REG-Pensana Plc: Technical Due Diligence Report on Longonjo

PensanaAnnouncement

24/01/2024 07:15

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

 

Pensana Plc ("Pensana" or the "Company")

 

Technical Due Diligence Report on Longonjo

 

Pensana (LSE:PRE) is pleased to advise that the technical due diligence report
on the Longonjo rare earth project in Angola (the Project or Longonjo) has
been reported by The Mineral Corporation (TMC) to ABSA Capital (ABSA) as the
Mandated Lead Arranger for potential debt funding of the Project.

 

A summary of TMC's key findings:

 

The Project is located approximately 320km east of the Port of Lobito and
envisages the open pit mining and processing of near surface Rare Earth
Elements (REE) bearing carbonatite ores to produce a mixed REE carbonate
(MREC) concentrate which will then be marketed commercially.

 

The holder of the Mineral and Mining Rights over the Longonjo mining licence
area is the Angolan registered company Ozango Minerais S.A. (Ozango), which is
84% owned by Portugal domiciled subsidiaries of Pensana. The balance of Ozango
is held by the Angolan Sovereign Wealth Fund and two Angolan partners.

 

Longonjo will comprise an open pit mine to recover near surface REE, which
will then be processed via concentration and downstream refining to produce a
commercially saleable Mixed Rare Earth Carbonate (MREC) concentrate for export
via the Port of Lobito to third-party offtakers for the purpose of ultimately
producing Neodymium/Praseodymium (NdPr) feed into the renewable energy and
electric vehicle markets.

 

A nominal plant feed of 0.8Mtpa has been specified at a TREO feed grade of
4.12% and an NdPrO feed grade of 0.9%. The stockpiling and blending strategy
critical to achieving stable and consistent concentrator performance and
product has been identified and included in the mining and processing
flowsheets. The plant design is nominally based on a dry concentrate feed of
approximately 59ktpa, to produce a nominal MREC dry product of 19.6ktpa
(15ktpa normal operating conditions).

 

Whilst TMC is of the opinion that ramp-up to achieve design recoveries will be
challenging, and the ongoing operational control of the processing plants will
be critical to maintaining product quality and recovery, TMC notes no fatal
flaws in terms of the revised bankable feasibility study (BFS) review and no
material technical divergences from the level of study required for bank
funding approval.

 

TMC noted the capital estimate provided is extremely detailed and based on
bills of quantities and tendered prices with a capital base date of Q4 2023.
An accuracy assessment was also carried out, which confirms the level of
accuracy complies with that required by a BFS standard. TMC is of the opinion
that sustaining capital may be slightly understated however this does not
present a material risk to the Project.

 

Capital Cost Breakdown

 

 Concentrator Plant                 US$37 766 993   
 Plant Common Areas                 US$14 687 930   
 TSF                                US$7 157 201    
 Recovery Plant                     US$75 472 541   
 Plant Infrastructure               US$15 568 988   
 Project Infrastructure             US$123 386      
 Mine Infrastructure                US$9 707 348    
 Environmental                      US$4 538 590    
 Security                           US$1 767 680    
 Site Infrastructure                US$7 001 150    
 Indirect Costs                     US$22 640 254   
 Contingency                        US$20 100 933   
 Total Project Capital Expenditure  US$216 532 994  

 

The capital estimate was derived from the various currencies relating to the
goods and services costs in the country of origin and adjusted for the
relevant exchange rates: US$ South African Rand ZAR 18.5, European Euro EUR
0.9, Australian Dollar AUD 1.5 and Angolan Kwanza AOA 830.

 

TMC notes the level of detail provided in the detailed capital estimate
consisting of in excess of 18,000 line items, the methodology undertaken to
produce the capital estimate and the basis of estimate being predominantly
based on bills of quantity, tendered rates and budget quotations.

 

Operating Cost Estimates have been updated based on the revised Project scope
and also brought to a consistent cost base date of Q4 2023. TMC has reviewed
all of the operating cost centre data and concurs that the operating cost
estimates as provided meet the accuracy levels associated with a BFS, however
it is noted that the retender for the mining contract scheduled for late 2024
will impact on overall Project economics and in all likelihood trigger the
requirement for a revision of the mining optimisation plan.

 

TMC notes that the financial model as received is detailed in all modelled
inputs and results in free cash flow levels which would be likely to support a
funding decision. TMC reiterates the sensitivity of the Project economics to
the forecast rare earth oxide prices and recommends that the imminent offtake
agreements and pricing structures should be included in any funding agreement
as Conditions Precedent. Once these are available the Project financial model
should be updated, and the economics revised. The Project economics are most
sensitive to projected market dynamics and the resulting product pricing
projections, which in turn present the most material risk to Project
economics.

 

Earthworks and civils contractors established site in November 2022. Servitude
bush clearing and pylon installations to the borehole pumps, contractors camp,
main camp and water treatment plant were in progress at the time of the site
visit at the end of February 2023. Overall, the level of detail design of the
infrastructure is commensurate with the requirements of the BFS and TMC is of
the opinion that the infrastructure design is appropriate and fit for purpose
to support the mining and processing operations.

 

TMC is of the opinion that the level of work undertaken for the project
schedule and plan of execution is commensurate with the requirements of a BFS
and the work undertaken is comprehensive and will be the basis for a potential
successful project execution.

 

Extensive work has been undertaken in the areas of social and community
engagement. TMC supports the programmes and costs which have been allocated to
the various social initiatives, however notes that the Relocation Action Plan
still requires careful monitoring and management to ensure successful
implementation, minimising community grievances. Ozango's engagements and
initiatives now comply with the expectations associated with a BFS level of
study and in some instances exceed expected levels.

 

TMC notes that all legislative aspects of Human Resources management have been
addressed adequately, however it does recommend that remuneration levels are
reviewed prior to the commencement of recruitment, as the budgeted levels may
mitigate against the procurement of top level individuals, particularly in the
senior technical expatriate roles. The BFS meets expected levels of detail in
terms of all HR, operational readiness and occupational health and safety
aspects. It is noted that specific operational readiness planning is only
expected at the next stage of the Project.

 

Tim George CEO commented: "We are very grateful to Russel Heins and the team
at The Mineral Corporation team for the diligent and extremely thorough review
of all aspects of the Longonjo project undertaken in their role as lead
Technical Advisor to ABSA as the Mandated Lead Arranger and we are pleased
with the positive recommendations.

 

The review was based on the re-engineered, reduced capital cost of the project
for financing purposes following our review in Q2 of 2023. A huge amount of
work has gone into the capital cost estimate which as noted by Russell and the
team is based on very detailed estimates and we are pleased that despite the
current inflationary and cost pressures the estimate has been confirmed around
US$217 million, which includes US$20 million in contingency.

 

As previously announced, once the Longonjo operations are operational and
fully commissioned it is our intention to expand production to around 40,000
tonnes of MREC per annum which will require an additional capital cost of
around US$100 million which is expected to be incurred around year three of
the initial operations.

 

Whilst this technical review has been underway, we have been working closely
with our financiers ABSA, FSDEA and others and we expect to be in a position
to announce the financing arrangements shortly."

 

About The Mineral Corporation

 

The Mineral Corporation (TMC) was established in Johannesburg, South Africa in
1997 and is home to a well-informed, globally-focused corporate and technical
advisory team of mining sector professionals. TMC have expertise in mineral
exploration, geology, mining engineering and development, mineral processing,
mining infrastructure, ESG, statutory compliance, mineral asset valuation and
techno-economic modelling.

 

TMC understand that exploration and mining can be high risk industries and are
confident that their skills can be applied to identify, resolve and minimise
their clients exposure to such risk, thereby creating or preserving value.

 

TMC cover all minerals, including precious metals, base metals, noble and
refractory metals, energy minerals (coal and uranium), mineral sands, precious
and semi-precious stones, rare earth elements and industrial minerals.

 

Since inception, TMC has created or preserved many billions in various
currencies (including rand, dollar, pounds) on behalf of clients. Their
business model is founded on the qualification and quantification of mineral
investment opportunities. TMC assemble teams of expert multi-disciplinary
consultants who collectively craft an integrated business model to evaluate
clients' enterprises. TMC's group of professionals offers knowledge from six
continents but enjoys a particular passion for Africa. In many circumstances,
TMC's imaginative, but always realistic, examination of mineral projects
offers distinctive solutions to the complex alternatives that challenge
investors.

 

TMC also provide bespoke institutional research on the mining industry.

   

The information contained within this announcement is considered by the
Company to constitute inside information as stipulated under the Market Abuse
Regulations (EU) No.596/2014. Upon the publication of this announcement via a
Regulatory Information Service, this inside information will be considered to
be in the public domain. The person responsible for arranging for the release
of this announcement on behalf of the Company is Paul Atherley, Chairman.

 

- ENDS -

 

For further information, please contact:

 

Shareholder/analyst enquiries:

Pensana Plc 

Paul Atherley, Chairman IR@pensana.co.uk 

Tim George, Chief Executive Officer

Rob Kaplan, Chief Financial Officer

 



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