Wyoming-focused Rare Element Resources (TSE:RES)(AMEX:REE) late Thursday unveiled a revised preliminary feasibility study (PFS) for its Bear Lodge rare-earth project.
The subject of the PFS is the Bull Hill deposit within Bear Lodge, which is the most advanced resource and will be developed first. The new study includes revised and improved estimates for both capital and operating costs, the company said.
Bear Lodge's PFS gives a net present value of $1.27 billion, at a 10 percent discount rate after state taxes but before federal income taxes, and an internal rate of return of 47.8 percent with two-year payback of initial capital.
Initial capital cost is seen at $334 million and life-of-mine capital is estimated at $404 million.
The company said that it sees an average annual operating cost of $61.8 million and operating costs of $194 per tonne mined and $2.94 per kilogram of bulk mixed rare earth carbonate concentrate.
"We are very encouraged with these revised results," Rare Element's president and CEO Randall Scott said.
"The PFS was designed to provide a preliminary engineering and economic assessment of the viability of the Bear Lodge Project and, more specifically, the Bull Hill rare-earth element open-pit mine, and these revised results continue to demonstrate the strong economics of this project to produce a bulk mixed RE carbonate concentrate."
A 19-year mine life is anticipated, based on mineable mineral reserves of 5.7 million tonnes at an average grade of 3.6% total rare earth oxides (TREO) with an average metallurgical recovery rate of 81.4 percent. The average annual production rate is seen at 20,962 tonnes bulk mixed rare-earth carbonate concentrates, containing 9,433 tonnes TREO.
Based on a three-year trailing basket price, average prices are seen at $17.36 per kilogram of rare earth concentrates.
At a price assumption 25 percent lower than the base case price, the project continues to demonstrate "robust economics", the company said.
Rare Element also said that there is substantial upside potential to increase reserves and resources as exploration continues at the Bull Hill, Whitetail Ridge, East Taylor and Carbon areas on the project. There is also potential in the district to delineate resources of heavy rare earth elements, the company added.
A definitive feasibility study is due to start in the second quarter of 2012 with a planned completion date of mid-year 2013.
"Our recent announcement of plans to develop and test a process to produce separated rare-earth products from concentrates and our metallurgical testing of drill core samples from the three target areas enriched in HREEs peripheral to the main deposit give the project the potential to substantially improve the economics in the future," Scott added.
"Commercial discussions are underway with several companies regarding strategic partnerships and off-take agreements. We will finalize a NI 43-101 technical report in the near term and that report will be filed with regulatory agencies.
"The NI 43-101 Technical Report will include updated mineral reserve and resource estimates that will encompass those drill assay results from the 2011 exploration season received by the end of the year."
Several other deposits and targets within Bear Lodge, including Whitetail, Carbon and East Taylor, located to the west and north of Bull Hill, are likely to be developed sequentially, assuming resource and reserve definition.
Exploration to define the other potential resources, some of which are enriched in the more valuable heavy rare earths, will continue for several years. The rare earth element district is still open in two directions and could eventually prove to be much larger than currently delineated.
Wyoming has been identified among the best mining jurisdictions in the world, according to the Fraser Institute's 2012 report. The project area is located northwest of the town of Sundance, Wyoming, which is located along US Interstate Highway 90, 35 kilometers by air west of the South Dakota state line.
Following completion of the PFS, the company said it will start more detailed metallurgical design, additional pilot plant testing, and engineering studies to be reported in the definitive study.
The Bull Hill Mine is planned as a conventional truck and shovel open-pit operation. The mineral reserves are derived from a measured and indicated mineral resource of 6.2 million tonnes averaging 3.75% REO.
Located within the pit is another 4.1 million tonnes of high-grade oxide inferred mineral resource that will be the subject of further drilling in 2012. An additional 10.9 million tonnes of near-surface high-grade inferred resources occur outside the pit area.
Rare Element also said that future drilling programs will focus on converting inferred resources into measured and indicated categories, and potentially extending the mine life or providing expansion opportunity.
Development of the Bear Lodge project is planned to consist of three principal components: the open-pit mine operation at Bull Hill, a physical upgrading plant for mineral pre-concentration located on-site adjacent to the mine, and a hydromet plant for further concentration of the rare-earth elements into a rare-earth carbonate concentrate product at Upton, Wyoming.
Various governmental approvals and permits will be required for the development of these facilities, Rare Element said. Rare Element said that to date, no fatal flaws associated with environmental permitting, legal issues, title, taxation, or socio-economic impacts, have been identified.
Rare earth elements are key components of the green energy technologies and other high-technology applications. Some of the major applications include high-strength magnets, hybrid automobiles, electric automobiles, advanced wind turbines and additives in ceramics and glass, among many others uses.
China currently produces more than 96 percent of the 124,000 tonnes of rare-earths consumed annually worldwide, and China has been reducing its exports of rare earths for a number of years. The market is projected to grow rapidly as these green technologies are implemented on a broad scale.