SOMBA K'E/YELLOWKNIFE
The rare metals exploration company proposing to develop a mine southeast of Yellowknife has reached a major milestone for the project.
Premier Bob McLeod, left, federal Minister Tony Clement, Minister of Industry, Tourism, and Investment David Ramsay, and MLA Tom Beaulieu are shown a topographic map on top of drill core boxes by geologist Martin Heiligmann, during a visit to Avalon Rare Metals Inc.'s Nechalacho rare earths exploration project site at Thor Lake, approximately 100 km southeast of Yellowknife, in July 2012. - NNSL file photo
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Avalon Rare Metals Inc. announced April 17 the completion of the feasibility study for its flagship Nechalacho Project at Thor Lake.
"It's a major milestone for us in the development of this project. It's taken a long time, several years and a $60 million dollar investment to take it to this level of study and obviously we're really pleased to see that it's produced a very positive result," said Don Bubar, president and CEO of Avalon.
"It was really important to get it concluded so we could demonstrate at this level of detail with operating costs and revenues, that this is an economically viable development opportunity in the rare earths world."
According to the feasibility study prepared by SNC-Lavalin Inc., more than $1 billion of the $1.575 billion in construction capital costs for Nechalacho will be incurred in the NWT.
Despite the high capital cost to ultimately build the mine, Bubar described the feasibility study as "robust" due to the measure of profitability determined in the study, which estimates a rate of return of more than 20 per cent.
Revenue for the project was estimated at $645.8 million per year, from the sale of mostly separated heavy rare earth elements, and enriched zirconium concentrate.
With the feasibility study in hand, the company can now accelerate talks with rare earth consumers around the world to secure commitments on future product sales and attracting financial partners to participate in the further development of the project, Bubar said.
"In fact the consumers around the world that we've been talking to and in some cases signed (memorandums of understanding) with have told us that they're interested in working with us but they really want to see the feasibility study concluded and the results of that to be confident that there's indeed a viable development opportunity before they'll get a little bit more serious about looking into the business opportunity," Bubar said. "So they've been waiting for this and now we got it out so that allows us to start more serious discussions with those parties."
The completion of the study puts Nechalacho -- which has a deposit particularly rich in the heavy rare earth elements used in green energy technology and other high-tech applications -- in the lead among rare earth projects outside China, which is currently the source of upwards of 95 per cent of the world's supply of heavy rare earth metals.
In addition to wrapping up the environmental assessment process for Nechalacho, Avalon is now looking to put financing in place for further development of the project.
Shares of Toronto-based Avalon Rare Metals Inc. closed at $0.95 on Monday on the Toronto Stock Exchange, down $0.02.
