Avalon updates Nechalacho resource

Exploration drilling completed last year has lifted indicated resources at its flagship Nechalacho rare earth deposit by 73% to 152.3 million tonnes grading 1.32% total rare earth oxides (TREO) and produced the deposit’s first measured resource of 8.90 million tonnes grading 1.64% TREO, Avalon Rare Metals (AVL-T, AVL-N, MKT-X) reports. (TREOs are total rare earth elements, calculated as oxides, including lanthanum to lutetium plus yttrium.)  

“This is a key milestone,” analysts at Dahlman Rose & Co. wrote in a research note. “A feasibility study is expected to commence later in the year following the completion of additional drilling programs that begin this month. In our opinion the completion of this study, anticipated in the second quarter of 2013, should remove a meaningful level of risk from an investment in AVL shares.”

The objective of the additional drill program is to bring these higher grade resources, where the first mining stopes are planned, into the measured category. The deposit at Thor Lake is about 5 km north of the Hearne Channel of Great Slave Lake and about 100 km southeast of the city of Yellowknife in the Northwest Territories.

In April, Frontier released the results of a prefeasibility study for a rare earth elements separation plant to be located in the southern United States. The Gulf Coast region was chosen as an attractive location the company said because of its low-cost, bulk transportation alternatives and proximity to suppliers of chemical reagents and potential customers.

SNC-Lavalin estimated capital and operating costs for a separation plant with a capacity of 10,000 tonnes per year and came up with a capital cost estimate of US$302 million, which includes a complete separation plant facility; infrastructure, and utilities.

The largest capital expense is the solvent extraction circuit consisting of over 1,000 mixer-settlers, which makes up about one third or US$101 million of the total capital cost.

Estimated operating costs were calculated at US$5,634 per tonne of rare earth oxide product, which includes labour, operating supplies, supplies and reagents, and maintenance costs. Reagent costs make up 70% of the total operating costs at US$3,934 per tonne of rare earth oxide product.

The separation plant would be designed to treat chemical concentrates containing a blend of light and heavy rare earth elements from Nechalacho.  These chemical concentrates would be produced from two hydrometallurgical facilities: a sulphuric acid bake plant planned for the Northwest Territories and a second cracking plant that is presently envisioned as being located close to the separation plant.

The separation plant would have the ability to produce ten different pure rare earth oxides and one pure mixed heavy rare earth carbonate at an overall plant recovery of about 98%.  

Rare earth mineralization was first discovered at Nechalacho in 1976 and Avalon picked up the property in April 2005.

At presstime in Toronto Avalon was trading at $1.49 per share within a 52-week range of $1.39-$6.51 per share. The Toronto-based junior has 103.6 million shares outstanding and cash of about $41 million.

In other news in the rare earth industry this week, Frontier Rare Earths (FRO-T) management announced on July 11 that KORES, South Korea’s state-owned mining and natural resource investment company, has committed to making a $23.8 million investment in cash to acquire a 10% stake in the junior’s Zandkopsdrift rare earth project in South Africa. The deal also gives KORES the right to buy up to 10% of all production at the project. In addition the Korean company has the right to acquire another 10% in Zandkopsdrift after Frontier completes a positive definitive feasibility study and also has the right at that time to acquire a 10% interest in Frontier.

In Toronto Frontier was trading at 60¢ per share within a 52-week range of 43¢-$2.50 per share. The company has about 89.6 million shares outstanding.