Avalon Rare Metals Inc. (TSX:AVL, OTC:AVARF) has revealed the positive findings of the prefeasibility study (PFS), on the Nechalacho Rare Earth Elements (REE) deposit, in Thor Lake NWT, Canada. According to Avalon, the PFS results demonstrate with a high degree of confidence that the project development model is technically feasible and Nechalacho will provide satisfactory returns on invested capital with acceptable risk.
Furthermore, Avalon has identified "many opportunities" to further optimize the project's economics and add to Nechalacho’s mineral resources.
The PFS was completed by independent consultants Scott Wilson Roscoe Postle Associates.
Additional work by Avalon and third party consultants/contractors is ongoing to develop a bankable feasibility level technical report - based on the BFS the financing for eventual construction and start-up of operations will be obtained.
The PFS proposes an 18-year mine life, based on a 12Mt NI43-101 Probable Mineral Reserve estimate grading 1.70% TREO (Total Rare Earth Oxide), with initial production of approximately 1,000 metric tonnes per day (tpd) which will subsequently ramp-up to 2,000tpd in year four.
The development model has two site components, with an underground mine and flotation plant to be located at the Thor Lake property, and a hydrometallurgical plant at a brownfield site, closer to existing transportation and energy infrastructure.
The model anticipates that the REE concentrate will be produced through conventional grinding, crushing and flotation techniques. Avalon's hydrometallurgical plant will produce four saleable products in hydrated oxide form - a total rare earth oxide, a zirconium oxide, a niobium oxide and a tantalum oxide.
Processing facilities are expected to include a flotation plant, producing a high-grade concentrate which will be barged off-site to the proposed hydrometallurgical plant site for secondary processing. A tailings management facility will be located up-slope from the flotation plant and northeast of Thor Lake in a local catchment area.
In terms of the model’s economics, Nechalacho’s total project construction capital costs, inclusive of a 22% contingency, were estimated at C$899.7m. The capital costs of the mine, mill and hydrometallurgical plant total C$589.3m.
Average operating costs, over the 18-year mine life, are estimated at C$267 per tonne of ore mined, or $5.93 per kilogram of ore product. The financial analysis foresees a pre-tax IRR (internal rate of return) of 14%; pre-tax Net Cash Flow C$2.1bn; and NPV C$826m (with a 5% discount rate).
Avalon noted that the financial analysis, prepared for pre-feasibility studies, are designed to determine if, after applying conservative assumptions on costs and revenues, the project stands up as an economically viable development opportunity. “In this regard, management is pleased that, despite a higher capital cost estimate than previously anticipated, the DCF analysis yielded positive results.”
The project development schedule envisages a possible start of full-capacity production in 2015, with the construction phase expected to take between 24 and 30 months, beginning in 2013.
In addition to the positive findings of the PFS, Avalon said it has identified ‘many opportunities’ to further optimize Nechalacho’s economics and add to the project’s mineral resources.
According to Avalon, it could: increase production rates and/or shorten the ramp-up period as production rates are only limited by the size of the available market, not the size of the mineral resource; adopt selective mining of higher grade sub-zones after start-up, which would increase revenues in the early years of production; And crucially, Avalon said that “the Thor Lake property offers much untested exploration potential” and the Nechalacho deposit remains open for expansion.
"Less than 10% of the property has been drill-tested to date and the company contemplates a long-term exploration program to add to our resource inventory and make more new discoveries in this truly remarkable rare metals mineralized system", Avalon Exploration VP Bill Mercer commented.
Notably, as stated in last week’s NI43-101 resource update, additions to the resource estimates, and re-classification of parts of the current inferred resource, are anticipated once all the results from the winter drilling are incorporated into the block model.