AMEX: REE & TSX-V: RES
VANCOUVER, Sept. 28 /PRNewswire-FirstCall/ - Rare Element
Resources Ltd. (TSX-V: RES and AMEX: REE) (the "Company") is
pleased to announce the results of a Scoping Study (the "Study")
(an NI 43-101 compliant "Preliminary Economic Assessment" or "PEA")
on the rare-earth resources delineated on its 100% owned Bear Lodge
project, located in northeastern Wyoming,
USA. Highlights of the Study are summarized in the Table 1
below, with additional commentary following.
Table 1 Preliminary Economic Assessment - Bear Lodge Rare-Earths Project
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Case 1
(Base Case) Case 2
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3-year
trailing Estimated
average long-term
prices(1) prices(2)
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Production Rate (tpd) 1,000 1,000
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Mine Life (Years) 15 15
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Initial Capital (US$) $87 million $87 million
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Operating Cost (US$/ton) $245 $245
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Life of mine sustaining capital (US$) $88 million $88 million
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REO recoveries to concentrates 80% 80%
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Annual REO contained in concentrates (tons) 11,400 11,400
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Annual Payable Value of REO (US$) $143 million $178 million
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Annual Operating Cash Flow (US$) $50 million $80 million
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Internal rate of return (IRR) 40% 60%
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After-tax Life-of-mine Cash Flow (US$)
(Undiscounted) $598 million $978 million
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After-tax Net Present Value (US$)
(At 10% discount rate) $213 million $380 million
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After-tax Net Present Value (US$)
(At 15% discount rate) $131 million $251 million
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Payback (years) 3.1 2.4
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1. Rare-earth bulk concentrate prices are used in the Study and are based
on historic three-year average concentrate prices from Metal-Pages and
assembled by the Industrial Minerals Company of Australia ("IMCOA").
2. Estimated long term prices of bulk concentrates represent a price
increase of 25% over the historic three year average concentrate
price.
"The preliminary economic assessment completed on Rare Element's
Bear Lodge rare-earths deposit demonstrates a potentially robust
case, without any government support or incentives," stated
Don Ranta, Rare Element's President
& CEO. "The Bear Lodge Project is expected to significantly
contribute to employment, revenues, and the economy of the
State of Wyoming. Work is
continuing to advance the project towards a production decision and
a number of opportunities to further enhance the already robust
project economics are being evaluated."
Scoping Study (PEA)
The Study was prepared by independent consultant, John T. Boyd
Company ("Boyd"), with the assistance of consultants Mountain
States R&D International ("MSRDI") and Ore Reserves Engineering
("ORE"). New NI 43-101-compliant inferred mineral resource
estimates for two of the four known mineralized zones at Bear Lodge
(Bull Hill Southwest and Bull Hill Northwest deposits) were
prepared by ORE and were announced on May
26, 2010. A summary table is reproduced (Table 4) for
convenience at the end of this news release. The Study provides an
initial development model and a preliminary economic analysis of
the project based on the resources estimated for the two deposits.
The final NI 43-101-compliant technical report is nearly completed
and will be filed on SEDAR within 45 days.
The Study was commissioned by the Company in 2009 to evaluate
the potential economic viability of recovering rare-earth elements
("REE") in concentrate, with a future goal to recover individual
rare-earth oxides ("REO"), from the resources in the Bull Hill area
of the Bear Lodge project. This was in response to growing demand
for these elements in environmental and other applications where
the REE are vital to the new technologies developed for fuel
efficient ("hybrid") automobiles and plug-in electric vehicles.
Many hybrid cars use rechargeable nickel-metal-hydride (Ni-M-H)
batteries that contain lanthanum along with electric motors and
generators that require high-strength permanent magnets containing
neodymium, praseodymium, dysprosium, and terbium. Substantial
quantities of all five of these rare-earth elements would be
produced by a mine at Bear Lodge, and the five would represent
nearly 65% of potential saleable products' value.
Rare Earths - Markets and Pricing
For an independent analysis of REE markets, including supply and
demand forecasts, Boyd relied on a recent confidential report and
supporting data produced by IMCOA, an independent industrial
minerals research firm based in Perth,
Australia and led by Dudley J.
Kingsnorth. This report was requested by the Company and
provided to Boyd as a basic reference. The IMCOA report forecasts
growth in global demand for REE at a rate of nearly 10% per year
until 2020, from approximately 125,000 tonnes in 2010 to 200,000
tonnes by 2015 to 280,000 tonnes by 2020, expressed as "TREO"
(total rare-earth oxides or the sum of all 14 REE plus yttrium).
During this period, primary supply sources located mainly in
China are not expected to increase
production significantly, creating a growing supply/demand gap.
China has been reducing its
exports of rare earths for several years and announced a major
reduction in exports in early July
2010. These policies have already caused significant price
increases for most REE and created opportunities for new primary
suppliers to enter the market. Boyd concludes that the Bear Lodge
REE resources, which require significant further work to bring them
to the feasibility level of analysis, represent an attractive
potential mine development opportunity for the Company.
Bear Lodge - Low-cost Open Pit Mining
The development model utilized by Boyd and its associates for
the Study contemplates conventional truck and shovel open-pit mine
production from the near-surface oxide inferred resources in the
Bull Hill SW and NW deposits, which would provide an initial mine
life of 15 years. Recent drilling has successfully intersected REE
outside the known resources and may support an eventual increase of
mine life beyond that contemplated in the Study. All of the mineral
resources at Bear Lodge are currently categorized as inferred
mineral resources. Mineral Resources that are not mineral reserves
do not have demonstrated economic viability. Mineral resource
estimates do not account for mineability, selectivity, mining loss
and dilution. These mineral resource estimates include inferred
mineral resources that are normally considered too speculative
geologically to have economic considerations applied to them that
would enable them to be categorized as mineral reserves. There is
also no certainty that these inferred mineral resources will be
converted to measured and indicated categories through further
drilling, or into mineral reserves, once economic considerations
are applied. Also there is no certainty that this Preliminary
Economic Assessment will be realized. An economic assessment will
almost certainly change as new information is generated on the
mineral resources, mine plan, and processing methodology.
Bear Lodge - REE Production
In the base case scenario, a conservative production rate
beginning at 500 tons per day of mineralized material will
progressively increase to 1,000 tons per day by year three. Once
full production is achieved, the TREO produced each year would be
approximately 11,400 tons (10,400 metric tonnes) in bulk rare-earth
concentrates. Discounted cash flow analysis of this scenario, using
2008 through 2010 REE bulk mixed concentrate prices and capital and
operating costs, yields a 40% Internal Rate of Return (IRR) and a
Net Present Value (NPV) of US$213
million at a 10% discount rate or a US$131 million NPV at a 15% discount rate on an
after-tax basis over a mine life of 15 years. With this Study the
Company is contemplating the sale of concentrates in North America to potential
refiners/processors, several of which have contacted Rare Element
already.
Hydrometallurgical tests for extraction and separation of
individual rare-earth oxides are progressing, and the ultimate goal
is the production and sale of high-purity oxides of cerium,
lanthanum, neodymium, praseodymium, and possibly europium,
dysprosium, terbium, and other REO. These products may be sold
individually as oxides, or in various combinations such as
"Didymium" (Neodymium and Praseodymium), "SEG" (Samarium, Europium
and Gadolinium), or as mischmetal (a mix of the rare earth
elements).
Bear Lodge - Rare Earth Prices
The prices used in this study are based on historic three-year
average concentrate prices. It is important to note the
following:
1. REO concentrate prices are lower than refined REO prices.
2. Historic REO concentrate prices are significantly lower than the
current REO concentrate prices as quoted in Metal Pages. For the Bear
Lodge distribution of rare earths, current prices have recently
increased approximately 360% from the three-year historic average due
to the reduction in exports of REE products from China during the
third quarter of 2010, however, it is unknown if the current higher
prices are sustainable.
3. A 10% change in the price of REO concentrate would change the Base
Case NPV of the project on an after-tax basis by approximately $58
million at a 10% discount rate, and $42 million at a 15% discount
rate.
4. The sale of concentrates from Bear Lodge would likely be subject to a
long-term supply contract for which a price would be set in the
contract with one or more buyers. These long-term prices can differ
substantially from quoted spot prices for metal with smaller markets
such as rare-earth elements.
The price assumptions used by Boyd for the REO concentrates are
based on compilations of the past three years that range from
US$4.59 (2008), to $3.65 (2009), to $7.54/kg (2010). These concentrates contain
approximately 43.5% REO and were derived from deposits that have a
similar, but slightly less valuable, REO distribution compared to
the Bear Lodge deposits. The 2010 concentrate price is based on
Metal-Pages' data through August 31,
2010.
A recent price quote for REE concentrates on an FOB China basis,
as reported on September 2, 2010 by
Metal-Pages.com, is $33.25/kg. The
elements needed for high-strength permanent REE magnets include
neodymium, praseodymium, dysprosium and terbium; prices were quoted
by Metal-Pages (September 2, 2010) at
US$56.75, $55.75, $288 and
$595/kg, respectively for those
elements (Table 2). Current REE producers seek to increase
production of neodymium, praseodymium, dysprosium and terbium to
meet the growing demand from magnet manufacturers. This underlines
the need for new producers with mineral resources having an REE
distribution that is more reflective of current market demand, such
as that indicated for the bastnasite-group minerals at Bear Lodge.
A complete list of historic prices used will be provided in the
Technical Report to be filed on SEDAR.
The economic model suggested by IMCOA and tested by Boyd
envisions a 5% market share capture (10,400 tonnes of a
200,000-tonne REO market) specifically for cerium, lanthanum,
neodymium and praseodymium. This assumes that 2 other mines, one in
the USA and one in Australia, will go into production prior to
Bear Lodge, and that IMCOA's projections of market growth will
allow additional producers of the light and heavy rare earths to
successfully market their products by 2015.
REO pricing over the past three years and the current prices are
shown in Table 2. This information is shown only to indicate the
recent increases in prices for individual rare-earth oxides and its
potential effect if Bear Lodge progresses into individual REO
production. There is no certainty the current prices will be
maintained for the duration of the operating life of the Bear Lodge
project.
Table 2 REO Prices 2008 through 2010 and Current Prices (9-2-10)
Current
Price
Rare Earth Bear Lodge 2010 Price (Sept. 2,
Oxide Oxide Zone 2008 Price 2009 Price (8 months) 2010)
REO REO% $/kg $/kg $/kg $/kg
--- ---- ----
Ce(2) O(3) 1.66 4.35 4.2 8.14 36
La(2) O(3) 1.06 7.75 5.9 9.65 37
Nd(2) O(3) 0.52 27 14.85 32.32 56.75
Pr(2) O(3) 0.16 27 14.75 31.69 55.75
Sm(2) O(3) 0.088 4.5 4.5 8 33.25
Gd(2) O(3) 0.045 9.75 6.5 11.45 40
Y(2) O(3) 0.032 15.25 13.5 13.5 34.5
Eu(2) O(3) 0.021 475 465 551.25 585
Dy(2) O(3) 0.018 110 105 195 288
Tb(2) O(3) 0.0075 650 350 494.37 595
Others 0.0085
TOTAL 3.62%
For the purposes of this Study, the Company has also shown a
case that uses a 25% increase from the three-year trailing average
prices used in the Base Case scenario. The Company believes these
may more realistically reflect long-term pricing for REO based on
market outlook information available at this time. As with the
current pricing for REO, there is no certainty these prices will be
maintained for the duration of the operating life of the Bear Lodge
Project.
Bear Lodge - Capital Costs
Capital cost estimates for the Bear Lodge project are lower than
many other rare-earth projects for two principal reasons: 1)
infrastructure in the project vicinity is already well established
with an excellent road and highway system, nearby railroads, nearby
power lines, available water source, and skilled labor within
several local communities; and 2) the metallurgical
preconcentration of rare-earth minerals is a very simple and
low-cost process that upgrades the mineralized material for further
hydrometallurgical concentration.
The capital cost estimate for the base-case production is
$87 million in construction capital
and $88 million in sustaining
capital. This scenario involves development of the Bull Hill
deposit at a mining rate of 1000 tons per day (tpd) or 360,000 tons
per year (tpy). Operating costs for the project are estimated at
$245 per ton of material milled, with
the most significant single cost being reagent consumption in
hydrometallurgical processing. The model assumes mining by open pit
methods and processing of the mineralized material on site to
produce mineral preconcentrates by crushing, attritioning with
water, and size separation methods. REE recoveries of 90% are
assumed for the preconcentration based on preliminary bench-scale
testwork, however these results have yet to be confirmed with
pilot-scale tests. The model further assumes construction of a
hydrometallurgical plant at the mine site where there is access to
low-cost power (estimated at approximately 3
cents per kwh) for the processing of the REE mineral
concentrates in order to produce a bulk mixed rare-earth
concentrate. Metallurgical recovery to a concentrate is estimated
at 90% from the preconcentrate, for overall recoveries of 90% times
90% or approximately 80% into the concentrate. All of these process
stages are being tested currently for optimization and reduction of
operating costs, and significant progress is being made with
potential reduction of reagent costs.
Further testwork is ongoing to extract and separate individual
rare-earth oxide products to 99+% purity levels. The Company's
ultimate goal is the production and sale of individual high-purity
rare-earth oxides (REO), which would require additional capital
costs.
Bear Lodge - REO Distribution
The REE mineral resources at Bear Lodge are of potentially
significant interest to the market because of their relatively high
proportions of contained neodymium, praseodymium, europium,
dysprosium and terbium. Demand is increasing for these elements in
the magnet production and other industries, but they typically
occur in lower concentrations in the majority of known REE
deposits.
Table 3 REO Distribution in Oxide Zone of the Bear Lodge Deposits
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Element Ce La Nd Pr Sm Gd Y Eu Dy
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Assay
REO % 1.66 1.06 0.52 0.16 0.088 0.045 0.032 0.021 0.018
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Distribution
Oxide % 45.86 29.28 14.36 4.42 2.43 1.24 0.88 0.58 0.50
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Relative
Value % 15.5 20.4 25.4 7.7 1.1 0.8 0.6 17.5 5.3
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Element Tb Er Yb Lu Ho Tm
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Assay
REO % 0.0075 0.0020 0.0012 0.00016 0.00100 0.00015
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Distribution
Oxide % 0.21 0.055 0.033 0.004 0.027 0.004
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Relative
Value % 5.6 - - - - -
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Total Assay REO% = 3.62% for oxide zone mineralization; Ce -
cerium, La - lanthanum, Nd - neodymium, Pr - praseodymium, Sm -
samarium, Gd - gadolinium, Y - yttrium, Eu - europium, Dy -
dysprosium, Tb - terbium, Er - erbium, Yb - ytterbium, Lu -
lutetium, Ho - holmium, Tm - thulium.
Bear Lodge - PEA Summary
The results of the Scoping Study (PEA) demonstrate that the Bear
Lodge REE project can achieve acceptable after-tax returns on
invested capital and therefore warrants further investment to
advance the project to a prefeasibilty level of analysis. Increased
rates of return are potentially achievable through any combination
of higher prices, increased product sales, higher resource/reserve
grades, lower operating costs, or higher metal recoveries. Boyd
recommends that the Bear Lodge project proceed to a Preliminary
Feasibility level analysis. The recommended work includes
completion of bulk sampling, pilot plant testing, further drilling
of the Bull Hill SW and NW deposits to upgrade more of the REE
resources to Measured or Indicated categories of confidence, REO
extraction and separation testwork on both the Bull Hill SW and NW
deposits, environmental studies, mine permitting, and continuing
community engagement.
The estimated cost of this work program is $15 million with the work to be conducted in two
phases. Phase 1 comprises of preparation of an updated mineral
resources estimate that includes 2010 drilling results, continued
metallurgical testing, and a pilot plant test, which is anticipated
to start in the spring of 2011. Phase 1 would include work to be
conducted on samples and analyses from the 2010 drilling program.
Phase 2 will include another drilling program for further resource
expansion, resource definition, and collection of metallurgical
samples that will be used in a subsequent full feasibility study.
The Phase 2 program will then proceed to more detailed
metallurgical testwork and engineering studies, leading to final
process design and commercial testing, market studies,
environmental studies and mine permitting, community consultation,
engineering design, and economic modeling. Phase 2 work is planned
to commence in the late spring of 2011, subject to positive results
from Phase 1 and arranging additional financing for the
project.
Risks & Opportunities
The principal risks for the Bear Lode project are identified as
follows:
1. Permitting and regulatory timelines and outcomes;
2. Changes in metallurgical recoveries as testwork continues;
3. Future pricing of REO;
4. Changes to capital and operating costs as studies continue;
The principal opportunities for the project are identified as
follows:
1. Drilling in 2010 has intersected significant grades of REO outside
the limits of the mineral resources used in the PEA, which could
result in increased mineral resources and potentially extend the mine
life and/or support a higher production level.
2. Optimization work is advancing and has had some success in developing
a more cost-effective and efficient metallurgical processing method
than is being announced in this Scoping Study by Rare Element for the
Bull Hill area mineralization, which information was not available in
time for this Study.
3. Hydrometallurgical tests for extraction and separation of individual
rare-earth oxides is progressing, and the ultimate goal is the
production and sale of high-purity oxides of neodymium, praseodymium,
dysprosium, terbium, europium, lanthanum, cerium, and other REO.
4. Drilling has encountered large areas of low-grade (1.0-1.5% REO)
oxide mineralization adjacent to the higher grade dikes. These areas
are not included in the resource estimates and will be the subject of
some drilling and metallurgical testing to determine if the material
can be upgraded with a simple inexpensive process of screening or
screening and washing.
Qualified Persons
Michael P. Richardson, P.E. is
the independent qualified person from John T. Boyd Company
responsible for the Scoping Study (Preliminary Economic Assessment)
as well as mine planning, capital and operating cost estimation,
and developing the economic models. He also reviewed and approved
this news release as well as all sections of the Scoping Study.
Alan C. Noble, P.E. of Ore Reserves Engineering, is the independent
qualified person responsible for resource estimation. Dr. Ron
Roman, P.E. of Mountain State R&D International is the
metallurgical engineer and an independent qualified person
responsible for the metallurgy, process development, and estimation
of the mill capital and operating costs. Dr. James G. Clark, L.Geo., who has direct
experience with the project dating back to 1986, is responsible for
the geologic, drilling, and sampling data on behalf of the Company;
these data and descriptions were reviewed and approved by Mr.
Richardson. The full Study will be
accessible on SEDAR and the Executive Summary will be available on
the Company's website within 45 days.
Rare Element Resources Ltd (TSX-V: RES & AMEX: REE) is a
publicly traded mineral resource company focused on exploration and
development of rare-earth elements and gold on the Bear Lodge
property.
Rare-earth elements are key components of the green energy
technologies and other high-technology applications. Some of the
major applications include hybrid automobiles, plug-in electric
automobiles, advanced wind turbines, computer hard drives, compact
fluorescent light bulbs, metal alloys, additives in ceramics and
glass, petroleum cracking catalysts, and a number of critical
military applications. China
currently produces more than 95% of the 130,000 metric tonnes of
rare-earths consumed annually worldwide, and China has been reducing its exports of rare
earths each year. The rare-earth market is growing rapidly, and is
projected to accelerate if the green technologies are implemented
on a broad scale.
ON BEHALF OF THE BOARD
Donald E. Ranta, PhD, PGeo, President & CEO
Donald E. Ranta, PhD, PGeo,
serves the Board of Directors of the Company as an internal,
technically Qualified Person. Technical information in this news
release has been reviewed by Dr. Ranta and has been prepared in
accordance with Canadian regulatory requirements that are set out
in National Instrument 43-101. This news release was prepared by
Company management, who take full responsibility for content.
Neither TSX Venture Exchange nor its Regulation Services Provider
(as that term is defined in the policies of the TSX Venture
Exchange) accepts responsibility for the adequacy or accuracy of
this release.
Mineral Resources
The mineral resources for the Bear Lodge project were estimated
by Alan C. Noble, P.E. of Ore Reserves Engineering, an independent
Qualified Person as defined by National Instrument 43-101 ("NI
43-101") and were reported in a news release dated May 26,2010, but are summarized below for
convenience. Readers should review that news release for additional
information, including the contribution of each deposit to the
overall mineral resource, the mineral resource estimates at
different cut-off grades, the parameters used in the estimate and
the required NI 43-101 disclosure.
Table 4 Total Inferred Tons and Grade of the Various Oxidation Zones
at a Range of Cut-Off Grades (% REO)
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Oxide Transitional Sulfide Total
Cutoff ----- ------------ ------- -----
Grade -------------------------------------------------------------------
(1,3) Grade Grade Grade Grade
----- Tons (1) Tons (1) Tons (1) Tons (1)
-------------------------------------------------------------------------
1.0 13,700,000 2.63 4,300,000 2.52 9,600,000 2.70 27,600,000 2.64
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1.5(3) 8,000,000 3.62 2,600,000 3.39 6,900,000 3.29 17,500,000 3.46
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2.0 5,600,000 4.45 1,700,000 4.23 4,600,000 4.05 11,900,000 4.26
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2.5 4,400,000 5.06 1,300,000 4.93 3,900,000 4.37 9,600,000 4.76
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3.0 3,300,000 5.84 930,000 5.71 3,000,000 4.88 7,200,000 5.42
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3.5 2,700,000 6.42 800,000 6.13 2,200,000 5.53 5,600,000 6.04
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4.0 2,300,000 6.90 690,000 6.50 1,470,000 6.33 4,400,000 6.65
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4.5 1,900,000 7.52 570,000 6.96 1,200,000 6.79 3,600,000 7.19
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5.0 1,600,000 7.88 460,000 7.48 1,000,000 7.24 3,100,000 7.61
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1. REO (rare-earth oxides) include Ce2O3, La2O3, Nd2O3, Pr2O3, Sm2O3,
Gd2O3,, Y2O3,, Eu2O3,, Dy2O3,, and Tb2O3, listed in relative order of
decreasing abundance in the deposits, plus minor quantities of other
REO.
2. The resource estimate is classified as Inferred Mineral Resources as
defined by CIM and referenced in NI 43-101.
3. ORE considers a range of 1.0 to 2.5 per cent REO cut-off grade to be
reasonable in preliminary estimation of potentially economic
resources. A cutoff grade of 1.5% REO was selected as the base case
during resource estimation and it is highlighted; a cutoff grade
closer to 2% REO is used for the Scoping Study but, with further
optimization work, will potentially be reduced; a cutoff grade of
3.0% REO is also highlighted to show the higher-grade tons above the
cutoff.
4. The Scoping Study is focused on the Oxide mineralization at
approximately 2.0% cutoff grade.
SOURCE Rare Element Resources Ltd.
Copyright . 28 PR Newswire