Scoping study out for Bear Lodge

VANCOUVER — With the hunt on for stable sources of rare earth elements (REEs), Rare Element Resources (RES-V, REE-X) has released a scoping study on its Bear Lodge REE project in Wyoming.

The study concentrates on the near-surface oxide inferred resource at Bull Hill. It marks a milestone for a company that was created specifically to advance the Bear Lodge project, at a time when interest in REEs is high.

Rare Element sees Bear Lodge as a conventional open-pit, producing 11,400 short tons of REE in concentrate per year for 15 years. Early on, the company expects a daily production rate of around 500 tons, but it plans to increase that to 1,000 tons within three years. Eventually the company plans to separate the rare-earth oxides into high-purity oxides to achieve better prices than with the concentrate.

With extensive existing infrastructure and the company’s decision to produce a simple concentrate, capital costs were kept lower than many similar projects. The study put initial capital costs at US$87 million, with life-of-mine sustaining capital at US$88 million. Operating costs were pegged at US$245 per ton, with the largest cost being the reagent for the hydrometallurgical plant.

The price of REE concentrate has varied significantly over the past three years, from US$4.59/kg in 2008, to US$3.65 in 2009, to US$7.54 this year, with ample speculation that it will rise still. The study used two cases: the three-year trailing average price and a long-term price that sees a 25% increase over the three-year price.

In the base case, the internal rate of return (IRR) is 40% while the after-tax net present value (NPV), using a 10% discount, is US$213 million. Using the estimated long-term price, the IRR goes up to 60% and the NPV increases to US$380 million. Payback is 3.1 years in the base case and 2.4 years with the long-term price outlook.

Earlier this year the company released an updated resource estimate on Bear Lodge that saw a 50% increase in total pounds of REE. The inferred resource, using a 1.5% rare-earth oxide (REO) cutoff, had 17.5 million tons grading 3.46% ROE in the oxide, transitional and sulphide zones. The scoping study, however, only incorporated the oxide portion that amounts to 8 million tons grading 3.62% REO.

The project has mostly the light REEs, with small quantities of the heavier elements. The rare earths are concentrated in carbonatite dykes near the centre of a large alkaline intrusive complex.

The company is also working to unlock the precious metal potential of the property after securing full control of its gold and base metal assets. In May, Newmont Mining (NMC-T, NEM-N) declined to exercise its right to earn a 65% interest in a gold exploration venture, known as Sundance, on the Bear Lodge property.

Since then, Rare Element has completed a small drill program on the Sundance project that returned some low-grade gold intercepts of significant lengths. Hole 60 cut 85.4 metres grading 0.81 gram gold per tonne from 67 metres depth, hole 62 hit 143.3 metres averaging 0.67 gram gold from 131 metres, and hole 64 intercepted 77.7 metres carrying 0.6 gram gold from 40 metres.

Along with the gold drilling, the company has continued to drill at Bear Lodge for REEs to upgrade the project’s resource estimate.

Rare Element’s share price has made sharp gains in recent weeks, climbing from a 52-week low of $1.94 in June to as high as $9.90 in late September. The stock closed at $8.90 three days after the scoping study was released. The company has 32.4 million shares outstanding.