Greenland Minerals and Energy (ASX: GGG) has delivered a significant Pre-Feasibility Study (PFS) result that demonstrates the clear potential for Kvanefjeld to be developed as a long-life, cost effective producer of heavy, light and mixed rare earth concentrates, uranium oxide and zinc.

Further, the production profile is of global significance in terms of output capacity, and low production costs.

Kvanefjeld will be able to generate four main products including a high-grade zinc sulfide concentrate from the Kvanefjeld multi-element project in Greenland, which has been outlined in a Prefeasibility Study.

The development scenario from an annual 7.2 million tonne throughput would provide; Uranium Oxide of 2.6 million pounds, Heavy Rare Earth Hydroxide of 4,200 tonnes, Mixed Rare Earth Carbonate of 10,400 tonnes and Light Rare Earth Carbonate of 26,200 tonnes.

The defining factor though for the development Kvanefjeld is the low production costs, with unit cost under US$31/lb uranium and less than US$8/kg TREO (as contained in the three combined rare earth products).

Putting these costs into perspective, Kvanefjeld will be in the bottom half of the cost curve for uranium producers, while also being one of the lowest cost rare earth elements producers worldwide.

The economics of the project are also robust - with a forecast pre-tax, ungeared internal rate of return of 32%, and a cash payback period of less than 4 years, based on long term prices of US$70/lb uranium and US$41.60/kg TREO. The pre–tax NPV is US$4,631 million.

Capital costs of an open cut mine, a mineral concentrator and a refining plant, capable of treating 7.2 Mtpa, is estimated to cost US$1.53 billion, which includes a contingency of US$247 million.


Global resource to rise in Q2 extending mine life options

Kvanefjeld has an initial mine life of over 33 years, which has been based on the Indicated mineral resources established near the surface at the deposit, with Greenland Minerals placing a construction timeline on the project commencing in 2014, with first production in 2016.

Where the development to production story becomes even more interesting is that the project mine life has the potential to extend for over 60 years.

Currently the total resource stands at 861 million tonne for 512 million pounds of uranium, 9.22 million tonnes TREO and 1.98 million tonnes of zonc (at a 150ppm U3O8 cut-off grade), but this will increase in the near term - with the Zone 3 resource to be included during the June 2012 quarter.


Prefeasibility Study inputs

The Prefeasibility Study builds upon extensive drilling, research and testwork programs conducted by Greenland Minerals over the past five years in association with internationally respected research institutions and accredited analytical facilities.

The study and also draws on extensive historical work conducted by Danish authorities and scientists in the 1970s and early 1980s, which culminated in an ‘historic’ prefeasibility study published by Risø National Laboratory (Risø) in 1983.

In contrast to the Risø studies that focused solely on the exploitation of uranium, Greenland Minerals has evaluated Kvanefjeld for the production of rare earth elements and uranium, which provides greater value of a multi commodity resource.

Analysis

In a sector known for superlatives, GGG's Kvanefjeld rare earth and uranium complex is indeed a massive mega project with enough supply of rare earths for nigh on 70 years of supply. Simply put, Kvanefjeld and nearby zones constitute one of the great rare earths and uranium orebodies.

Increasingly, it does appear that Zone 2, just six kilometres away from the existing Kvanefjeld deposit could link and the two deposits may indeed be one giant deposit.

However, it is the production of uranium that GGG's managing director Rod McIllree appears to be adroitly steering the Kvanefjeld complex toward in the last year.  Often lost is that Kvanefjeld complex also contains over 500 million pounds of uranium. 

The Pre-Feasability Study does fill in more missing pieces of the jigsaw: forecast unit costs of production at less than US$31 per pound of uranium and Total Rare earth Oxide costs of less than US$8 per kilogram. 

The forecast low uranium unit cost is significant - very significant - placing the Kvanefjeld Project into the bottom half of the cost curve for uranium producers.  Timing into production (assuming approvals) in 2016 would neatly link with strong forecast uranium demand. 

However, it is the Pre-tax Net Present Value of US$4.6 billion for the project that is the game changer from previous estimates.  Capital cost at $1.53 billion is in line with the NPV and massive mine life and scale of Kvanefjeld. A low waste strip ratio (1.1 tonne of waste for each tonne of ore) in addition to the highest grade material occurring at surface is further strong data on the strength of project economics.

With GGG moving toward 100% ownership of the Kvanefjeld Project in the process, would clear the way for a strategic investor to step in and help finance the project.

The Greenland government appears to be warming to the idea of uranium mining, certainly as a by-product of REE mining and it is expected that an exploitation license could be issued in the near term.

The fact that the Government has only ever issued one licence for the exploration of radioactive materials to GGG is telling.  With approvals given, the current market valuation of GGG at $210m would look positively puny based on resource per pound of uranium and resource per pound of TREO.

The PFS provides another milestone and evolutionary step in the early life of this remarkable Kvanefjeld Project.

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•    GGG has announced its maiden JORC-compliant resource for Zone 2 of 242M tonnes @ 304ppm U3O8 and 1.1% TREO (Total Rare Earth Oxide). This adds 46% to the existing uranium inventory, bringing the total to 512M lbs and over 39% to its total rare earth resource, bringing the total to 9.2M tonnes. GGG has also announced that a higher grade area within Zone 2 has been identified and drilled. This high grade area contains 119M tonnes of ore at 400ppm U3O8 and 1.2% TREO.

•    Zone 2 is only 6 km away from the existing Kvanefjeld deposit which has 619M tonnes @ 257ppm U3O8 and 1.05% TREO. It now seems that the mineralogy of Zone 2 is similar to Kvanefjeld with metallurgical synergies expected. Zone 2 is still open towards the Kvanefjeld deposit with the possibility that the two deposits may indeed be one giant deposit.

•    A total of 23 holes have been drilled in Zone 2, totaling 10,351m. These were used for the independent calculation of the JORC-compliant resource by SRK Consulting.

•    GGG’s rare earth resource inventory now includes 330,000 tonnes of heavy REO, 740,000 tonnes of Yttrium.

•    We are now waiting for drill results for Zone 3 and Steenstrupfjeld, two other deposits in the region. It is now likely that we could see over 1.0 billion tonnes of ore in the region at +250ppm U3O8 and +1.1% TREO making this deposit the largest in the world with over 10M tonnes of rare earths.

Recommendation

GGG’s Kvanefjeld rare earth and uranium complex is now growing to mega proportions. Indeed, there is probably little added drilling required as the deposit contains over 70 years’ the entire global consumption of rare earths.

The game plan appears to be uranium and a major push by GGG in seeking a relaxation to the “Zero Tolerance” stance to uranium by the Greenland Government. With outstanding metallurgical recoveries achieved and very strong beneficiation results via atmospheric leaching, the next stage in the company’s history will be a positive move by the government to give uranium exploitation on the Island the go-ahead.

The fact that the Government has only ever issued one licence for the exploration of radioactive materials (to GGG), we believe this is a positive sign to future relaxation to the Zero Tolerance stance. We have a $1.80 price target on GGG and a Buy recommendation.

One of the Great Accumulations of Rare earths & Uranium

The Kvanefjeld complex consists of the main Kvanefjeld orebody, Zone 2 & 3 and a smaller deposit called Steenstrupfjeld. A JORC-compliant resource now exists of 861M tonnes containing 9.22M tonnes of rare earths and 512.8Mlbs of U3O8. Over 340,000 tonnes of “Heavy Rare Earths” also exist in the main deposit.

Zone 3 & Steenstrupfjeld resources are expected to be released over the coming weeks with a high chance to extending the total deposit past 1.0 billion tonnes. Chart 1 outlines the location of the four (4) mineral deposit on-site.

Zone 2

Zone 2 is 6km away from the main Kvanefjeld deposit and has now added 242M tonnes to the overall resource of the area. The ore appears to be similar to Kvanefjeld and metallurgical testing is expected to see similar results. The important aspect to Zone 2 is the grade, where the grade of rare earth is 5% higher and that of uranium is 18.3% higher. Zone 2 contains 162Mlbs of uranium at a grade of 304ppm. At a valuation of US$1-2/lb, this would underpin the valuation of GGG in itself.

Other Matters

GGG is expected to complete the buyout of its joint venture partner in Kvanefjeld by June 2012. Currently, GGG has 61% of the project and Westrip has the remainder 39%. A cash payment of $35m or equivalent remains.

Recent metallurgical and beneficiation test-work by GGG has revealed that the ore can be beneficiated to <15% of its original mass. This will have a dramatic reduction in mine site infrastructure requirements. The leaching of this concentrated ore under atmospheric conditions has yielded a recovery of between 90-95% of both uranium and rare earth products. These results will form part of the pre-feasibility work on Kvanefjeld project expected to be released by the company in the next 3-4 weeks.

GGG is now looking at a staged development of the project up to 40,000 tonnes per annum of rare earth product and 4-6M lbs of uranium production per annum. A feasibility study is expected to be released in the June quarter 2012. GGG and its joint venture partner have the only licence in Greenland to explore for radioactive minerals.

We see this as a positive move by the Government of Greenland towards the granting of a future Exploitation Licence, subject to all Environmental and Social Impact Studies being completed and endorsed by the Government.

The impact of the new discovery on the company's global resource is a 46% jump in total resource base to 512 million pounds of uranium, a 39% jump in TREO to 9.2 million tonnes, with an additional zinc component of 1.98 million tonnes.

Where the global resource becomes more important, is that the inventory includes 330,000 tonnes of heavy REO, 740,000 tonnes Y2O3.

The Kvanefjeld, Zone 2 and Zone 3 multi‐element deposits are hosted within the northern portion of the Ilimaussaq Intrusive Complex, favourably located near existing infrastructure in southern Greenland.

The initial Inferred Resource at Zone 2 has now been delivered to market and comprises a very encouraging; 242 million tonnes at 304 ppm uranium, 1.1 % TREO and 0.26% zinc for a contained metal inventory of 162 million pounds uranium and 2.67 million tonnes TREO.

There is potential for the Zone 2 resource to increase with additional exploration due to being open towards the Kvanefjeld deposit, which is located just 6 kilometres to the north.

The most notable similarity between Kvanefjeld and Zone 2 is the clear trend of improving uranium and rare earth grades with proximity to the surface, with the uppermost sill at Zone 2 showing similar, if not better uranium grades, than the upper uranium‐rich zone at Kvanefjeld.


Zone 2 similarities to Kvanefjeld

Provding an added bonus for the future development opportunities of the project, the Zone 2 resource is hosted by the same rock‐type as Kvanefjeld, which is conducive to the same enhanced processing method already established for Kvanefjeld.


Zone 3 resource pending

Highlighting how the project continues to grow its metal inventory at speed, across at Zone 3 drill assay results will be finalised soon, which will then deliver the initial Zone 3 mineral resource in the coming weeks.

Increasing the short term news flow, drilling results from Steenstrupfjeld are also expected in the next month.


Quick Kvanefjeld back story

A regional exploration program has been running in tandem with the resource development and Feasibility Studies on Kvanefjeld since 2008, with deep exploration drill holes demonstrating that lujavrite forms a thick sub‐horizontal internal layer that extends through much of the northern Ilimaussaq Complex.

The upper portions of the lujavrite horizon are strongly enriched in uranium, REEs and zinc, with some sections exceeding 150 metres in true thickness.

Greenland Minerals and Energy has been targeting outcropping and near surface lujavrite bodies with extensive uranium‐REE mineralization now confirmed at Zone 2, Zone 3 and Steenstrupfjeld.


Geology

The Ilimaussaq Intrusive Complex is known for the abundance of specialty‐metal rich minerals that cocrystallised with the highly alkaline silicate rocks of the complex.

The northern Ilimaussaq Complex is dominated by cubic kilometres of a sodalite‐nepheline syenite known as naujaite. Intruding the voluminous naujaites is a suite of hyper‐peralkaline syenites known as lujavrites.


Early 2012 technical breakthrough

Just last month Greenland Minerals and Energy in a major technical breakthrough identified that mineral concentrates can be leached under atmospheric conditions to yield extractions of 90% to 95% for uranium and heavy rare earth elements.

The significance of these extraction levels for the company is immense, as both uranium and heavy rare earth elements are the two main value drivers for the Kvanefjeld project. Light rare earth oxides are also recovered, but at a slightly lower level of extraction.

Importantly - beneficiation through froth flotation reveals industry leading upgrade ratios from ore to mineral concentrate representing less than 15% of the original mass.

Leach studies on the mineral concentrates demonstrate that the rare earth element and uranium bearing minerals are highly amenable to conventional acid leach/solvent extraction.

Greenland Minerals told Proactive Investors at the time that the breakthrough, "firms up our progress in establishing a simple, and effective way of processing the Kvanefjeld ores.

"In particular, high extractions of heavy rare earth elements under a simple atmospheric leach is a very favourable outcome. Put simply, we can effectively beneficiate and leach the key components."


Other key outcomes from the technical breakthrough include:

- Favourable leach solution chemistry allows for the generation of both heavy and light rare earth products;

- Major advances in beneficiation and atmospheric leaching allow for the development of an enhanced, efficient flowsheet utilising conventional methods with low technical risk;

- Developments eliminate the need for whole‐of‐ore pressure leaching and significantly reduce the scale of leach circuits, leading to a substantial reduction in capital expenditure; and

- The company is looking to finalise its preferred flowsheet and development scenario through Q1 2012, before finalising Pre-Feasibility work on the Kvanefjeld project.


Kvanefjeld offers multiple revenue drivers

Where the revenue generating potential really ramps up for Greenland Minerals is that there are multiple product streams and revenue drivers that can be derived from Kvanefjeld.

The company will focus on uranium and heavy rare earth oxide production initially, which then increases options and greater flexibility in the marketing and pricing of light rare earth products thereafter.


Greenland Government uranium decision "momentous" for Kvanefeld

At the end of 2011 Greenland Minerals and Energy received some very positive news, in that the Greenland Government is introducing a uranium licensing framework for Kvanefeld, which looks to have delivered a blue print for the company to move ahead with a strategic partner and ultimately move closer to heavy rare earths production.

Under the licensing framework in Greenland, the licensee maintains the right to apply for an exploitation (mining) license for all exploitable elements listed on the exploration license.

Importantly the exploration license now includes radioactive materials, providing the company with the clear right to apply for the exploitation of radioactive elements along with all other exploitable elements - which brings the potential production of heavy rare earths into play.

At the time, Roderick McIllree, managing director of Greenland Minerals, commented on the good news and said, "The company expects in the first few months of next year to announce its final flow sheet that will almost certainly see Kvanefjeld optimised on heavy rare earth production, underpinned by an economic keel of uranium production."

To the extent necessary to permit the company’s notice of meeting seeking shareholder approval for the issue of 17,500,000 ordinary fully paid shares to Hackleton Investments Limited, to state the shares will be issued later than one month after the date of the shareholders’ meeting.

The waiver is conditional on the notice of meeting stating the shares will be issued to Hackleton no later than 30 June 2012.

The meeting seeking shareholder approval for the issue of 17,500,000 shares to Hackleton, will be held today at 11:00am (WST).

Waiver 2: listing rule 14.7

On the 13 December 2011 GMEL announced the details of an extension to the settlement of the agreement to move to 100% ownership of the Kvanefjeld multi-element project.

As a consequence of the settlement extension, GMEL has been granted a waiver from listing rule 14.7 to the extent necessary to permit the Company to issue to minority shareholders of Westrip Holdings Limited up to 7,825,000 fully paid ordinary shares and up to 5,000,000 options, later than 3 months after the general meeting of shareholders at which the issue of the Westrip Securities was approved.

The waiver is conditional on the Westrip Securities being issued no later than 15 June 2012 and otherwise on the same terms and conditions as approved by shareholders on 7 October 2011.


Greenland Minerals comments on importance

The company views’ securing the outstanding components of the project it does not already control such as the royalty and the 39% of the shares in GME A/S (Greenlandic subsidiary) to be of critical importance.

These acquisitions come at a time when the project’s international importance is growing quickly. Internal modelling indicates that annuities payable on the royalty even over the first several years of production could be far in excess of the consideration agreed and that this acquisition is a significant value-add especially when taken in the context of recent policy changes made by the government of Greenland towards the company’s license to be inclusive of Uranium.

There was also building, a requirement to resolve these outstanding issues so that the company can continue on its trajectory of entering orbit with several strategic consortiums to discuss development parameters for the Ilimaussaq Mineral Field which has a projected mine life of greater than 50 year based on current resources.

A new resource model is currently being calculated and is expected in the first half of March which will clearly demonstrate the global significance of the project with the inclusion of the maiden resource from zone’s 2 and 3.

The current JORC contains 6.6 million tonnes total rare earth oxides (TREO), 350 million pounds U3O8, and 3 billion pounds of zinc.

A major focus of the 15,000 metre current drilling program is to generate sufficient data to establish initial resource estimates on Zones 2 and 3, both located within the broader northern Ilimaussaq project area.

Highlighting the continued increasing potential of the project, the company said that initial multi‐element resource estimates on the zones are anticipated to increase the overall resource base substantially.

Greenland Minerals continues to progress Kvanefjeld, and earlier in the month in a pivotal deal, the company announced a buy out of the 39% minority interest for just A$39m cash, along with 8.125 million shares and 5 million options.

The company making deal therefore provides Greenland Minerals with full control over the largest known occurrence of rare earths.

It is understood that Greenland Minerals is currently evaluating alternative financing proposals to mop up the remaining interest in the project -with a window of 150 days to finalise these.

Analysis

The deal to take out the minority partner allows Greenland Minerals to acquire the 39% minority holding and move to 100% of Kvanefjeld for just $39 million cash.

It is a significant step for Greenland Minerals and also removes uncertainty as to whether Westrip, or Rimbal, the private company of Barnes, held the rights to the minority share of the joint venture.

It also removes legal claims from of the picture.

Strategically, it allows Greenland Minerals to own 100% of the Kvanefjeld project - unfettered - and in a way that can unlock greater value for Greenland Minerals shareholders. 

This outcome, for the entire 100% of the Kvanfeld project that has a resource of 6.6 million tonnes TREO, 350 million pounds of uranium and 3 billion pounds of zinc at a cost of $39 million, yet Greenland Minerals is itself still valued at a miserly $224 million.

The trading halt is to allow the Company to finalise documentation regarding the acquisition of the outstanding 39% of the Kvanefjeld rare earths, uranium and zinc project.

The halt will last until the earlier of an announcement, or the commencement of trading on Monday 15 August.

The Greenland Government has approved the company's ‘Terms of Reference’ for environmental and social impact assessments at the project.

The importance of the approval for Greenland Minerals is very significant, with the approvals a critical component of Definitive and Bankable Feasibility Studies.

This latest news is another boost for the company's Kvanefjeld operations, and follows on from the news in June of key work programs on the efficient development of the project.

Significantly, the beneficiation testwork programs are now producing positive results with recent tests resulting in the concentration of >85% of light REEs in <15% of the mass. This effectively increases the grade fivefold.

This opens the opportunity for further reductions in the capacity and cost of the REE leach circuit while maintaining a high output, reducing the capital costs of the project.

Negotiations with local community

Stakeholder engagement programs are continuing, with a well-received open day having recently been held in the town of Qaqortoq, south Greenland.

Qaqatoq is located about 30 kilometres from the town of Narsaq where the company's operations are based.

Greenlandic stakeholders input is critical to the site selection process, along with the results from the Resource definition drilling. Significantly, the company is expecting Government environmental approvals within weeks, which would be a boost for the market value of the company.

The open day was the second by the company, and provided a comprehensive update on the Kvanefjeld project, with a strong emphasis on the feasibility studies and the environmental and social impact assessments.

The company has a good rapport with local communities and has its next open day in October.

A 619 million tonne (Mt) multi-element resource (rare earth elements, uranium, zinc) has already been defined at Kvanefjeld, which was the first focal point of resource definition within the northern Ilimaussaq project area.

With the global resource at Kvanefjeld including an inventory of 6.6 million tonnes of total rare earth oxides (TREO), the Resource definition drilling will add to the company's already impressive Resource base in Greenland.

In addition,  Greenland Minerals and Energy has the potential for a funding injection on the exercise of the company's June 30 options.

On March 31 the company delivered a significant upgrade in the resource estimate at the project with a 619 million tonne JORC‐code compliant resource. The company has since been ramping up its technical capacity to facilitate the feasibility program at the project.

Previous sterilization holes drilled in 2009 adjacent to the Kvanefjeld plateau revealed a significant extension of mineralization from outcropping zones at Steenstrupfjeld.

Stakeholder engagement programs will be conducted along with ongoing environmental baseline studies in areas under assessment for the mine site, processing plant and related infrastructure, and potential hydro‐electric power facilities.

A series of meetings recently took place in Greenland in early April to discuss the ‘terms of reference’ for upcoming social and environmental impact assessments with key stakeholder groups. This follows the procedures specified by Greenland’s Bureau of Minerals and Petroleum.

In addition, there will be field assessments for constructability studies relating to site selection for key infrastructure items.

Key personnel have now mobilised to the company’s operations base in Narsaq, south Greenland, and drill crews will be arriving onsite in the coming days.

GMEL said it is is fully funded to September 2012 by the exercise of the options that expire 30 June 2011. The company is currently in discussions with a number of investment banks and broking firms in regard to the underwriting of these options.

An Interim Pre‐feasibility Report on the Kvanefjeld study was released in February that indicates the potential for the multi‐element resources to sustain a large‐scale mining operation for decades.

On March 31 the company delivered a significant upgrade in the resource estimate at the project with a 619 million tonne JORC‐code compliant resource.

The company has since been ramping up its technical capacity to facilitate the feasibility program at the project.

SRK Consulting increased the JORC Indicated resource 20% to 437 million tonnes, and the total resource 35% to 619 million tonnes, effectively confirming Kvanefjeld as one of the world’s most significant resources of rare earth elements and uranium.

The contained metal inventory is; 6.6 million tonnes of total rare earth oxide (TREO), 350 million pounds of U3O8 and 3 billion pounds of zinc.

The TREO includes 0.24 million tonnes of heavy rare earth oxides, and 0.53 million tonnes Y2O3.

Greenland Minerals said the resources of the northern Ilimaussaq complex are both extensive and unique, providing the potential to produce both light and heavy rare earth products, uranium and zinc concentrates, fluoride compounds and a zirconium product.

The company's base case mining scenario evaluates an operation to produce a rare earth concentrate and uranium oxide.

Current metallurgical programs are advancing the process route to produce both a light and heavy rare earth product, including yttrium, uranium and zinc concentrates.

Importantly, key beneficiation studies are underway aiming to significantly enhance the project’s efficiency and economics.

SRK Consulting increased the JORC Indicated resource 20% to 437 million tonnes, and the total resource 35% to 619 million tonnes, effectively confirming Kvanefjeld as one of the world’s most significant resources of rare earth elements and uranium.

The contained metal inventory is; 6.6 million tonnes of total rare earth oxide (TREO), 350 million pounds of U3O8 and 3 billion pounds of zinc.

The TREO includes 0.24 million tonnes of heavy rare earth oxides, and 0.53 million tonnes Y2O3.

Greenland Minerals said the resources of the northern Ilimaussaq complex are both extensive and unique, providing the potential to produce both light and heavy rare earth products, uranium and zinc concentrates, fluoride compounds and a zirconium product.

The company's base case mining scenario evaluates an operation to produce a rare earth concentrate and uranium oxide.

Current metallurgical programs are advancing the process route to produce both a light and heavy rare earth product, including yttrium, uranium and zinc concentrates.

Importantly, key beneficiation studies are underway aiming to significantly enhance the project’s efficiency and economics.