Avalon expands Nechalacho resource

Avalon Rare Metals (AVL-T, AVL-X) reports that exploration drilling completed last year has lifted indicated resources at its flagship Nechalacho rare-earth deposit in the Northwest Territories by 73% to 152.3 million tonnes grading 1.32% total rare earth oxides (TREO), and produced the deposit’s first measured resource of 8.9 million tonnes grading 1.64% TREO.

“This is a key milestone,” analysts at Dahlman Rose write in a research note. “A feasibility study is expected to commence later in the year following the completion of additional drilling programs that begin (in July). 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 Avalon 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 5 km north of the Hearne Channel of Great Slave Lake, and 100 km southeast of Yellowknife.

In April, Avalon released the results of a prefeasibility study for a rare earth element separation plant planned in the southern U.S. The company says the Gulf Coast region was  an attractive location because of its low-cost bulk transportation alternatives, and proximity to chemical reagent suppliers 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 are calculated at US$5,634 per tonne of rare earth oxide product, which includes labour, operating supplies, 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 envisioned near the separation plant.

The separation plant would produce 10 pure rare-earth oxides and one pure, mixed, heavy rare-earth carbonate at an overall plant recovery of 98%.  

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

At presstime Avalon traded 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 $41 million in cash.

In other rare-earth industry news, 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 agreement also gives Kores the right to purchase up to 10% of all production at the project, acquire another 10% in Zandkopsdrift after Frontier completes a positive definitive feasibility study and acquire a 10% interest during this time in Frontier.

Frontier traded at 60¢ per share within a 52-week range of 43¢–$2.50 per share. The company has 89.6 million shares outstanding.