VANCOUVER — It has been a busy start to the year for Saskatoon-based rare earth outfit Great Western Minerals (GWG-V) and its past-producing Steenkampskraal project located roughly 350 km north of Cape Town, South Africa. The company kicked off 2013 with an updated resource estimate, and followed up with the release of a preliminary economic assessment (PEA) that it hopes will lead to initial production within the next 24 months.
Great Western acquired a 74% interest in Steenkampskraal through a subsidiary in 2010, and the company has spent the past three years exploring the mine site and refurbishing a variety of surface and underground infrastructure left behind by an Anglo American (AAL-L) subsidiary, which ran a thorium operation at Steenkampskraal from 1952 to 1963.
Great Western's exploration efforts yielded a big resource upgrade at the project in late January, including a 114% increase in indicated resources and a 218% jump in the inferred category. Steenkampskraal now hosts 176,000 monazite tonnes in the indicated category that grade 18.2% total rare earth oxides (TREO), as well as 278,000 inferred tonnes averaging 15.2% TREO at a 1% cut-off grade.
Great Western has noted strong ground conditions despite 50 years of inactivity at the mine, and intends to utilize a combination of conventional and shrinkage stoping for flat and steeply dipping sections of its underground Monazite Area. Conventional jack-leg drilling and blasting will be used, with cleaning being done by winches scraping the broken rock down the raises to main haulages.
A rare-earth chloride plant will process roughly 192 tonnes of run-of-mine material per day — or roughly 70,000 tonnes annually. The mixed rare-earth chloride will then be hauled to a separation plant approximately 100 km from the mine site. Steenkampskraal's current resources will support 11 years of operations based on 70,532 tonnes of in-situ TREO content.
"The [PEA] confirms our internal projections of a high grade and excellent distribution of the critical rare earth elements," commented president and CEO Marc LeVier. "The impressive, high-grade nature of Steenkampskraal translates into lower tonnages for processing, which in turn, results in low capital cost requirements relative to other REE projects. The work undertaken on the project to date is intended to enable [us] to advance rapidly. This ‘early mover' status, combined with [our] existing alloy manufacturing capacity, positions [us] very favourably."
Development costs clock in at roughly $176 million, and assuming a TREO basket price of $53.13 per kilogram Steenkampskraal carries a $555 million after-tax net present value and 66% internal rate of return at a 10% discount rate. The project would have around a 4 year payback period from the start of underground production.
A major cost driver for Great Western is the rare-earth separation plant, which carries a $62 million price tag. If the company was too look at saving capital costs it could be the first item on the chopping block. Great Western enjoys one other key advantage over its peer group in the form of integrated processing.
The company owns Great Western Technologies — which processes specialty metal alloys that include rare earth materials and focuses primarily on the battery alloy and hydrogen storage markets — and Less Common Metals, which caters to magnet manufacturers and ties into the automotive industry.
Due to a convertible bond issuance in early 2012, Great Western was sitting on roughly $65 million in cash and equivalents at the end of the third quarter. The company reports 40% institutional ownership and has 416 million shares outstanding for a $73 million press-time market capitalization. Great Western traded 2.26 million shares following news of its PEA, but dropped 12.5% or 2.5¢ before closing at 17.5¢ per share on March 19.
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