Frontier cuts deal with Koreans to advance Zandkopsdrift

In the race to bring the world new sources of rare earths from places other than China, Frontier Rare Earths (FRO-T) has put itself in a solid position, thanks to a deal with a deep-pocketed Korean consortium.

While the Chinese have largely cornered the rare earth metals, the country’s recent aggressive moves – evidenced by limiting the export of the metals to Japan for political reasons – has end-users calling for mines outside of the country now more than ever. 

The situation helped motivate Korea Resources Corp. (KORES), a government-owned mining company, to make an agreement with Frontier that will help ensure its Zandkopsdrift rare earth project in South Africa makes it into production.

The increased likelihood of achieving production was reflected in Frontier’s share price.
It climbed 13% to $2.25 since announcing the agreement on July 13. 

The agreement would see KORES acquire up to a 20% interest in the project, and a 10% equity position in Frontier, along with the right to buy up to 40% of the project’s rare earth production.

That should pave the way for Frontier to enter the big leagues of rare earth production. It could be one of the first large-scale mines to reach production outside of China. 

But like most junior miners on the verge of greater things, Frontier’s alignment for success did not come overnight. 

The company’s president and chief executive, James Kenny, began laying the foundation for the venture back in the early 1990s, just as South Africa exited its dark years of apartheid. 

It was 1994, and Kenny was an investment banker, keenly aware that despite its abundance of natural resources, the country had no semblance of a junior mining sector. 

His response was part of the founding of Firestone Diamonds (FDI-L), which has two operating mines: one in Botswana, and another in Lesotho. Kenny continues to serve as a non-executive director for the company. 

“By 2002 we wanted a new company to focus on everything but diamonds,” Kenny says of the origins of Frontier.

With considerable expertise and contacts in an area known as Namaqualand in the northwestern region of South Africa, the team made the easy decision to continue to focus on resource projects there. They decided on the rare earth metals project long before rare earths were in vogue. 

“We did question our wisdom for a couple of years,” he confesses. “People were saying back then that you could get as much rare earths as you wanted from China, at basically no cost. We didn’t know how long it would take until [a rare earths project] would catch traction, but we were confident that at some point it would.”

By 2005, the company had locked-up 500 sq. km of land in an area known for diamond and base metal mining. 

It was a good mining address, but rare earth metals were a new game. Or at least that’s what Frontier believed. 

Early exploration work uncovered a series of collars left behind by Anglo American (AAL-L, AGL-J). And while Anglo never reported results from the drills, some dogged determination from Frontier eventually yielded some
answers. 

Anglo had discovered rare earth mineralization while looking for phosphate in a 3,500-metre drill program and had compiled the data and kept it to itself. That is, until Frontier was able to acquire it. 

“We would have got there without them,” Kenny says of the delineation of the current deposit. “But we would be having this conversation in three year’s time . . . It sped things up by a couple of years.” 

But the story of Zandkopsdrift isn’t just about the speed of outlining a deposit. It is about the quality of that deposit. 

Zandkopsdrift is composed of two zones: the A zone, and the B zone, which is enveloped by the A zone. It is the B zone that has attracted attention in the world of rare metals.

“It’s sort of like the layers of an onion,” Kenny says of the two zones. “You take off the lower grade and a higher-grade zone is within it.”

The inner zone is composed of material that is 50% higher grade than the surrounding zone. It hosts an estimated 450,000 tonnes of ore and will be mined for the first 10 to 12 years. 

The B zone’s 2.5% total rare earths (TREO) grade ranks it third amongst advanced projects outside of China. And its near surface location, combined with the weathered ore’s highly friable nature, should make mining uncomplicated. 

“We will have challenges with this project,” Kenny concedes, as all honest mining executives would. “But mining the ore won’t be one of them.”

The plan is to dig a shallow low-tonnage open pit in an area that has no particular environmental sensitivities, and in a jurisdiction well equipped for mining. 

The project sits 100 km north of Great Western Minerals‘ (GWG-V) Steenkampskraal mine, within good proximity to rail and a port. 

With 60% of the resource in the indicated category, Frontier has a decent handle on the deposit. And while it is still early, the company envisions building a mine that would process 20,000 tonnes of ore per year.

That amount would put the project in the same league as Molycorp‘s (MCP-N) Mountain Pass project and Lynas‘ (LYC-A) Mount Weld project.

Lynas plans to build an 11,000-tonne-per-year mine in phase one at Mount Weld, and take that up to 22,000 tonnes in phase two.  

Molycorp plans to restart Mountain Pass at 20,000 tonnes per year and eventually ramp up to 40,000 tonnes. 

Those two projects are considered the industry standard, because of their advanced stage of development and their high grades. Both projects rank above Zandkopsdrift in the latter category. 

But KORES isn’t complaining. The move with Frontier marks its first with a western-based rare earth junior, and signals Korea’s seriousness in securing a stable supply of metals that are essential in the production of high-tech products. 

Discussions between the two firms began last year. KORES president and chief executive, Shin-Jong Kim, called Zandkopsdrift a strategic priority project for the company and for Korea.

“The development of Zandkopsdrift will be a critical element of KORES’ efforts to secure a long-term, stable source of rare earth supply,” Kim said in a statement.

The agreement also calls for KORES to provide financial, technical and operational assistance.

A preliminary economic assessment (PEA) on Zandkopsdrift is underway and should be finished in the fourth quarter, Frontier says.

The completion of a definitive feasibility study, which is scheduled for late next year, would give KORES the right to acquire another 10% of the project.

Frontier holds a 95% interest in the project, which is located in the Northern Cape province of South Africa.

The project hosts an indicated resource of 22.9 million tonnes grading 2.32% TREO, for 532,000 tonnes TREO, and an inferred resource of 20.8 million tonnes at 1.99% TREO, for 415,000 tonnes.

Frontier has $48 million in the kitty, which it says will finance it through the PEA and prefeasibility studies.