MBAC advances shallow REO deposit in Brazil

Toronto-based MBAC Fertilizer (MBC-T, MBCFF-O) has carved out a near-surface and high-grade rare earth oxide deposit that includes niobium and phosphate in the municipality of Araxa in Brazil’s Minas Gerais state and plans to complete a prefeasibility study in the second quarter of 2013, and a bankable feasibility study in early 2014. 

In September the company released a preliminary economic assessment of its Araxa project outlining a mine life of 40 years based on a measured and indicated resource of 6.34 million tonnes grading 5.01% total rare earth oxides (TREO), and inferred resources of 21.9 million tonnes at 3.99% TREO.

The PEA envisions the operation in three phases, running from 2016–2020, 2021–2023 and 2024–2056. Run-of-mine tonnes per year would start at 120,000 tonnes in the first phase, expand to 240,000 tonnes in the second phase and to 385,000 tonnes in the third phase.

During phase one, the project is forecast to produce 8,750 tonnes a year of individual rare earth oxides. After the first five years that number would climb to 17,500 tonnes annually. Niobium oxide would be produced as a by-product. In the first five years the mine will produce 740 tonnes of niobium oxide a year, which would grow to 1,832 tonnes during phase three.

Capital costs are estimated to fall in the range of US$407 million for phase one, with an additional US$215 million required for expansion after the fifth year. Cash operating costs are estimated at US$10.50 per kilogram of REO in phase one, US$9.60 per kilogram in phase two and US$12.20 per ­kilogram in phase three.

At a 10% discount rate, the PEA estimated an after-tax net present value of US$967 million and an internal rate of return of 30%.

The Araxa resource estimate is based on 67 diamond drill holes, or 3,764 metres, drilled at a spacing of 40 by 40 metres down to 20 by 20 metres in the centre of the deposit. 

The resource estimate is focused on the main oxide mineralization within a flat-lying mineralized domain defined to a depth of 60 metres, and employs a 1% TREO grade cut-off.

Of the deposit’s light rare earth elements (LREEs) and heavy rare earth elements (HREEs), the heavies make up about 2.6%, according to Stephen Burleton, MBAC’s vice-president of corporate development. But that percentage, he says, can be misleading. “The percentage of LREEs is deceiving when you take into account the high overall grade of the deposit,” he explains. “Araxa has a respectable amount of HREEs when compared to other REE deposits that have a greater percentage of HREEs, but a lower overall grade.”

The company says the main REO mineralization is derived from the residual enrichment of a REO-rich protholite, and possibly a carbonatite. Monazite is the principal REO mineral present at Araxa, while apatite is the most common and important phosphate mineral in the Araxa carbonatite.

MBAC has already started laboratory work to examine recovery scenarios for the rare earth oxides and run tests on alkaline digestion, hydrochloric acid leach, nitric acid leach, ammonium chloride fusion and sulphuric acid leach. Acid leach by salt precipitation has so far returned the best recovery, averaging 92%, the company says. 

The company began putting together a pilot plant in mid-September to test the acid-leaching route.

Once that has been completed, MBAC plans to analyze oxide separation using solvent-extraction technology. 

Pilot plant testing is expected to be finished by mid-2013.

While MBAC has signed a number of confidentiality agreements for possible offtake agreements, most of the companies are waiting to see the results of the pilot plant tests, Burleton says.

Araxa is surrounded by good infrastructure, and is less than 10 km away from Vale’s (VALE-N) Arafertil phosphate mine and processing plant. It is also adjacent to a niobium mine owned by Companhia Brasileira de Metalurgia e Mineracao, which supplies 85% of the world’s niobium. 

The deposit is also a couple of kilometres outside of Araxa city, which supports about 100,000 people, and caters to the phosphate and niobium mines in the region.

Burleton says the company is trying to determine the best structure for financing the project. “We’re an agricultural input company, so this falls a bit outside of our bailiwick,” he concedes. “I don’t see us doing the project ourselves. This is something where we’ll likely be a minority partner, or it will be sold later on to maximize value for our shareholders.”

At press time in Toronto, MBAC was trading at $3.24 per share within a 52-week range of $2.50 to $3.75. The company has 118 million shares outstanding.