Northern Miner: Quest unveils prefeasibility study for Strange Lake
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Quest unveils prefeasibility study for Strange Lake
With initial capex of more than $2 billion and the high degree of uncertainty and risk with which financial markets view the production of rare earth elements outside of China, Peter Cashin knew that unless a prefeasibility study on the Strange Lake B Zone rare earth project in northern Quebec yielded an after-tax internal rate of return (IRR) of 20%, it probably wouldn’t make the cut. A prefeasibility study released today clears that hurdle with an after-tax IRR of 22%.
“We knew that it would come in at a range of 20%-25%, so we did it!” Cashin, president and chief executive of Quest Rare Minerals (TSX: QRM; NYSE:QRM), says enthusiastically in an interview. “Now we have the opportunity to push the number higher by optimization.”
A hydrometallurgical plant to be built in southern Quebec will process four separated products: a mixed HREE + Yttrium oxide concentrate; high-purity zirconium basic sulfate; high-purity niobium oxide, and a mixed light rare earth element (LREE) double-sulfate concentrate.
Revenues will average $1.05 billion a year, of which 55.8% will come from the sale of HREE+Y concentrate, 17.3% from the sale of zirconium product, 12.9% from the sale of niobium product and 13.9% from the sale of a light rare earth element (LREE) concentrate.
Based on a minimum mine life of thirty years, Strange Lake’s initial capital expenditure is forecast to tally $2.57 billion, and could be paid back in three and a half years. At a 10% discount rate Strange Lake’s after-tax net present value (NPV) clocks in at $1.8 billion, and rises to $2.54 billion at an 8% discount rate. Cash operating costs were calculated to average $432 million per year, or $300 per tonne milled.
The standard truck and shovel operation will target the highest REE grades possible for the first ten years of production and will be followed by additional lower grade mineralization in subsequent years.