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Perhaps it’s time to look more closely at those projects able to raise funding in the current environment. One of these is ASX-listed Peak Resources, that is developing the Ngualla Rare Earth Project in Tanzania.
The project has now secured funding from two partners – Appian Natural Resources Fund and the International Finance Corporation – that should see it through to the completion of the Bankable Feasibility Study (BFS) by the end of next year. “We have been able to progress it quite quickly,” says Peak Resources Managing Director, Darren Townsend. “The deposit was only discovered in August 2010, and we have only spent A$17m thus far (to the end of pre-feasibility), but the grades have certainly warranted the rapid development of the project.”
The Ngualla deposit is rich in magnetic rare earth elements praseodymium (Pr) and neodymium (Nd). “We have a combined head grade of 1% of praseodymium and neodymium, and to our knowledge that is the highest grade of any undeveloped projects in the world,” says Townsend. “The plan is to develop an operation that will produce less than a years’ global supply. Because of our head grade is so high, we don’t have to go for economies of scale, and we can come in with a nimble operation.”
Besides the rich presence of rare earth elements that have plenty of commercial uses, the deposit will allow for a configuration that will get rid of the uneconomic elements quickly. Townsend explains: “We have worked out a way to drop 80% of the cerium early on in the project. Cerium is about 40% of the total tonnage of the rare earths we process, so being able to drop it out early is a huge advantage for us.”
Praseodymium and neodymium are magnet metals capable of lifting 1,000 times their own weight. Townsend says that as the project stands, 81% of the revenues will come from those two elements. “Our mine reserve indicates a 58-year mine life, and our resource is the most metallurgically favourable part of the deposit,” says Townsend.
40% of the magnetic metals are used in cars, specifically in window and seat motors where weight is important – they keep the weight of the car down. 19% of the metals find their way into wind turbines, where they allow for the use of direct drive systems that again reduces the weight as well as the maintenance required on the systems
The last major category of application is in electric and hybrid vehicles. “They use 8x as much praseodymium and neodymium than conventional vehicles,” says Townsend.
China is still the largest producer of rare earth elements, providing as much as 80-85% of the world’s supply. Up until May this year, they applied export tariffs to any rare earth materials leaving the country. But the issue was taken to the World Trade Organisation, where they lost their case and had to remove the tariffs.
They have now replaced the tariffs with a resource tax. “But the new tax does not apply to any inventory in the system. So the inventory needs to work through the system before the tax becomes applicable, and when it does, the tax will be borne by production in China. So any production outside the country will have an advantage, including our own,” says Townsend.
With a rich deposit and investors that have deep pockets and plenty of experience, Peak Resources development of the Ngualla Rare Earth Project could be a ray of sunshine in a very dark market.