TIDMPRE
PENSANA Plc
25 May 2022
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
Pensana Plc
("Pensana" or the "Company")
Completion of FEED and Value Engineering Study
Pensana Plc (LSE: PRE) has completed a Front End Engineering Design (FEED) and
Value Engineering Study into establishing a UK-based world-class, independent
and sustainable supply of the magnet metal rare earths vital for the electric
vehicle, offshore wind turbine and other strategic industries.
Highlights
* Completion of FEED and Value Engineering Study for rare earth separation
hub at Saltend Chemicals Park and the Longonjo Operations.
* Study demonstrates sustainable operations with strong economics based on
the most recent independent base case NdPr oxide price forecasts:
* Generates an unleveraged post-tax NPV8% of US$3.5 billion
* Average annual EBITDA first five years steady state production US$630
million
* IRR of 71%
* Payback of 1.5 years
* Initial capital expenditure of US$494 million
* Study prepared by leading technical consultants WOOD, SRK, Snowden Mining
Industry Consultants and Paradigm Project Management.
Pensana Chairman, Paul Atherley commented:
"Completion of this study is another important step for Pensana in its plans to
establish an independent and sustainable rare earth processing hub in the UK.
The strong fundamentals and robust economics provide a solid platform for the
financing and development of the project.
The growing concerns over supply chain resilience and the burgeoning demand for
magnet metals from the electric vehicle and offshore wind sectors is reflected
in the growing customer demand for our products."
The study outlines the plans to establish the world's first independent and
sustainable magnet metal rare earth separation hub at the Saltend Chemicals
Park in the Humber Freeport, UK, treating material sourced from the Longonjo
Operations in Angola and third-party feedstock from a variety of other sources.
Saltend is targeting production of 12,500 tonnes per annum of separated rare
earths including 4,500 - 5,000 tonnes of neodymium and praseodymium (NdPr)
oxides, representing around 5% of the projected world demand in 2025.
The study has been prepared by Wood Plc, SRK Consulting, Snowden Mining
Industry Consultants (Pty) Limited and Paradigm Project Management (Pty) Ltd.
Financial and Production Summary
The key material assumptions and outcomes of the results of the study are set
out below.
Study Unit
Production Assumptions
Life of Mine (based on Measured and Indicated category 20 years
MRE)
Average grade, TREO1 (Year 1-5) 3.72 %
Average grade, TREO1 (Year 6-20) 2.18 %
Average grade, NdPr2 (Year 1-5) 0.78 %
Average grade, NdPr2 (Year 6-20) 0.48 %
Average strip ratio (LOM) 0.29 waste:feed
Design ROM throughput 1.5 mtpadry
Design concentrator production 107,000 tpadry
Design MRES Refinery production 41,100 tpadry
Design Saltend Refinery capacity 46,600 tpadry
Annual Production of Rare Earth Oxides (TREO) 12,500 tpa
Annual Production NdPr Oxides3 (included in TREO) 4,500 - 5,000 tpa
Average concentrator recovery (NdPr) 45 %
Average MRES recovery (NdPr) 72 %
Average SX recovery (NdPr) 92 %
Operating Costs4
Average annual operating cost 199 US$ million
Average operating (total rare earth oxide) 16 US$/kg
Capital Costs
Saltend Refinery 195 US$ million
Longonjo Mine Infrastructure 49 US$ million
Longonjo Concentrator Plant 123 US$ million
Longonjo MRES Refinery 127 US$ million
Total Capital Pre-production 494 US$ million
Average annual sustaining capital (year 1 - 5) 7 US$ million
Average annual sustaining capital (from year 6) 16 US$ million
Financial Metrics5
Revenue6 (average p.a. based on first five years steady 976 US$ million
state production)
EBITDA6 (average p.a. based on first five years steady 630 US$ million
state production)
NPV8 6 (un-leveraged, post-tax) 3.5 US$ billion
IRR 71 %
Payback from first production 1.5 years
The study estimates have been prepared by Wood Plc in conjunction with Paradigm
Project Management (Pty) Ltd under the review of Professional Cost Consultants
(PCC).
All costs are estimated in United States Dollars and are considered Class 3 as
defined in the American Association of Cost Engineers document 18R-97.
The key fiscal terms are:
* 2% royalty on revenue;
* 20% national tax and 5% municipal tax following an initial two-year tax
holiday;
* Custom duties exemption on imported mining and processing equipment;
* Full 5-year capital repayment allowance;
* Dividend tax exemption for 3 years.
The Longonjo mining licence is renewable for a period up to 35 years and has
the same basis as the internationally accepted oil and gas contracts through
which the country has successfully financed its main revenue industry.
Production assumptions: 1st 10 years:
Year: 1 2 3 4 5
Tonnes treated (Longonjo) Mt 1.0 1.5 1.5 1.5 1.5
TREO grade % 3.20 4.67 4.09 3.45 3.20
NdPr grade % 0.70 0.95 0.85 0.73 0.68
Concentrator recovery (NdPr) % 45 45 45 45 45
MRES recovery (NdPr) % 72 72 72 72 72
MRES tonnes produced Kt 21 41 37 32 30
(Longonjo)
Saltend design capacity Kt 46.6 46.6 46.6 46.6 46.6
3rd party MRES feed Kt 1 - 3 2 - 6 6 - 10 11 - 16 13 - 18
Saltend SX recovery (NdPr) % 92 92 92 92 92
NdPr oxide produced Kt 2.30 4.75 4.75 4.75 4.75
Year: 6 7 8 9 10
Tonnes treated (Longonjo) Mt 1.5 1.5 1.5 1.5 1.5
TREO grade % 3.16 2.88 2.97 2.62 2.60
NdPr grade % 0.69 0.65 0.62 0.57 0.58
Concentrator recovery (NdPr) % 45 45 45 45 45
MRES recovery (NdPr) % 72 72 72 72 72
MRES tonnes produced Kt 30 28 27 25 25
(Longonjo)
Saltend design capacity Kt 46.6 46.6 46.6 46.6 46.6
3rd party MRES feed Kt 13 - 17 15 - 19 16 - 20 18 - 22 18 - 22
Saltend SX recovery (NdPr) % 92 92 92 92 92
NdPr oxide produced Kt 4.75 4.75 4.75 4.75 4.75
Notes:
1. TREO = total rare earth oxides, the sum of La2O3, CeO2, Pr6O11, Nd2O3,
Sm2O3, Eu2O3, Gd2O3, Tb4O7, Dy2O3, Ho2O3, Er2O3, Tm2O3, Yb2O3, Lu2O3, Y2O3
2. NdPr = Neodymium + praseodymium oxide and is included within TREO (NdPr
OXIDE is expected to represent approximately 94% of total revenue)
3. Targeted annual production assumes sourcing third party MRES / MREC feed
to be processed at Saltend as an alternative to ramping Longonjo up to 2 Mtpa
4. Excludes the purchase cost of 3rd party feedstock. Total cost of US$200
million per annum is split US$135 million for Longonjo and $65 million for
Saltend.
5. Assumes third party feed to be purchased at same cost per tonnes of MRES
when compared to Longonjo.
6. Management estimates, inclusive of Angolan and UK operations, are based
on underlying independent studies undertaken by:
. SRK Consulting: Mineral resource estimates
. Snowden Mining Industry Consultants (Pty) Limited: Mine plan schedule and
pit optimisation
. Wood plc: Longonjo Operations and Saltend technical engineering and
design; CAPEX and OPEX cost estimates; supervision of metallurgical testwork
and pilot plant programmes
. Paradigm Project Management (Pty) Ltd: Longonjo Mine site infrastructure
and bulk services technical engineering, design and cost estimates
. HCV Africa: Environmental and Social Impact Assessment, Environmental
Management Programme, Relocation Action Plan, and hydrology
. Grupo Simples: Angolan Environmental and Social Impact Assessment
. Adamas Intelligence: Market Forecasts
7. Net Present Value is calculated at an operational level (pre-financing)
and is anticipated to be a blend of equity and long-term debt financing.
Revenue estimates are based on NdPr oxide prices as per Adamas Intelligence
base forecast (Q2 2022). NdPr oxide prices starting at $153/kg in 2022,
escalating at CAGR of 3.7% p.a. to 2035, flat real thereafter.
Establishing the World's First Independent and Sustainable Rare Earth Oxide
Separation Facility at the Saltend Chemicals Park in Humber, UK
The Saltend Refinery will be the first major new rare earth concentrate
facility to be established in over a decade once commissioned and would be one
of only three major producers located outside China when it comes into full
production in 2024.
Benefitting from Humber's Freeport status, the Saltend Refinery will be a major
step in establishing a magnet metal supply chain outside China and has the
potential to bring high-value manufacturing jobs back to the UK. The US$195
million facility will create over 150 permanent high value jobs, with over 500
jobs during the construction phase and an estimated 750 indirect jobs created
as a consequence of the investment.
Saltend is set to become one of the world's largest rare earth processing hubs,
eventually importing sustainably sourced feedstock from around the globe, and
processing it into magnet metal and other rare earth products largely for
export to customers in South East Asia, Europe and the US, as companies look to
reorientate their supply chains in light of recent geopolitical events.
The Saltend Refinery will make use of the existing Saltend Chemicals Plant
infrastructure with the utilities and maintenance skills provided by the
pxGroup as its owner and operator.
The high value manufacturing process involves separating and purifying the
various rare earth metals. This is accomplished by dissolving the mixed rare
earth sulphate received from Longonjo and other sources treating the resulting
solution through several chemical dissolution and solvent extraction processes
before precipitating the separated elements back into a purified solid state
for sale.
Four products are to be separated, NdPr oxide, Lanthanum carbonate, Cerium
concentrate, and the mid and heavy rare earth elements including Terbium,
Dysprosium, Samarium, Europium, and Gadolinium carbonates.
The Saltend Refinery is designed in a manner to easily allow for an increase in
capacity, especially in the NdPr separation process and to allow for expansion
into separation of the heavy rare earths to cater for mixed rare earth
carbonates sourced from ionic clay deposits.
Ethically Sourced Rare Earths from the State-of-the-Art Longonjo Operations in
Angola
Pensana will establish the Longonjo Operations in Angola to supply the Saltend
Refinery. The free dig, at surface, weathered carbonatite resources will be
mined and treated through a flotation concentration plant followed by further
hydrometallurgical beneficiation to produce a high-grade mixed rare earth
sulphate (MRES) in the Mixed Rare Earth Sulphate Refinery.
The Longonjo Operations are adjacent to the fully recommissioned Caminho de
Ferro de Benguela railway line, which links directly to the Atlantic deep-water
port of Lobito and will use very low-cost hydro-electric power from the Angolan
National grid system, recently contracted at 2 cents per KWh for 10 years.
The Longonjo Operations will treat 1.5 million tonnes per annum for a period of
20 years, with the material being sourced from Measured (45%) and Indicated
(55%) Mineral Resources, producing approximately 40,000 tonnes per annum of
MRES for export to the Saltend Refinery.
The Longonjo design includes the open pit development, concentrator and MRES
Refinery plants, tailings storage facility (designed to meet the requirements
of the Global Industry Standard on Tailings Management), process water supply,
hydro-electric bulk power supply, mine infrastructure, workshops, offices,
accommodation village, recreational facilities, and other associated port and
rail side infrastructure.
The operations will represent a major investment in the Angolan mining sector
supporting the Government's policy to diversify the economy away from the
dominant oil and gas and diamond industries as well as providing employment in
an under-developed region.
In September 2020, a substantial upgrade to the Longonjo Mineral Resource
estimate was announced. International mining industry consultants SRK
Consulting reported an upgraded Measured, Indicated and Inferred Mineral
Resource estimate of 313 million tonnes at 1.43% REO including 0.32% NdPr for
4,470,000 tonnes of REO including 990,000 tonnes of NdPr making it one the
world's largest undeveloped rare earth deposits.
Mineral Tonnes REO grade NdPr grade Contained Contained
Resource (million) (%) (%) REO (Tonnes) NdPr
estimate (Tonnes)
category
Measured 26 2.58 0.55 664,000 141,000
Indicated 165 1.51 0.33 2,490,000 536,000
Inferred 123 1.08 0.25 1,320,000 313,000
Total: 313 1.43 0.32 4,470,000 990,000
Table 1: Summary of Longonjo Mineral Resource Estimate, at 0.1% NdPr lower
grade cut.
REO includes NdPr. Figures may not sum due to rounding.
Rapid Route to Production
The overall Development Schedule provides 14 months for main construction and
six months for commissioning and ramp-up to full production in mid-2024.
With a view to accelerating the Project execution phase, various activities
have been initiated to mitigate the post-Covid supply chain disruptions,
material price increases and other inflationary pressures including:
* Over 70% of the equipment packages for both Saltend and Longonjo have been
tendered and priced externally including all of the Tier 1, 2 and 3
packages.
* The EPCM contractual arrangements for Saltend and Longonjo are currently
being finalised. Key project execution personnel have been identified and
retained for both sites to enable a seamless transition from FEED.
The Saltend facility will be commissioned on third party feedstock ahead of
feeding the plant with high grade MRES when operations at Longonjo come online.
Should there be delays, Saltend will continue to treat third party feedstock
until Longonjo comes online.
Design, costing, and contractor selection for the Longonjo Mine site
infrastructure, along with the provision of bulk services, have been completed
and ready to be mobilised.
Modularisation (by ADP in Cape Town, a company with 25 years of experience in
Angola modular processing plants) of the Longonjo plant to optimise the site
construction crew size and do pre-commissioning tests before despatch to site.
Strong Demand Growth from Electric Vehicles and Offshore Wind Leading to
Shortages Equivalent to 15 Times Saltend's Annual Production By 2035
The following are extracts from the recent "Adamas Intelligence - Rare Earth
Market Outlook to 2035":
* Adamas Intelligence (an independent research and advisory company and
leader in strategic metals and minerals sector) forecasts that global
demand for NdFeB magnets will increase at a CAGR of 8.6%, bolstered by
double-digit growth from electric vehicle and wind power sectors. This will
translate to comparable demand growth for the rare earth elements (i.e.,
neodymium, praseodymium, dysprosium and terbium).
* With total magnet rare earth oxide demand forecasted to increase at a CAGR
of 8.3% and prices projected to increase at CAGRs of 3.2% to 3.7% over the
same period, Adamas Intelligence forecasts that the value of global magnet
rare earth oxide consumption will triple by 2035, from US $15.1 billion
forecast for 2022 to US $46.2 billion by 2035.
* Constrained by a lack of new primary and secondary supply sources coming to
market from 2022 onward, coupled with the inability of existing producers
to increase output steadily at the rate of demand growth, Adamas forecasts
that global shortages of neodymium, praseodymium and didymium oxide (or
oxide equivalents) will collectively rise to 68,000 tonnes by 2035-an
amount roughly equal to China's total 2021 production.
The processing of rare earths is currently limited to a small number of Chinese
companies, which control nearly 90% of the global market. The market for
sustainably sourced concentrates is expected to grow as the magnet suppliers
come under pressure from their international automotive customers to diversify
away from environmentally damaging sources.
When it comes into production in 2024 Saltend will become one of three
significant rare earth producers outside China. Lynas Corporation of Australia,
(ASX: LYC, market capitalisation: US$6.1 billion) currently the world's largest
non-Chinese producer, last year produced around 5,461 tonnes of NdPr oxides
from its facility in Malaysia. MP Materials (NYSE: MP, market capitalisation:
US$7.3 billion) is planning to produce approximately 6,000 tonnes of NdPr
oxides from 2024.
Long-Term Production Profile from Longonjo and Third-Party Feedstock
The Longonjo Operations life may have the potential to be extended beyond the
current 20-year plan by the exposure of the underlying un-weathered carbonatite
material as mining progresses. Subject to favourable metallurgical studies,
this mineralisation has the potential to add a further dimension to the
operations and extend the life of mine significantly.
Pensana is in active discussion with a number of potential third party
feedstock suppliers including existing producers and mines that are either in
construction or planning to be developed in the near-term. Pensana will offer
an attractive alternative to selling to Chinese processors.
Marketing and Offtake
The Company is in discussions for 50% of Saltend's capacity of NdPr oxides to
supply directly to an Asian magnet manufacturer. In addition, the Company has
developed a marketing agreement with a major Asian trading house to market 30%
of the production capacity within Asia to secure direct offtake agreements with
customers.
The Company has been in talks with most of the major automotive original
equipment manufacturers (OEMs) within Europe and the US who are seeking to
secure a sustainable source of material independent from China and will update
the market on these developments in due course.
Within Europe, there has been a transition towards OEMs of both electric
vehicles and offshore wind purchasing rare earth materials directly to supply
the magnet manufacturers in order to secure supply of these critical materials.
Pensana has been approached by the offshore wind industry to secure 500 tonnes
per annum of NdPr oxide from 2024 in order to meet the increased demand of the
global wind energy market.
In addition, due to challenges securing the supply of Cerium and Lanthanum
products from China, the European customer base has approached Pensana to offer
an alternative supply from the Saltend facility. Furthermore, a UK based
manufacturer has shown interest in 1,000 tonnes per annum of Cerium carbonate
to be applied in the catalyst and water treatment industries.
It is anticipated that this growing interest in the products planned to be
produced from Saltend will be translated into formal offtake agreements over
the forthcoming weeks and months.
Study Underway for Heavy Rare Earth Separation
Heavy rare earths Dysprosium (Dy) and Terbium (Tb) are critical for high
technology magnets required for automotive industry.
The Company has initiated a design and cost estimate to produce the first
separated Dy and Tb independently of China and is actively looking to
accelerate this project due to the strong interest from the Japanese market.
Moving further down the supply chain within the EU region offers a competitive
advantage for magnet manufacturers who are investigating establishing magnet
production in the EU, further lowering the carbon footprint generated by
transporting volumes of material to and from Asia.
Positive climate impact
Increasing the supply of rare earths is essential to support the global drive
towards net zero.
Pensana has consciously embedded climate mitigation and adaptation to climate
change in its strategy and business operations.
The Company has become a partner of the Taskforce for Climate-related Financial
Disclosure (TCFD) and will disclose against the recommendations, including
highlighting risks and opportunities from climate change, with effect from its
2021-2022 reporting cycle.
Pensana will develop and annually report on a low greenhouse gas emission (GHG)
supply chain (scopes 1, 2 and 3) and will target continual reduction of GHG
emissions aligned to scientific expectations to support the global drive
towards net zero GHG emissions.
This will ensure that developed products meet the requirements of the EU
taxonomy for sustainable activities for the manufacture of low carbon
technologies.
Commitment to low greenhouse gas emissions was considered from the outset, and
was a key consideration with initial planning of the Longonjo and Saltend
operations, supporting infrastructure and across the value chain.
Positive Environmental, Social and Governance
Pensana takes its risks and opportunities from ESG seriously. The business has
an ESG sub-committee chaired by a non-executive director and the CEO is
responsible for the delivery of ESG related targets. Additionally, the business
has committed to developing digital traceability for Saltend feedstock which
will be traceable from source to end use to meet the demand from customers to
know the source and sustainability credentials of their raw materials.
The information contained within this announcement is considered by the Company
to constitute inside information as stipulated under the Market Abuse
Regulations (EU) No.596/2014. Upon the publication of this announcement via a
Regulatory Information Service, this inside information will be considered to
be in the public domain. The person responsible for arranging for the release
of this announcement on behalf of the Company is Paul Atherley, Chairman.
-ENDS-
For further information, please contact:
Shareholder/analyst enquiries:
Pensana Plc
Paul Atherley,
Chairman
IR@pensana.co.uk
Tim George, Chief Executive Officer
Rob Kaplan, Chief Financial Officer
Virginia Skroski, Head of Investor Relations & Communications
Media enquiries:
Finsbury Glover Herring:
Gordon Simpson / Richard Crowley
Pensana-LON@finsbury.com
The information contained within this announcement is considered by the Company
to constitute inside information as stipulated under the Market Abuse
Regulations (EU) No.596/2014. Upon the publication of this announcement via a
Regulatory Information Service, this inside information will be considered to
be in the public domain. The person responsible for arranging for the release
of this announcement on behalf of the Company is Paul Atherley (Chairman).
About Pensana Plc
The electrification of motive power is by far the most important part of the
energy transition and one of the biggest energy transitions in history. Magnet
metal rare earths are central to the transition away from internal combustion
engines and critical to electric vehicles and offshore wind turbines.
Pensana plans to establish Saltend as an independent and sustainable processing
hub supplying the key magnet metal oxides to a market which is currently
dominated by China. The US$195 million Saltend facility is being designed to
produce 12,500 tonnes per annum of rare earth oxides, of which 4,500 - 5,000
tonnes will be neodymium and praseodymium (NdPr), representing over 5% of the
world market in 2025.
Pensana's plug and play facility is located within the world class Saltend
Chemicals Park, a cluster of leading chemicals and renewable energy businesses
in the Humber Freeport and will create over 500 jobs during construction and
over 125 direct jobs once in production.
It will be the first major separation facility to be established in over a
decade and will become one of only three major producers located outside China.
Pensana is aiming to establish Saltend as an attractive alternative for mining
companies who may otherwise be limited to selling their products to China,
having designed the facility to be easily adapted to cater for a range of rare
earth feedstocks.
www.pensana.co.uk
END
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