REG - Altona Rare Earths - Monte Muambe Scoping Study Results

Altona Rare EarthsAnnouncement

18/10/2023 07:00

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RNS Number : 5071Q  Altona Rare Earths PLC  18 October 2023

18 October 2023

 

ALTONA RARE EARTHS PLC

("Altona" or "the Company")

 

 

Monte Muambe Scoping Study Results

 

Altona (LSE: REE), a resource exploration and development company focused on
Rare Earths in Africa, is pleased to announce the positive outcome of its
Scoping Study((1)) for its Monte Muambe rare earths project in northwestern
Mozambique (the "Project"), and the publication of an updated Competent Person
Report.

 

Results of the Scoping Study provide an encouraging initial validation of the
Project's potential, with highlights including:

 

·     Post-tax NPV 8((2)) of US$ 283.3 million

 

·     Post-tax IRR((3)) of 25%

 

·     Payback from first production: 2.5 years

 

·   Production of 15,000 tonnes per annum, on average, of Mixed Rare Earth
Carbonate ("MREC"), at an average price of US$ 13,558.4 per tonne of MREC((4))

 

·     18 years Life of Mine ("LoM")

 

·     Open pit mining operation, 750,000 tonnes of ore extracted and
processed per annum

 

·  Two stage recovery process, consisting of comminution and flotation,
followed by hydrometallurgy

 

·     LoM EBITDA((5)) of US$ 1.67 billion

 

·     Initial Capex of US$ 276.3 million

 

The new Competent Person Report containing the Scoping Study, prepared by
international geological and mining consultant Snowden Optiro, is available on
the Company's website under the investor section:
https://www.altonare.com/investors/reports/
(https://www.altonare.com/investors/reports/) .

 

The executive summary of the Scoping Study is attached as an appendix to this
RNS.

 

Scoping Study Overview

 

The Monte Muambe Scoping Study takes into consideration open-pit mining of
Target 1 and Target 4, at a LoM strip ratio of 1.6, over a period of 18 years.
An anticipated 750,000 tonnes of ore per annum will be extracted and processed
through a beneficiation plant to produce a Rare Earths concentrate. The
beneficiation process will include crushing, milling and flotation. The
concentrate will then be processed through a hydrometallurgical plant to
produce an average of 15,000 tonnes of MREC per annum. The hydrometallurgical
process will involve a weak acid gangue leach, followed by rare earths
leaching and purification. The MREC product would be packaged and transported
via existing road infrastructure to the port of Beira, in Mozambique, for
export.

 

Base Case Technical and Economic parameters are summarised in the table below:

 

 Parameter                            Unit   Value
 Ore processed                        Mt     13.5
 MREC produced                        kt     270.7
 Initial Capex                        M US$  276.3
 Sustaining Capex                     M US$  63.0
 Opex LoM                             M US$  1,519.0
 Opex per ton MREC                    US$/t  5,612.6
 Net Revenue LoM                      M US$  3,193.1
 EBITDA LoM                           M US$  1,673.8
 Gross revenue per ton MREC           US$/t  13,558.4
 Payback from first MREC              years  2.5
 Post tax NPV 8((2))                  M US$  283.3
 Post tax NPV 8((6)) Upside Scenario  M US$  409.9
 Post tax IRR                         %      25%
 Operating margin                     %      42%

 

Sensitivity Analysis

 

Using an NPV of US$283.3 million with an applied real discount rate of 8%, the
Project is most sensitive to revenue (price, recovery, grade and exchange
rates), less sensitive to opex and least sensitive to capex.

 

 

Figure 1 - Project sensitivity analysis

 

Upside Potential

 

The Scoping Study demonstrates the potential for Monte Muambe to become a
viable mining operation.

 

Considerable upside potential has been identified in the Scoping Study and
will be developed further in the Prefeasibility Study ("PFS"). This includes:

 

·    Increase of the resource base, as well as of the LoM and/or ore
extraction rate;

·    Mining parameters optimisation;

·    Processing and metallurgy, both for the beneficiation and
hydrometallurgical plants;

·    Energy sources mix and logistics options;

·   Evaluation of the possibility of doing further onsite, in-country or
regional separation and refining; and

·    Setting up Responsible Sourcing systems.

 

Next Steps

 

The publication of the Scoping Study marks the end of Phase 2 of the Project
Farm-Out Agreement and entitles Altona to an additional 31% ownership in Monte
Muambe Mining Limitada, the Project's special purpose vehicle, taking its
total current holding to 51%. Contractual and administrative processes have
already been initiated to implement this change and a further announcement
will be made when this has been completed.

 

The Project is now entering Phase 3, which upon completion will allow the
Company to increase its holding to 70%, with the key deliverable being the
PFS. Preliminary PFS activities started in July this year, in the form of
in-fill drilling at Target 4 and these will ramp up over the course of the
coming months, with additional exploration, planning and consultant services
procurement activities, as well as a strong focus on additional metallurgical
test work. The Company intends to also apply for a mining concession during
Phase 3.

 

Cedric Simonet, CEO of Altona, commented: "For Altona, the Monte Muambe
Scoping Study is a significant milestone. This key deliverable serves as an
affirmative initial validation of the Project's economic viability, enabling
the Company to establish its presence amongst other prospective REE producers
in Africa. It provides, together with the Mineral Resource Estimate ("MRE"), a
solid foundation for the Project's subsequent progression.

 

"As the Project moves into its PFS stage, the Company will continue to work
towards de-risking Monte Muambe and, with its local partners, to optimise its
technical, commercial and financial parameters. We believe the timing for this
achievement is impeccable, at a time where the global rare earths supply chain
is diversifying away from China's decades-long domination, and Western
processing facilities are starting to come online.

 

"The magnet metals present at Monte Muambe (and representing 90% of the
Project's future revenue) are critical components of the global green energy
transition. The supply deficit for Neodymium and Praseodymium Oxide is
forecast to grow to 90,000 tonnes per year by 2040((7)) and, to allow the
decarbonisation of energy sources, more magnet metals mines must come on
stream in the following years.

 

"Altona intends to play its part in supporting this crucial agenda, by working
in a responsible manner to reduce the dependence on China for critical mineral
supplies."

 

Notes

 

(1)  Under the terms of the Farm-Out agreement of 21 June 2021, Altona will
earn a 51% interest in the Monte Muambe Project by delivering the present
Scoping Study (Project Phase 2), and a 70% interest by delivering a
Prefeasibility Study (Project Phase 3). The results of the Scoping Study are
presented on a 100% basis.

(2)  Post-tax Net Present Value using an 8% discount rate for the base case
scenario, using Adamas Intelligence low case scenario forecast for the period
2024-2040.

(3)  Post-tax Internal Rate of Return.

(4)  Price based on the average of Adamas Intelligence base-case forecast
from 2024 to 2040 for Nd, Pr, Tb and Dy oxides with a payability factor in
MREC of 90% for these 4 elements.

(5)  Earnings Before Interest, Tax, Depreciation and Amortisation.

(6)  Post-tax Net Present Value using an 8% discount rate for the upside
scenario, using Adamas Intelligence base case scenario forecast for the period
2024-2040.

(7)  Source: Adamas Intelligence, "Rare Earth Magnet Market Outlook to 2040",
Q2 2023.

 

Scoping Study Cautionary Statement

 

The Monte Muambe Scoping Study has been prepared to assess the potential
viability of an open pit mining and MREC production operation, to assess
development options, and to give sufficient confidence to the Company to
advance to the Prefeasibility Study stage. The results of the Scoping Study
should not be considered a profit forecast or a production forecast.

 

The Scoping Study is preliminary in nature and include material assumptions
outlined in the CPR, including product price assumptions. Capex estimates
qualify as Class 4 estimates as per the Association for the Advancement of
Cost Engineering Recommended Practice 47R-11. The accuracy of the opex and of
the initial capex estimate is assessed at +35% to −30%.

 

The base case includes an indicative life of mine extraction and production
schedule, which is based on a Mineral Resource Estimate, 58% of which
classified as Indicated and 42% as Inferred. The assessments contained in the
Scoping Study are insufficient to support the estimation of Ore Reserves or,
at this stage, to provide assurance of an economic development.

 

Further evaluation work including infill drilling, metallurgical test work,
engineering and environmental studies will be required to support the
estimation of Ore Reserves, and to provide assurance of an economic
development case.

 

The Scoping Study must be read and considered as a whole. Selection of
portions of the analysis or factors considered by it, without considering all
factors and analyses together, could create a misleading view of the process
underlying the opinions presented in the Scoping Study and CPR.

 

-ends-

 

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Altona Rare Earths Plc

Cedric Simonet,
CEO
+44 (0) 7778 866 108

Christian Taylor-Wilkinson, Business
Development
+44 (0) 7795 168 157

 

Novum Securities Ltd (Corporate
Finance)
+44 (0) 20 7399 9400

David
Coffman

Daniel Harris

George Duxberry

 

Allenby Capital Ltd (Joint
Broker)
+44 (0)20 3328 5656

Kelly Gardiner / Guy McDougall (Sales)

Nick Athanas (Corporate Finance)

 

Optiva Securities (Joint
Broker)
+44 (0) 20 3411 1882

Daniel
Ingram

 

Yellow Jersey PR (Financial
PR)
+44 (0) 20 3004 9512

Sarah Hollins

Annabelle Wills

Soraya Jackson

 

About Altona Rare Earths Plc

 

Altona is a resource exploration and development company focused on Rare
Earths in Africa. The Company is listed on the Main Market of the London Stock
Exchange.

 

Rare Earths are a group of 17 chemical elements, many of which are critical to
the World's on-going transition from carbon-based to renewable energies, and
to the defence and communication sectors.

 

The Company currently focuses on the development of Monte Muambe, its flagship
Magnet Rare Earths Project, located in Northwest Mozambique. The Project was
acquired in June 2021, and the Company has so far drilled over 7,800m, and
defined a maiden JORC Mineral Resource Estimate of 13.6 million tons at 2.42%
TREO.

 

A Competent Person Report including the Scoping Study for Monte Muambe has
been published on 18 October 2023.

 

Altona continues to take advantage of its position in Africa to assess other
possible Rare Earths opportunities on the Continent.

 

Competent Person Statement

 

The information in this RNS that relates to the CPR has been prepared under
the responsibility of Mr Julian Aldridge, MSc Mining Geology (MCSM), MESci
(Oxon), CGeol FGS, MIMMM. Mr Aldrige is an employee of Snowden Optiro, and the
overall Competent Person and principal author of the CPR.

 

The information in this RNS that relates to the MRE has been compiled under
the responsibility of Dr Andrew Scogings, PhD (Geology), MAIG, RPGeo
(industrial minerals). Dr Scogings is the Competent Person for the Geology and
Mineral Resources sections of the CPR.

 

Other authors have contributed to the redaction of the CPR. Their details are
given in Section 2.7 of the CPR.

 

Dr Scogings is employed by Snowden Optiro and is independent of Altona. Dr
Scogings is a Member of the Australian Institute of Geoscientists (Number
3013) and the South African Geological Society. Dr Scogings has sufficient
experience that is relevant to the style of mineralisation and type of deposit
under consideration and to the activity which he and the co-authors are
reporting to qualify as Competent Person as defined in the JORC Code (2012).

 

For more information visit: www.altonaRE.com (http://www.altonaRE.com)

 

COMPETENT PERSON REPORT EXECUTIVE SUMMARY

1.  Background

This Competent Person's Report (CPR) and Scoping Study document has been
prepared by Snowden Optiro, a business unit of Datamine Australia Pty Ltd
(Snowden Optiro) for Altona Rare Earths Plc (Altona, the Company or the
Client). This CPR has been prepared to provide compliant disclosure on all
material mining assets and liabilities of Altona's Monte Muambe Rare Earth
Element (REE) project (Monte Muambe or the Project), located in western
Mozambique, in accordance with relevant Financial Conduct Authority (FCA)
guidelines (FCA Technical Note 619.1 of May 2022, Appendix II), and the
Australasian Code for Reporting of Exploration Results, Mineral Resources and
Ore Reserves, 2012 edition (JORC Code, 2012).

The Company is a UK London Stock Exchange (LSE) listed mining company focused
on the supply of rare earth metal oxides for the catalyst, laser, glass,
polishing and magnetic materials industries for the anticipated growth in the
wind turbine and electric vehicle sectors.

The Project is an advanced exploration and pre-development project. Altona's
interest in the Prospecting Licence (Licença de Prospecção e Pesquisa)
LPP7573L (the Licence) is through a Farm Out Agreement dated 23 June 2021
between Ussokoti Investimentos, Altona, Monte Muambe Mining Lda (MMML) and its
original shareholders. The Farm Out Agreement gives Altona the right to earn
up to 70% of MMML in a phased manner, subject to the completion of certain
conditions and milestones.

In this CPR and Scoping Study all references to dollars ($) refer to American
United States dollars.

2.  Project description, location and ownership

The Project is located in Niculunga Locality, Cambulassisse Administrative
Post, Moatize District, Tete Province, Mozambique (Figure 1.1). Access from
the provincial capital Tete is through the tarred road leading to the Malawi
border (Zobue), through Moatize town, and to the village of Cateme. The
distance from the Zambezi bridge in Tete to the Cateme turn-off is about 40
km. From the Cateme turn-off, an ungraded 43 km track leads from to the Monte
Muambe camp through the villages of Mualadzi and Djendje. Figure 1.2 shows the
location of Target 1 and Target 4 in relation to the Monte Muambe geology and
structure and the proposed open pit outline (black).

Figure 1.1        Project location in Mozambique

Figure 1.2        Location of Target 1 and Target 4 in relation to the
Monte Muambe structure and geology

3.  Geology and Mineral Resources

Monte Muambe is located in the central part of the Karoo Moatize-Minjova coal
basin, which corresponds to the eastern part of the Zambezi Graben. The Monte
Muambe carbonatite intrusion is hosted by Upper Karoo Sandstones of the Cádzi
Formation. The age of the intrusion is presently unknown.

While the Monte Muambe structure resembles a ring-dyke, or a volcanic edifice,
the outer ridge consists of sub-horizontal indurated Upper Karoo sandstones
and is the product of differential erosion (Figure 1.2). The basin formed by
the inner part of the structure consists chiefly of fenites, various types of
carbonatites, breccias, as well as pyroclastics. The diameter of the
carbonatite intrusion at surface level is about 3.3 km. Carbonatites tend to
outcrop in the form of small hills rising above the floor of the basin.
Fenites are often deeply weathered at near-surface levels and rarely outcrop,
though float can be encountered on slopes.

Fenites form a circular zone lining the contact between carbonatites and host
sandstones, but the detailed relationships between fenites and carbonatites
are a lot more complex, involving faulting during and after the emplacement of
the intrusion, as well as the incorporation of xenoliths of various size
(centimetre to decimetre size). Drilling in various parts of the intrusion
shows that fenite outcrops often cover carbonatites. This, as well as the
presence of pyroclastics, suggests that the present erosion level may
corresponds to the roof of the carbonatite intrusion, immediately under the
base of the volcanic edifice.

The Mineral Resource outline is shown for Targets 1 and 4 (Figure 1.2).
Mineral Resource Estimates for Targets 1 and 4 are provided in Table 1.1 and
are reported in accordance with the JORC Code (2012).

 

Table 1.1          Monte Muambe Indicated and Inferred Mineral Resource September 2023 reported using a 1.5% TREO cut-off

 Target   Classification  TREO Cut-off (%)  TONNES (Mt)  TREO%  CeO(2) ppm  Pr(6)O(11) ppm  Nd(2)O(3) ppm  Tb(4)O(7) ppm  Dy(2)O(3) ppm  NdPr Oxide (ppm)  Contained TREO (t)
 1        Indicated       1.5               8.0          2.38   11,400      910             2,250          15             80              3,160            191,000
          Inferred        1.5               0.8          2.28   10,900      861             2,140          15             78              3,000            18,000
          TOTAL           1.5               8.8          2.38   11,400      905             2,240          15             80              3,150            209,000
 4        Indicated       1.5
          Inferred        1.5               4.8          2.50   11,300      872             2,190          26             143             3,060            119,000
          TOTAL           1.5               4.8          2.50   11,300      872             2,190          26             143             3,060            119,000
 OVERALL  Indicated       1.5               8.0          2.38   11,400      910             2,250          15             80              3,160            191,000
          Inferred        1.5               5.6          2.47   11,200      871             2,190          24             134             3,060            137,000
          TOTAL           1.5               13.6         2.42   11,400      894             2,230          19             102             3,120            329,000

  Notes:

·    Million tonnes are rounded to one decimal place.  Grades are rounded
to two decimal places for % and whole numbers for ppm.

·    The MRE has been reported in consideration of reasonable prospects
for eventual economic extraction (RPEEE) using a pit shell based on a 1.5%
Total Rare Earth Oxide (TREO) cut-off, revenue of 24.65 $/kg TREO in Mixed
Rare Earth Carbonate (MREC) and average total recovery to MREC of 48%.

·    Mineral Resources are reported as dry tonnes on an in-situ basis.

·    Rare Earth Elements are inclusive of the TREO and not additional to
it.

·    "NdPr Oxide" is the sum of Nd(2)O(3) and Pr(6)O(11).

4.  Mining

The mining method is based on conventional open pit using truck and shovel, and drill and blast, coupled to a ROM stockpile. Although the rock is largely classified as weathered, ore and waste rock will require drilling and blasting.

Both ore and waste will be excavated in 5 m flitches following mark-out by
grade control. Ore will be hauled to either the ROM pad and tipped onto a
designated ore finger or a designated low-grade stockpile. All mine waste will
be hauled directly from the pit and placed onto a designated location of the
tailings storage facility (TSF) dam wall; there are no other external waste
dumps.

The mining fleet will comprise 40 - 60 t capacity articulated dump trucks
(such as a Caterpillar 745) loaded by a 90-t excavator (such as a Caterpillar
395). A 30-t front-end loader (Caterpillar 980M) capable of loading the 41-t
dump trucks, will be used as back-up for the primary loading unit and to make
up shortfalls in periods where additional material movement is required. Other
ancillary support will be supplied by a Cat D9R dozer, Cat 14M grader, and Cat
745 watercart. Maintenance will be conducted on site. Contract-mining is
selected as the operating strategy at the Project.

4.1.  Pit optimisation

Optimization parameters used for the Scoping Study are summarised in Table 1.2
below. For Target 4 area the pit shell chosen was using the price increment of
102% which provided the highest undiscounted NPV as summarised in Figure 1.6.
For Target 1 and 6, the chosen price increment was 98% which provided the
highest undiscounted NPV (Figure 1.4).

The mine life is planned at 18 years. There is no pre-stripping period. Based
on the selected pit shells a high-level pit design was produced.

Table 1.2          Parameters used in optimization

 Item                             Unit             Value
 Total Rare Earth Oxide (TREO)    $/t              24,651
 Royalty                          %                3.0
 Mining costs                     $/t              3.28
 Ore - free dig                   $/t              4.26
 Ore - drill and blast            $/t              2.51
 Waste - free dig                 $/t              3.53
 Waste - drill and blast          $/t              3.28
 Processing cost                  $/t ore          25.00
 Downstream processing cost       $/t TREO         66.00
 Recovery from run of mine (ROM)  %                60
 Recovery from refining           %                80
 Throughput rate                  Tonnes per year  750,000
 Discount rate                    %                10
 Overall slope angle (OSA) T4     °                47
 OSA T1 and 6                     °                43

Figure 1.3        T4 optimisation result

Figure 1.4        T1 and 6 optimisation result

4.2.  Indicative schedule

An indicative life of mine (LOM) schedule was prepared for the mining of the
two open pits as shown in Figure 1.5. Throughput rate is maintained at 750,000
t/a at a total mining rate of between 2.0 to 2.5 Mt/a. The average strip ratio
is 1.67 (waste: ore). A pre-stripping period is not required but may be used
to generate sufficient waste for the first TSF lift.

Figure 1.5        Monte Muambe annual LOM mining schedule

5.  Metallurgy and processing

The proposed process flow sheet includes a beneficiation plant and a
hydrometallurgical plant (Figure 1.6).

The beneficiation plant comprises of the comminution and flotation circuits.
The purpose of the comminution circuit is to reduce the size of solid rock
particles and thus increase the surface area of solids to enable the
liberation of valuable materials that are locked within the gangue minerals.
This is achieved by means of crushing and milling. Flotation is a method of
separation, which uses the differing surface properties of the various
minerals in the carbonatite. It involves the selective attachment of mineral
particles to air bubbles generated in the flotation cell which float to the
surface of the slurry and then flow over the lip of the cells into the
launders.  A two-stage selective flotation reagent regime is used; the first
stage being a gangue flotation to selectively target the calcium bearing
gangue minerals (calcite, fluorite and ankerite) and the second stage being a
rare earth flotation targeting the host mineral bastnaesite.

The recovery process flow sheet comprises a two-stage selective hydrochloric
acid leach process. The first stage being a calcite gangue leach in a weak (pH
4) acid solution and the second stage being a strong acid leach (20% HCl) at
~80°C.  The hydrochloric acid is recycled via calcium sulphate precipitation
with sulphuric acid which is produced on site via a commercial sulphur burner
plant. The process flow sheet also includes purification and Mixed Rare Earth
Carbonate (MREC final product) precipitation. This approach offers advantages,
including a significant reduction in acid costs as well as a further
concentration of the rare earths thus providing a reduction in downstream
capital and operating costs.

Figure 1.6        Proposed process flow sheet

6.  Project infrastructure

All required infrastructure, the accommodation camp, process buildings,
stockpiles, water resources, and tailings storage facility (TSF) are located
within the current mineral tenement boundaries. Site infrastructure is
required both inside the crater and outside to service these facilities.

A conceptual site block plan (SBP) locates the main accommodation camp outside
of the crater to minimize dust, noise and radiation exposure, whereas the
process plant, mining contractors' workshops, TSF and associated
infrastructure are deployed inside the crater, arranged to minimize the
physical footprint and in close proximity to the two main pits.

The mine infrastructure and process areas are, as far as practical,
consolidated to reduce materials handling distances, including that of run of
mine (ROM) mineralisation. The SBP arrangement has considered the topography
as well as accommodating future expansion of selected process units and
exploitation of new pits.

Diesel generators will be used during construction and commissioning, and as
backup for infrequent events of grid failure. It is assumed that the appointed
bulk diesel supplier will install its own diesel storage tank(s) at site.
Process, mine and office diesel storage tanks will be connected to the primary
diesel storage tank(s).

The 18 MW electrical power maximum demand of the Monte Muambe site will be
provided at 11 kV, 50 Hz by a hybrid power generation plant. The plant will
comprise a diesel-powered electrical generator station and solar photovoltaic
(PV) power station supported by a battery energy storage system. Cables will
link the power station substation to the process plant substation.

Solar PV generation is expected to contribute approximately 25% to the overall
generation. The solar PV power station will be contained in a separate area,
800 m upwind from the process plant.

Management consider that a bore well-field will be the most optimal solution
for the Project's water supply.  The water demand for the Monte Muambe site
will be supplied by on-ground overland pipelines from the bore field. Various
sites for bore water have been identified and well tested. The bore field
selected will provide water to the accommodation camp, process plant and camp.
Dewatering from the open pits is also expected to increasingly contribute to
the plant's water supply during the life of the mine. A water demand forecast
will be designed as part of the PFS.

Wastewater and overall water management will be achieved by suitably planned
drainage channels and site layout. Waste will be collected in a landfill.

The Project is primarily accessed from the northern side. A tarred, single
carriageway (N7) extends from Tete, passed Moatize coal mine in a north
easterly direction, a total distance of 70 km. There is a right turn onto a
tarred single carriageway extending in a southeasterly direction for 10 km to
Cateme. From Cateme, a 35 km gravel road is used to access the Project site;
this road passes through the villages of Mwaladzi and Dezemge (Figure 1.7).

The road from Dezemge to the Project site will require upgrading, including
by-passes around villages. The road climbing from the foot of the mountain to
the existing camp and into the basin will need to be redesigned to ensure a
maximum slope of 10 percent. Inside the basin, where the planned mining
infrastructure and plant facilities will be located, the topography is gentle.
Existing dirt tracks will require widening and upgrading using locally sourced
road metal.

The Tete International Airport (Chingozi) or TET, is 110 km by road to the
Project, along the N7. Beira is the closest port to the Project site,
approximately 730 km by road. A detailed cost-benefit of the various
logistical options both for inbound and outbound freight cargo will need to be
done as part of the PFS.

An integrated information system will be provided by the Company, including
the latest operating systems enabling effective telephonic and digital
communications.

For product transport, it is proposed that stockpiled MREC will be placed in 1
t polypropylene, double-lined woven bulk bags at Project site, and then placed
on pallets or loaded directly into containers. Containers will be trucked to
Beira port and warehoused, prior to shipment. These transport arrangements are
expected to result in approximately 745 truck journeys per annum (equivalent
to 62 trips per month) of bagged concentrate product to Beira. The
containerised bags will be offloaded at Beira and then re-containerised at
Beira or report straight to ocean going vessels.

Figure 1.7        Location of the Project, licence LPP7573L in Tete
Province, Mozambique

Source: Altona, 2023

The approximate infrastructure size and costs for the Project have been
estimated. Primary infrastructure costs include:

·      Power ($7.5 million)

·      Access road ($7.0 million)

·      Accommodation ($4.0 million)

·      Sewage treatment ($2.0 million)

·      Raw water dam ($2.0 million)

·      Wellfield ($2.0 million)

·      Stormwater ($1.0 million)

·      Water treatment ($1.0 million)

·     Other surface infrastructure (including gatehouse, changehouse,
laundry, clinic, canteen, office buildings), of $2.8 million.

The approximate footprint of the ten primary surface infrastructure/ buildings
is 10,915 m(2). As the Project advances, greater accuracy and footprint size
will be estimated.

Design details will be required as the project advances to PFS stage; this
will include as a priority:

·      Power demand

·      Water demand

·      Detailed plans for site location

·      Detailed access road plans.

7.   Tailings and waste

7.1.  Tailings storage facility

All process plant waste products will likely be disposed of onto a single
fully contained tailings storage facility. Pre-stripping over the mining area
will provide the initial waste rock required for the containment embankment
walls. As more waste is stripped over the mining areas, these waste rock
embankments will be raised always above the tailings level to provide solid
rock embankment walls. The intention is to, where possible, use the existing
topography and outcropping areas to buttress the final TSF walls.

The tailings will be placed on a 2 mm high density polyethylene (HDPE) lined
facility with suitably constructed underdrainage systems. Despite the low acid
generating potential and also the presence of carbonate rock, there will be a
component of plant waste containing residual thorium and radio-active
elements, which will require safe disposal in the TSF.

A preliminary site was chosen for a storage capacity of 13.3 Mt, with a
full-containment facility in line with the Global Industry Standards for
Tailings Management (GISTM). The design also took cognisance of the potential
seismic nature of the area with the full waste containment and has 1V:3H outer
perimeter waste rock side-slopes.

The capital expenditure estimate (capex) was factorised from a database of
costs into 2023 prices. The overall TSF has an estimated capex of $54 million
over the 18-year mine life. It may be possible to divide the capex over
various design phases with further design work, to reduce the initial capital
and to increase the sustaining capital over the subsequent tailings dam lifts.

7.2.  Waste rock disposal

The waste rock excavated from the Monte Mumbe open pit mining activities will
be loaded and hauled to a permanent disposal site or waste rock dump (WRD).
The waste rock will partly be used in the construction of the TSF containment
embankments. The balance of the waste will be deposited in designated waste
rock dumping between the Target 1 and Target 4 pits. The TSF embankment will
require approximately 3.6 Mm(3) or 6.5 Mt of waste rock, with the WRDs
requiring a collective capacity of 8.7 Mm(3) or 15.7 Mt.

The WRD is expected to be non-acid forming with limited release of
contaminants over the long term. The waste rock contact water is however
expected to be high alkalinity (due to the carbonatites) with minor
concentrations of REEs. The WRD footprints are not expected to be lined, but
an engineered (compacted) basal area is proposed to rescue seepage and protect
ground- and surface water resources.

The WRDs will be located adjacent to each respective pit, and adjacent to the
TSF. The development of the waste rock dumps will be in 10 m vertical lifts,
with 15 m wide benches and 1V:1.5H intermediate side slopes. The overall outer
side slope profile will be 1V:3H for rehabilitation. The WRDs will cover a
total footprint (natural ground) of approximately 40 ha, with a final
downstream height of approximately 50 m.

The capex for the WRDs has been determined through the factorisation of
database costs into Y2023 terms and has been estimated at $2.72 million,
inclusive of 30% preliminary and general costs. The capex is primarily
comprised site clearance and earthworks with selected concrete works and
drainage material.

Future recommended work includes a geotechnical investigation and geochemical
characterisation of the waste rock.

8.  Social and environmental matters

Exploration activities on LPP7573L are carried out under an environmental
management plan (EMP) prepared by local environmental consultancy GeoAmbiente
Lda. The Company's activities were subjected to an independent Environmental
Audit which was validated by the National Agency for Environmental Quality
Control (AQUA) of Tete Province on 24 October 2022.

The Licence is not located in any environmentally protected area.

As part of its Mining Concession application, the Company will prepare an EMP
covering the proposed mining operations, and subsequently a Level A
environmental impact assessment (EIA).

A Level A EIA covers mining activities carried out on a Mining Concession.
These activities require a full EIA, which must be prepared by an
environmental specialist licensed by the Ministry of Land and Environment
(MITA). The EIA process aims at producing a project-specific environmental
licence.

The EIA licensing process involves:

·      The preparation and submission to MITA of a set of Terms of
Reference (ToR), which must include the timing and procedures for public
consultation, a risk and emergency management plan, and an EMP.

·      The review of the ToR by MITA and the Minister, Ministry of
Mineral Resources and Energy (MIREME).

·      If the EIA is approved, MITA issues an Environmental Licence
within 10 days from the date of approval. The Environmental Licence is valid
for the duration of the Mining Concession but must be reviewed every 5 years.

The holder of a Level A Environmental Licence must also submit an annual
environmental management report, with the monitoring process carried out
either by the concessionaire or by an independent consultant.

Level A activities also require the provision of an environmental bond to
cover rehabilitation activities during the closure of the mine. The bond may
take the form of an insurance policy, a bank guarantee, or a deposit in cash
in a bank account provided by MIREME. The value of the bond is based on an
estimate of the costs of such restoration, which will be calculated during or
after the active life of the project. The value of the bond is set by MIREME
and reviewed every two years.

8.1.  Radiation management

The Project ore contains low levels of thorium (Th) and uranium (U). The LOM
average concentrations for the bastnaesite ore are 200 ppm Th and 20 ppm U at
Target 1 and 330 ppm Th and 7 ppm U at Target 4, which is favourably low
compared with other rare earth deposits. The Project's flotation tailings will
contain lower levels of radioactivity because thorium and uranium are mostly
associated with the rare earth minerals (and hence removed from the tailings).

The mineral concentrate produced from the Project, whilst having an upgraded
Th and U content, is expected to have a specific activity well below the
trigger point of 10 Bq/g and will therefore not be deemed as Class 7 Dangerous
Goods for transportation purposes. Note that this concentrate does not leave
the site; it is fed directly to the hydrometallurgical plant.

Radionuclides (Th, U and the decay nuclides) will be removed during the
hydrometallurgy refining stage to produce a radionuclides-free MREC.

Altona will develop a comprehensive radiation management plan and undertake
regular monitoring and regulatory compliance of radioactivity levels of all
activities including exploration, mining, processing and tailings disposal.

8.2.  Closure and remediation

The intent for closure planning at the Project is that disturbed areas will be
rehabilitated and closed in a manner to make them physically safe to humans
and animals, geotechnically stable, and geochemically non-polluting/
non-contaminating. It is the Company's intent that a sustainable solution is
agreed upon for post-mining land use, without unacceptable liability to
stakeholders.

In addition, environmental rehabilitation will be ongoing throughout the LOM.
Decommissioning activities are likely to include the following:

·      Dismantling of buildings and infrastructures.

·      Rehabilitating haul roads and hard stand areas.

·      Ensuring access to the void left from open pit mining is
restricted.

·      Reprofiling slopes and top surfaces of waste rock dumps,
stockpiles and TSF to ensure stable landforms.

·      Revegetation of previously disturbed areas with indigenous
vegetation.

9.  Project costs and economic analysis

Snowden Optiro has undertaken a real financial model for the Project. The base
date for all financial inputs is 1 September 2023. All values reported in this
section are real; and all diagrams and tables have been generated from the
financial model. ROM material and mineralisation are used interchangeably in
this section.

A basis of estimate and exclusions are referenced in Section 11.2 and 11.3
respectively, for capex and opex.

A mine schedule has been undertaken by Datamine and reviewed by Snowden
Optiro. Proposed ROM steady state production of 0.75 Mt/a is reported for a
mine life of about 20 years. A tail-cut has reduced the Project mine life to
18 years and is referenced accordingly as the LOM in this report. Planned
steady-state is reached in Year 1 of mining production.

Long-term CIF (China) metal prices calculated as the average of Adamas
Intelligence forecast (Adamas Intelligence, 2023) for the period 2024-2040 low
case scenario have been applied as follows:

·      Praseodymium oxide price of $148,000/ t

·      Neodymium oxide price of $156,000/ t

·      Terbium oxide price of $1,937,000/ t

·      Dysprosium oxide price of $440,000/ t.

Gross revenues total $3,670 million over LOM. Neodymium and praseodymium
comprise the bulk of planned gross revenues (86%) along with dysprosium and
terbium (14%); no value has been ascribed to the other 13 REOs, primarily
cerium and lanthanum. A payability of 90% on the four primary elements in the
sold MREC has been applied.

Net revenues include a State royalty of 3% on gross revenues; and payabilities
of 90% on MREC product sold. Total MREC produced is 270.7 kt over LOM or 15.0
kt p/a, with an equivalent contained TREO volume of 148.9 kt over LOM or
8.3 t p/a. Net revenues total $3,193 million over LOM.

The planned LOM opex and unit opex is shown in Table 1.3. Process opex
accounts for 74% of total opex over LOM.

Table 1.3          Planned LOM opex for the Project

 Opex item                   Value ($ M)  Unit cost ($/t ROM)  Unit cost ($/t MREC)
 Mining                      152          11.3                 563.0
 Process                     1,127        83.7                 4,164.3
 Overheads/ shared services  160          11.9                 591.0
 Off-mine                    80           5.9                  294.3
 Total                       1,519        112.8                5,612.6

Note: MREC - Final Mixed Rare Earth Carbonate product

The total initial and sustaining capital for the Project was estimated to be
$339.3 million, which includes project execution;, engineering, procurement
construction management (EPCM), contingency and sustaining capital costs.
Initial capital is estimated to be $276.3 million and includes all capex over
the period October 2023 to December 2028. The initial capital is summarised in
Table 1.4.

Table 1.4          Initial capital summary

 Initial capital item                                             Value ($ M)
 Project mobilisation and camp construction                       4.0
 Bulk and other infrastructure                                    31.3
 Direct plant costs                                               150.0
 Indirect plant and EPCM costs                                    35.0
 Tailings dam                                                     18.0
 Waste rock dump                                                  2.0
 Mining infrastructure, pre-production and mobilisation           14.0
 Exploration, evaluation, Owners Team and sterilisation drilling  22.0
 Total initial capital                                            276.3

 

Note: EPCM - Engineering, procurement, construction management; rounding has
been applied to select initial capital items.

For the LOM, debtors days of 30 days has been applied, creditors of 30 days
(mining and process opex) and 15 days on inventories (select mining and
process opex).

A production tax or royalty is payable based on the value of the mineral
extracted, with an applicable royalty of 3% for other minerals. Total State
royalties over LOM is $110.1 million and have been included under net
revenues.

A corporate tax of 32% on cashflows (after the applied WPT) has been applied
in the financial model. Total corporate tax over LOM is $372.5 million.

Provision has been made under Owners costs, for customs and duties; although
there is a strong likelihood that no customs will be payable during the
initial years of construction, ramp-up and first two years of steady-state
production.

No government free carry has been applied to the financial model.

No capital gains, withholding or transaction tax has been applied.

Snowden Optiro is not aware of any municipal fees or rates that are to be
applied.

9.1.  Net present value (NPV) and internal rate of return (IRR)

The NPV of the Project is $283.3 million, based on a real discount rate of 8%.
An NPV of $149.6 million is reported using a real discount rate of 12%. A
post-tax IRR of 25% and a payback from the construction start date of 4.5
years, and a payback from first TREO production of 2.5 years is reported. An
operating cashflow margin of 42% is noted. Project earnings before interest,
tax, depreciation and amortisation (EBITDA) would effectively be operating
cash flows (no capital expenditure, tax, interest, depreciation nor
amortisation expenses have been included). Operating cashflows would include
all realisation costs, on- and off-mine expenses and royalties. The planned
LOM EBITDA will be $1,674 million; and planned annual EBITDA is $93 million.

9.2.  Sensitivity analysis

Using an NPV of $283.3 million with an applied real discount rate of 8%, the
Project is most sensitive to revenue (price, recovery, grade and exchange
rates), less sensitive to opex and least sensitive to capex (Figure 11.6). The
sensitivity analysis shows that the Project is more sensitivity to capital
than other benchmarked projects.

9.3.  Summary of key Project parameters

A summary of key Project parameters is shown in Table 1.6.

Table 1.5          Forecast key Project parameters

 Parameter                        Unit      Value
 Ore processed                    Mt        13.5
 TREO ROM grade (after dilution)  %         2.30%
 MREC produced                    Kt        270.7
 Initial capex                    $ M       276.3
 Sustaining capex                 $ M       63.0
 Opex LOM                         $ M       1,519.3
 Opex per sold MREC               $/t MREC  5,612.6
 Gross revenue LOM                $ M       3,670.2
 Net revenue LOM                  $ M       3,193.1
 EBITDA LOM                       $ M       1,673.8
 Gross revenue per tonne MREC     $/t       13,558.4
 Net revenue per tonne MREC       $/t       11,795.8
 Payback from first MREC          Years     2.5
 Post-tax NPV(8)                  $ M       283.3
 Post-tax NPV(10)                 $ M       207.0
 Post-tax IRR                     %         25%
 Operating margin                 %         42%

Note: TREO - Total Rare Earth Oxide; ROM - Run of mine; MREC - Mixed Rare
Earth Carbonate; EBITDA - Earnings before interest tax, depreciation and
amortisation; opex - operating expenditure.

9.4.  Upside scenario

An upside scenario with higher long-term metal prices has been undertaken. No
changes in production, opex, capex or discount rates were made to the
financial model. The long-term metal prices applied are as follows:

·      Praseodymium oxide price of $174,000/ t.

·      Neodymium oxide price of $183,000/ t.

·      Terbium oxide price of $2,083,000/ t.

·      Dysprosium oxide price of $474,000/ t.

Total gross revenues of $4,258 million are reported over LOM for the upside
scenario; with planned net revenues of $3,704 million.

The NPV of the upside scenario is $409.9 million, based on a real discount
rate of 8%. An NPV of $231.3 million is reported using a real discount rate
of 12%. A post-tax IRR of 32% and a payback from the construction start date
of 4.0 years, and a payback from first TREO production of 2.0 years is
reported. An operating cashflow margin of 50% is noted.

10. Project execution

A high-level planned schedule has been undertaken for the overall Project. Key
milestones are highlighted in the Level 1 schedule (Table 1.6). The schedule
was based on industry benchmarking, scope of work and a general deliverables
list. Snowden Optiro assumes a seamless advancement between the various
phases, as the Project advances. The overall schedule is five years to first
TREO being produced, which includes 18 months for a PFS, one year for a FS,
two years construction and a six-month production ramp-up. Project financing
will be applied for, for pre-production funding and Project construction.

An engineering, procurement, construction management (EPCM) execution strategy
has been recommended for the Project.

Table 1.6          Planned milestones for the Project

 Milestone                                        Milestone date/ duration
 Prefeasibility study                             18 months to March 2025
 Submission of mining concession application      Q4 2023
 Feasibility study                                12 months to March 2026
 Value engineering, FEED and financing            Nine months to December 2026
 EPCM tendering                                   November 2026
 Early works commencement                         December 2026
 EPCM award                                       January 2027
 Construction commences                           Two years to December 2028
 First TREO to be produced                        December 2028
 Production ramp-up                               Six months to June 2029
 Steady state of 187.5 kt per quarter (750 kt/a)  Q3 2029

Note: FEED - Front end engineering design; EPCM - Engineering, procurement,
construction management; TREO - Total Rare Earth Oxide

Source: Snowden Optiro, 2023

11. Recommendations

It is expected that Altona will undertake a prefeasibility study (PFS) as the
next stage of project development, based on the positive outcome of this CPR
and Scoping Study.

11.1.   Exploration

Snowden Optiro's recommendations for continued exploration include:

·      Use the improved mineralisation model to attempt identifying new
targets, including blind targets.

·      Continue improving mineralisation model through mapping as well
as academic research.

·      Exploration drilling at T3, T9, T11, and any other potential
high-grade target

·      MRE update

·      Data centralisation

The resource update should cover tonnage increase, as well as improve the
level of confidence within the pits to Measured and Indicated.

11.2.   Geometallurgy / processing

Geometallurgy and process flowsheet design will be a priority activity during
the PFS. The Scoping Study sighter testwork forming part of this Scoping Study
provides a preliminary assessment based on a possible flowsheet.  Ongoing
work includes:

·      Mineralogical and geo-metallurgical assessment.

·      Beneficiation flowsheet development.

·      Hydrometallurgical flowsheet development.

It is anticipated that the ongoing testwork will extend over a nine to
12-month period.

11.3.   Mining

Snowden Optiro's recommendations include:

·      Geotechnical studies:

Drilling program

Geotechnical logging of core

Off-site testing of core

Structural interpretation

Slope stability assessment

·      Mine planning and ore reserve:

Pit optimisation and schedule

Scenario analyses

Cost assessments

Ore reserve development

Once adequate testwork has been completed to reliably inform geotechnical
models, recovery and process cost parameters, more detailed work can be
carried out.

11.4.   Environmental studies

This will involve starting baseline studies as soon as possible and planning
to reach environmental compliance as part of the Mining Concession application
(EMP, ESIA). This will include environmental, social and governance (ESG)
planning to a World Bank level. Minimisation of the carbon footprint of the
proposed product can be minimised through locally available sourcing.

11.5.   Infrastructure studies

This will involve multiple trade-off studies; including logistics optimisation
(road vs different rail options), and power sources mix optimisation (based on
capex, opex and carbon footprint).

11.6.   Tailings / waste management

The PFS study will require a detailed site selection and associated surface
geotechnical investigations. A key requirement will be to conduct geochemical
static and kinetic leach testing on the types of ore / tailings / waste to
determine the future design / lining of the TSF. The planned PFS will identify
several options and determine the best site or sites for tailings disposal.

For waste rock disposal, the prefeasibility scope will include hydrogeological
testing, site selection, geotechnical and chemical testwork. Both tailings and
waste rock will require detailed design criteria and opex / capex costings.

11.7.   Marketing

As part of the PFS, Altona will join a Responsible Sourcing organisation and
integrate Responsible Sourcing processes. The Company plans to develop
marketing side of business as part of PFS, which may include offtakes and
integration with rest of world supply chains (existing and projects).

11.8.   Project economics

Relevant studies need to be undertaken to improve granularity and accuracy of
the opex and capex estimates, production, payabilities and planned recoveries.

 

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