Lindian Resources Ltd (ASX:LIN, OTC:LINIF) has completed a feasibility study for Stage 1 development of the Kangankunde Rare Earths Element (REE) Project in Malawi, confirming a low-risk and economically robust project.
The feasibility study estimates pre-production capital costs of about US$40 million (A$60 million) including a 12.5% contingency, making for one of the lowest capital cost rare earths projects under development.
This study also predicts a pay-back period of less than two years, a post-tax net present value of (NPV8) of US$555 million (A$831 million), which offers a post-tax NPV to capital expenditure (capex) ratio of more than 10:1, an internal rate of return (IRR) of 80% and an average annual earnings before interest, taxes, depreciation and amortisation (EBITDA) of US$84 million (A$124.5 million).
Low commissioning risk, high potential return
“The feasibility study results reaffirm the world-class status of the Kangankunde Project and its competitive positioning to meet a rising demand for rare earths,” Lindian Resources CEO Alwyn Vorster said.
“It is distinguished by its high grade, low levels of impurities and attractive cost structure that positions the project in the lowest cost quartile of rare earths projects globally.
“The Stage 1 development will require low upfront capital cost, presents low commissioning risk and generates strong financial returns.
“Importantly, Stage 1 could serve as a logical springboard for future expansion options.
“Kangankunde is fully permitted to commence construction and operations once financing is confirmed.
“The feasibility study has been prepared over 10 months by a team of experienced contractors, consulting firms and Lindian team members. The quality of the study is first class and everyone is to be congratulated on their efforts.”
The study predicts an average annual free on-boarding (FOB) operating cost of US$2.92 per kilogram of total rare earth oxides (TREO), and the low-cost structure of Kangankunde’s staged development will place it as one of the few rare earths projects to deliver a positive annual EBITDA at the current low rare earth market prices.
LIN expects Stage 1 to produce an average annual 15,400 tonnes of premium concentrate with a 55% TREO grade, low levels of thorium and uranium, and require limited acid-consuming minerals – the premium concentrate will contain about 8,400 tonnes per annum of rare earth oxide (REO) and about 1,640 tonnes per annum of neodymium and praseodymium.
Confident in securing “superior” funding solution
“We are extremely proud of the excellent feasibility study results,” Lindian Resources executive chair Asimwe Kabunga said.
“We have been discussing funding options for Stage 1 with several parties over a number of months and the feasibility study is the key catalyst to progress these negotiations as well as attract new funding interest.
“We are confident of securing a superior funding solution that minimises dilution for shareholders.
“The fully permitted Kangankunde Project is strongly supported by the Malawian Government and the local communities.
“It will create hundreds of jobs, improved local infrastructure and become a major source of income for the Malawian economy.”
The feasibility study also offered a maiden ore reserve for the Kangankunde Project of 23.7 million tonnes at 2.9% TREO, supporting a Stage 1 life-of-mine of 45 years.
Lindian expects the ore to have a no pre-stripping, very low waste-to-ore ratio of less than 0.1:1, using a simple flowsheet based on gravity and magnetic separation requiring limited reagents, and access to a low-cost power grid.
The company says it has received significant interest in its premium production specifications from potential offtake partners, with 40% of annual production already contracted with Gerald Metals, a US-based commodity trading group.
Key development approvals are already in place for Kangankunde, meaning the company can award construction contracts within a short time frame once funding has been secured – multiple discussions are ongoing with construction groups, trading companies and strategic investors, and Lindian already has a strong cash reserve.
Lindian is aiming to achieve funding confirming by the end of the third quarter of this calendar year, begin construction in the fourth quarter and commission the processing plant in the fourth quarter of next year.
Overall, the company believes the strong economics of its planned Stage 1 development, the large resource endowment at Kangankunde, and positive market demand forecasts, provide confidence for a potential Stage 2 expansion to increase annual production levels.
Lindian will formally launch a Stage 2 expansion study in this calendar year.