Rare Earth Mine Prefeasibility Study Shows Lower Cost

(Wyoming Business Report, August 27) – Officials for a company planning to open a rare-earth minerals mine in the Black Hills near Devils Tower are grinning after the results of a third-party pre-feasibility study.

“We’ve got better and more reasons to smile,” said George Byers, vice president of government and community relations for Rare Element Resources in a phone interview Wednesday. 

The study had numerous positive results, including lower-than-expected costs to get the mine in the ground. Former estimates pegged the mine costs at $500 million, which officials still classified as “a relatively small project” producing a lot of material for its size. But after the study, officials have said initial capital costs will be about $290 million with a 45-year mine life total of about $453 million. The lower-than-expected costs, one official said can be chalked up to proprietary technology, Wyoming’s cooperative nature with the mining industry and existing infrastructure.

The company estimates it will take only 2.9 years to pay back initial capital for the mine. The company said it expects operating costs of $11.75 per kilogram of total rare earth oxide, or TREO concentrate. It then assumed a selling price of $24.60 per kilogram, although competitor Lynas Corporation Ltd. said it fetched prices of only $20.35 per kilogram in the most recent quarter. A Forbes opinion article pointed out earlier this month that Lynas is struggling after prices fell from more than $200 per kilogram in 2012, and its author argued that rare earths are no longer rare as new mines ramp up.

But Rare Element says $24.60 is a low price compared to where markets are likely to go as Chinese production costs escalate, China stockpiles more rare earths, techno-gadgets continue to eat up all supplies thrown into the market and new research and development finds more uses for rare earths. 

Byers said that research into magnetic refrigeration technologies at some labs could really drive a lot of demand for Rare Element’s products. 

“If that ever gets done it’s going to require rare earths and will produce enormous energy savings if you can do it,” he said. “No one knows what’s going to crop up next.”

And things could look even better after the feasibility study.

“Given Bear Lodge’s long project life, the fact that it is expected to deliver a solid after-tax return using the low average rare earth prices over the past year is only part of the story,” said Paul Zink, senior vice president and chief financial officer in a release. “As we move toward the feasibility study, we believe we have numerous opportunities to improve the economics further, including work currently advancing to optimize the metallurgical process.”

Byers said customers for the rare earths will likely be from Japan, Western Europe and the U.S. – the areas complaining most loudly when China calls for stockpiling of their resources. But some are complaining that as things stand, the ore would have to be shipped to China to be separated into rare earths after being mined and processed. 

But Byers said the company is looking at adding that capability as well by constructing an industrial facility that could go anywhere in the U.S.

“We would love to find a place for it in Wyoming,” he said.

The mine would be smaller than other players, but Byers said “it’s going to be enough to make a substantial impact on the American supply chain and that’s what’s important.”

Moving forward, Byers said the largest obstacle for the mine will be timely permitting.

“We need the Forest Service to keep the schedule they promised us which is [providing] a draft EIS (environmental impact statement) this winter and a final EIS and record of decision in fall or late winter of next year,” Byers said. If the Forest Service does adhere to its schedule, the mine could be operational by 2016.

Original article here.