17 : Geotechnical Core Logging Results and Preliminary Slope Design Recommendations

LITHOLOGY ROCK MASS RATING FACE ANGLE (⁰) CATCH BERM WIDTH

(m) Competent fragmental carbonatite 61 – 68 90 4.8 Decomposed and altered carbonatite 20 – 35 60 4.0 Manganese cap 47 – 49 Silcrete lenses 60Gneiss country rock (estimated) 58 – 65 58 – 65 4.0

Source : SMS 2011 The geotechnical study resulted in the proposal that mining should progress from surface, from the southwest towards limonitic Fe-Mn saprolite, at bench heights restricted to a maximum height of 6m. The mining area within the mineralisation will be continuous to a depth of at least 70m to 90m below surface. The positive topography of a portion of the deposit means that portions of the mineralisation will be mined before it will be necessary to establish a ramp on the footwall. The footwall pit slope and ramp will be constructed in gneissic bedrock, within which a single haul road ramp is envisaged along the footwall slope. The preliminary slope design criteria are presented in Table 17 and will be continually reviewed as the geological and geo-technical database is expanded and the geological interpretations are revised. The presence of large weathered zones of carbonatite within the fresh carbonatite will require further investigation into the impact on slope stability. The current data suggests that the open pit will extend below the regional water table at 25m to 45m below surface and a geo-hydrological assessment will be undertaken in the planned PFS to accurately define the flow parameters. The PFS slope design will be adjusted accordingly. The mineralised material consists of the decomposed and altered carbonatite and is typically expected to be free dig material with a 30t excavator. Further geotechnical testwork and trial excavation work will confirm the exact excavation characteristics of the different lithologies. Blasting will be required to remove the competent carbonatite and gneiss country rock. Ripping and special blasting will be required to remove the limonitic Fe-Mn saprolite and silcrete lenses. The weathered soil profile is generally very shallow namely, less than 0.3m. The weathered gneiss is suitable for use as fill but volumes are limited. In order to limit the environmental impact, the aeolian sand and weathered gneiss can be removed from the tailings dam area and used for construction aggregate.

15.2 Mine Design, Mining Methodology and Pit Optimisation (NI 16b, 16d)

The mine design for the Zandkopsdrift carbonatite consists of a conventional open pit layout with a single entry access ramp. The carbonatite is highly weathered and consequently excavation will consist of a mix of free digging, ripping and conventional drill and blasting methods. Mining will consist of excavator loading of RoM ore and waste on Articulated Dump Trucks (“ADT”) and haulage via the planned access ramp to the Process Plant. An auxiliary fleet of dozers, graders, bowsers, water carts and utility vehicles will support the mining operation. Various alternative plant feed and waste transport systems, including conveyor belts, were considered but not pursued due to the relatively low production levels planned over the life of mine (“LoM”) and the short haulage distances to the plant feed stockpiles and waste dumps. Possible underground extensions of the mine design were not included in the study. The mineralisation is classified into the following categories for the mine design purposes (see Table 18):-

a Central Zone, which consists of material with in situ TREO contents of >2.0% TREO, and which will form the RoM feed to the Process Plant;

an Outer Zone, which consists of material with TREO contents ranging between 1.0% TREO and 2.0% TREO. Some of the Outer Zone material will be mined to provide access to the Central Zone material and will be stockpiled close to the Process Plant. For the purposes of the PEA, the Outer Zone material is not treated, but could represent possible RoM plant feed for consideration in the PFS; and

a Low Grade Zone, which consists of material with TREO contents of <1.0% TREO, and which will be considered as waste for purposes of the PEA;


50

The waste material produced at the Zandkopsdrift Mine has been categorised into various types including barren country rock, weathered and fresh carbonatite with sub-economic grades (<1.0% TREO) and topsoil. Each of the waste categories is specifically stockpiled and the stripping ratio calculations include not just these waste categories, but also the Outer Zone and Low Grade Zone material. The specific gravities of the various mined materials are presented in Table 18:-

Table 18 : Lithologies Mined at Zandkopsdrift

EXPLOITED LITHOLOGY/OVERBURDEN TREO (%) SPECIFIC GRAVITY Weathered Central Zone material >2.0 2.06 Weathered Outer Zone material <2.0 and >1.0 2.06 Weathered Low Grade material <1.0 2.60 Fresh Carbonatite* <1.0 2.60Waste Country Rock 2.60Overburden 1.80

Source : SMS 2011 *No fresh carbonatite material is assumed to be processed through the plant for the PEA LoM The PEA mine design focussed only on developing the Central Zone material zone (>2.0% TREO cut-off grade) Mineral Resource and in situations where the Outer Zone material (1.0% to 2.0% TREO) must be removed to access the >2.0% Central Zone material, the Outer Zone material will be stockpiled as future feed to the Process Plant. Net Present Value (“NPV”) Scheduler software utilising the Lerchs-Grossman algorithm, was used to optimise the ultimate pit shape and define the mining limits given the specific orebody constraints. The parameters applied to the Mineral Resource block model to generate the optimised pit are presented in Table 19:-

Table 19 : Economic and Technical Parameters used in the Pit Optimisation

ITEM UNIT VALUE Mining Recovery % 95.00 Mining Dilution % 5.00 Revenue assumption for each mining block (assuming production of separated REOs to a purity of 99% or greater)

R/kg 457.50

Mining cost R/t 22.50 Global Density Assumption t/m3 2.06 Processing Plant opex R/t 1,423.10 Plant Recovery % 67.00 Mining Rate Mtpa 1.00 Annual discount rate* % 10.00 Exchange rate* ZAR/USD 7.50

Source : SMS 2011 *the exchange rate of ZAR7.50/USD and discount rate of 10% used for the mine design as compared to the overall

exchange rate of 7.80 and discount rate of 11% used for the PEA, is not considered to materially affect the final optimised pit shell

The proposed Zandkopsdrift pit is illustrated in Figure 16 and the dimensions of the designed pit are 900m north to south and on average 830m from west to east. Pit access is planned from the northwest of the orebody on the same side of the deposit as the Process Plant (Figure 19). Twelve benches have been planned from a level of 176mamsl to 104mamsl, approximately 72m below surface, with sub-pits removing pockets of deeper material up to three benches below this level. The summary of the pit optimisation is presented in Table 20:-

Table 20 : Summary of Results of the Pit Optimisation

MATERIAL TYPE AND TREO GRADE (%) SPECIFIC GRAVITY

VOLUME (Mm3)

TONNES (Mt)

GRADE (% TREO)

CONTAINED TREO (‘000t)

Waste 2.60 9.30 24.30 0.00 0.00 Low Grade Zone material (TREO between 0% and 1.0%)

2.60 5.70 14.80 0.63 93.60

Outer Zone material (TREO between 1.0% and 2.0%) 2.06

9.10 18.70 1.40 260.70

Central Zone material (TREO greater than 2.0%) 2.06

9.50 19.50 2.89 563.00

TOTAL 33.60 77.30 917.30 Source : SMS 2011 Excludes dilution



FIGURE 16



ZANDKOPSDRIFT OPTIMISED PIT SHELL

Source: 2011SMS

SLOPE DESIGN CRITERIA - 2 BENCH STACK

Face angle

AverageSlope angle

Catch Berm Bench

heig

ht

ZANDKOPSDRIFT PIT WEST-EAST SECTION (B-B)

ZANDKOPSDRIFT PIT NORTH-SOUTH SECTION (A-A)

ZANDKOPSDRIFT - PLAN VIEW OF OPTIMISED PIT (LOOKING NORTH)

900m

A

A

B

B

OPTIMISED PIT OUTLINE

OPTIMISED PIT OUTLINE

TOPOGRAPHIC SURFACE

TOPOGRAPHIC SURFACE900m

830m

90m

90m



FIGURE 17



LIFE OF MINE TONNAGE SCHEDULE AND WASTE-PLANT FEED PROFILE

Source: 2011SMS

ZANDKOPSDRIFT WASTE-TO-PLANT FEED RATIO CHANGE OVER LOM

ZANDKOPSDRIFT TONNAGE SCHEDULE

5,000,000

4,500,000

4,000,000

3,500,000

3,000,000

2,500,000

2,000,000

1,500,000

1,000,000

500,000

0

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

25,000

20,000

15,000

10,000

0

CALENDAR YEARS

FIN

AL

TR

EO

SA

LE

S P

ER

AN

NU

M (

t)

OR

E T

ON

NE

S P

ER

AN

NU

M (

tpa

)

5.00

4.50

4.00

3.50

3.00

2.50

2.00

1.50

1.00

0.50

0.00

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

CALENDAR YEARS

WA

ST

E-T

O-O

RE

RA

TIO

(t:

t)

PERIOD 1Surface mining

and establishmentof the ramp

PERIOD 2Extension

of the rampat depth

PERIOD 3Completion of

the ramp and miningat depth with in-pit ramps

Waste Tonnes (all tonnes below 2% TREO) Plant Feed TREO Production

Waste-to-Plant Feed Ratio


53

15.3 Production Rates and Mine Schedule (NI 16b, 16d)

The pit optimisation has defined a LoM of 20 years based on the exploitation of the Central Zone material and the LoM could be extended by the inclusion of the Outer Zone material into the mining schedule. The mining schedule has been guided by the following design criteria:-

an output of 20,000tpa of SREOs after an overall metallurgical recovery of 67%;

the recovery of the 20,000tpa SREO from processing of material from the Central Zone only;

Outer Zone material to be stockpiled separately or left in situ for potential future processing;

steady state mining conditions achieved in Year 2;

an approximate steady state mining production rate of 1.0Mtpa of Central Zone material;

dilution at 5%; and

TREO mining losses of 7.5%.

A profile of the LoM mining schedule is presented in Figure 17 and illustrates that the target 20,000tpa of SREO is achieved throughout the LoM with an intentional production build-up from 80% in Year 1 to full steady state by Year 2. The waste to plant feed ratio changes throughout the LoM as illustrated in Figure 17. In the first five years, the mining is focused on the above ground level deposit with low waste tonnages and low overburden stripping ratios. As the mine matures, higher levels of waste must be mined to access the ore sub-surface and the waste to ore ratio increases as the mining sequence accesses the deeper material. Towards the end of the LoM, the amount of waste that is mined to access the ore decreases and the majority comes from lowering the access ramp the last few benches. The average waste to ore ratio over the LoM for the pit is 3.0(t/t), which includes removal and stockpiling of the Low Grade Zone material. The mining of the Zandkopsdrift carbonatite is planned to be undertaken with conventional open pit mining equipment and the various capital and operating costs for the mining are summarised in Section 21.

16 RECOVERY METHODS (NI 17)

The PEA process design for the Zandkopsdrift Project has been undertaken by SNC-Lavalin and independently reviewed by MDS Ltd (Table 1). The results are reported in a document entitled: “Zandkopsdrift Scoping Study Report” (SNC-Lavalin 2011) and an interim report entitled “Metallurgical Testwork Programme-Zandkopsdrift Rare Earth deposit, South Africa” (MDS September 2011). The process flow assessment was based on Frontier’s objective of producing 20,000tpa SREOs at the intended purities indicated in Table 21, which is to be confirmed by further testwork planned to be performed during 2012. The figures listed in Table 21 are conceptual and cannot be taken as guaranteed until confirmatory testwork has been completed.

Table 21 : Percentage Oxide Purity

REE OXIDE % PURITY Lanthanum 99.999 Cerium 99.000 Praseodymium 99.900 Neodymium 99.900 Samarium 99.000 Europium 99.990 Gadolinium 99.000 Terbium 99.990 Dysprosium 99.900 Yttrium 99.999

Two preliminary flow sheets for the Zandkopsdrift Concentrator Plant were demonstrated to be technically feasible for the purposes of a PEA by the SGS testwork as summarised below, where ‘cracking’ refers to the hydrometallurgical acid curing, baking and leaching, followed by extraction and precipitation of REE compounds:-

the ‘Flotation and Cracking’ option, which includes size reduction of the RoM material, after which the slimes fraction is removed prior to flotation of the remaining fraction. The slimes are reintroduced to the coarse rougher concentrate, before the concentrate undergoes acid cracking with concentrated (98%) sulphuric acid; and

the ‘Whole-Ore Cracking’ option, where, following size reduction of the RoM material, the material undergoes acid cracking with concentrated sulphuric acid with no prior flotation concentration of the REEs.


54

The ‘Flotation and Cracking’ route has the advantage of a lower total acid requirement to achieve the required TREO, with resultant logistic and environmental residue disposal benefits. The ‘Flotation and Cracking’ basic process flow block diagram and mass balance calculation is presented in Figure 18 and the anticipated overall REE extraction is 67%. The ‘Whole-Ore Cracking’ option has the advantage of greater potential REE overall extraction (approximately 88%) and a consequential lower annual RoM tonnage target to achieve the required 20,000tpa TREO. The selected process flow design for the PEA was chosen to incorporate a crushing, milling and flotation front end to satisfy the throughput requirements of the ‘Flotation and Cracking’ option, with a cracking section sized to handle the required throughput for the ‘Whole-Ore Cracking’ option, so that the process design remains sufficiently flexible for either process option to be ultimately adopted. 16.1 Concentrator Plant (NI 17a, 17b)

The Concentrator Plant will be situated in close proximity (<1.5km) to the opencast pit and within less than 2km pumping distance of the TDF. The Concentrator Plant will comprise the following major components namely, crushing, scrubbing, milling, flotation, thickening, filtration and tailings disposal, as described in detail below and illustrated in Figure 18:-.

RoM material from the pit is transported by ADTs to various stockpiles depending on the grade;

RoM material is reclaimed from the stockpiles and blended into the crusher feed bin at a rate of 1.0Mtpa, via a grizzly to remove any oversize material and thereafter passes through a screening circuit to remove the fines. The oversize is returned to the crusher;

the primary crusher product is combined with the primary screen undersize and scrubbed/washed prior to secondary screening. The coarse secondary screen fraction is crushed in the secondary cone crusher and the undersize is combined with the secondary crusher product and dumped on an intermediate stockpile;

crushed material is extracted from the stockpile and fed to the milling circuit. The mill discharge is pumped to a classifying cyclone and the underflow from the classifying cyclone is returned to the mill. The overflow from the classifying cyclone is pumped to the conditioning tanks where dispersants are added before the slimes fraction is removed;

the slimes fraction is pumped to the rougher concentrate thickener where it is combined with the rougher concentrate before sulphuric acid cracking of the mixture. The underflow from the concentrate thickener is filtered prior to the cracking process to reduce the amount of water reporting to the acid contacting and subsequent baking sections;

the deslime cyclone underflow is directed to the flotation conditioning tanks, where the pulp is thermally and pH conditioned and the required reagent suite added prior to being pumped to the rougher scavenger flotation cells. The feed to the flotation section is estimated at 728,900tpa;

the flotation section concentrate is mixed with slimes from the desliming cyclone, in the concentrate thickener;

tailings from the scavenger flotation cells are thickened and the thickener underflow is pumped to the TDF, with an off take to the Th, U, Fe removal section;

the TDF is located close to the Process Plant. The overflows from both the rougher concentrate and tailings thickeners are returned to the process water tank for re-use; and

the design of the TDF is based on the receipt of two different tailings streams, one of which is contaminated with thorium, uranium and high levels of salts and metals, referred to as the contaminated tailings, that will be deposited in the lined section of the TDF, and the other, consisting of uncontaminated tailings, which will deposited in the un-lined section of the TDF.

16.2 Acid Cracking Section (NI 17a, 17b)

The Acid Cracking Section of the Process Plant will be supplied with concentrated 98% sulphuric acid from an onsite sulphur burning, Sulphuric Acid Production Plant located northwest of the Process Plant. Feed to the cracking section is based on the ‘Whole-Ore Cracking’ option and is estimated at 658,000tpa. The major components of the Acid Cracking Section include the following units; roasting, leaching, thorium, uranium and iron precipitation, REE carbonate precipitation, centrifugation and drying of the RE carbonate, as summarised below:-



FIGURE 18



‘FLOTATION AND CRACKING’ PROCESS FLOW DESIGN

ROM from Stockpiles

Primary crushing

Secondary crushing Screening

Cyclone classification Milling

Conditioning

Deslime classification Slimes thickening Slimes

Conditioning Process water

Rougher Scav Flotation Tails thickening Tails disposal

Mixing

Thickening

Filtration Process water

Conc Sulphuric soak

Thermal Cracking

Water leach

CCD / Filtration Residue disposal

Th, U, Fe removal/neutralisation

CCD / Filtration Residue disposal

Bulk REO precipitation

Filtration Process water

Transport to Separation Plant

SE

PA

RA

TIO

N P

LA

NT

(S

AL

DA

NH

A)

Multiple Solvent extraction

Stripping

Effluent ponds

Precipitation

Filtration

Centrifuging

Product drying

Reagents

H SO42

Process water

Reagents

H O2

AC

ID C

RA

CK

ING

PL

AN

T (

ZA

ND

KO

PS

DR

IFT

)C

ON

CE

NT

RA

TO

R (

ZA

ND

KO

PS

DR

IFT

)


HCl Redissolution

Products

Process components which, once removed from the ‘Flotation and Cracking’ process flow, create a ‘Whole Ore Cracking’ process flow.

HCl

STAGETONNES

(dtpa)

TREO

GRADE

(%)

TREO

(tpa)

MASS

PULL

(%)

REE

(%)

MASS

(%)

ROM from Stockpiles 985,000 3.04 29,944

Mill Feed 985,000 3.04 29,944

Slimes separation 256,100 4.68 11,978 40 26

REE concentrate 291,560 3.07 10,780 40 60

Tailings disposal 437,340 1.64 7,187

Rougher Concentrate plus slimes 547,660 4.16 22,757

Leach Residue 527,178 0.43 2,276

Solid

(tpa)

REE

(tpa)

REE carbonate to Saldanha 30,747 20,482 90

REE HCl Leach 20,482 99

REE SX 20,277 99

Final Products 20,074 100

Overall Recovery 67.04

Carbonate to Saldanha Bay Separation Plant

RECOVERY RECOVERY


56

concentrated (98%) sulphuric acid is mixed with the filtered flotation rougher concentrate (plus reintroduced slimes fraction) in high shear reactors which are continually agitated. The acidified concentrate that results from this curing is baked in a rotary kiln at >140ºC to decompose the dominant rare earth mineral, monazite, as well as other REE minerals present;

the ground, roasted concentrate is then water leached and processed through a counter current decantation (“CCD”) plant. The final CCD thickener underflow is pumped to centrifuges where the solution is optimally recovered and the residues washed and removed;

the REE enriched solution is pumped to a clarified solution tank and the washed centrifuged residue is re-pulped with process water and disposed of to the TDF;

the CCD thickener overflow is pumped to the clarified solution tank ahead of the thorium, uranium and iron removal section;

leached radioactive elements will be selectively removed on-site by neutralising the leach solution with a portion of the flotation tailings, which will result in the co-precipitation of iron, thorium and uranium. Site allocation has been made for the possible future introduction of a uranium removal circuit by solvent extraction;

the low pH clarified solution from the leach stage will be pumped to an agitated gravity train of tanks, where the pH will be increased by the addition of flotation tailings. The pH will progressively be increased through the train to a final pH of 3.8, in order to precipitate the thorium and uranium, and finally the iron;

the resultant slurry of flotation tailings plus thorium, uranium and iron precipitates are gravitated to a thickener and the thickener underflow is fed to centrifuges where the solids are washed before disposal to the TDF;

the REE enriched aqueous solution is pumped to a bulk precipitation tank in which a stoichiometric excess of Na2CO3 results in the precipitation of the REE as carbonates;

the precipitation slurry is pumped to a centrifuge where the REE carbonates are separated and washed prior to being dried. The resultant crystalline product is transferred to a hopper from where it is fed to bulk bags for dispatch;

the solutions and washings from the carbonate centrifuge will be treated to remove the Na2SO4 prior to the water being returned to the process circuit; and

the dry REE carbonates are transported by road to the Saldanha Separation Plant for further separation and individual REE recovery.

16.3 Saldanha Separation Plant

The MREC produced from the Acid Cracking Section of the Process Plant is to be trucked by road to the Saldanha Separation Plant (Figure 1 and Figure 3). The REE carbonates will undergo multi stream solvent extraction and stripping processes to separate the currently saleable REEs. The final product is achieved by filtration, centrifuging and calcining to produce REE oxides to an anticipated purity of between 99.0% and 99.999% (Table 21). The five ‘heavy’ REEs namely holmium, erbium, thulium, ytterbium and lutetium for which demand is limited and recovery therefore presently unwarranted, will be co-precipitated as a mixed REE product and stockpiled for potential future processing or sale. No revenue has been assumed from these five REEs for the purposes of the PEA. 16.3.1 Leaching

The rare earth carbonates from the Process Plant are dissolved in HCl into an aqueous solution. Most contaminants will have been removed at the Zandkopsdrift Mine and no solid residues, radioactive material or impurities are expected to be generated during the HCl leaching. The resultant solution contains REE chlorides, which will be pumped to the solvent extraction circuit, where it will undergo a complex multi-stage solvent extraction and stripping process.

16.3.2 Solvent Extraction

The leaching process is based on two solvent extraction modules, each with a capacity of 10,000tpa, to achieve the overall intended capacity of 20,000tpa REO product. Each solvent extraction module is divided into 14 solvent extraction circuits to separate the mixed REE chloride bearing solution into the desired products. Each circuit consists of four process steps, namely; loading, extraction, washing and stripping and the number of stages for each step for each of the extraction circuits varies according to the feed composition and required product purities.


57

Sodium hydroxide is used to prepare the solvent to load the rare earth elements. A mixture of 50% P507 in a kerosene diluent is used as the extraction reagent for most separations, while 50% naphthenic acid in a kerosene diluent is used for yttrium extraction. Hydrochloric acid is used to strip the REEs from the organic phase. De-ionized water is added in the washing and stripping stages to dilute and adjust the reagent concentration.

16.3.3 Precipitation

The leach solutions obtained from the leaching process are purified and pumped to dedicated precipitation circuits. The individual precipitation stages are operated in a batch processing mode in order to permit control of particle size. Three batch precipitation tanks provide a continuous feed to each product dryer/calciner with one tank filling with fresh solution, the second in precipitation mode, and the third emptying the precipitated slurry to the drying/calcining stage. Sodium carbonate (Na2CO3) is used to precipitate lanthanum, cerium, praseodymium and neodymium products, while oxalic acid (C2O4H2) is utilised for the other REEs.

16.3.4 Filtration and Dewatering

The separated rare earth precipitates are pumped to filters where they are dewatered prior to discharge to dryers. The filtrate is sent to water treatment for purification. A designated set of filtration/dewatering units is included for each separated REE to avoid cross contamination.

16.3.5 Drying/Calcining and Packaging

Cerium will be dried and sold as carbonate after filtration and dewatering. Other saleable RE precipitates will be dried and calcined to produce pure rare earth oxides. Precipitates of five heavy REEs namely holmium, erbium, thulium, ytterbium and lutetium will be stored after dewatering for later disposal or potential sale. Each REE circuit is designed to have a designated set of drying/calcining units to avoid contamination. Rotary kiln type dryers are used to remove moisture contained in the rare earth precipitates, and rotary kiln type calciners are used to convert carbonates and oxalates into oxides for the market. After calcining or drying, the products will be cooled and transported to bins prior to feeding the packaging system. The rare earth products will be packaged and stored in a separate area as final products. Mixed precipitates of holmium, erbium, thulium, ytterbium and lutetium will be stored after thickening for future reprocessing or potential sales.

17 PROJECT INFRASTRUCTURE (NI 18)

17.1 Zandkopsdrift Mine Sulphuric Acid Production Plant

The Zandkopsdrift Acid Cracking Section will be supplied with 98% sulphuric acid from an onsite sulphur burning, Sulphuric Acid Production Plant. The cost estimate (to an intended accuracy of ±30%) for the Sulphuric Acid Production Plant for the PEA was undertaken by SNC-Lavalin (Table 1) and is summarised below:-

Steam and Boiler Feed Water Systems: the exothermic combustion of sulphur to produce sulphur dioxide, and reaction of sulphur dioxide and oxygen to produce sulphur trioxide, generates heat, which is converted to steam. The water to produce the high pressure steam is sourced from condensate and makeup water from a water treatment plant. The steam is used in the Sulphuric Acid Production Plant and the Process Plant with the excess used for power generation;

Sulphur Handling and Storage System: unpurified sulphur is fed by conveyor to a sulphur melter where hydrated lime is added to neutralise any acid present and thereafter the molten sulphur is cleaned via a pressure leaf filter and stored in a ‘clean sulphur’ storage tank. The clean molten sulphur is pumped to the sulphur burning furnace; and

Air and Gas System: atmospheric air is dried in a drying tower where concentrated sulphuric acid absorbs the moisture. The dry air enters the sulphur burning furnace where the oxygen component combines with the clean elemental sulphur and the resultant sulphur dioxide (11% SO2) content can be adjusted by varying the input ratios of air and sulphur. The heat generated is recovered in a fire tube type waste heat boiler and the heat recovery will reduce the temperature of the process gases to acceptable levels for further processing.

The SO2 is converted to SO3 in a multi-pass catalytic reactor and cooled SO3 is adsorbed in adsorption towers in a re-circulated flow of 98.5% H2SO4. Post the final absorption tower, the gas will pass through a layer of spray eliminator packing and candle type mist eliminators, prior to discharging to atmosphere via the process gas exit stack.


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Acid from the absorption towers will gravitate to the pump tank and strength control will be maintained by the addition of dilution water. Concentrated sulphuric acid at 98.5% will be taken as a side stream from the circulation acid cooler, and delivered to the product acid storage tank.

17.2 Zandkopsdrift Mine Infrastructure

Various surface engineering and infrastructure designs for the Zandkopsdrift Mine were undertaken by SNC-Lavalin (Table 1). The proposed Zandkopsdrift Mine and Process Plant site plans are presented in Figure 19 and Figure 20. Allowance has been made for five houses in the town of Garies for senior management. All other skilled and unskilled staff will be sourced from local towns where they will reside and be transported by bus from the major towns on a daily basis and consequently no provision has been made for on-site housing facilities. The Process Plant will operate on a three shift 24hr/day, 6 days per week, 48 weeks per year basis. The Sulphuric Acid Production Plant will operate on a continuous basis with planned annual maintenance shutdowns for three to four weeks. The mining and crushing operation will operate on a single shift basis, 12hr/day, 6 days per week, 48 weeks per year. The Zandkopsdrift Mine will be equipped with the following supporting infrastructure and services (Figure 19):-

administration/offices, medical station, training facility, change house, ablution facilities, and contractor site camp;

gate house, site security offices, access control and weigh bridge;

stores, reagent and fuel storage and final product storage;

workshops and wash bays;

compressed air generation;

water purification; and

explosives magazine.

17.3 Zandkopsdrift Project Power Requirements

The anticipated power supply requirement for to the various Zandkopsdrift Project components is summarised Table 22:-

Table 22 : Power Supply Requirements for the Zandkopsdrift Project

PROJECT COMPONENT MAXIMUM DEMAND

SOURCE COMMENT

Zandkopsdrift Mine and associated infrastructure

10MW (12.5MVA)

Supplied in total by power co-generation from on site Sulphuric Acid Production Plant

The power co-generation from the Sulphuric Acid Production Plant is expected to be 11.5MW (14.4MVA). Capex is included in the cost estimate for the Sulphuric Acid Production Plant

Desalination Plant west of Kotzesrus

1MW (1.5MVA) Supplied by diesel generators at the plant

No direct Eskom supply due to remote location from existing Eskom infrastructure

Booster pump station at Kotzesrus

0.4MW (0.4MVA) Supplied by diesel driven pumps

Pumping demineralised water from the Desalination Plant to the Zandkopsdrift Mine

Saldanha Separation Plant 5MW (6.25MVA) Supplied from Eskom’s Blouwater Bay Substation

Eskom tariff will be ZAR0.53/kWh (2011/2012).

TOTAL Power Requirement

16.4MW (20.7MVA)

The power supply options investigated for the PEA for the Zandkopsdrift Mine comprised a combination of independent power generating facilities on the mine with supply from the national provider, Eskom. Frontier has chosen independent power generation as the most favourable option for the Zandkopsdrift Mine, which will be adequately supplied with 11.5MW from a turbo-generator driven by steam produced from the Sulphuric Acid Production Plant (Table 22). The operational start up power requirements will be provided by diesel generators and it is assumed that electric power will be supplied to the mining operations at the contractor site camp at 11kV. The total power requirement for the mining operation will be approximately 141kW (SMS 2011).

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17.4 Zandkopsdrift Mine and Saldanha Separation Plant Water Requirements

A fatal flaw analysis and baseline groundwater study for the Zandkopsdrift Mine was undertaken by AGES and the results reported in a document entitled: “Zandkopsdrift Rare Earth Element Mine: Fatal Flaw Analysis and Water Baseline Study” (AS-R-2011-10-04, 2011). The regional groundwater in the Namaqualand region occurs in three main aquifer systems, namely fractured bedrock, regolith (weathered zone) and sandy/alluvial aquifers. The fractured bedrock and regolith aquifer systems are normally associated with Pan-African north-south brittle fracture systems which constitute the most important targets for groundwater resources. The shallow alluvial aquifers are formed in the sand-filled valleys of the non-perennial stream channels, such as at the Groen and Swartdoring Rivers. Two additional potential aquifers were identified during this assessment, namely; the deep fractured aquifers associated with regional fault zones that could be situated at depths of +200m and the palaeo deep river channels that could be up to 40m deep. Groundwater yields are generally very low within the Namaqualand Region, which is the case for the Zandkopsdrift Mine site, with yields ranging from 1.7l/s to 0.6l/s. The groundwater quality in the region is saline and unfit for human consumption because of high sodium, chlorine and fluorine concentrations. Groundwater inflow into the Zandkopsdrift open pit is expected below depths of 25m. The estimated inflow rate would be in the order of 5l/s. The make-up water requirements of the mine is 2,836m3/d (32.8l/s), which would be sourced mainly from the Desalination Plant that could be supplemented with groundwater supply from local and groundwater resources. The groundwater supplement, which would reduce the volume of seawater treated by 24%, is expected to be 700m3/d (8l/s) and will be quantified during a planned groundwater drilling campaign scheduled to commence in February 2012. The assurance of supply for mining water use should be at 98% (i.e. up to a 1:50 year drought). The net water surplus after mining requirements obtained from dewatering the open pit will be integrated into the total operational water requirements. Run-off water from each of the stockpiles and dump areas will be integrated into the overall mine water balance. Effluent treatment facilities will ensure that any water discharge will meet with the requirements of the Department of Water and Environmental Affairs (“DWA”) and associated environmental guidelines. The potential post-operational seepage of tailings material containing radionuclides into the groundwater was examined as part of a fatal flaw Radiological Impact Assessment report by Aquisim Consulting (2011). The results of the study indicate that effective dose tends to be limited to distances less than 1km away from the groundwater pathway sources. In the case of the Zandkopsdrift Mine, the implementation of a Radiation Management Programme to identify and manage any potential issues from run-off and seepage control from the TDF will be sufficient to mitigate the risk and reduce the impact of the radionuclides to negligible. The Saldanha Separation site occurs in a locality with two regional aquifers, namely Langebaan Road Aquifer System and the Elandsfontein Aquifer System. Groundwater yields in the area have been reported in previous studies to be low (0.1l/s – 4l/s) and groundwater recharge has been estimated at between 3.3% and 5.5% of mean annual precipitation (“MAP”). Groundwater flow is predominantly in the direction of the coast, i.e. west-southwest and due to a low gradient, groundwater flow rate through the aquifer systems is expected to be low. The water table levels on the Saldanha Separation Plant site are shallow, at approximately 4m depth. A water quality assessment shows that the groundwater is saline and not fit for human or livestock consumption. There are no groundwater users within a 5km radius of the Saldanha Port, and the nearest reported groundwater abstraction borehole is located approximately 6km north of the Port. No fatal flaws were identified with regards the groundwater study for the Saldanha Separation Plant site. The total 200,000m3pa water requirement for the Saldanha Separation Plant will be sourced from the local municipality.

17.5 Zandkopsdrift Mine Road Infrastructure

The Zandkopsdrift Mine will be accessed from the N7 national highway through the towns of Garies and Bitterfontein, utilising existing well maintained gravel roads. The main access road for the transportation of product to Saldanha Bay will be via Bitterfontein and Rietpoort (Figure 1). Similarly, the majority of equipment, materials and consumables will be transported from Cape Town to Bitterfontein and through the town of Rietpoort to the mine. The Desalination Plant, located on the coastline to the west of the mine, will be accessed through the town of Kotzesrus. Due to the significant increase in vehicular traffic through the towns of Rietpoort and Kotzesrus, the existing portions of the gravel roads passing through these towns will be upgraded to hard surfaced roads to eliminate dust generation from vehicles. In addition, heavy vehicle traffic through these towns will be prohibited between 22h00 and 06h00, to prevent excessive traffic noise.


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The mining area is linked by graded mining haul roads, which provide routes from the pit to the stockpile pads and waste dumps. A total of 4km of these connecting haul roads has been planned. Initial aggregate requirements for road construction will be supplied from on-site aggregate sources and from aggregate quality waste arising from the LoM production scheduling. Corli Havenga Transport Engineers Cc (Table 1) performed a fatal flaw review of the access routes to the Zandkopsdrift Mine, the results of which were presented in a document entitled: “Access Route Logistics Survey Zandkopsdrift Scoping Study” (29th July 2011) and summarised as follows:-

the road between Garies and the Zandkopsdrift Mine consists of two numbered provincial roads, P2938 and P2936 that are of reasonable standard but lack maintenance;

the expected traffic from the Zandkopsdrift Mine can be accommodated from a road transport point of view, but the sections of gravel road between Garies, the Zandkopsdrift Mine and Rietpoort, will require upgrading and regular maintenance, which must include the section of gravel road from Rietpoort to Bitterfontein;

a small risk of flooding from the Groenrivier over the P2938 exists, but an alternative route to the N7 can be utilised. In case of severe flooding of both the Groenrivier and the Swartdoring River, the N7 can be accessed through Bitterfontein;

quarterly grading of the gravel roads from Garies to the Zandkopsdrift Mine is proposed, with a monthly grading between the Zandkopsdrift Mine and Bitterfontein;

the road between the Zandkopsdrift Mine and Rietpoort crosses the provincial boundary and from a local government authority perspective, approximately 42km of the road are included in the Northern Cape Province and approximately 31km in the Western Cape Province;

the road network serving the proposed Saldanha Bay Separation Plant consists of well-established tarred roads, most of which are in a good condition; and

no road upgrades are required along the route from Bitterfontein to the Separation Plant turnoff at Saldanha.

17.6 Zandkopsdrift Mine TDF

The design and costing of the Zandkopsdrift Mine TDF for the PEA was undertaken by Epoch (2011, see Table 1) and reported in a document entitled: “Zandkopsdrift Rare Earth Project: Preliminary Economic Assessment – Design of Tailings Disposal Facility” (Report Number 000-149-01, Dec 2011). The TDF is designed for an expected LoM of 20 years and a total of 1.0Mt of dry tailings products per annum. The Zandkopsdrift Mine metallurgical extraction processes are complex and will result in the production of two tailings streams, one of which is contaminated with thorium, uranium, iron, high levels of salts and metals referred to as the contaminated tailings, and the other consisting of uncontaminated tailings. The uranium may be removed in future by solvent extraction as a separate by-product for sale, but initially will contribute to the contaminated tailings The ratio of contaminated to uncontaminated tailings products is unknown at this stage, so for the purposes of the PEA, it has been assumed that the tailings streams will be split 50:50. The nature of the tailings may be summarised as follows:-

the tailings particle size distribution is +80% passing 75µ. The tailings will be extremely fine and may not settle and consolidate easily and the material is expected to be clay rich;

a tailings particle density of 3.2 t/m3;

in situ dry density of 1.52 t/m3 based on average void ratio of 1.1; and

the contaminated tailings stream is expected to be pumped to the TDF at a slightly lower density than the uncontaminated tailings and is likely to contain dissolved solids which may not precipitate easily.

Geochemical characterisation of the tailings material is being carried out as part of the Environmental Impact Assessment (“EIA”) and regulatory licensing processes. For the purposes of the conceptual design it has been assumed that the contaminated tailings stream will require containment in a lined facility with provision for leakage detection. The uncontaminated tailings will be treated as conventional tailings, with no specific requirements in terms of lining and containment. Several TDF site options were investigated and the selection of the preferred site was based on the topography of the area and the proximity to the deposit and Process Plant. The Base Case locality of the TDF is illustrated in Figure 19 and was selected on the basis that:-

the site topography facilitates the containment of the tailings in a single, small localised surface water catchment;


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the facility will be screened from the gravel road connecting Garies with Kotzesrus;

there is no significant mineralisation within the TDF footprint, as confirmed by sterilisation drilling performed during August 2011;

the site does not impact local district roads; and

the site is sufficiently distant from the Swartdoring River to reduce the potential for contamination.

A preliminary safety and environmental hazard classification of the proposed Zandkopsdrift TDF has been carried out in terms of the requirements of the South African National Standards (“SANS”) Code of Practice for Mine Residue Deposits (SANS 0286:1998). The TDF could constitute a potential risk to the environment given the expected production of a contaminated tailings product but the proposed Radiation Management Programme will be sufficient to mitigate the risk and reduce the impact of the radionuclides to negligible and result in the TDF being considered a Low Hazard facility. The portion of the TDF into which the contaminated tailings will be deposited will be lined and supplied with a leakage detection and collection system, whilst the portion of the TDF into which the uncontaminated tailings are deposited is not expected to require lining. The proposed design for the TDF is therefore a concentric configuration with a central lined facility surrounded by an unlined outer area. The proposed configuration will reduce the area of the lined portion, allow for the containment of the lower density hazardous tailings within an outer wall of more competent conventional tailings and allow for the collection of all excess water from the facility in the central lined portion. The excess water can be returned to the Process Plant by a decant barge and return water pipe arrangement. Since this portion of the facility will be lined, water losses and contamination of groundwater resources can be expected to be minimised. Stage capacity analyses were carried out for both the inner and outer TDF compartments and both compartments have the required capacity to store a minimum of 10Mt of tailings at the estimated in situ density of 1.52 dry t/m3, for a total storage capacity of 20Mt. Some optimisation of the layout is planned for the PFS to ensure that the crest level of the outer compartment is always above the level of the inner compartment. The expected rate of rise of the TDF is approximately 1m/yr or slightly less just prior to closure. The TDF will not rise higher than 30m above datum at its highest point and will not protrude more than 5m to 10m above the level of the surrounding topography. A detailed geotechnical investigation of the TDF site will be undertaken for the PFS but based on inspection of the site it is expected that the foundation materials will be suitable and free draining. Investigation of the site geohydrology is in progress and it is anticipated that the study will demonstrate that seepage from the TDF would migrate along the drainage line to the east of the facility. The potential migration along the drainage, together with the pollution potential of the tailings, will necessitate that measures are taken to control seepage to the foundation of the TDF. The water balance calculations suggest that the TDF and metallurgical plant have a significant capacity to absorb excess water, making it unlikely that significant quantities of water would build up on the TDF. The contributions to the water balance from rainfall (approximately 113mm per annum) are not expected to be significant. The development of the TDF will have to be completed to coincide with the commissioning of the Process Plant and will include:-

site clearance, stripping and stockpiling of topsoil for use during rehabilitation of the facility;

excavation of a box cut to each of the starter embankments in preparation for the construction of the embankments;

backfilling of the box cuts to each of the starter embankments using selected fill, sourced preferably from within the TDF basin;

construction of the inner and outer starter embankments to the facility using selected fill borrowed either from the TDF basin, open pit, or a designated borrow pit assumed to be located within 2km of the TDF;

construction of a series of cross walls to the outer TDF to assist in the control of deposition in the early stages of the TDF’s development;

installation of a double liner and leakage detection system to the inner tailings paddock;

the construction of a seepage collection drain to the outer tailings compartment;

installation of slurry delivery systems to the inner and outer tailings compartments;


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installation of floating return water pumping platforms and access walkways sized to accommodate a system capable of pumping at a rate of between 10l/s and 20l/s depending on the rainfall season and assumed pumping duration of 24hrs per day; and

the construction of a surface water control works as necessary to the areas adjacent to the TDF.

The excess slurry water and runoff collecting on the TDF will be pumped directly back to the Process Plant, eliminating the need for the creation of a return water dam, which would also require lining. The return water from the inner TDF may require treatment before being returned to the Process Plant and no provision has been made for this possibility in the estimates of the TDF costs. The estimated capital costs associated with the development of the TDF are significantly higher than normal due to two major costs associated with the containment of the contaminated tailings stream. The first cost is the earthworks costs associated with the splitting of the facility into two compartments and the second is the cost of the liner and leakage detection system to the inner TDF. Optimisation of these costs should be the focus of future phases of the design. The cost of operating the TDF was estimated on benchmarked costs for similar facilities by specialist contractors. The operating costs are dictated by the costs associated with establishing and maintaining the staff and equipment necessary for the operation of the facility. The capex and opex of the TDF are presented in Section 21.

17.7 Saldanha Separation Plant

The Saldanha Separation Plant will be located within a region of the Saldanha Bay environs demarcated for industrial development and the specific plant site has been selected so as to be outside any bio-sensitive areas as illustrated in Figure 21. No solid residues are expected to be generated from the Saldanha Separation Plant and the liquid effluents are sodium chloride brines which would be concentrated through a reverse osmosis plant following which the concentrated brine will be disposed of to an evaporation pond, located at the Saldanha Separation Plant, and the demineralised water returned to the process water reservoir. On-site housing facilities are not planned for the Saldanha Separation Plant and staff will be accommodated in the surrounding towns. Due to the close location of the Saldanha Separation Plant to the surrounding towns of Langebaan, Vredenberg and Saldanha, staff will be expected to make their own transport arrangements. The Saldanha Separation Plant will operate on a three shift basis 24/day, 7 days per week, 52 weeks per year and will include following supporting infrastructure and services:-

administration/offices, medical station, training facility, change house and ablution facilities;

gate house and site security offices, access control and weigh bridge;

stores, reagent and fuel storage and separate REE product storage;

workshops, wash bays, and

compressed air generation.

17.8 Desalination Plant

A sea water desalination plant is planned to supply purified, potable water to the Zandkopsdrift Mine. The Desalination Plant will be located on the coastline, southwest of the town of Kotzesrus and the PEA design was undertaken by ART (2011, see Table 1) and reported in a document entitled: “Zandkopsdrift Desalination Scoping Study” (Dec 2011). The major components of the plant include a desalination plant, a transfer pipe line and a booster pump. Seawater will be purified to potable water standard at a rate of approximately 120m3/hr. The cleaned water will be pumped to Kotzesrus, where an unmanned, diesel driven booster pump station will pump the demineralised water to the Zandkopsdrift Mine. The demineralised water will be stored in a water storage reservoir at the mine, from where the water will be gravity fed to the Zandkopsdrift Mine (Figure 19).

18 MARKET STUDIES AND CONTRACTS (NI 19)

The information in the following market review is sourced from various public domain sources, as well as Metal Pages, Asian Metal, Tech Metals Research, Industrial Minerals Company of Australia Pty Ltd, the US Department of Energy, and equity analysts who have published research on the rare earth sector. A detailed market review and forecast to 2015 published by Roskill Information Services Ltd. (“Roskill”) in November 2011 is used with permission. The term ‘rare earths,’ is used throughout the following discussion to encompass both REOs and REEs where they were unspecified in the source documents.


FIGURE 21


SALDANHA SEPARATION PLANT SITE PLAN



SATELLITE IMAGE OF THE SALDANHA SEPARATION PLANT LOCATION

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Arcelor Mittal Saldanha Steel

Exxaro Namakwa Sands Smelter

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Transnet Salcor Yard

General Freight Line

Strategic Fuel Fund Storage Facility

Separation Plant Location

Industrial Corridor

Farm Uyekraal 189

Roads

Rail

LEGEND

Saldanha

Witteklip

600m

300m

Scale0 2.25km

Scale0 1.1km

7

R399

R45

R85

R27

8

51

8

**

*

Critical biodiversity area

Farm boundary

Saldanha Separation Plant

Plant fence

Access road

LEGEND

1

5

8

Wetlands

Arcelor Mital Saldanha Steel

Blouwater Bay Substation

Strategic Fuel Fund Storage Facility

1


2

5 6

7

9

8

34

10

Administration

Laboratory

Car park

Power substation

Water treatment

Precipitation

Calcining Drying

Feed stock storage

Product Storage

Reagent Storage

Solvent extraction

module 1

Solvent extraction

module 2

LEGEND

1

2

3

4

5

6

7

8

9

10

11

12

SATELLITE IMAGE OF UYEKRAAL 189

R85

11

12

*


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The material contracts for the Zandkopsdrift Project are summarised in Section 3.3. 18.1 International Trade in Rare Earths

Currently, China is the main source of rare earth supply, producing 94% of total global production and is also the main consumer of rare earths accounting for approximately 70% of total rare earth usage. The largest consumer outside of China is Japan. The main factor affecting international trade in rare earths over the past decade has been Chinese government trade policy. Exports of rare earth ores and concentrates were restricted and the government started to introduce a form of export quota in 2000. The policies were designed to safeguard the development of downstream industries in China, to encourage foreign companies to establish their processing operations in China and to increase the value of exports. The total Chinese rare earth export quota has fallen by over 50% from 65kt in 2005 to 30kt in 2011. In reality the actual decline is greater, as the range of rare earth products included within the quota has been expanded in 2011 to include some metal alloys with a rare earth component above 10%.

18.2 Rare Earth Supply

According to Roskill (November 2011) global supply of rare earths peaked in 2006 and subsequently fell by 4%pa during the five years to 2011. Chinese supply fell at a marginally higher rate over this period, whilst that from the rest of the world (“RoW”) increased at a rate of 4.5%pa. China supply of rare earths is estimated to account for 94% of world supply in 2011, with most of the remainder 6% is supplied by Russia and the USA. Chinese government controls on the output from the rare earth sector were implemented in 2006 and have become more effective. The control measures include restriction on the issuing of mining licences and the introduction of more stringent quotas. In 2011, further controls were introduced and all rare earth mining companies have mandatory production plans, must have planning permission for production, environmental certification and safety licences. In addition, companies exceeding the prescribed production quota can have their licence to operate revoked. In 2011, the Chinese government introduced tighter controls on emissions from rare earth processing plants, and in order to ensure that measures to control output and reduce emissions are realised, a process of consolidation has been taking place since 2007, with a sequence of plant closures and amalgamations in 2011 that is expected to result in Baotou Rare Earths controlling all rare earth processing capacity in Inner Mongolia. In the South China region, a number of companies have been involved in the consolidation process, including China Minmetals, Chinalco, Ganzhou Rare Earths, Guangdong Rising Nonferrous Metals and China Nonferrous Metals. In Sichuan, Jiangxi Copper has taken control of the three main rare earth producers and some downstream capacity. The global structure of the rare earth industry is changing, within and outside of China, with a focus on vertical integration on the rare earth value chain, in order to maximise both profits and margins of rare earth operations. The Chinese supply is expected to increase by approximately 8%pa between 2011 and 2015 to approximately 145,000t REO, but this increase in output will mainly serve to supply the growing demand for rare earths in China’s own manufacturing industry. Rare earth export quotas are not expected to be relaxed over the next four years, so supply to meet RoW demand growth will have to come from non-Chinese sources. RoW supply is estimated to provide over 25% of global supply by 2015 and this percentage is likely to increase further over the following five years to 2020, as summarised in Table 23:-

Table 23 : Rare Earth Global Supply Estimates

SOURCE 2011 2013 2015 China 105,000 140,000 145,000 RoW 7,025 32,000 56,300 TOTAL 112,025 172,000 201,300

Source : Roskill 2011

18.3 Rare Earth Demand

Global rare earth demand grew at 5%pa between 2005 and 2010, despite the demand decline in 2009 as a consequence of the global economic crisis and its marked negative impact on RoW demand. Demand growth in China was much higher, at 11%pa, and China now accounts for 70% of global demand. The global demand for rare earths in 2010 was 125,000t REO.


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The growth in Chinese demand reflects the growth in output of audio-visual equipment, telecommunications and computer equipment, power drives for electric bicycles and permanent magnet motors for wind turbines and hybrid electric vehicles (“HEVs”). Historically, much of the output from these industries was directed towards the export market, but by 2009 the Chinese domestic market was becoming more dominant. The RoW consumption of rare earths declined by nearly 4%pa between 2005 and 2010, partly as a consequence of the global economic slowdown, but also as a result of increasing downstream processing within China and the tightening of rare earth export quotas. Japan is the major consumer of rare earths outside China and industry participants are concentrating on high value, high technology rare earth based products. Many of the basic processing units in Japan, for example those producing rare earth magnets and battery alloys, have already relocated to China in order to secure raw material supplies, including rare earths. Roskill expects global demand for rare earths to grow at 7% to 9%pa to 2015 by which time demand is forecast to reach approximately 180,000t, an increase from 130,000t in 2011. An overall surplus of supply over demand is expected by 2015, however the proportions in which the individual rare earth elements are distributed by deposit, or are produced, does not reflect the relative demand by elements. It is generally expected that neodymium, europium, terbium and dysprosium will be in deficit in 2015. Furthermore, it should be noted that the demand forecasts do not include requirements for national rare earth stockpiles as announced by various governments including the Chinese, Korean and Japanese. The likely future impact of this additional demand is not quantified at this stage 18.3.1 Rare Earth Demand by Application

A summary of the global demand for rare earths by application is presented in Table 24, which, where possible, indicates the total demand per sector by volume, the value by percentage of the total market and the predicted growth rate for the main applications for the rare earths:-

Table 24 : Global Rare Earth Demand by Application

SECTOR/APPLICATION DATE of STUDY

TOTAL DEMAND by Volume (%)

PREDICTED GROWTH RATE

TO

TOTAL GROSS

VALUE (%) GROWTH DRIVERS

Magnet Sector 2000 13 11% -13%pa to

2015 43 – 48

Increased demand for computer hard disc drives, audio equipment, electric bicycles 2010 27

Metallurgical Applications 2010 19 9%- 11%pa to

2015 ~

Nickel metal hydride batteries driven by demand for portable electronic equipment

Fluid Catalytic Cracking catalysts (“FCC”)

2010 16 3% - 4%pa to

2015 ~

Emission control in vehicles but improved technology has resulted in slower growth. Main application for LREEs.

Polished glass products in electronics (Ce oxide)

2%pa to 2015 ~ ~

Phosphors and pigment 2010 7 7% to 8%pa to

2015 15

Main market for Eu and Tb both high value HREEs. Growth driven by increased legislation to phase out incandescent bulbs

Other (ceramics) ~ ~ 8% to 9%pa to

2015 ~ ~

Source : Roskill 2011

18.4 Supply/Demand by Element

The supply of cerium is expected to exceed demand in 2013 and beyond, due to its relative abundance in most deposits. The supply-demand dynamic of lanthanum is more favourable, as demand to 2015 for batteries, catalysts and in optical glass grows more strongly than the growth in supply. The demand for LREEs used in magnets (praseodymium and neodymium) is expected to continue to exceed supply as new sources of neodymium and praseodymium are likely to increase supply by 10% to11%pa to 2015, whilst demand is forecast to increase by 11% to 13%pa. New rare earth production capacity due to come on stream before 2015 is not expected to add significantly to the supply of HREEs and consequently the key HREEs will remain in short supply. The supply of dysprosium is forecast to grow by 3% to 4%pa to 2015, whilst the demand for magnet alloy is forecast to grow at 11% to 13%pa. Although the intensity of the use of dysprosium in magnet alloys is likely to continue to fall from 5%-8% to 2%-4%pa, this may not be sufficient to avoid a significant deficit in supply by 2015.


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The main sector demand for the other HREEs is in phosphors, where yttrium, europium and terbium are all intrinsic components. Supply of yttrium to 2015 is expected to grow at 4%pa, terbium by 3%-5%pa and europium by 10%-11%pa, whilst overall demand in this sector is forecast to be 6%-8%pa.

18.5 Rare Earth Pricing

A reasonable estimation of the future value of 1kg of separated 99% pure Zandkopsdrift REO is required for the PEA to estimate the revenue that future mining and processing operations will generate. A ‘basket price’ must be estimated, which is a weighted average of the individual REO oxide prices at the relative proportions in which they occur within the Zandkopsdrift deposit. In order to estimate the Zandkopsdrift basket price, some realistic forecast estimate of the value of the individual REOs must be made. Many of the REEs underwent significant price increases in the first half of 2011 driven by Chinese policy changes in the rare earths sector and market speculation and the prices have subsequently decreased again in the second half of 2011. In the context of the price volatility, it is therefore not considered appropriate to use current market prices for REOs as the basis for longer term price forecasts or projections. The China Free on Board (“FoB”) prices at 1st December 2011 are presented in Table 25 and the possible Zandkopsdrift basket price calculated from this data is USD137.93/kg. Historical average prices are commonly used as reference pricing points in economic and feasibility studies for mineral projects, as they smooth out pricing volatility and utilise a long data series that reduces distortion due to significant short-term price rises or falls. The three year average China FoB price to 1st December 2011 is presented in Table 25 and includes both a significant period of time when rare earth prices were materially undervalued and the more recent period of higher prices in 2011. The Zandkopsdrift basket price as determined from the 3 year average historic FoB China prices is USD64.36/kg. The mid-point of the 2015 forecast rare earth prices from Roskill for the principal REEs are presented in Table 25 and a basket price for Zandkopsdrift Project production based on these forecasts is USD52.10/kg.

Table 25 : REO Historic, Current and Forecast Prices

SOURCE RARE EARTH OXIDE (USD/kg)

DESCRIPTION La Ce Pr Nd Sm Eu Gd Tb Dy Y Zandkopsdrift

BASKET FoB China Price (1 Dec 2011)

64 54 20 235 89 3,790 133 2,810 1,960 113 137.93

3 Year Average FoB China Price (Dec 2008- Dec 2011)

42 41 81 93 39 1,207 56 1,016 554 57 64.36

China Domestic Price (1 Dec 2011)

17 19 100 190 14 2,048 36 1,517 956 42 72.13

Roskill forecast prices 2015 20- 35

10- 15

80 -120

80 to 120

~* 1,000- 1,200

~* 1,000- 1,200

800- 1,000

40- 60

52.10*

Source : Metal Pages, Asian Metals, Roskill 2011 All prices post-2015 are assumed to stay constant No prices or revenues are attributed to holmium, erbium, lutetium, ytterbium and thulium, as they are typically produced on a special order basis for limited applications, and do not have regular market pricing data. * USD52.10 is calculated based on the mid-point of the Roskill forecast range and using the 3 year average prices of Samarium and Gadolinium as Roskill does not forecast prices for these elements

For the purposes of the price forecasts in the PEA, the Zandkopsdrift basket price was calculated using an equal weighting of the historic 3 year China FoB price (USD64.36/kg) and the mid-point of the Roskill 2015 forecast (USD52.10/kg, resulting in an estimated basket price of USD58.23/kg. The Zandkopsdrift forecast basket price of USD58.23/kg represents a 58% discount to the China FoB price and a 20% discount to the China domestic price as at 1st December 2011. It should be noted that the prices quoted on Metal Pages and comparable sources, are typically based on a rare earth oxide with a purity of 99%. Higher prices are available for certain oxides with higher purity grades, however there is no independent, reliable published source of pricing data on such products. The Saldanha Separation Plant that Frontier has included in its PEA design and capital cost estimation will produce significantly higher purities for several elements, typically 99.9% or 99.999% for the more valuable elements and as a result, all else being equal, the forecast basket price may be understated. No contribution is assumed from the sale of holmium, erbium, lutetium, ytterbium and thulium or the potential uranium by-product.


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18.5.1 Mixed Rare Earth Carbonate Pricing

Typically REE carbonate is not sold on the open market but sold by mining companies to separation plants in China for onward processing and there are no reliable prices available for these transactions in the public domain. Outside of China two significant separating plants are nearing completion, both of which are associated with deposits, namely Mountain Pass and Mount Weld. The global trend appears to be that no mine similar to the Zandkopsdrift Mine is being developed without the route to process its REE carbonate to individual SREOs and that separation plants are unlikely to be built independently of a guaranteed source of supply. Separation plants are typically designed to treat the particular proportions of individual rare earths that occur in the associated deposit. Given the symbiotic relationship between these two trends, it is reasonable that pricing should be set at a level that equates the returns on capital for each phase.

18.5.2 Toll Treatment at Saldanha Separation Plant

In respect of toll treatment costs charged by Sepco to Tradeco, the risk profile of Sepco will be less than that of Sedex and Tradeco, as it will operate without risk related to the market price of the REE carbonate or SREOs. Examples of toll treatment of REE carbonate that can be used as a benchmark do not exist in the public domain but similar types of arrangements occur in the platinum group metals and coal industries. The total capital cost of building the Separation Plant is estimated to be USD611.0m. The capital cost of the Saldanha Separation Plant will result in the capital allowances from construction balancing the profits in Sepco for the full LoM.

19 ENVIRONMENTAL STUDIES (NI 20)

The Preliminary Environmental Assessment of the Zandkopsdrift Project was conducted by AGES for both the Zandkopsdrift Mine and the Saldanha Bay Separation Plant. The results were reported in two separate documents entitled:-

“Preliminary Environmental Assessment: Zandkopsdrift Rare Earth Element Project” (AS-R-2001-07015, 2011); and

“Preliminary Environmental Assessment: Zandkopsdrift Rare Earth Element Project-Saldanha Bay Separation Plant” (AS-R-2001-07-17, 2011).

The purpose of the Preliminary Environment Assessment is to assess the environmental implications of the Project activities and infrastructure, to identify and quantify possible risks, identify applicable legal and permitting requirements and inform the environmental management proposal. Several environmental specialist fatal flaw analyses and impact assessments have been conducted as part of the Preliminary Environment Assessments, as summarised in Table 26, the conclusions of which, were integral to the final deliberations of the Preliminary Environmental Assessments:-

Table 26 : Specialist Environmental Studies Informing the Preliminary Environmental Assessments for Zandkopsdrift Mine and Saldanha Separation Plant

SPECIALIST CONSULTANT TITLE DATE

Africa Geo-Environmental Engineering and Science (Pty) Limited

Phase 1 Archaeological Impact Assessment Report. Uyekraal 189 Saldanha Municipality, Western Cape Province

Aug-11

Phase 1 Archaeological Impact Assessment Report. Zandkopsdrift 357 Garies, Northern Cape Province

Aug-11

Airshed Planning Professionals (Pty) Ltd Zandkopsdrift Project: Air Quality Fatal Flaws Analysis Oct-11 Aquisim Consulting (Pty) Ltd Zandkopsdrift Fatal Flaw Assessment: Radiological Impact Assessment Oct-11

EnviroSim Consulting AC-2011-A Prospective Human health Risk Assessment for the Zandkopsdrift Rare Earth Minerals Prospecting Area

Sep-11

Nick Helme Botanical Surveys Botanical Fatal Flaws Analysis of Proposed Development Site on Uyekraal 189, near Saldanha, Western Cape

Aug-11

Nick Helme Botanical Surveys Botanical Fatal Flaws Analysis of Proposed Zandkopsdrift Mining Site, South of Garies, Northern Cape near Saldanha, Western Cape

Aug-11

In addition to the AGES Preliminary Environmental Assessment, an independent legal opinion by Cameron Cross, assessed the environmental legal requirements for the Zandkopsdrift Project and provided a legal memorandum (Table 1) which highlights the anticipated regulatory authorisation requirements for the Project. The conclusions of the opinion are included in Section 19.1 and Section 19.6:-


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19.1 Statutory Framework and Legal Requirements for the overall Zandkopsdrift Project (NI20c)

Regulatory requirements at local, provincial and national levels that will have to be fulfilled for the Zandkopsdrift Project are summarised in Table 27 and discussed in detail below:-

the mining activities proposed at the Zandkopsdrift Mine require the approval by the DMR of a Mining Right with an associated Environmental Management Programme Report (“EMPR”) in accordance with the requirements of the MPDRA (Act 28 of 2002);

the proposed Project also involves activities that are listed in terms of National Environmental Management Act (“NEMA”) (Act 107 of 1998) and the regulations promulgated there under. An EIA will therefore also be required for the Zandkopsdrift Mine site;

the Desalination Plant will require an application for a water use licence under the National Water Act (“NWA”, Act 36 of 1998), as well as authorisation under the NEMA. There are many options regarding the brine that is generated as a by-product of the desalination of sea water. Depending on the proposed method of brine disposal, a waste licence may also be required for the Desalination Plant;

the pipeline connecting the Desalination Plant with the Zandkopsdrift Mine will most likely require authorisation under the NEMA. Storage of water in certain quantities requires water use licensing under the NWA;

the proposed activities at Saldanha would not require an approved EMPR, but will require authorisation under the NEMA and an EIA will therefore be required. Furthermore, the requirements of the NWA; the National Environmental Management: Air Quality Act (“NEM:AQA”) (Act 39 of 2004); the National Environmental Management: Waste Act (“NEM:WA”) (Act 59 of 2008), the National Heritage Resources Act (“NHRA”) (Act 25 of 1999) and the Water Services Act (“WSA”) (Act 108 0f 1997) will have to be satisfied;

the mining of REEs is also associated with certain naturally occurring radionucliides or radioactive material (“NORM”). Therefore the provisions of the National Nuclear Regulator Act (Act 47 of 1999) (“NRRA”) and the Nuclear Energy Act (Act 46 of 1999) (“NEA”) will also apply to the Project; and

the presence of radionuclides or radioactive material (NORM) is controlled by the provisions of the NRRA and the NEA, and will thus apply to the Project.

The requirements of the NWA; the NEM:AQA; the NEM:WA, the NHRA and the WSA are applicable to the proposed activities at Zandkopsdrift Mine, the Saldanha Separation Plant and the Desalination Plant as discussed in Table 27:-


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Table 27 : Statutory Framework and Legal Requirements for the Zandkopsdrift Project

ZANDKOPSDRIFT LEGAL AND PERMITTING REQUIREMENTS Governing Authority

Minister of Mineral Resources

Minister of Water and Environmental Affairs

National Administration

Department of Mineral Resources (DMR)

National Department of Environmental Affairs* (DWEA) National Department of Water Affairs (DWA)

National Legislation

Mineral and Petroleum Resources Development Act (MPRDA)

National Environmental Management Act (NEMA)

National Environmental Management Waste Act 59 of 2008 (NEMWA)

National Heritage Resources Act 25 of 1999 (NHRA)

Water Services Act 108 of 1997 (WAS)

National Environmental Management Air Quality Act 39 0f 2044 (NEMAQA)

National Water Act (NWA)

Study Documents Required

Environmental Management Programme Report (EMPR)

Environmental Impact Assessment (EIA) under EIA Regulations 2010 (GNR 543)

Environmental Impact Assessment (EIA) under EIA Regulations 2010 (GNR 543)

Minimum Phase 1 Archaeological Impact Assessment

To be determined in consultation with relevant authorities

Atmospheric Emissions Licence application and Air Quality Impact Assessment

Integrated Water and Waste Use Licence (IWUL) in Terms of Section 22 of NWA

Authorisations Required:

Approved EMPR

Under Section 24 of the NEMA it is not permitted to commence specific activities without environmental authorisation

Specified activities that require a permit or licence



A list of activities for which an atmospheric emission licence is required


*In addition to the requirements listed above, the fulfilment of the requirements of the following National Acts maybe required:-

National Integrated Coastal Management Act 24 of 2008 (ICMA);

the National Environmental Management Biodiversity Act 10 of 2004 (NEMBA); the conservation of Agriculture Act 42 of 1983 (CARA); National Forests Act 84 of 1998 (NFA);

National Road Traffic Act 93 of 1996; National Nuclear Regulator Act 27 of 1999 (NNRA); The Nuclear Energy Act 46 of 1999 (NEA) The Explosive Act 26 0f 1956 (EA)

Source: AGES 2011, Cameron Cross 2011


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19.2 Baseline Environmental Description for the Zandkopsdrift Mine (NI20a)

A baseline study is a brief description of the receiving environment at a project site which identifies how the receiving environment may influence the proposed Project, and vice versa. The Zandkopsdrift Mine and Prospect area is sparsely populated with the principal land use being commercial sheep farming. The proposed Project will potentially generate more socio-economic benefit than the land does in its current state. The impact that the Project will have on biodiversity at the mine site is likely to be significant, however preliminary findings suggest that there are no fatal flaws in the proposed Project from a botanical point of view. The closest surface water feature to the proposed development activities is the non-perennial Swart-Doring River which flows in a westerly direction to the Groen River to the north of the Zandkopsdrift Prospect. The Project site is situated in quaternary catchment F50D and falls within the Lower Orange Water Management Area NC064WMA. Most of the region is dependent on ground water resources for domestic use and livestock watering. The archaeological baseline study noted that widespread Middle Stone Age lithic remains are scattered across large surface areas and that two higher density Middle Stone Age artefact distribution areas occur at the site. The recommendation is that the sites be recorded and that the larger cultural and social context of the sites be established, to minimally include a surface sampling and analysis of the stone artefacts. The recommended study is planned for the first quarter of 2012 and will be conducted by Dr M van der Ryst, an accredited professional archaeologist for the South African Development Community Region (Member No 158). Air quality in the region is relatively un-impacted by human activity and noise is expected to be extremely low, typical of rural, sparsely populated districts. The socio-economic perspective of the Project is that the local population in search of employment is likely to welcome the proposed development, whilst the limited number of local land owners may be opposed to such a drastic change in the current land use and sense of place of the area. The environmental studies conducted show that the environmental impact of the radionuclides associated with the Project will be negligible and this information will have to be carefully communicated to the local communities so that appropriate levels of understanding are achieved. It is important to note that Frontier is the owner of the land on which the Zandkopsdrift Mine infrastructure will be located.

19.3 Baseline Environmental Description for the Saldanha Separation Plant (NI20a)

The product from the Zandkopsdrift Mine will be subjected to a complex multi stream solvent extraction and stripping process from which no solid residues are expected to be generated. The liquid effluents are sodium chloride brines which would be disposed of to an evaporation pond. Site alternatives for the plant were evaluated in terms of practicality and environmental sensitivities. The preferred site for the plant was selected from an ecological perspective as it is not located within a critical biodiversity area or highly threatened ecosystem. The activities proposed at Saldanha Separation Plant site are in keeping with the current and future planned land uses, which includes large-scale industrial developments such as the Saldanha Steel Plant and therefore it is possible that the cumulative effect of the proposed development may not be significant. This premise will be verified as more detailed Project specific data becomes available. The proposed site has been historically disturbed so the indigenous vegetation cover is not pristine and the area is grazed by cattle. The overall botanical species diversity on site is low to moderate, when compared to undisturbed adjacent areas of the same habitat type. The botanical sensitivity is also low to moderate on a regional scale. Two plant Species of Conservation Concern (“SCC”; previously known as Red Data or Red list species) were recorded in the study area, and there is a low to moderate likelihood that one or two others may be present in the area. The site populations of the two Near Threatened plant species are very small and insignificant at a regional scale, and their loss would not be significant. The archaeological survey identified Middle Stone Age and Later Stone Age material occurring in low densities and comprised limestone and quartz flakes randomly scattered across the property and scattered ostrich eggshell fragments. These occurrences are deemed of low significance. A Colonial period foundation structure and midden were located on the southeast periphery of the area and the site is of medium significance, as it might potentially add to a wider conception of the Western Cape Colonial history.


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No major rivers are present due to the sandy nature of the substrata and the area is situated in quaternary catchment G10M. Local drainage is to Saldanha Bay and the Langebaan Lagoon. The results of the groundwater assessment of the Saldanha Separation Plant site are presented in Section 17.7. Dust is currently generated in the larger Saldanha area during the handling of iron ore and other minerals currently being processed in the area, as a result of which air quality is likely to be a major concern for interested and affected parties (I&AP). The cumulative impact that the proposed separation plant may have on the regional air quality will be assessed and appropriately managed in subsequent phases of the Project.

19.4 Stakeholder Engagement for the Zandkopsdrift Mine and Saldanha Separation Plant (NI20d)

Formal engagement with stakeholders in relation to the Zandkopsdrift Mine EIA process will be undertaken at the DFS stage when further work has been carried out to permit selection of the final metallurgical process flow. As public participation is one of the most important aspects of the environmental authorisation process and effective public participation improves the ability of the competent authority to make better and more informed decisions, a stakeholder identification process has been undertaken, and a stakeholder engagement plan formulated which details the steps that will be followed when the formal public participation process commences. Effective public consultation will be of paramount importance and public perception can be managed and mitigated by following a comprehensive public participation process during the authorisation processes. Extensive informal consultation including 70 meetings/consultations has been undertaken with local and regional communities, groups and bodies since mid-2011 and is continuing. Based on feedback from these consultations it is expected that community support for the proposed development is likely to be secured. The success of appeal processes can also be mitigated by conducting official legal reviews throughout the authorisation processes prior to submission to the public and the relevant legislative Departments. Due to the early stage of the proposed development of the Saldanha Separation Plant and the undefined nature of the Project parameters at this PEA stage, it was decided not to formally engage with any stakeholders until the later planned PFS and DFS stages. A preliminary stakeholder identification process was undertaken, and a stakeholder engagement plan formulated, detailing the steps that will be followed at the time when a formal public participation process will be entered into.

19.5 Environmental Risk Identification and Evaluation for the Zandkopsdrift Mine (NI20a, 20c)

The potential environmental risks associated with the Zandkopsdrift Mine were evaluated in terms of legal and permitting requirements, environmental risk that the Project could cause to the receiving environment, the cost of mitigating the potential environmental impacts of the Project, Project compatibility with the receiving environment and reputational risk that could result to Frontier from the implementation of the Project. The Zandkopsdrift Project needs to comply with a number of legislative requirements but no legal fatal flaw was identified by the independent legal opinion (Cameron Cross 2011). Of note is the fact that some of the authorisation processes can require two years for finalisation in particular the NWA and NNRA (Table 27). Frontier intends applying to NWA as soon as the current groundwater drilling programme is completed. The pathways of potential radiation exposure are the atmospheric pathway, the groundwater pathway, to a lesser extent the surface water pathway, all of which have the potential to contribute to terrestrial pathways. The Zandkopsdrift Mine and Prospect area has a very low population density, which means that critical group receptors in the area are very limited. Depending on site-specific conditions, such as the activity concentrations in the source material, as well as local meteorological and hydro-geological conditions, the potential radiological impact to members of the public in the vicinity of the Zandkopsdrift site is not expected to be above the public dose limits of 1mSv per annum (Potgieter 2011). The activities of the Zandkopsdrift Mine may result in significant PM10 (Particulate Matter with an aerodynamic diameter of less than 10µm) ground level concentrations at the nearest sensitive receptors. However, the PM10 sources can be mitigated to restrict the impact to meet the National Ambient Air Quality Standards (“NAAQS”) at the closest sensitive receptors. No air quality fatal flaws are therefore anticipated for the Zandkopsdrift Project (Airshed, 2011). The environmental impacts associated with the implementation of the Project at Zandkopsdrift Prospect can be effectively avoided or mitigated so as not to pose any significant risks to the Project (AGES 2011).


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Rehabilitation and effective environmental management at the site throughout all Project phases and effective communication of measures that are implemented to manage environmental impacts, should mean that environmental risks identified are not significant enough to render the Project impracticable. Sensitive areas can be protected by implementing development buffers around these areas.

19.6 Environmental Risk Identification and Evaluation for the Saldanha Separation Plant (NI20a, 20c)

The potential risks associated with the proposed Saldanha Separation Plant were evaluated in terms of legal and permitting requirements, environmental risk that the Project could cause to the receiving environment, the cost of mitigating the potential environmental impacts of the Project, Project compatibility with the receiving environment and reputational risk to Frontier. Environmental impacts have been identified in association with the Saldanha Separation Plant but AGES considers that these can be effectively avoided or mitigated so as not to not pose any significant risks to the Project. Rehabilitation and effective environmental management at the site throughout all phases of the Project and buffering of sensitive areas can be undertaken.

19.7 Mitigation and Closure Costs for the Zandkopsdrift Mine (NI20e)

South African legislation requires that sufficient provision is made for mitigation and rehabilitation of environmental damage both at closure of an operation and at any point should the Project fail to prove economic. The implementation of a concurrent rehabilitation strategy significantly reduces the cost of overall rehabilitation at the end of the lifespan of the Project. The total financial liability for the closure of Zandkopsdrift Project without progressive rehabilitation is estimated to be USD10.1m. Should all progressive rehabilitation be performed, the remainder of the total liability required at closure is estimated at USD5.5m. The initial rehabilitation fund contribution is estimated to be USD1.9m and the concurrent rehabilitation cost over the LoM will be USD4.6m. Legislation requires that provision for the full mine closure costs be maintained in the event of failure of the Project, and in order to achieve this goal, an insurance allowance is made to cover the shortfall between this amount and the rehabilitation fund plus concurrent rehabilitation. A development provision is made for a rehabilitation cost of USD0.3m to be spent during the construction and development phases of the Project, mostly related to topsoil stripping and stockpiling. Furthermore, a provision for the final LoM closure liability and aftercare of USD5.5m is required should all progressive rehabilitation be complete. The total Rehabilitation Fund and operational concurrent rehabilitation cost per RoM tonne is USD0.32/t.

19.8 Mitigation and Closure Costs for the Saldanha Separation Plant (NI20e)

The anticipated impacts that will require provision for monitoring and mitigation are in relation to water and air quality. Insufficient information with regards the planned infrastructure and applicable technology is available at this stage, to estimate the efficacy or cost of such mitigation. However, closure provision for the Saldanha Separation Plant is not required by NEMA and has therefore not been included in the PEA.

19.9 Environmental Studies Conclusion

At this stage of the Project environmental evaluation, no sufficient risk that cannot be managed or mitigated and is highly likely to occur, has been identified that would render the Project unfeasible.

20 PERMITTING, SOCIAL AND LABOUR (NI 20)

20.1 Permitting, South African Mining Law and the MPRDA

A summary of the South African Mining Law, Mining Charter and ‘Mineral and Petroleum Resources Royalty Act’ which are relevant to the Zandkopsdrift Project is presented in Appendix 4.

20.2 Labour

For the purposes of the PEA, Zandkopsdrift Mine labour costs have been accommodated in the operational cost estimates for the Process Plant, Sulphuric Acid Production Plant, contractor miner and administration costs. Similarly, labour costs for the Saldanha Separation Plant and the Desalination Plant have been included in the operational costs for these individual components.


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20.3 Social and Labour Plan

In terms of the MPRDA, a Social and Labour Plan (“SLP”) has to be developed for the Zandkopsdrift Mine which will include several major components, namely, a skills development programme, a local economic development programme and a management downscaling and retrenchment programme. The SLP will have to provide guidelines on the following aspects:-

remuneration and benefits for all staff,

the extent and nature of the planned workforce;

costs of manpower for the concentrator, Sulphuric Acid Production Plant, workshops and maintenance, security, health and safety and administration; and

planned programme and allowances for Basic Adult Education and Training (“ABET”), Leadership and Skills Training Programmes, Portable Skills development, Scholarships and Bursaries and Internship.

The SLP is currently being developed and will be finalised in the planned PFS but for the purposes of the PEA, the skills development programme has been estimated at a high level and is summarised in Table 28:-

Table 28 : Preliminary Estimate of the Skills Development Programme for the Zandkopsdrift Mine

DESCRIPTION YEAR 1 (USD)

YEAR 2 (USD)

YEAR 3 (USD)

YEAR 4 (USD)

YEAR 5 (USD)

TOTAL COST (USD)

Skills Development Programme ABET 1,000 1,000 1,000 1,000 1,000 5,000 Skills programme 19,000 23,000 26,000 29,000 32,000 129,000 Operational Learnerships 10,000 10,000 8,000 8,000 8,000 44,000 Portable Skills Development 6,000 6,000 6,000 6,000 6,000 30,000 Mentorship Programme 6,000 6,000 6,000 6,000 6,000 30,000 Sub-total 42,000 46,000 47,000 50,000 53,000 238,000 Bursaries and Scholarships 12,000 12,000 12,000 12,000 12,000 60,000 Internship Programme 8,000 8,000 8,000 8,000 8,000 40,000 Sub-total 20,000 20,000 20,000 20,000 20,000 100,000

Local Economic Development Programme Infrastructure project 0 64,000 64,000 0 0 128,000 Educational upliftment projects 24,000 26,000 28,000 30,000 33,000 141,000 Community project 32,000 8,000 8,000 8,000 8,000 64,000 LED Project 38,000 38,000 26,000 13,000 13,000 128,000 Sub-total 94,000 136,000 126,000 51,000 54,000 461,000

Managing Downscaling and Retrenchment Process Sub-total 0 77,000 77,000 90,000 90,000 334,000 Total Skills Development, LED Programme and Downscaling and Retrenchment Financial Provision Total 156,000 279,000 270,000 211,000 217,000 1,133,000

* Local Economic Development (“LED”) Apparent inconsistences in totals due to rounding

21 CAPITAL AND OPERATING COSTS (NI 21)

The total capex for the Zandkopsdrift Project, estimated at an overall accuracy of ±30%, is USD910.2m, which is a combined figure produced by the following:-

i. the mine design, for which a mining capex of USD2.9m was estimated by SMS;

ii. the preliminary design of the Process Plant and associated infrastructure, for which a total capex of USD173.6m was estimated by SNC-Lavalin;

iii. the design of the Sulphuric Acid Production Plant for which a total cost of USD87.7m was estimated by SNC-Lavalin;

iv. the design of the Saldanha Separation Plant and associated infrastructure, for which a capex of USD611.0m was estimated by SNC-Lavalin;

v. the TDF, for which a capex of USD16.5m was estimated by Epoch;

vi. the desalination plant and associated pipeline infrastructure, for which a capex of USD12.4m was estimated by ART with an provision of USD0.1m for land;

vii. mine closure and rehabilitation, for which a capex of USD2.2m was estimated by AGES;


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viii. upgrading of the local district roads, for which a capex of USD3.9m was estimated by Corli Havenga Transport Engineers;

The costs of plant start up, spares, skills development and local development programmes have been estimated at USD26.7m.

No contingencies were provided for in the above capex estimates, but an overall contingency of 15% has been added In the Zandkopsdrift Project financial model and valuation. A summary of the Project capex is presented in Table 29:-

Table 29 : Summary Capital Expenditure Estimate for the Zandkopsdrift Project

DESCRIPTION (USDm) (ZARm) Mine and Process Plant

Mining Equipment, surface infrastructure and pre-production 2.84 22.12 Process Plant1 138.14 1,077.50 Other infrastructure1 35.47 276.70 Tailings Disposal Facility 16.50 128.71 Upgrade of district roads 3.88 30.26 Rehabilitation and Closure 2.20 17.18 Desalination Plant and Pipeline 12.51 97.60 Sub-total Mine and Process Plant 211.54 1,650.07

Saldanha Separation Plant Land and Services2 3.85 30.02 Separation Plant2 508.92 3,969.59 Other Infrastructure2 96.28 751.01 Evaporation Ponds2 1.92 15.00 Sub-total Saldanha Separation Plant 610.97 4,765.62

Sulphuric Acid Production Plant Sulphuric Acid Plant1 87.69 683.95

Start up / Indirect costs First Fills1 9.04 70.54 Spares1 16.55 129.09 Total Skills and Local Economic Development Programmes 1.14 8.86 Sub-total Start up costs 26.73 208.48 Total Mine, Process Plant and Saldanha Separation Plant 822.51 6,415.69 Total Capex excluding start-up and indirect costs 910.20 7,099.64

Source : SMS, SNC-Lavalin, AGES, Epoch, ART, Corli Havenga and Frontier 2011

Note: No contingencies have been included. All cost estimates have an overall accuracy of ±30%.

1. Combined capital cost estimate by SNC‐Lavalin totalling USD173.6m for the Zandkopsdrift process plant and associated

infrastructure, excluding spares, first fills and the sulphuric acid plant.

2. Combined capital cost estimate by SNC‐Lavalin totalling USD611m for the Saldanha separation plant and associated

infrastructure, excluding spares.

The Zandkopsdrift Project opex is determined from the opex for the various Project components namely:-

the Zandkopsdrift Mine, which includes the operational costs of the mining operation, the Process Plant, the Sulphuric Acid Production Plant, the TDF, transportation and various other costs;

the Saldanha Separation Plant; and

administrative costs relating to Tradeco .

The average opex over the LoM for the Project is summarised in Table 30. No contingencies were provided for in the opex estimates, but an overall contingency of 15% has been added In the Zandkopsdrift Project financial model and valuation.

Table 30 : Operational Expenditure Estimate for the Zandkopsdrift Project

DESCRIPTION OPEX per RoM TONNE OPEX per SALEABLE REE

(USD/t) (ZAR/t) (USD/kg) (ZAR/kg) Mining 16.58 129.33 0.86 6.68 Concentrator Plant (Incl. Sulphuric Acid Production Plant)1

98.03 764.64 5.06 39.50

Tailings Disposal Facility 0.24 1.86 0.01 0.10 Rehab and Closure (Operational) 0.23 1.83 0.01 0.09


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DESCRIPTION OPEX per RoM TONNE OPEX per SALEABLE REE

(USD/t) (ZAR/t) (USD/kg) (ZAR/kg) Rehab and Closure (Insurance) 0.01 0.10 0.00 0.00 Maintenance – District Roads 0.27 2.12 0.01 0.11 Solid Carbonate Product Transport 1.33 10.34 0.07 0.53 Separation Plant1 136.04 1,061.13 7.03 54.81 Administration Costs 0.66 5.13 0.03 0.26 TOTAL 253.39 1,976.48 13.08 102.08

Source : SMS, SNC Lavalin, AGES, Epoch 2011

Note: No contingencies have been included. All cost estimates have an overall accuracy of ±30%.

1. Operating cost estimates provided by SNC-Lavalin are limited to concentrator plant, including sulphuric acid production plant and separation plant. All other components of the operating cost estimates have been provided by the other Specialist Consultants who have contributed to the ITR.

22 ECONOMIC ANALYSIS (NI 22)

Venmyn was commissioned by Frontier to perform an independent valuation of the Zandkopsdrift Project. The valuation was compiled in accordance with the South African Code for the Reporting of Mineral Asset Valuation (“SAMVAL Code”) as amended in July 2009. 22.1 Valuation Methodology (NI22a)

A summary of the various valuation methodologies applicable to mineral assets is presented in Appendix 5. In performing the valuation of the Zandkopsdrift Project, Venmyn relied on the Market Valuation Approach and the Cash Flow Valuation Approach.

22.2 Cash Flow Approach

22.2.1 Introduction

The Cash Flow Approach relies on the “value in use” principle and requires determination of the present value of future cash flows over the useful life of a mineral asset. The mineral asset is valued using the free cash flow capitalisation, i.e. the DCF methodology. The Cash Flow Approach focuses on the value of a company’s future income streams. The future forecasts are usually based on the historical results and the value of the business is based on the value, in present day terms, of an anticipated series of future income streams. The Cash Flow assumptions are based upon realistic estimates, at the time of the valuation, of the costs of ongoing capital spending, production, sales revenues and expenditures. A discount rate is then applied to the cash flows, which is dependent on the nature of the project and operating company’s cost of capital and risk profile, to yield an NPV on the post-tax un-escalated DCF. The Cash Flow Approach takes into account the unique technical and financial characteristics of the mineral asset.

22.2.2 DCF Model Inputs

A constant money DCF model was constructed for the Zandkopsdrift Project, using the “value in use” principle, using cash flow projections based on future production, yields, sales and expenditure over the LoM. Considering the early stage of the Zandkopsdrift Project and the uncertainties of future global economics, as well as exchange rate, interest rate and commodity (especially REE) price uncertainties, a constant money DCF model was deemed more appropriate than an escalated DCF model, as an escalated DCF model would require the prediction of very uncertain input parameters. The cash flow streams of Sedex, Sepco and Tradeco were modelled separately, and combined into a consolidated model summarising cash flows of the entire Zandkopsdrift Project. Sedex is responsible for the mining, concentration, acid cracking and production of MREC. Sedex generates its revenue from selling the MREC production to Tradeco, which in turn contracts to Sepco to toll treat the MREC into SREOs. The final SREOs are sold by Tradeco at market related prices.


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A discount rate of 11.0% is applied in the DCF valuation. The results of the valuation are presented at different discount rates for comparative purposes and are reported on a non-attributable, 100% Project basis. The REO basket price for 99% pure product used in the DCF model is USD58.23/kg, calculated as discussed in Section 18.5, on a 50% weighting between the 3 year historic China FoB prices and the mid-point of Roskill’s recent forecast price range for 2015. Technical and Economic input parameters used in the DCF model are summarised in Table 31:-

Table 31 : Technical and Economic Input Parameters for the Zandkopsdrift Project DCF

DESCRIPTION UNIT VALUE Total Run of Mine (Mt) 19.50 Total Rare Earth Oxide Grade including dilution (%) 2.89 Mixed Rare Earth Carbonate to Separation Plant (tonnes) 580,263 Separated Saleable Rare Earth Elements (tonnes) 377,443 % Slimes from ROM (%) 26.0 % of REE in Slimes (%) 40.0 REE Float Recovery (%) 60.0 REE Acid Crack Recovery (%) 90.0 REE HCL Leach Recovery (%) 99.0 REE SX Recovery (%) 99.0 REO Basket Price (99% purity) (USD/kg) 58.23 USD Exchange Rate (ZAR/$) 7.80 Capex and Opex Contingency (%) 15.0 Blended Corporate Tax Rate (%) 14.5 Frontier Effective Economic Interest in Sedex (%) 95.0 Frontier Effective Economic Interest in Sepco and Tradeco (%) 100.0 Discount Rate (%) 11.0

Source : Venmyn 2011

22.2.3 DCF Valuation Results

The consolidated Cash Flow model for the Zandkopsdrift Project is presented in Figure 22. The summary valuation results using the Cash Flow approach for the Zandkopsdrift Project is presented in Table 32. The value range was determined from the sensitivities of the Project to the discount rate as presented in Table 33:-

Table 32 : Summary of the Cash Flow Valuation for the Zandkopsdrift Project

DESCRIPTION UNIT VALUE Total Capital (plus 15% contingency)* (USDm) 1,079 Payback Period from start of production (years) 2 Pre tax IRR (%) 57.56% Post tax IRR (%) 52.48%

VALUE RANGE Lower Value (USDm) 3,007 Preferred Value (USDm) 3,646 Upper Value (USDm) 4,454

Source : Venmyn 2011 * Capex from Table 29 plus 15% contingency Valuation results reported on a non-attributable, 100% Project basis

Table 33 : NPV post-tax of the Zandkopsdrift Project at Various Discount Rates

DISCOUNT RATE NPV (%) (USDm)

7% 5,491 9% 4,454 11% 3,646 13% 3,007 15% 2,497

Source : Venmyn 2011 Valuation results reported on a non-attributable, 100% Project basis. Frontier’s effective interest 95%..


CONSOLIDATED DCF FOR THE ZANDKOPSDRIFT PROJECT

FIGURE 22

File Location.cdr


This diagram and the information herein may not be reproduced or transmitted in any form without prior written permission from Venmyn Rand (Pty) Ltd. Graphics by Interaction. D990M_FrontierRareEarths_2011

UNIT TOTAL -3 -2 -1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

RoM feed to processing plant (t) 19,495,605 817,193 958,392 931,467 1,067,072 1,017,922 907,050 1,020,975 935,018 938,659 984,070 1,070,998 1,103,747 1,091,950 1,064,853 1,060,448 1,087,980 1,127,449 1,153,612 1,109,457 47,292

Run of Mine TREO Grade (incl. mine dilution) (%) 2.89 3.35 3.11 3.20 2.79 2.94 3.27 2.92 3.17 3.19 3.02 2.76 2.69 2.72 2.77 2.77 2.72 2.61 2.57 2.69 3.05

Contained TREO in RoM (t) 563,022 27,379 29,830 29,830 29,743 29,912 29,668 29,772 29,607 29,905 29,750 29,507 29,673 29,740 29,495 29,361 29,562 29,372 29,640 29,830 1,445

Feed to acid cracking plant (t) 14,426,748 604,723 709,210 689,286 789,633 753,262 671,217 755,522 691,913 694,608 728,212 792,539 816,773 808,043 787,991 784,732 805,105 834,312 853,673 820,998 34,996

Contained TREO in feed to acid cracking plant (t) 427,897 20,808 22,671 22,671 22,604 22,733 22,548 22,627 22,502 22,728 22,610 22,425 22,551 22,603 22,416 22,314 22,467 22,323 22,527 22,671 1,098

Mixed carbonate feed to separation plant (t) 580,263 28,217 30,744 30,744 30,653 30,828 30,576 30,683 30,514 30,821 30,661 30,411 30,581 30,651 30,398 30,260 30,468 30,272 30,548 30,744 1,489

Contained TREO in mixed carbonate (t) 385,107 18,727 20,404 20,404 20,344 20,460 20,293 20,364 20,252 20,455 20,349 20,183 20,296 20,342 20,175 20,083 20,221 20,091 20,274 20,404 988

Separated REOs (t) 377,444 18,354 19,998 19,998 19,939 20,053 19,889 19,959 19,849 20,048 19,944 19,781 19,892 19,937 19,773 19,683 19,818 19,691 19,871 19,998 969

CASH FLOW

Total Revenue (USDm) 21,962.82 0.00 0.00 1,068.01 1,163.64 1,163.64 1,160.22 1,166.83 1,157.31 1,161.36 1,154.95 1,166.57 1,160.51 1,151.04 1,157.49 1,160.13 1,150.57 1,145.34 1,153.19 1,145.78 1,156.24 1,163.64 56.36

Mining and Concentrator Opex (USDm) (2,586.55) (0.28) (0.54) (105.31) (120.34) (117.36) (134.84) (129.06) (119.92) (134.46) (125.15) (129.63) (136.46) (147.28) (152.28) (147.05) (145.32) (145.96) (147.77) (154.82) (148.45) (137.77) (6.51)

Seperation Plant (USDm) (3,079.78) (149.76) (163.17) (163.17) (162.69) (163.62) (162.29) (162.85) (161.96) (163.58) (162.74) (161.41) (162.31) (162.68) (161.34) (160.61) (161.71) (160.67) (162.14) (163.17) (7.90)

Admin Costs (USDm) (12.82) (0.64) (0.64) (0.64) (0.64) (0.64) (0.64) (0.64) (0.64) (0.64) (0.64) (0.64) (0.64) (0.64) (0.64) (0.64) (0.64) (0.64) (0.64) (0.64) (0.64)

Total Operating Expenditure (USDm) (5,679.16) (0.28) (0.54) (255.71) (284.15) (281.17) (298.18) (293.32) (282.85) (297.95) (287.75) (293.86) (299.83) (309.33) (315.23) (310.37) (307.31) (307.20) (310.12) (316.13) (311.22) (301.59) (15.06)

Operating Profit (USDm) 16,283.66 (0.28) (0.54) 812.29 879.49 882.47 862.04 873.51 874.46 863.41 867.20 872.71 860.68 841.71 842.26 849.76 843.27 838.13 843.07 829.65 845.01 862.05 41.30

Total Capital Expenditure (USDm) (1,079.18) (7.15) (589.93) (480.01) (0.46) (0.35) (0.28) (0.29) (0.04) (0.04) (0.04) (0.04) (0.04) (0.04) (0.04) (0.04) (0.04) (0.04) (0.04) (0.04) (0.04) (0.04) (0.04) (0.13)

Pre Tax Cashflow (USDm) 15,204.41 (7.15) (590.21) (480.55) 811.83 879.14 882.19 861.75 873.47 874.42 863.37 867.16 872.67 860.64 841.67 842.22 849.72 843.23 838.09 843.03 829.61 844.97 862.01 41.10

Royalties (USDm) (573.33) (27.88) (30.38) (30.38) (30.29) (30.46) (30.21) (30.32) (30.15) (30.45) (30.29) (30.05) (30.22) (30.28) (30.04) (29.90) (30.10) (29.91) (30.18) (30.38) (1.47)

Tax (USDm) (2,170.46) (41.84) (99.55) (125.86) (120.49) (123.09) (124.33) (120.82) (122.54) (122.90) (120.15) (115.80) (115.30) (117.13) (116.29) (115.39) (115.97) (112.97) (116.20) (120.21) (3.63)

Undiscounted Cash Flow (USDm) 12,460.69 (7.15) (590.21) (480.55) 742.11 749.21 725.95 710.98 719.92 719.88 712.23 714.47 719.32 710.20 695.82 696.71 702.31 696.91 692.81 696.96 686.73 698.59 711.43 36.07

IRR - Post-tax % 52.48%

IRR - Pre-tax % 57.56%

Project NPV - Post-tax (USDm) 3,646

NPV of Frontier's interest in the Project - Post-tax (USDm) 3,596

Notes: A 15% contingency has been added to both capital expenditure and operating expenditure estimates.

Post closure costs in year 21 to 25 equates to USD0.01m per annum

YEAR

MINING

PROCESSING

SALEABLE PRODUCT


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22.2.4 Sensitivity Analysis

The Zandkopsdrift Project DCF model was interrogated by Monte Carlo simulation using Palisade Corporation’s @RISK™ simulation software. The simulation illustrates the effects of changes in the input parameters on the final NPV of the Project. Venmyn also determined the “drop dead” REO basket price, which is the REO price below which the Project yields a negative NPV Venmyn identified 34 key input parameters that have associated estimation risk in the DCF model the most significant of which include REO prices, exchange rates, recoveries and costs, to which appropriate distributions were ascribed. In a single iteration of the Monte Carlo simulation, values for each of these parameters are randomly chosen from their distributions, and the NPV is calculated. This process is repeated thousands of times, to test thousands of different scenarios. The output of the simulation is a final NPV distribution graph, which indicates the density (y-axis) of the NPV values (x-axis). The Monte Carlo simulation of the Zandkopsdrift Project consisted of 250,000 iterations of which 16,922 iterations were considered in the analysis. The analysis indicated that the most sensitive parameter in the model is the REO Basket price. Figure 23 summarises the results of the analysis with the NPV distribution graph of the simulation results, a spider graph of the most sensitive input parameters, and correlation scatter plot between the NPV of the project, and the REO Basket price for each iteration.

Market Approach (NI22a)

The Market Approach relies on the principle of “willing buyer, willing seller” and requires that the amount obtainable from the sale of the asset is determined as if in an arm’s length transaction. The Market Approach requires comparison with relatively recent transactions and valuations of assets that have similar characteristics to those of the asset being valued. Venmyn maintains a comprehensive database of recent transactions, valuations and market capitalisations of mineral companies around the world. The data is then processed and categorised to form the Venmyn Commodity Valuation Curves. The Venmyn Commodity Valuation Curves plots the value per unit of Mineralisation against the Mineral Resource classification based on predetermined parameters. Utilising the curves, Venmyn can identify similar assets as the one being evaluated, and benchmark the valuation to market trends. Owing to the uniqueness and complexity of rare earth projects, Venmyn did not construct a Commodity Valuation Curve for market comparative valuation of the Zandkopsdrift Project, but rather identified a REE project owned by a publicly traded company that exhibits similar characteristics. The Lynas Corporation’s Mount Weld project was identified from the Venmyn database as the most comparable REE project owing to the similar mineralisation style, deposit type and relative contributions of the individual REEs to the overall mineralisation. Lynas Corporation also concentrates and separates the REEs as is proposed in the Zandkopsdrift Project PEA (Section 1.4). Venmyn calculated the value per unit of mineralisation for each category of the Lynas Corporation’s Mount Weld Mineral Resource estimate using the volume weighted share price to determine the EV and the weighting of the REO tonnes for each Mineral Resource category. The results of this analysis is summarised in Table 34. The composition of REEs in the Zandkopsdrift Project yields a basket price approximately 13% higher than that of the Mount Weld project. Venmyn therefore considers it appropriate to choose a mid-point ‘value per unit of mineralisation’ which is 13% higher than the value estimated for Mount Weld. Furthermore, due to the paucity of relevant comparable projects and information available in the public domain, Venmyn applied a relatively wide range of 20% above and below the selected mid-point value.

Table 34 : Value per Unit Mineralisation for Mount Weld

DESCRIPTION UNIT VALUE Shares Outstanding (millions) 1,713.85 Share Price (USD) 1.57 Enterprise Value (USDm) 2,697 Total Mineral Resource (tonnes) 1,409,670 Average Value per Mineral Resource (USD/tonne) 1,913 Estimated Inferred Mineral Resource Value (USD/tonne) 419 Estimated Indicated Mineral Resource Value (USD/tonne) 1,675 Estimated Measured Mineral Resource Value (USD/tonne) 2,932



FIGURE 23


@RISK NPV DISTRIBUTION GRAPH AND SENSITIVITIES FOR THE ZANDKOPSDRIFT PROJECT


Source: Venmyn 2012

SPIDER GRAPH OF PROJECT NPV

PROJECT NPV VS REO BASKET PRICE

PROJECT NPV DISTRIBUTION GRAPH

Minimum

Maximum

Mean

Std Dev

Values

Filtered

-881.48

11,257.55

3,254.12

1,569.44

16922/250000

233078

Project NPV

X Mean

X Std Dev

Y Mean

Y Std Dev

Corr. (Pearson)

Corr. (Rank)

0.97709

.018635

3,254.12

1,569.44

0.8035

0.8229

Combined / $m NPVvs REO Basket Price (99% purity)

+

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

Ou

tpu

t % C

ha

ng

e

Input % Change

Grade

Float Recoveries

Acid Crack Recoveries

HCL Leach Recoveries

ROE Basket Price

Concentrator Plant Opex

Separation Plant Capex


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Other factors taken into account in determining the value range for the Zandkopsdrift Project include:-

a TREO content of 0.74Mt Indicated Mineral Resource and 0.21Mt Inferred Mineral Resource at a cut-off grade of 1%;

the proposed open cast mining method; and

a REO basket price of USD58.23/kg.

Considering all the factors discussed above, the value per unit mineralisation, market comparative results and value range attributable to the Zandkopsdrift Project are summarised in Table 35 and Table 36:-

Table 35 : Value per Unit Mineralisation for Zandkopsdrift Project

MINERAL RESOURCE "FAIR" UPPER LOWER CATEGORY (USD/t) (USD/t) (USD/t)

Indicated 1,892 2,270 1,513 Inferred 473 568 378 AVERAGE 1,577 1,892 1,261

Table 36 : Market Comparative Valuation Results for the Zandkopsdrift Project

MINERAL RESOURCE TREO "FAIR" UPPER LOWER

CATEGORY (mt) (USDm) (USDm) (USDm)

Indicated 0.74 1,395 1,674 1,116

Inferred 0.21 100 120 80 MINERAL RESOURCE 0.95 1,495 1,794 1,196

Source : Venmyn 2011 Valuation on a 100% Project basis

22.3 Concluding Remarks on the Valuation Results

The Zandkopsdrift Project has been valued using the Market Approach and the Cash Flow Approach. Given the paucity of transactions for projects comparable to Zandkopsdrift Venmyn considers the Cash Flow valuation results to be the most representative of the Project value and therefore selected the valuation results for the Cash Flow Approach as the Project value. A valuation range of USD3,007m to USD4,454m was determined with a preferred value of USD3,646m. The payback period of the Project is estimated at 2 years from start of production with a post-tax IRR of 52.48%. The Net Present Value (“NPV”) of the Project at a discount rate of 11% becomes negative at an REO basket price of USD23.23/kg (a discount of 58% to the projected Zandkopsdrift basket price. The operating cash flow breakeven point is reached at a REO basket price of USD13.08/kg, which is approximately a 78% discount to the projected Zandkopsdrift basket price. The most sensitive parameters in the model are the REO basket price and the REO grade. The most sensitive cost parameters are the Saldanha Separation Plant opex and capex. In the iterations that yielded negative NPVs, low income factors due to low REO price and high cost factors worked in parallel to depress the NPV. Venmyn calculated that the current contingency of 15% needs to increase to 174% to yield a zero NPV, keeping revenue unchanged. These results from the sensitivity analysis demonstrate the robustness of the Zandkopsdrift Project.

23 ADJACENT PROPERTIES (NI 23)

No REE Prospecting Rights or exploration projects are in the vicinity or adjacent to the Zandkopsdrift Mine or the Zandkopsdrift Prospect.

24 OTHER RELEVANT DATA (NI 24)

24.1 Risk Analysis

Benchmark Risk Advisory, a division of QuantiMetrics (Pty) Ltd was requested by Frontier to carry out a scoping risk assessment on the Zandkopsdrift Project. The objective of the risk assessment was to determine the highest risks to the Zandkopsdrift Project at the current PEA stage, and to ascertain the most effective and efficient manner to minimise and mitigate these risks. The KnowRisk® risk


83

management software product, complying with the AS/NZS 4360 Standard, was used to document the identified risks and their control measures. The review identified 56 risks overall with 24 Intolerably High or Very High Inherent risk ratings. The majority of these were reviewed and preventive and corrective control measures identified to mitigate each. After the application of preventative and corrective measures, only a single risk sustained a residual rating of High and related to the geological interpretation of the Zandkopsdrift carbonatite. This risk does not impact on the the overall Mineral Resource estimate, for which the risk was considered to be minimal. The geological interpretation risk is expected to be substantially reduced in the planned PFS when the remaining results from the 2011 drilling programmes are incorporated into the geological and Mineral Resource block models. All other inherent risks were exhibited as Tolerable, Low or Very Low risk factors. The proposed control measures would have to be approved and implemented before the residual risk rating is applicable but in most cases the control measures required were existing or, in the process of being developed. No abnormal control measures were required. Based on the Residual Risk rating, the Zandkopsdrift Project is considered to be a low risk Project.

25 INTERPRETATION AND CONCLUSIONS (NI 25)

The PEA on the Zandkopsdrift Project was commissioned by Frontier with the purpose of defining and quantifying the technical and economic merits of the Project. The PEA comprised technical and costing studies by independent specialist consultants including: Mineral Resource estimation; mine geotechnical assessment and mine design; metallurgical studies and process design; access and infrastructure design; TDF design; geo-hydrological studies and design of a desalination plant for process water supply; alternative and bulk power supply investigation; environmental assessment including archaeological, botanical, human health risk, air quality and radiological assessment; mine closure and rehabilitation estimation; legal permitting opinion; as well as independent opinions on tax and pricing. The results and conclusions of these studies are summarised as follows:-

the Zandkopsdrift Project comprises three separate but integral components, namely:-

o the Zandkopsdrift Prospect and Mine, which includes an open cast mine and the Process Plant. The Zandkopsdrift Mine, operated by Sedex, is supplied with process water from a seawater desalination plant located on the west coast of South Africa, 35km from the Mine;

o a trading and marketing company, Tradeco; and

o a REE separation plant located at Saldanha Bay, operated by Sepco.

The overall PEA concept was developed and reported on these components which have been integrated into the final financial model to provide an overview of the economic merits of the Project;

the Zandkopsdrift Prospect comprises a Prospecting Right (PR 869/2007 PR) over a total area of 58,862ha in the extreme southwest portion of the Northern Cape Province of South Africa. The right was granted to Sedex on the 5th September 2007 for a period of 5 years, until 4th September 2012. Sedex has fulfilled its obligation to a minimum exploration expenditure of USD420,000 and has the right to renew the Prospecting Right for an additional three years, subject to compliance with the requirements for renewal set out in the MPRDA. A renewal application for the Prospecting Right was submitted in February 2012. Independent legal opinion confirms that that there is no litigation or potential litigation which could affect the surface rights of Sedex within the Prospecting Right;

Sedex has complied with the BEE equity ownership requirements of 26%, as laid down by the South African Mining Charter and MPRDA. The Sedex BEE shareholding comprises a 21% interest owned by the Namaqualand Empowerment Trust, and 5% by Mr M van Zyl. In terms of the Sedex shareholders agreement, the BEE shareholders will receive a free carried interest in the Zandkopsdrift Project until the completion of a DFS, at which point the Namaqualand Empowerment Trust will be required to pay market value for its 21% interest in Zandkopsdrift, Project thereby giving Frontier a current effective 95% economic interest in the Zandkopsdrift Project until such payment is concluded;

Frontier holds effective 100% interests in Tradeco and the Saldanha Separation Plant. The Desalination Plant will be wholly owned by Sedex;

Frontier has concluded a definitive agreement with KORES, a Korean government owned company, to form a strategic partnership to accelerate the development of the Zandkopsdrift Project. The agreement involves investments in both the Zandkopsdrift Project and Frontier combined with an off-take arrangement for up to 31% of future production from the Zandkopsdrift Project;

the Zandkopsdrift Prospect is located within the Namaqua-Natal metamorphic belt, an arcuate belt bordering the southern and western margins of the Southern African Archaean Kaapvaal craton. The


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Zandkopsdrift REE enriched carbonatite intrusion is located on the northern margins of the Koegel Fontein Complex, a Cretaceous aged alkaline complex intruded into basement Bushmanland granite-gneiss terrane;

the Zandkopsdrift carbonatite is ovoid in shape (1.3km x 900m in dimension) and forms a low positive feature (Swartkop Hill) in the southeastern portion of the Prospecting Right. The primary carbonatite comprises vertical intrusions of brecciated hypabyssal carbonatite and glimmerite. The primary REE mineralisation at Zandkopsdrift is considered to be associated with residual/late stage fluids, in which the incompatible REEs were progressively concentrated as the various carbonatite phases crystallised. The REEs are theoretically known to concentrate into the late stage ferruginous fluids and current exploration gives some indication that such late stage, high REE grade dykes are present at Zandkopsdrift. The carbonatite complex has been interpreted as a deeply weathered, root zone of a carbonatite type volcano;

the multiple phase carbonatite intrusion is extensively altered at surface and although the depth of the weathered profile is highly variable, the average depth to fresh carbonatite is 80m. The primary vertical structure, with its vertical facies changes with depth, is overprinted by deep weathering, possible metasomatic processes and supergene REE enrichment in a horizontal modality. The primary REE mineralisation has been enriched in the weathered profile through supergene enrichment processes. A surface cap of limonitic Fe-Mn saprolite comprises one of the principle deposit constituents;

mineralogical studies of Zandkopsdrift carbonatite show that the majority of REE-bearing minerals consist of late stage, secondary supergene, REE-bearing members of the monazite group of minerals, although a number of other minerals such as crandallite and cheralite also occur;

Frontier’s exploration programmes, which began in 2007, were independently designed, monitored and managed by MSA. The programme included ground magnetic and radiometric surveys; RC validation drilling of historic Anglo American drilling (13 vertical boreholes totalling 1,005m); RC drilling programme (61 vertical boreholes totalling 3,414m); metallurgical diamond drilling and sampling (12 vertical diamond drillholes); mineralogical and petrographic studies and specific gravity determinations. Frontier adopted a set of industry standard operating procedures which ensured best practice and the integrity of the data;

the analytical methods adopted for the assay samples and laboratories employed are considered appropriate. Sampling methods, chain of custody procedures, sample preparation procedures and analytical techniques are considered appropriate and compatible with industry standards. MSA concluded that appropriate QA/QC procedures were applied by Frontier and that appropriate remedial action was taken in relation to any analytical issues that were identified. Industry standard practices were followed and the quality of the Frontier database meets NI 43-101 standards and CIM best practice guidelines;

the Mineral Resource estimate for the PEA was conducted by MSA and independently reviewed by Venmyn. A Mineral Resource estimate was undertaken by MSA in 2010 and the 2011 Mineral Resource estimate represents an update which incorporates additional drilling results and consequential refinement of the understanding of the morphology of the carbonatite and mineralisation model. Venmyn has performed selected checks on the data input into the Mineral Resource block model and has interrogated the methodology and assumptions made in the generation of the Mineral Resource estimate. Venmyn is satisfied that the Mineral Resource estimate is globally unbiased and fairly reflects the deposit;

the geological and mineralisation model is sufficiently understood at this stage to permit the generation of a mineralised envelope for the purposes of the PEA. Lithologies within the mineralised envelope were not modelled and a TREO grade-only approach was adopted. The Mineral Resource estimate at presented in Table 37 for the selected economic cut-off grade of 1.0% TREO and the 2.0% TREO, Central Zone material:-

Table 37 : NI43-101 Compliant Mineral Resource Estimate for Zandkopsdrift (Dec 2011)


TONNAGE (Mt)

GRADE TREO (%)

CONTAINED TREO (t)



Source: MSA 2011 Mineral Resources reported inclusive of Mineral Reserves (no Mineral Reserves have been reported for the Zandkopsdrift Project)


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Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability In situ estimation with no geological losses estimated Frontier 95% current effective interest attributable

the Mineral Resources have not been converted to Mineral Reserves and this conversion will be an integral component of the planned PFS;

the mine design for the Zandkopsdrift carbonatite consists of a conventional open pit with a single entry access ramp. The carbonatite is highly weathered and consequently excavation will consist of a mix of free digging, ripping and conventional drill and blasting methods. The geotechnical study indicates that mining should progress from surface, from the southwest towards the limonitic Fe-Mn saprolite, at bench heights of 6m, to an overall pit depth of 70m to 90m below surface. The positive topography of a portion of the deposit means that portions of the mineralisation will be mined before it will be necessary to establish a ramp on the footwall. The open pit will extend below the regional water table at 25m to 45m below surface and will require de-watering;

the mineralisation is classified into several categories for the mine design purposes, namely; Central Zone material with in situ TREO contents of >2.0%, which will form the RoM material stream to the Process Plant; Outer Zone material, with TREO contents ranging between 1.0% and 2.0% which represents possible future RoM material but which for the purposes of the PEA, will be mined, stockpiled close to the Process Plant, and not treated at present; and Low Grade Zone material with TREO contents of <1.0% TREO, which will be considered waste material. The PEA mine design focussed only on developing the Central Zone material;

the pit optimisation defined a LoM of 20 years for 19.5Mt RoM with 563,000t of contained TREO. The mining schedule was designed to permit an output of 20,000tpa of SREOs at an average metallurgical recovery of 67% from the Central Zone material only. An approximate steady state mining production rate of 1.0Mtpa of Central Zone material was assumed to be reached in Year 2 with TREO mining losses of 7.5%. As the mine matures, higher levels of waste must be mined and the waste to ore ratio increases as the mining sequence accesses the deeper blocks. The LoM could be extended by the inclusion of material from the Outer Zone into the mining schedule;

the mine design requires a capex of USD2.8m;

the mining of the Zandkopsdrift carbonatite is to be undertaken with conventional open pit mining equipment. The average mining cost per RoM tonne is USD16.5/t RoM, including stripping of waste, Outer Zone and Low Grade material;

extensive metallurgical testwork at SGS on a composite sample of Central Zone material has been completed and further testwork is ongoing. Results to date indicate the following:-

o desliming results have indicated that the fines at <15μm contain 40% of the REEs recovered to a 26% mass fraction;

o the initial phase of flotation testwork results indicate that without further cleaning, at least 60% REE recoveries can be achieved to 40% of the feed material mass by rougher flotation;

o the initial un-optimised cracking tests on the un-beneficiated material indicate that baseline extractions of 88% at acid consumptions of between 600kg/t and 750kg/t are possible; and

o after acid cracking the mineralogy is no longer relevant to the separation process. For the purpose of the PEA the Saldanha Separation Plant is expected to return recoveries of 99%. Testwork confirming this assumption is planned for the next stage of the Project.

two basic flow sheets were demonstrated to be technically feasible by the SGS testwork. The two processes are:-

the ‘Flotation and Cracking’ option, where, following size reduction of the RoM material, the slimes fraction is removed prior to flotation of the remaining fraction. The slimes are reintroduced to the coarse rougher concentrate, before undergoing acid cracking of the mixture with concentrated (98%) sulphuric acid; and

the ‘Whole-Ore Cracking’ option, where, following size reduction of the RoM material, the material undergoes acid cracking with concentrated sulphuric acid without prior flotation concentration.

The ‘Flotation and Cracking’ option has the advantage of a lower total acid requirement to achieve the required TREO, with resultant logistical and environmental residue disposal benefits. The overall TREO recovery of the ‘Flotation and cracking’ option is 67%.


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The ‘Whole-Ore Cracking’ option has the advantage of greater REE overall extraction (88.21%) and a consequential lower annual RoM tonnage target to achieve the target 20,000tpa separated TREO;

the Zandkopsdrift Mine infrastructure will comprise several components namely, an open cast mine, a Process Plant including flotation, acid leaching and an onsite Sulphuric Acid Production Plant. The Concentrator Plant design includes a front end crushing, screening, and washing section with beneficiation of the deslimed fraction through a three stage flotation circuit. The slimes fraction is combined with the rougher concentrate and proceeds to the Acid Cracking Section. In the Acid Cracking Section, concentrated sulphuric acid is mixed with the feed and the acidified concentrate is baked in a rotary kiln to decompose the rare earth minerals. The roasted concentrate is subsequently water leached and REE carbonates precipitated as MREC and finally dried. Thorium, uranium and iron are precipitated for removal to the lined TDF. The uranium may in future be removed by solvent extraction for sale as a separate by-product;

the final process flow design selected for the PEA was based on the ‘Flotation and Cracking’ option with a cracking section sized to handle the required throughput for the ‘Whole-Ore Cracking’ option, so that the process design remains sufficiently flexible for either process option to be ultimately adopted. The operating cost for this process route is estimated at USD98.03/t RoM or USD5.06/kg of TREO produced;

the Process Plant, Sulphuric Acid Production Plant and associated plant and service infrastructure (including land purchase, road upgrade and SLP provision) requires a capex of USD277m;

the Saldanha Separation Plant and associated plant and service infrastructure requires a capex of USD627m;

the total 10MW (12.5MVA) bulk power requirement of the Zandkopsdrift Mine will be supplied by co-generation from the exothermic Sulphuric Acid Production Plant. The power supply to the Saldanha Separation Plant will be supplied by Eskom at a cost of USD0.9m. The Desalination Plant will be supplied by diesel generated power and the booster pumps at Kotzesrus will be diesel driven;

total water requirements for the Zandkopsdrift Mine will be supplied from a desalination plant located on the west coast and demineralised water will be transported by pipe through Kotzesrus to the mine at a total capex of USD12.4m. The possibility exists that a portion of the Zandkopsdrift Mine water requirements can be sourced from groundwater, which will be investigated during a ground water drilling campaign scheduled to commence during the first quarter of 2012;

the Zandkopsdrift TDF is designed for the expected initial LoM of 20 years, with a total capacity of 1.0Mt of dry tailings products per annum and a rate of rise of 1m/yr. The Zandkopsdrift Mine metallurgical extraction processes are complex and will result in the production of two tailings streams, one of which is expected to be contaminated with thorium, uranium and high levels of salts and metals and referred to as the contaminated tailings and the other consisting of uncontaminated tailings;

the TDF is designed as a concentric structure with a lined inner compartment for the contaminated tailings and an outer structure for the uncontaminated tailings. Overall the TDF would be considered a Low Hazard facility. The estimated capital cost for the TDF is USD16.5m and the cost of operating the TDF has been estimated on benchmarked costs for similar facilities at USD19,231/month, with a once off site establishment cost of USD32,000;

for the purposes of the price forecasts in the PEA, the Zandkopsdrift basket price was estimated at USD58.23/kg TREO, using the historic three year average of the China FoB prices (USD64/kg) and the mid-point of the 2015 forecast prices range by Roskill(USD52/kg);

Preliminary Environmental Assessments of the Zandkopsdrift Mine and the Saldanha Bay Separation Plant were completed and included several environmental specialist fatal flaw analyses and impact assessments in terms of botany, archaeology, air quality, human health risk and radiology impact.

An independent legal opinion assessed the environmental legal requirements for the Zandkopsdrift Project and concluded that, whilst the Zandkopsdrift Project needs to comply with a number of legislative requirements, no legal fatal flaw was identified.

The pathways of potential radiation exposure were identified but the potential radiological impact to members of the public in the vicinity of the Zandkopsdrift Mine is not expected to be above the public dose limits of 1mSv per annum. The environmental impacts associated with the implementation of the Project can be effectively avoided or mitigated and environmental management throughout the Project phases will mean that the environmental risks identified become negligible.

The total financial liability for the closure of Zandkopsdrift Project without progressive rehabilitation is estimated to be USD10.1m. If the recommended progressive rehabilitation is performed, then the remainder of the total liability required at closure is estimated at USD5.5m.


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An initial rehabilitation fund contribution is estimated to be USD1.9m and the concurrent rehabilitation contribution to the Rehabilitation Fund is estimated at USD0.3m;

the total capex (including contingencies) of USD1,079m for the Zandkopsdrift Project is estimated from the capex requirements for the Zandkopsdrift Mine, related infrastructure and services, land purchases, mine closure and rehabilitation provision, upgrading of local district roads, Social and Labour Plan provision, the Saldanha Separation Plant and related infrastructure and services;

the average operational expenditure (opex) for the Zandkopsdrift Project is USD13.08/kg saleable REE (USD253.39/t RoM) which is determined from the opex of each Project component. The opex for the Zandkopsdrift Mine averages USD5.94/kg saleable REE (USD132.67/t RoM) over the LoM. The opex for the Saldanha Separation plant (Sepco) averages USD7.03/kg saleable REE (USD157.97/t RoM) and the opex for Tradeco averages USD0.03/kg saleable REE (USD0.66/t RoM);

the Zandkopsdrift Project has been independently valued using the Market and the Cash Flow valuation approaches. Venmyn selected the results of the Cash Flow valuation as being the most representative of the Project value. A valuation range of USD3,007m to USD4,454m was determined with a preferred value of USD3,646m. The Project payback period is estimated at 2 years from start of production, with a post-tax IRR of 52.48%;

the point below which the NPV becomes negative is at an REO basket price of USD23.23/kg ( a discount of 58% to the projected Zandkopsdrift basket price). Cash flow breakeven is reached at an REO basket price of USD13.08 /kg (a discount of 78% to the projected Zandkopsdrift basket price). Sensitivity analysis demonstrates that negative NPVs are the result of low income factors due to low REO price and high cost factors which work in parallel to depress the NPV. Venmyn concluded from the sensitivity analysis that the Zandkopsdrift Project is very robust;

the PEA on the Zandkopsdrift Project includes approximately 27% of the total Mineral Resource in the Inferred category. The inclusion of such Inferred Mineral Resources in the PEA is permissible in accordance with Canadian National Instrument 43-101 Section 2.3 (3)(a), however it must be noted that the Inferred Mineral Resources are considered too speculative geologically to have economic considerations applied to them that would enable them to be categorised as Mineral Reserves and there is no certainty that the preliminary economic assessment will be realised; and

an independent risk assessment of the Zandkopsdrift Project identified 56 risks overall with 24 Intolerably High or Very High Inherent risk ratings. After the application of preventative and corrective measures, only a single risk sustained a residual high rating and this related to the geological interpretation of the Zandkopsdrift carbonatite. This risk does not impact on the the overall Mineral Resource estimate, for which the risk was considered to be minimal. The geological interpretation risk is expected to be substantially reduced in the planned PFS when the results of the additional drilling programmes completed in late 2011 are incorporated into the geological and Mineral Resource block models. All other inherent risks were exhibited as tolerable, low or very low risk factors and based on the residual risk rating, the Zandkopsdrift Project is concluded to be a low risk project.

26 CONCLUDING REMARKS AND RECOMMENDATIONS (NI 26)

The results of the PEA conducted on the Zandkopsdrift Project indicate that a viable open pit mining operation can be undertaken to produce 20,000tpa SREOs for a LoM of 20 years. The required infrastructure in terms of power and water can be adequately provided, for the most part independently of national supply. Viable process design options have been identified and participation and off-take agreements concluded. Potential environmental risks have been identified and can be managed or successfully mitigated. No environmental or legal permitting fatal flaws have been identified. The current mine design is restricted to the mineralisation at a >2.0% TREO cut-off grade and considerable upside potential exists for the Project in terms of treating the material with TREO grades between 1.0% and 2.0% TREO which for the purposes of the PEA was either stockpiled on surface or left in-situ. Exploration efforts have also identified satellite bodies to the main carbonatite which represent further upside potential for the Project. Venmyn concludes that the PEA has been conducted well within industry and National Instrument standards and comprehensively examines at a PEA accuracy level, all the necessary components of the Project. Venmyn considers that the costs and price estimates are realistically conservative and that the Zandkopsdrift Project is economically robust. The REO basket price would have to fall to half of its current value and the costs increase considerably, to produce a negative NPV. Independent risk assessment confirms that the Project is low risk, and given these conclusions Venmyn considers that further analysis is warranted and recommends that the proposed PFS be implemented.


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The PFS will include the various component studies summarised in Table 38 and the estimated costs for the programme are also presented in the Table 38. A decision to proceed onto a DFS will be contingent upon the successful completion of the PFS.

Table 38 : Estimated Future Costs for the PFS

DESCRIPTION COSTS

(USD) (ZAR) Drilling 576,923 4,500,000 Geotechnical and geological 576,923 4,500,000 Metallurgical Pilot Test Work 1,538,594 12,001,037 Sample Generation 10,769 84,000 Sample Transportation 26,667 208,000 Laboratory Costs (CaOH Crack) 814,682 6,354,518 Laboratory Costs (H2SO4 Crack) 686,477 5,354,519 Mine Design 198,718 1,550,000 Process Plant Design 592,689 4,622,975 Zandkopsdrift 185,897 1,450,000 Saldanha Separation Plant 217,949 1,700,000 HCl plant 112,433 876,975 Sulphur Supply Chain, Warehousing and Logistics study 64,615 504,000 Sulphuric Acid Technology Supplier Investigation 11,795 92,000 Design of Mine Tailings Disposal Facilities 217,949 1,700,000 Groundwater Drilling and Assessment 980,769 7,650,000 Desalination Plant and Sea Water Extraction Design 179,487 1,400,000 Environmental Assessment 884,615 6,900,000 Zandkopsdrift 320,513 2,500,000 Saldanha Separation Plant 358,974 2,800,000 Desalination Plant and Sea Water Extraction Design 205,128 1,600,000 Eskom Feasibility Costs 1,246,282 9,721,000 Zandkopsdrift 850,128 6,631,000 Saldanha Separation Plant 384,615 3,000,000 Consultant's Fee 11,538 90,000 Process Consultants 135,385 1,056,000 Risk Assessment 3,846 30,000 PFS Documentation Review and Overall Report Compilation 89,744 700,000 15% Contingency 893,779 6,971,474 TOTAL 7,538,780 58,802,486

Note: Ongoing metallurgical testwork costs are excluded from the budget since the allocation has been previously committed by the Board of Directors Note: No further drilling costs have been provided for, as the remaining results from the 2011 drilling programmes are expected to be sufficient for the purpose of upgrading the Mineral Resource estimate for the PFS.


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27 REFERENCES (NI 23)

AUTHOR DATE TITLE SOURCE

Aveng Water Aug-11 Pre-Feasibility for the Design, Construction, Installation and Commissioning of a 1.7Mm3pa Sea Water Desalination Plant at Kotzesrus Plant

Aveng Water E1254

Cameron Cross Incorporated

Aug-11 Environmental Authorisation Application Process and Preliminary Legal Requirements Assessment: Zandkopsdrift Project

Cameron Cross Attorneys, www.cameroncross.co.za

Dalbock, K. 2011 Zandkopsdrift Mining Project; Scoping Study Details- Eskom Power Supply

EHL Consulting Engineers (Pty) Ltd

De Beer, C. Aug-11 Geotechnical Assessment as Part of the Mining Scoping Study for the Zandkopsdrift Rare Earth Project Northern Cape, South Africa

Sound Mining Solution (Pty) Ltd SMS/026/11

Derbyshire, J. 2011 Metallurgical Testwork Programme-Zandkopsdrift Rare Earth Deposit, South Africa

MDS Ltd 12 Sept 2011

Frontier Rare Earths

2011 Review of Zandkopsdrift Project to 2010 and Developments in 2011



Mar-11 Developing a World Class Rare Earth Deposit in South Africa



May-11 Zandkopsdrift Carbonatite Complex: Update on Geological and Mineralogical Understanding



2011 Frontier Rare earth and Korea Resources Corporation Sign definitive Strategic Partnership Agreement

http://tmx.quotemedia.com

Hansen, R.N., Vivier, J.P.

Oct-11 Zandkopsdrift Rare Earth Element Mine: Fatal Flaw Analysis and Water Baseline Study

Africa Geo-Environmental Services (Pty) Ltd AS-R-2011-10-04

Harmer, J. 2011 Rare Earth Elements; One Day Symposium Geological Society of South Africa

Havenga, C. Jul-11 Access Routes Logistics Survey Zandkopsdrift Scoping Study

Corli Havenga Transportation Engineers

Helme, N Aug-11 Botanical Fatal Flaws Analysis of Proposed Development Site on Uyekraal 189, near Saldanha, Western Cape

Nick Helme Botanical Surveys

Helme, N Aug-11 Botanical Fatal Flaws Analysis of Proposed Zandkopsdrift Mining Site, South of Garies, Northern Cape near Saldanha, Western Cape

Nick Helme Botanical Surveys

Humpheries, M. 2011 Rare Earth Elements: The global Supply Chain

Congressional Research Report 7-5700. www.crs.gov

Kruger, N. Aug-11 Phase 1 Archaeological Impact assessment Report. Uyekraal 189 Saldanha Municipality, Western Cape Province

Africa Geo-Environmental Services (Pty) Ltd

Louw, J.M.A. Aug-11 Zandkopsdrift Rare Earth Element Minerals: Mine Closure Plan and Estimate of Financial Provision

Africa Geo-Environmental Services (Pty) Ltd ZAN01-R01-20110816

Pocock, G. Jul-11 Veolia Water Desalination Africa Remediation Technologies Pocock, G., Joubert. J.H.B.

Sep-11 Zandkopsdrift Desalination Scoping Study Final Report

Africa Remediation Technologies

Potgieter, N., Blerk, J.

Sep-11 Prospective Human health Risk Assessment for the Zandkopsdrift Rare Earth Minerals Prospecting Area

EnviroSim Consulting AC-2011-A

SGS Canada Inc Aug-11

An Investigation by High definition Mineralogy into the Mineralogical Characterisation of one Composite Sample from the Zandkopsdrift Rare Earth Element Project in South Africa

SGS Canada Inc. 13024-001B

SNC-Lavalin 2011 Zandkopsdrift Scoping Study Report SNC-Lavalin, Project 150095, Report number 150095-0000-30RA-001

Tabacks 2011 Title Held by Sedex Minerals (Pty) Ltd Tabaks Corporate Law Advisors

Van Blerk, J.J. Oct-11 Zandkopsdrift Fatal Flaw Assessment: Radiological Impact Assessment

Aquisim Consulting (Pty) Ltd

Venter, M., Hall, M., Siegfried, P.

Oct-11

Updated NI43-101 Mineral Resource Estimate and Technical Report on the Zandkopsdrift Rare Earth Element Project, located in the Republic of South Africa

The MSA Group J2052

Venter, M., Hall, M., Siegfried, P.

Oct-10 Amended NI43-101 Mineral Resource Estimate and Technical Report on the Zandkopsdrift Rare Earth Element Project in the Republic of South Africa

The MSA Group J1580

Vivier, C., Stolp, L. 2011 Preliminary Environmental Assessment: Zandkopsdrift Rare Earth element Project

Africa Geo-Environmental Services (Pty) Ltd , AS-R-2011-07-15

Wiid, G. 2011 Zandkopsdrift Rare Earth Element Project- Preliminary Economic Assessment- Design of the Tailing Disposal Facility

Epoch Resources (Pty) Ltd Report 000-149-01


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28 DATE AND SIGNATURE PAGE

This report titled: “A Preliminary Economic Assessment in the form of an Independent Technical Report on Frontier Rare Earths Limited’s Zandkopsdrift Rare Earths Project, Located in the Northern Cape Province of South Africa”, was prepared on behalf of Frontier. The report has an effective date of 15th December 2011, is dated 10th March 2012, and was prepared and signed by the following authors:- NAME, QUALIFICATIONS, ASSOCIATIONS, DESIGNATION, COMPANY, DATE AND SIGNATURE Item: 1 to 5, and 19 to 28 (Sections 1 to 4, 18 and 20 to 28) Dated at Johannesburg, South Africa Fiona Harper 15th December 2011 B.Sc.Hons (Geol.), Pr Sci Nat, MGSSA

Minerals Industry Analyst Venmyn

Item: 6 to 12 (Sections 5 to 11) Dated at Johannesburg, South Africa Pete Siegfried 15th December 2011 B.Sc.Hons (Geol), MSc, MAusIMM

Independent Consulting Geologist GeoAfrica Prospecting Services

Item: 6 to 12 and 14 (Sections 5 to 11 and 13) Dated at Johannesburg, South Africa Mike Venter 15th December 2011 B.Sc.Hons (Geol), Pr Sci Nat

Regional Consulting Geologist MSA

Dated at Johannesburg, South Africa Mike Hall 15th December 2011 B.Sc.Hons (Mining Geol), MBA, Pr Sci Nat

Resource Consultant MSA

Item 13 (Section 12) Dated at Johannesburg, South Africa James Brown 15th December 2011 MASc, Pr. Eng

Snr Metallurgist SGS Mineral Services, Canada

Item 15 , 16 and 21 (Sections 14, 15 and 21) Dated at Johannesburg, South Africa Graham Stripp 15th December 2011 Ph.D, M.Sc, B.Sc Mining Eng (Hons), FSAIMM

Snr Mining Engineer Sound Mining Solution


91

NAME, QUALIFICATIONS, ASSOCIATIONS, DESIGNATION, COMPANY, DATE AND SIGNATURE Item: 17, 18, 21 (Sections 16.2, 16.3, 17.1, to 17.3, 17.7 and 21) Dated at Johannesburg, South Africa Craig de Jager 15th December 2011 B.Sc Civil Eng.(Hons) B.Comm Financial Man.

Pr. Eng Project Manager SNC-Lavalin (South Africa)

Dated at Johannesburg, South Africa Jansen Scheepers 15th December 2011 B. Eng (Bachelor of Engineering) Pr. Eng

Senior Process EngineerSNC-Lavalin (South Africa)

Item 18, 20, 21 Section 17.4, 19 and 21) Dated at Johannesburg, South Africa Koos Vivier 15th December 2011 Ph.D Environmental Management

M.Sc, B.Sc Geohydrology (Hons), Pr Sci Nat Snr Consulting Geohydrlogist AGES South Africa

Dated at Johannesburg, South Africa Michael Grobler 15th December 2011 B.Sc Conservation Ecology (Hons), Pr Sci Nat

Environmentalist AGES South Africa

Item 18, 21 (Sections 17.6 and 21) Dated at Johannesburg, South Africa Guy Wiid 15th December 2011 BSc, MSc Eng (Civil), Pr.Eng.

Snr. Civil & Environmental Engineer Epoch Resources


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Appendix 1 : Qualified Persons Certificates

CERTIFICATE OF QUALIFIED PERSON AND CONSENT TO FILE

I, Jansen Scheepers, do hereby certify that:

1. I am a Senior Process Engineer for:

SNC-Lavalin (Pty) Ltd.

Block C, Cullinan Place, 2 Cullinan Close, Morningside, P.O Box 784593 Sandton 2146

South Africa

+27 11 535 4900

+27 11 535 4585

2. I graduated with a B.Eng Extractive Metallurgy Degree from the University of Pretoria in 2000. In addition I have also obtained a Master of Business Administration degree from the University of Stellenbosch Business School in 2008.

3. I am a Professional Engineer with the Engineering Council of South Africa (20080185), and have been a member in good standing since 2008.

4. I have worked in the mining and metallurgy field for the last 12 years since my graduation. I have worked in operations for 5 years as plant and technical metallurgist in different commodities, and as process engineer at different levels in the engineering design field for a further 7 years.

5. I have read the definition of “qualified person” set out in National Instrument 43-101 (NI 43-101) and certify that by reason of my education, affiliation with a professional association (as defined in NI 43-101) and past relevant work experience, I fulfil the requirements to be a “qualified person” for the purposes of NI 43-101.

6. I am responsible for the preparation of Sections 17.1 to 17.3 and 21 of the technical report entitled:

“A Preliminary Economic Assessment in the Form of an Independent Technical Report on Frontier Rare Earths Limited’s Zandkopsdrift Rare Earths Project, Located in the Northern Cape Province of South Africa”, having and effective date of 15 December 2011 (the “Technical Report”) relating to the Zandkopsdrift Prospecting Right property.

7. I have not visited the Zandkopsdrift Project site.

8. I have not had prior involvement with the property that is the subject of this Technical Report.

9. To the best of my knowledge, information and belief as of the amended date hereof, the Technical Report contains all the scientific and technical information that is required to be disclosed to make the Technical Report not misleading.

10. I am independent of the issuer applying all of the tests in Section 1.4 of National Instrument 43-101.

11. I have read National Instrument 43-101 and Form 43-101F1, and the Technical Report has been prepared in compliance with that Instrument and Form.

12. I consent to the public filing of the Technical Report or extracts from, or a summary of, the Technical Report with any stock exchange and other regulatory authority and any publication by them for regulatory purposes, including electronic publication in the public company files on their websites accessible by the public, of the Technical Report.

Dated this 28 March 2012,

Jansen Scheepers


I, Andrew Neil Clay, do hereby certify that:-

1. I am the Managing Director of Venmyn Rand (Pty) Ltd

First Floor, Block G Rochester Place 173 Rivonia Road Sandton. 2146 South Africa

2. I am a graduate in Geology and a Bachelor of Science from University College Cardiff in 1976.

3. I am a member/fellow of the following professional associations:-

CLASS PROFESSIONAL SOCIETY YEAR OF

REGISTRATION Member Canadian Institute of Mining, Metallurgy and Petroleum 2006 Advisor JSE Limited Listings Advisory Committee 2005 Associate Member

American Association of Petroleum Geologists 2005

Member South African Institute of Directors 2004 Fellow Geological Society of South Africa 2003 Member American Institute of Mineral Appraisers 2002 Member South African Institute of Mining and Metallurgy 1998 Fellow Australasian Institute of Mining and Metallurgy 1994 Member Natural Scientist Institute of South Africa 1988 Member Investment Analysts Society of South Africa 1990

4. I have practiced my profession continuously since graduation;

5. I have read the definition of ‘Qualified Person’ as set out in NI43-101 and certify that by reason of my education and affiliation with a professional association (as defined in NI43-101), I fulfill the requirements to be a ‘Qualified Person’ for the purposes of NI43-101;

6. I am responsible for Sections 1 to 5, 17.5, 17.8, 20 to 28 of the Technical Report entitled “A Preliminary Economic Assessment in the Form of an Independent Technical Report on Frontier Rare Earths Limited’s Zandkopsdrift Rare Earths Project, Located in the Northern Cape Province of South Africa”, having and effective date of 15th December 2011 (the “Technical Report”) relating to the Zandkopsdrift Prospecting Right property.

7. I have not visited the Zandkopsdrift Project.






Dated this 15th December 2011 at Johannesburg, South Africa.

ANDREW NEIL CLAY M.Sc. (Geol.), M.Sc. (Min. Eng.), Dip. Bus. M. Pr Sci Nat, MSAIMM, FAusIMM, FGSSA, MAIMA, M.Inst.D., AAPG MANAGING DIRECTOR


I, Craig Michael de Jager, do hereby certify that:

1. I am a Project Manager for:

SNC-Lavalin (Pty) Ltd.

Block C, Cullinan Place, 2 Cullinan Close, Morningside, P.O Box 784593 Sandton 2146

South Africa

+27 11 535 4900

+27 11 535 4980

2. I graduated with a BSc Civil Engineering Degree (Honours) from the University of the Witwatersrand in 1995. In addition I have also obtained a National Diploma in Surveying from the Cape Peninsula University of Technology in 1990 and a BCom Specialisation in Financial Management from the University of South Africa in 2004.

3. I am a Professional Engineer with the Engineering Council of South Africa (20010250), and have been a member in good standing since 2001.

4. I have worked as a engineer and a project manager for a total of 16 years since my graduation.


6. I am responsible for the preparation of Sections 17.1 to 17.3 and 21 of the technical report entitled:


7. My most recent visit to the Zandkopsdrift Project was on 17th May 2011.






Dated this 15 December 2011,

Craig Michael de Jager


I, Fiona Harper, Pr. Sci. Nat (400017/08) do hereby certify that:- 1. I am a Senior Minerals Industry Advisor of Venmyn Rand (Pty) Ltd

First Floor, Block G Rochester Place 173 Rivonia Road Sandton 2146 South Africa Telephone: +27 11 783 9903 Fax: +27 11 783 9953

2. I graduated with a B.Sc.Hons (Geology) degree from the University of the Witwatersrand in 1977;

3. I am a member/fellow of the following professional associations:-

CLASS PROFESSIONAL SOCIETY YEAR OF

REGISTRATION

Member Geological Society of South Africa 2007

Member South African Council for Natural Scientific Professions (400017/08)

2008

4. I have practiced my profession from 1977 to 1984 and resumed in 2006;

5. I have read the definition of ‘Qualified Person’ as set out in NI43-101 and certify that by reason of my education and affiliation with a professional association (as defined in NI43-101), I fulfill the requirements to be a ‘Qualified Person’ for the purposes of NI43-101;

6. I am responsible for Sections 1 to 5, 17.5, 17.8, 20 to 28 of the Technical Report entitled “A Preliminary Economic Assessment in the Form of an Independent Technical Report on Frontier Rare Earths Limited’s Zandkopsdrift Rare Earths Project, Located in the Northern Cape Province of South Africa”, having and effective date of 15th December 2011 (the “Technical Report”) relating to the Zandkopsdrift Prospecting Right property.

7. My most recent visit to the Zandkopsdrift Project was on 17th May 2011






Dated this 15th December 2011,

FIONA JANE HARPER B.Sc.Hons (Geol.) Pr Sci Nat ; MGSSA MINERALS INDUSTRY ADVISOR


I, Graham Peter Stripp, do hereby certify that:

1. I am a Mining Engineer for:

Sound Mining Solution (Pty) Limited

DavWal Square, 2a Fifth Avenue, Rivonia, 2128, South Africa , PO Box 97194, Petervale, 2151.

South Africa

Telephone: +27 (0)11 234 7152

Facsimile: +27 (0) 11 234 8912

2. I graduated with a B.Sc (Hons) Mining Engineering from University College Cardiff, Wales in 1983. In addition, I have also obtained an M.Sc from the University of Newcastle upon Tyne, England in 1985 and a PhD from the University of the Witwatersrand, South Africa in 1989.

3. I am a Fellow of the South African Institute of Mining and Metallurgy (Registration Number 702472) and have been a member in good standing since March 2003.

4. I have worked as a mining engineer for a total of 23 years since my graduation.


6. I am responsible for the preparation of Sections 14,15 and 21 of the technical report entitled:


7. My most recent visit to the Zandkopsdrift Project was on 12 October 2012.






Dated this 15December 2011,

GRAHAM PETER STRIPP

Physical Address

Postal Address Telephone Facsimile

Web Address Company Registration

Directors Associate Consultant

Building 22A, The Woodlands, Woodlands Drive, Woodmead, 2148, Johannesburg, South Africa

PO Box 6, The Woodland, 2080, South Africa +27 (11) 656 0380/1

+27 (11) 502 3657 www.epochresources.co.za

Epoch Resources (Pty) Ltd, No 2005/007908/07 GJ Wiid, G Papageorgiou, A Savvas, SJP Coetzee

Prof G Heymann

Project No: 000-149 File Reference: l_000-149_zandkop.doc


I, Guy John Wiid, do hereby certify that:

1. I am a Professional Engineer for:

Epoch Resources (Pty) Ltd

Building 22A, The Woodlands,

Woodmead, 2080

Johannesburg, South Africa

Tel : +27 (11) 656 0380/1

Fax : +27 (11) 802 3654

2. I graduated with a BSc Eng (Civil) from The University of the Witwatersrand in 1988. In addition I have also obtained an MSc Eng (Civil)from the University of the Witwatersrand in 1995

3. I am a Professional Engineer registered with the Engineering Council of South Africa (ECSA) (Registration No. 940269), and have been a member in good standing since 1994

4. I have worked as an engineer in the fields of mining waste management and mine closure [for a total of 22 years since my graduation.


6. I am responsible for the preparation of Section 17.6 and portions of Section 21 of the technical report entitled:

e p o c h r e s o u r c e s ( p t y ) l t d Page 2

Project No: 000-149 Document Status: R0

Epoch Resources (Pty) Ltd Certificate Of Qualified Person

December 2011


7. My most recent visit to the Zandkopsdrift Project was on the 17th of May 2011.







Guy John Wiid


I, James Brown, do hereby certify that:

1. I am a Senior Metallurgist for:

SGS Canada Inc

PO Box 4300, 185 Concession Street,

Lakefield ON, K0L 2H0

Canada

1-705-652-2000 (phone)

1-705-652-6365 (fax)

2. I graduated with a BASc (20002) and MASc (2004) from the University of Toronto

3. I am a Professional Engineer in the province of Ontario (Lic. 100114888), and have been a member in good standing since October 2007.

4. I have worked as a metallurgist for a total of 8 years since my graduation.


6. I am responsible for the preparation of Section 12 of the technical report entitled:


7. I have not visited the Zandkopsdrift Project site.

8. I have previously been involved with the property that is the subject of this Technical Report and contributed as Qualified Person in the NI 43-101 document used for the initial public offering of Frontier Rare Earth Limited in a document entitled: “Amended NI 43-101 Resource Estimate and Technical Report on the Zandkopsdrift Rare Earth Element (REE) Project, located in the Republic of South Africa”, dated 28 September 2010 (Amended Date, 29 October 2010).


10. I am independent of the issuer applying all of the tests in Section 1.4 of NI 43-101.

11. I have read NI 43-101 and Form 43-101F1, and the Technical Report has been prepared in compliance with that Instrument and Form.


Dated this 14 February 2012,

James Brown


I, Jacobus Johannes Petrus Vivier, do hereby certify that:

I am a Senior Geohydrologist and Environmental Manager / Director for:

Africa Geo-Environmental Engineering and Science (AGES Gauteng)

Plot 356

Lynnwood Road

Zwavelpoort

0081

Tel: +27 12 751 2160

Fax: :+27 86 607 2406

1. I graduated with a PhD in Environmental Management from the University of North West on the 22nd of September 2011 and MSc in Geohydrology in March 1996 at the University of the Free State.

2. I am a registered member of the South African Council for Natural Scientific Professions with registration number 400177/05, and have been a member in good standing since 2005.

3. I have worked as a Senior Geohydrologist for a total of 16 years since my graduation.


5. I am responsible for the review of the technical report entitled:


6. My most recent visit to the Zandkopsdrift Project was on 2011-05-17.







JACOBUS JOHANNES PETRUS VIVIER


I, Hendrik Michael Grobler, do hereby certify that:

1. I am an Environmental Assessment Practitioner / Director for:

Africa Geo-Environmental Engineering and Science (AGES Gauteng)

Plot 356

Lynnwood Road

Zwavelpoort

0081

Tel: +27 12 751 2160

Fax: :+27 86 607 2406

2. I graduated with a B.Sc Honours degree from the University of Stellenbosch in 2004.

3. I am a registered Professional Natural Scientist belonging to the South African Council for Natural Scientists with registration number 10023/07, and have been a member in good standing since 2007.

4. I have worked as an Environmental Assessment Practitioner for a total of 7 and a half years since my graduation.


6. I am responsible for the preparation of Sections 3.5, 17.4 and 19 of the technical report entitled:


7. My most recent visit to the Zandkopsdrift Project was on 17 May 2011.







HENDRIK MICHAEL GROBLER


I, Michael Robert Hall, do hereby certify that:

1. I am a Consulting Geologist, Mineral Resources for:

MSA Geoservices (Pty) Limited

20b Rothesay Avenue,

Craighall Park

Johannesburg,

Gauteng

2196

Tel: +27 (0) 11 880 4209

Fax: +27 (0) 11 880 2184

2. I graduated with a BSc (Honours) in Mining Geology from Leicester University, United Kingdom in 1980. In addition I have also obtained a MBA from the Business School at the University of the Witwatersrand, Johannesburg, South Africa in 2003.

3. I am registered with the South African Council for Natural Scientific Professions (Pr.Sci.Nat.) since 2010 (membership no. 400219/10), a member in good standing of the Australasian Institute of Mining and Metallurgy (MAusIMM, membership no. 206659) since 1999 and also a member in good standing of the Geological Society of South Africa (GSSA: membership no. 965822, since 2009).

4. I have worked as a geologist for a total of thirty-one years since my graduation.


6. I am responsible for the preparation of data and text for Section 13, Mineral Resources of the technical report entitled:


7. My most recent visit to the Zandkopsdrift Project was on April 11th to April 14th 2011.







Michael Robert Hall


I, Michael Neil Venter, do hereby certify that:

1. I am a Principal Consultant for:

MSA Geoservices (Pty) Ltd

20B Rothesay Avenue

Craighall Park

2196

South Africa

+27 11 880 4209

+27 11 880 2149

2. I graduated with a BSc Honours in Geology and Geochemistry from the University of Cape Town in 1993.

3. I am a registered Professional Scientist with the South African Council for Natural and Scientific Professions (SACNASP) (Registration number: 400018/01), a member of the Society for Economic Geologists (SEG) and a member of the South African Geological Society (GSSA), and have been a member in good standing since 2001.

4. I have worked as a geologist for a total of 18 years since my graduation.


6. I am responsible for the preparation of Sections 6 - 11 of the technical report entitled:


7. My most recent visit to the Zandkopsdrift Project was on July 2011.







Michael Neil Venter


I, Pete R. Siegfried, do hereby certify that:

1. I am a geologist for:

GeoAfrica Prospecting Services cc

P. O. Box 24218, Windhoek

Namibia

+264 61 232 898

+ 264 61 232 788

2. I graduated with a B.Sc. (Hons.) and M.Sc., from the University of Cape Town in 1984 and 1990 respectively.

3. I am a Member of the Australian Institute of Mining and Metallurgy (No. 221116), and have been a member in good standing since 2004.

4. I have worked as a geologist for a total of 25 years since my graduation.


6. I am responsible for the preparation of Sections 6 through to 11 of the technical report entitled:


7. My most recent visit to the Zandkopsdrift Project was on 5 th February 2012.







Pete R. Siegfried


93

Appendix 2 : Glossary and Technical Terms, Units of Measurement, Acronyms and Abbreviations

TERM/ABBREVIATION/ACRONYM DEFINITION % Percentage + Plus ± Approximately º Degrees µ Microns < Less than > Greater than / Per AGES Africa Geo-Environmental Engineering Services (Pty) Ltd amsl Above mean sea level ART Africa Remediation Technologies (Pty) Ltd Aeolian Formed or deposited by wind.

airborne magnetic surveys Surveys flown by helicopter or fixed wing aircraft to measure the magnetic susceptibility of rocks at or near the earth’s surface.

alkaline rocks Rocks containing an excess of sodium and or potassium. amphibolite A metamorphic rock comprised mainly of amphibole, generally with an orientated fabric. apatite A mineral Ca5(F,Cl)(PO4)3 found in igneous rocks which is the main source of phosphate. Archaean The oldest rocks of the Precambrian era, older than about 2 500 million years. BEE Black Economic Empowerment BFS Bankable Feasibility Study BRAVO Benchmark Risk Advisory basement The igneous and metamorphic crust of the earth, underlying sedimentary deposits.

betafite A mineral in the pyrochlore group, (Ca,U)2(Ti,Nb,Ta)2O6(OH) and typically occurs as a primary mineral in granite pegmatites, and rarely in carbonatites.

brecciated/breccia Condition applied to an intensely fractured body of rock. CARA Conservation of Agricultural Resources Act (43 of 1983) Ce Cerium, a LREE CIM Canadian Institute of Mining, Metallurgy and Petroleum CoV Coefficient of variation CRM Certified Reference Material

Cambrian The oldest of the systems into which the Palaeozoic stratified rocks are divided, 545 to 490 million years ago.

carbonate A rock, usually of sedimentary origin, composed primarily of calcium, magnesium or iron and CO3. Essential component of limestones and marbles.

carbonatite An alkaline, carbonate-rich magmatic rock. cheralite Cheralite is a variety of monazite which can contain up to 30% ThO2

chondrite Stony meteorites that have not been modified due to melting or differentiation of the parent body, and are considered to have very primitive compositions

churchite A rare REE-bearing mineral - (Y,Er)PO4-2H2O

colluvial Weathered material transported largely by gravity and usually proximal to the source area.

conglomerate A rock type composed predominantly of rounded pebbles, cobbles or boulders deposited by the action of water.

crandallite A secondary REE bearing phosphate mineral – CaAl3(PO4)(PO3OH)(OH)6

craton Large, and usually ancient, stable mass of the earth’s crust comprised of various crustal blocks amalgamated by tectonic processes. A cratonic nucleus is an older, core region embedded within a larger craton.

Cretaceous Applied to the third and final period of the Mesozoic era, 141 to 65 million years ago.

DD (Diamond Drilling) Method of obtaining cylindrical core of rock by drilling with a diamond set or diamond impregnated bit.

DCF Discounted cash flow DFS Definitive Feasibility Study DMR Department of Minerals Resources DWA Department Water Affairs Desco Zandkopsdrift Project desalination plant located at Kotzesrus diatreme A volcanic vent or pipe created by gaseous magma sourced from the mantle.

dolomite A mineral composed of calcium and magnesium carbonate; a rock predominantly comprised of this mineral is also referred to as dolomite or dolostone.

Dy Dysprosium, a HREE dyke A tabular body of intrusive igneous rock, crosscutting the host strata at an oblique angle. EHL EHL Consulting Engineers (Pty0 Ltd EIA Environmental Impact Assessment EMP Environmental Management Plan EMPR Environmental Management Programme Report EOX Energy dispersive X-ray spectrometry Er Erbium, a HREE Eu Europium, a HREE


94

TERM/ABBREVIATION/ACRONYM DEFINITION

eluvium Incoherent material resulting from the chemical decomposition or physical disintegration of rock in situ.

Epoch Epoch Resources (Pty) Ltd fault A fracture or fracture zone, along which displacement of opposing sides has occurred. fenitisation Metasomatic alteration of host rocks surrounding a carbonatite intrusion fluvial Pertaining to streams and rivers. free dig Mining methodology whereby ore is extractable without the necessity for blasting fold A planar sequence of rocks or a feature bent about an axis. Gd Gadolinium, a HREE

GIS Geographical Information System - any system that captures, stores, analyses, manages, and presents data that are linked to location. In the simplest terms, GIS is the merging of cartography and database technology

GPS Global geographic positioning system g/t grams per tonne glimmerite An ultrabasic rock consisting almost entirely of phlogopite or biotite gneiss A coarse grained, banded, high grade metamorphic rock. gorgceixite (Ba,REE)Al3(PO4)2(OH5.H2O)

gossan The leached and oxidised near surface parrt of a vein containing sulphides, especially iron bearing ones.

granitoid A generic term for coarse grained felsic igneous rocks, including granite. granulite A metamorphic rock of regional metamorphic origin having a granular texture ha hectares HDSA Historical disadvantaged South African Ho Holmium, a HREE HCL Hydrochloric acid HREE Heavy Rare Earth Elements – Eu, Gd, Tb, Dy, Ho, Er, Tm, Yb, Y and Lu Hydrometallurgical Processing of ore by acid or caustic leaching

Hydrothermal The name given to any process/es associated with igneous activity which involve heated or superheated water

Hyperbyssal An igneous rock that originates at medium to shallow depths within the crust and contains intermediate grain size and often porphyritic texture.

ICP-OES Inductively Coupled Plasma Optical Emission Spectrometry – analytical method used for elemental analyses.

ICP-MS Inductively Coupled Plasma Mass Spectrometry IRR Internal rate of return ISO International Organisation for Standardisation imaging Computer processing of data to enhance particular features. JOGMEC Japan Oil and Gas Metals National Corporation

Joints Regular planar fractures or fracture sets in massive rocks, usually created by unloading, along which no relative displacement has occurred.

km Kilometres KORES Korean Resources Corporation

KORES Consortium Consortium of Korean companies led by Kores, whose proposed members include Samsung Group, GS Group, Daewoo Shipbuilding and Marine Engineering group and AJU Group

KPMG KPMG Services (Pty) Ltd kt Kilo tonnes

Kriging Kriging is a group of geostatistical techniques to interpolate the value of a random field (e.g., the elevation, z, of the landscape as a function of the geographic location) at an unobserved location from observations of its value at nearby locations.

La Lanthanum, a LREE

lamproite A highly alkaline volcanic or subvolcanic rock, characterised by the presence of unusual potassium and titanium minerals. Mafic and ultramafic lamproites may host diamond.

lamprophyre A rare alkaline (usually potassic) igneous rock commonly emplaced as dykes, and generated from shallower depths in the earth’s mantle than lamproite or kimberlite. Not known to contain diamond, but may be associated with diamond-bearing rocks.

Landsat imagery Photographs of the earth’s surface, collected by satellite, and taken at different wave-lengths of light, processed to enhance particular features.

limestone A sedimentary rock containing at least 50% calcium or calcium-magnesium carbonates. limonite A group term for a range of mixtures of hydrated iron oxides and iron hydroxides lineament A significant linear feature of the earth’s crust.

LoI Loss on ignition. A test used to drive off volatile substances and is reported as part of an elemental or oxide analyses of a mineral.

LoM Life of Mine

loam sampling Sampling of the A horizon of a soil profile to recover resistant minerals accumulated via the process of deflation.

LREE Light Rare Earths – Ce, Pr, Nd, Pm, Sm and La Lu Lutetium, a HREE Ma Million years. m metres mamsl Metres above mean sea level MAP Mean annual precipitation MREC Mixed rare earth carbonate


95

TERM/ABBREVIATION/ACRONYM DEFINITION msl Mean sea level mbs Metres below surface mbsl Metres below sea level MDS MDS Ltd MSA The MSA Group MW Mega watt of power my million years MPRDA Mineral and Petroleum Resources Development Act MPRRA Mineral and Petroleum Resources Royalty Act Mt Million tonnes magnetite An important iron-bearing mineral Fe3O4 Magnetic susceptibility The degree of magnetisation of a material in response to an applied magnetic field. mafic Descriptive of rocks composed dominantly of magnesium and iron rock-forming silicates.

mantle The layer of the earth between the crust and the core. The upper mantle lies between depths of 50 and 650km beneath continents

melilite A rare igneous mineral, usually associated with olivine. melnoite Acronym for (melilite plus alnöite) as a stem name for all ultramafic lamprophyres Mesoproterozoic Middle Proterozoic era of geological time, 1,600 to 1,000 million years ago.

metamorphism Alteration of rock and changes in mineral composition, most generally due to increase in pressure and/or temperature.

metasomatic A metamorphic change in the rock which involves the introduction of material from another source

mobile zone An elongate belt in the earth’s crust, usually occurring at the collision zone between two crustal blocks, within which major deformation, igneous activity and metamorphism has occurred.

monazite A rare earth mineral found as an accessory mineral in acid igneous rocks, pegmatite dykes and heavy mineral sands (Ce La Pr Nd Th Y)PO4

ICMA The National Environmental Management: Integrated Coastal Management Act (24 of 2008)

Nd Neodymium, a LREE NEA The Nuclear Energy Act (46 of 1999) NEMA National Environmental Management Act (107 of 1998) NEMAQA National Environmental Management Air Quality Act (39 of 2003) NEMBA National Environmental Management Biodiversity Act (10 of 2004) NEMWA National Environmental Management Waste Act (59 of 2008) NHRA The National Heritage Resources Act (25 of 1999) NFA National Forest Act (84 of 1998) NNRA National Nuclear Regulator Act (47 of 1999) NNR National Nuclear Regulator NPV Net present value NWA National Water Act olivine A common mineral found in mafic igneous rocks, (Mg,Fe)2SiO4

orogeny A deformation and/or magmatic event in the earth’s crust, usually caused by collision between tectonic plates.

pa per annum PFS Preliminary Feasibility Study PR Prospecting Right Pm Promethium, a LREE Pr Praseodymium, a LREE pelloidal Ovoid particles composed of calcium carbonate

petrographic Systematic description of rocks in hand specimen and thin section (utilising a microscope)

palaeo Prefix often used meaning “ancient, of past times”

Palaeozoic An era of geologic time between the Late Precambrian and the Mesozoic era, 545 to 251 million years ago.

percussion A drilling method whereby the rock is broken up and pulverised by action of a hammer and rotary action of a drill bit.

plug An intrusive near vertical circular feed channel of a volcano Precambrian Pertaining to all rocks formed before Cambrian time (older than 545 million years).

prospecting right A mineral right conferred to a 3rd party by the South African Department of Mineral Resources.

Proterozoic An era of geological time spanning the period from 2,500 to 545 million years before present.

Pyrometallurgical Processing of ore through heating pyrite Most widespread sulphide mineral, Fe2S pyrrhotite An unusual iron sulphide mineral with a variable iron content. pyrochlore A mineral - (Na,Ca)2Nb2O6(OH,F) characteristically associated with carbonatites QA/QC Quality assurance/Qualitycontrol OPEX Operating Expenditure Quaternary The latest period of time in the stratigraphic column, 0 – 2 Ma.

radiometrics Radiometrics is a measure of the natural radiation in the earth’s surface, and is often also known as Gamma-Ray Spectrometry


96

TERM/ABBREVIATION/ACRONYM DEFINITION REE Rare earth elements REO Rare earth oxides RoM Run of Mine

RC drilling (Reverse Circulation) A percussion drilling method in which the fragmented sample is brought to the surface inside the drill rods, thereby reducing contamination.

TREO Total Rare Earth Oxides

sandstone A sedimentary rock composed of cemented or compacted detrital minerals, principally quartz grains.

schist A crystalline metamorphic rock having a foliated or parallel structure due to the recrystallisation of the constituent minerals.

scintillometer A scintillation counter measures ionizing radiation.

Sedex Sedex Minerals (Pty) Ltd, a South African registered sudsidiary of Frontier SCC Species of Conservation Concern SEM Scanning electron microscope SG Specific Gravity SGS SGS Canada Inc SLP Social and Labour Plan Sm Samarium, a LREE SMS Sound Mining Solution (Pty) Ltd SMU Smallest Mining Unit SREO Separated rare earth oxide Sievert (sv) Unit of radiation absorbed

silicic Containing an abundance of silica; rocks which have been extensively replaced by silica are referred to as silicified.

siltstone A rock intermediate in character between a shale and a sandstone. Composed of silt sized grains.

Sepco Zandkopsdrrift Saldanha Separation Plant located at Saldanha Bay

sövite The coarse-grained variety or facies of a carbonatite intrusive. Sövite is often a medium to coarse grained calcite carbonatite with variable accessory amphibole, biotite, pyrite, pyrochlore and fluorite.

Steady state Production rate at which the design design rates are attained

stream sediment geochemistry The analytical determination of relative or absolute abundances of elements in samples collected from stream sediment.

stream sediment sampling The collection of samples of stream sediment with the intention of analysing them for trace elements.

supergene A process involving circulation of surface waters throughout an ore deposit, which can result in remobilisation and enrichment of metals and minerals.

strike Horizontal direction or trend of a geological structure.

syenite An intrusive igneous rock composed essentially of alkali feldspar, with little or no quartz and ferromagnesian minerals.

Tb Terbium, a HREE t tonnage tph Tonne/s per hour tpm Tonnes/s per month TSF Tailings storage facility TDF Tailings disposal facility Tm Thulium, a HREE tpa Tonnes per annum

tectonic Pertaining to the forces involved in, or the resulting structures of, movement in the earth’s crust.

terrane A fragment of crustal material that has been transported laterally and may be accreted onto others.

trough A large sediment-filled and fault-bounded depression resulting from extension of the crust.

USD United States of America Dollar

vegetation anomaly An area of vegetative growth inconsistent with the surrounding vegetation, usually caused by an unusual drainage characteristic, soil type or trace element chemistry.

XRD X-Ray Diffraction – a non destructive mineralogical method that provides detailed information about the chemical composition and crystallographic structure of minerals

XRF X-Ray Fluorescence – used a routine relatively non destructive method to determine major and trace elements in geological materials

Y Yttrium, a HREE Yb Ytterbium, a HREE ZAR South African Rand

Zircon A silicate of zirconium, (ZrSiO4), and a very common detrital heavy mineral. Can be dated using uranium-lead methods.



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Appendix 3 : Hydrometallurgical Testwork Results

The majority of the hydrometallurgical testwork work was carried out on the whole ore composite sample. Under the best conditions, the acid bake/leach test, with concentrated (98%) sulphuric acid, showed results of sulphuric acid consumptions of between 600kg and 750kg per ton of material at bake temperatures of between 175ºC and 250ºC. The resultant REE extraction to the leach solution was between 80% and 90% as shown in Table 39. Eight tests were performed on the whole ore without a prebake, under atmospheric leach conditions. The results are detailed in Table 40. REE extractions approaching 80% were obtained during these leach tests, at concentrated sulphuric acid consumption of 2,000kg/ton material. Two whole ore caustic leaching tests were concluded but have not currently shown the extractions achieved compared to that achieved with the concentrated sulphuric acid bake and leach, presumably due to inadequate caustic additions. Caustic leaching testwork is continuing to improve the extractions of the REE to levels similar to those achieved by the sulphuric acid cracking route and will be investigated more extensively for the PFS. The results of the whole material caustic leach tests are detailed in Table 41. Two acid bake water leach tests have been performed on the rougher flotation concentrate plus slimes material. Following adjustment of the acid/rock ratio, the REE extraction obtained in the second test were higher than that was achieved for the whole ore. The results are detailed in Table 42. Additional testing with this sample is ongoing to improve the extraction and acid consumptions. Additional testwork on optimisation of the acid bake and water leach conditions is ongoing and solution purification testwork is planned for the future.


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Table 39 : Acid Bake and Leach Test Results

TEST ID

P80 ACID BAKE* WATER LEACH

ACID CONS. (Kg/t)

EXTRACTION (%)

(µm) Temp (ºC) A/O w/w (%) La Ce Pr Nd Sm Eu Gd Tb Dy Ho Er Y Th Fe P HG-1 ~35 200 1 8.3 595 77.4 87.7 88.1 90.3 91.3 90.9 89.3 90.6 89.4 88 88.3 88.6 87.9 73.8 79.6 HG-3 ~35 150 1 10 702 67.5 79.6 78.0 80.5 82 81.6 79.1 81.3 79.4 77.1 77.2 77.3 81.7 65.4 73.0 HG-4 ~35 150 0.8 10 681 65.2 78.4 72.9 75.2 75.9 74.9 73.4 73.4 71.3 68.6 68.8 70.8 77.1 64.8 57.8 HG-5 ~35 150 0.6 10 563 53.2 70.0 58.9 60.7 62.2 61.7 60.3 58.7 60.3 59.1 59.4 58.9 37.8 51.1 8.2 HG-6 74 150 0.6 10 448 56.7 75.3 65.8 67.4 68.6 67.8 69.3 68.5 65.6 64.0 64.2 65.9 46.6 40.7 44.1 HG-7.1 ~35 175 1 20 764 60.4 76.6 79.2 82.5 86.8 85.8 83.2 84.0 82.6 81.3 79.3 81.1 81.4 84.6 86.9 HG-7.2 ~35 175 1 10 763 67.8 83.4 98.4 95.7 90.4 90.4 90.1 90.4 90.3 90.1 89.2 88.2 86.2 85.8 84.9 HG-8 ~35 225 1 20 815 71.8 83.1 81.2 84.6 83.3 83.0 83.4 82.1 79.5 76.1 75.5 81.2 87.5 66.9 78.6 HG-9 ~35 250 1 20 728 81 89.6 87.3 88.9 90.0 89.1 88.4 88.8 88.2 88.4 88.1 89.6 93.1 87.5 87.3 HG-10 <10 175 1 20 865 50.8 68.6 66.6 64.4 65.2 65.3 66.3 68.4 65.3 65.0 65.0 65.6 77.6 81.7 74.0 HG-11 slimes 200 1 20 886 55.3 72.9 66.7 64.3 67.5 68.6 71.9 72.9 73.2 73.2 72.7 75.8 78.2 84.3 68.0 HG-12 ~35 200 1 20 784 70.7 85.4 82.9 88.3 89.4 89.6 88.1 89.5 89.4 88.7 87.8 88.7 87.4 72.5 81.0 HG-22 ~35 250|700 1 20 1024 5.7 4.2 5.0 5.0 10.3 15.0 20.9 28.2 43.6 50.3 58.5 64.7 0.9 1.2 60.2 HG-23 ~35 275 1 20 874 67.7 81.0 82.2 79.2 83.7 82.4 82.2 82.6 83.2 82.9 82.8 84.8 84.7 71.3 71.2 HG-24 ~35 300 1 20 809 68.7 84.3 82.2 78.7 80.9 82.0 83.8 83.8 80.9 83.2 83.9 83.9 90.0 80.0 77.2

Source : SGS 2011, MDS 2011 *4hr acid bake and leach at TºC of 90º

Table 40 : Whole-Ore Atmospheric Leaching

TEST ID

P80 ACID BAKE* w/w (%)

TIME (hr)

ACID CONS EXTRACTION (%)

(µm) TEMP,

(ºC) CONS (kg/t (kg/t) La Ce Pr Nd Sm Eu Gd Tb Dy Ho Er Y Th Fe P

HG-2 ~35 90 80 20 3 156 2.5 4.4 3.8 4.4 7.1 8.8 8.7 12.2 15.0 18.4 21.2 18.3 4.3 9.9 17.5 HG-13 ~35 95 500 15 24 331 4.6 12.1 7.5 7.0 10.5 12.5 13.5 16.1 20.4 24.0 26.5 24.0 8.9 26.5 23.5 HG-14 ~35 95 1500 15 24 853 25.8 54.6 47.5 43.7 51.9 54.7 54.9 58.1 60.7 60.2 60.6 59.0 64.7 92.3 70.8 HG-15 ~35 95 2000 15 24 884 35.2 71.1 53.7 56.7 66.3 69.9 68.9 72.8 75.3 75.4 74.1 74.5 79.4 95.3 80.7 HG-19 10-May 95 2000 15 24 994 32.0 59.8 49.1 54.5 63.0 66.2 70.1 74.4 74.7 75.9 75.5 76.1 76.9 97.0 83.2 HG-20 10-May 95 2000 30 24 881 45.9 79.3 57.4 57.5 63.9 68.0 73.7 76.5 79.0 80.9 82.3 84.8 92.6 94.9 89.2 HG-21 10-May 95 2000 15 24 985 42.0 70.7 65.0 69.4 74.8 76.2 78.2 80.2 79.2 80.8 80.0 80.4 83.5 97.0 86.7

HG-27 ~35 95 1520 HCl

10 24 1047 84.8 86.0 80.1 82.5



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Table 41 : Whole-Ore Caustic Leaching

TEST ID

P80 (µm)

CONDITIONS EXTRACTION

La Ce Pr Nd Sm Eu Gd Tb Dy Ho Er Y Th HG-17 ~35

Atmospheric, ~130ºC for 2 h in 50% NaOH Solution; pH 1 HCl Res. leach at 50ºC for 4 h 37 2 33 31 32 35 36 39 38 41 41 46 0.1

HG-18 ~35

Caustic crack, 600ºC 1 t/t NaOH, 4 h followed by 3 N HCl 50ºC 4 h leach 26 3 26 20 21 22 25 34 31 34 39 41 1.8


Table 42 : Concentrate Acid Bake and Leach Results

TEST ID ACID BAKE

WATER LEACH*

ACID CONS EXTRACTION (% ) (kg/t)

TEMP (ºC)

W/W (%)

W/W (%)

kg/t La Ce Pr Nd Sm Eu Gd Tb Dy Ho Er Y Th Fe Mn P

C1-1 200 1 10 898 69.7 84.3 83.4 83.4 85.2 85.1 84.3 84.5 82.6 83.1 81.5 83 83.5 84.5 57.4 82.1 C1-2 200 1.5 10 899 90.4 91.3 93.4 93.2 80.1 54.9 84.4



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Appendix 4 : South African Mining Law and Mining Charter

Mineral and Petroleum Resource Development Act

The South African Government enacted the MPRDA on the 1st May 2004, which defines the State’s legislation on mineral rights and mineral transactions in South Africa. The Act emphasises that the government did not accept the existence of the historical dual State and private ownership of mineral rights in South Africa and, as such, the Act legislated that all mineral and petroleum resources in South Africa now vest in the State. Additional objectives of the Act include the promotion of economic growth, the development of resources to expand opportunities for the historically disadvantaged, and the socio-economic development of the areas in which mining and prospecting companies are operating. It also provides for security of tenure relating to prospecting, exploration, mining and production. A further objective of the Act was to further BEE within South Africa’s minerals industry, by encouraging mineral exploration and mining companies to enter into equity partnerships with BEE companies. The Act also makes provision for the implementation of social responsibility procedures and programmes by mineral resource companies. The Act incorporated a "use-it or lose-it" principle, that has been applied to companies or individuals who owned mineral rights or the rights to prospect and mine prior to 2004 (Old Order Rights). These Old Order Rights were required to be transferred within specified timeframes, under the provisions of the Act, into New Order Rights to prospect and mine. Once the State has granted the conversion of the Old Order Rights to New Order Rights, or has granted a New Order Right to new applications submitted after the implementation of the MPRDA, a Notarial Agreement between the State and the holder of the New Order Right is entered into. This Agreement sets out all the conditions associated with the New Order Right. New Order Rights can be suspended or cancelled by the Minister if, upon notice of a breach from the Minister of its obligations to comply with the MPRDA, or the conditions prescribed as part of its New Order Right, a breaching entity fails to rectify such a breach. In addition, in terms of the MPRDA, mining and exploration companies have to comply with additional responsibilities relating to environmental management and to environmental damage, degradation or pollution, resulting from their prospecting or exploration activities. Types of rights and permits applicable to the mining industry in South Africa, as provided for in the MPRDA, are detailed below:- Types of Rights in the South African Mining Industry

LICENCE TYPE

PURPOSE DURATION REQUIREMENTS CONDITIONS

Reconnaissance Permission

Exploration at the reconnaissance stage.

2 years (Non-renewable)

Financial ability; technical ability; and work programme.

Holder does not have the exclusive right to apply for a Prospecting Right.

Prospecting Right

Exploration at target-definition stage.

Up to 5 years initially. Renewable once for 3 years.

Financial ability; technical ability; economic programme; work programme; and environmental plan.

Payment of Prospecting fees. Holder has the exclusive right to apply for a Mining Right

Retention Permit

Hold on to legal rights between prospecting and mining stages.

3 years initially. Renewable once for 2 years.

Prospecting stage complete; feasibility study complete; Project not currently feasible; and completed Environmental Management Plan (EMP).

May not result in exclusion of competition, unfair competition or hoarding of rights. May not be transferred, ceded, leased, sold, mortgaged or encumbered in any way.

Mining Right Development and production stage.

30 years initially. Renewable for further periods of 30 years. Effective for LoM.

Financial ability; technical ability; prospecting complete; economic programme; work programme; social plan; labour plan; and completed EMP.

Payment of royalties (from 2010). Compliance with Mining Charter and Codes of Good Practice on broad-based BEE (BBBEE.)

Mining Permit Small-scale mining.

2 years initially. Renewable for 3 further periods of 1 year at a time.

Life of Project must be <2 years; areas must be <1.5Ha; and completed EMP.

Payment of royalties (from 2010). May not be leased or sold, but can be mortgaged.


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The Act also makes provision for the implementation of social responsibility procedures and programmes by mineral resource companies. Applicants for Prospecting Rights or Mining Rights will be required to provide details of these criteria under so-called Schedule II, Transitional Arrangements. In the MPRDA, the State has reaffirmed its commitment to guaranteeing security of tenure in respect of prospecting and mining operations. This commitment has stimulated debate between mining companies and the government on how best to meet the government’s objectives to prevent the hoarding of Mineral Rights to the exclusion of new entrants to the minerals industry. An issue which still requires clarity is the discretionary power the Minister has with respect to the transferability of prospecting permits and mining licences. It appears that the Minister’s approval will not be “unreasonably” withheld. Any “Old Order” Prospecting Right continued in force for a period of two years from the date on which the Act takes effect, whereas any “Old Order” Mining Right continued in force for a period of five years from the date on which the Act took effect. Holders of any unused “Old Order” Rights had the exclusive right to apply for a Prospecting Right or a Mining Right within one year of the Act coming into effect, failing which the Right ceased to exist. On conversion of an “Old Order” Right to a “New Order” Right, there is theoretically, an impairment of the Right, since the Act effectively precludes the owner of the “New Order” Right to deal with it freely and without encumbrances. This reduces its value. The Act stated that a company had five years to apply for a “new order” Mining Rights and the “new order” Mining Right will only be granted for a maximum of 30 years

The Mining Charter

The Mining Charter, which came into effect on the 1st May 2004, provides a framework to assist mining companies to fulfil their obligation to comply with Sections 2(d) and 2(f) of the MPRDA. The Mining Charters main objectives are:-

to promote equitable access to South Africa’s Mineral Resources for all South Africans;

to substantially and meaningfully expand opportunities for HDSAs, including women, to enter the mining and minerals industry and to benefit from the exploitation of South Africa’s Mineral Resources;

to utilize the existing skills base for the empowerment of HDSAs;

to expand the skills base of HDSAs to serve the community;

to promote employment and advance the social and economic welfare of mining communities and areas supplying mining labour; and

to promote beneficiation of South Africa’s mineral commodities beyond mining and processing, including the production of consumer products.

The Mining Charter also clarifies that it is not the Government’s intention to nationalise the mining industry. To achieve its objectives, the Mining Charter requires that each mining company achieves a 15% HDSA ownership of mining assets within five years and a 26% HDSA ownership of mining assets within 10 years. Ownership can comprise active involvement, through HDSA controlled companies (where HDSAs own at least 50% plus one share of the company and have management control), strategic joint ventures or partnerships (where HDSAs own at least 25% plus one vote and there is joint management and control) or collective investment vehicles (the majority ownership of which is HDSA based) or passive involvement, particularly through broad based vehicles like employee stock option plans. When considering applications for the conversion of existing licences, the Government takes a “scorecard” approach to ascertain a company’s compliance with the charter. In February 2003 the DME published the scorecard, which is intended to facilitate the application of the Mining Charter and measure compliance with the empowerment requirements of the MPRDA for the purpose of determining whether an application for conversion should be granted. The scorecard sets out the requirements of the Mining Charter in tabular form which allows the DME to check areas where a mining company is in compliance. The scorecard covers the following areas:-

human resource development;

employment equity (including participation in management and participation by women);

migrant labour;


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mine community and rural development;

housing and living conditions;

ownership and joint ventures;

beneficiation; and

reporting.

The Mining Charter, together with the scorecard, provides a system of “credits” or “offsets” with respect to measuring compliance with HDSA ownership targets. The charter also requires mining companies to submit annual, audited reports on progress towards their commitments

Royalties Fees and Taxes (Mineral and Petroleum Resources Royalty Act (MPRRA))

The MPRDA requires that compensation be given to the State (as custodian) of the country’s Mineral and Petroleum Resources to the country’s “permanent loss of non-renewable resource”. The Act distinguishes between refined and unrefined mineral resources, where refined minerals have been refined beyond a condition specified by the Act, and unrefined minerals have undergone limited beneficiation as specified by the Act. The royalty is determined by multiplying the Gross sales value of the extractor in respect of that mineral resource in a specified year by the percentage determined in accordance with the royalty formula. Both operating and capital expenditure incurred is deductable for the determination of earnings before interest and tax (EBIT). For Refined Mineral Resources is a follows:-

Royalty Rate = 0.5 + EBIT X 100

Gross Sales (refined) x 12.5

The maximum percentage royalty for refined Mineral Resources is 5%.

For Unrefined Mineral Resources:-

Royalty Rate = 0.5 + EBIT X 100

Gross Sales (unrefined) x 9

The maximum percentage royalty for unrefined Mineral Resources is 7%. The MREC produced by the Zandkopsdrift Mine will be treated under the refined formula. The corporate tax rate is 28% of the chargeable income of mining companies. Chargeable income is derived from accounting profits adjusted by certain allowances. Tax losses arising in any one accounting period may be carried forward. In addition to these deductions, a mining company is allowed to capitalise all expenditure during development. VAT at 14% is payable on most goods and services in South Africa. However, as it is claimable against any VAT charged on sales of product, it does not represent a cost to the Project. Accordingly, the impact of VAT has been excluded from the evaluation.


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Appendix 5 : Valuation Methodologies Applied to Mineral Assets

A mineral asset is defined, according to International Financial Reporting Standards (IFRS), as:-

“A resource controlled by the enterprise as a result of past events and from which future economic benefits are expected to flow to the enterprise”.

Mineral Assets can be classified as follows:- Exploration Areas – properties where mineralisation may or may not have been identified, but where a Mineral or Petroleum Resource has not been identified. Advanced Exploration Areas – properties where considerable exploration has been undertaken and specific targets have been identified that warrant further detailed evaluation, usually by drill testing, trenching or some other form of detailed geological sampling. A Mineral Resource estimate may or may not have been made but sufficient work will have been undertaken on at least one prospect to provide both a good understanding of the type of mineralisation present and encouragement that further work will elevate one or more of the prospects to the Mineral Resource category. Pre-Development Projects – properties where Mineral or Petroleum Resources have been identified and their extent estimated (possibly incompletely) but where a decision to proceed with development has not been made. Properties at the early assessment stage, properties for which a decision has been made not to proceed with development, properties on care and maintenance and properties held on retention titles are included in this category if Mineral or Petroleum Resources have been identified, even if no further Valuation, Technical Assessment, delineation or advanced exploration is being undertaken. Development Projects – properties for which a decision has been made to proceed with construction and/or production, but which are not yet commissioned or are not yet operating at design levels. Operating Mines – mineral properties, particularly mines and processing plants that, have been commissioned and are in production. Any decision to apply a valuation technique depends principally on the stage to which the project has been developed, the geological confidence and the potential of the asset for reasonable and realistic prospects for eventual economic extraction. Changes in value of a mineral asset are associated with increasing confidence through increased knowledge, as well as the greater degree of probability of it being brought to account. An appropriate valuation recognises these possibilities. The valuation approaches and the underlying methodologies applicable to the mineral asset categories outlined above, as stipulated in the SAMVAL Code, are presented in Table 43:-

Table 43 : Internationally Accepted Methods of Mineral Project Valuation

VALUATION APPROACH

VALUATION METHODOLOGY

DORMANT PROPERTIES

EXPLORATION PROPERTIES

COAL RESOURCES

DEVELOPMENT PROPERTIES

MINING PROPERTIES

DEFUNCT PROPERTIES

Cash Flow DCF No No Yes Yes Yes No

Market Comparable Yes Yes Yes Yes Yes Yes

Cost Asset Recognition and Impairment Test

Yes Yes Yes No No Yes

Most acceptable method and widely used Acceptable method and quite widely used Less acceptable method, less widely used and poorly understood Not acceptable

Where insufficient confidence exists in the technical parameters of a mineral deposit, or mineral asset, to classify Mineral Resources, valuation methods mainly rely on the principle of historical cost. This implies that a mineral asset’s value is related to the acquisition cost, plus a multiple of the exploration expenditure, depending upon the degree to which its prospectivity has been enhanced by exploration.


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As soon as Mineral Resources have been classified, then market comparisons are made on a monetary value per unit of mineralisation. Technical studies establishing the basis for future economic exploitation, provide information for Discounted Cash Flow (DCF) method and all the methods used to identify a reasonable transaction value. Cost Approach - According to the SAMVAL Code, “The Cost Approach relies on historical and/or future amounts spent on the Mineral Asset”. Market Approach - According to the SAMVAL Code, “The Market Approach relies on the principle of ‘willing buyer, willing seller’ and requires that the amount obtainable from the sale of the Mineral Asset is determined as if in an arm’s-length transaction”. The Market Approach is based upon other, preferably recent, arm’s length transactions of a similar nature, which determines a monetary value per unit of Resource. Cash Flow Approach - According to the SAMVAL Code, “The Cash Flow Approach relies on the ‘value-in-use’ principle and requires determination of the present value of future cash flows over the useful life of the Mineral Asset”.