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Rare Earth Minerals Plc Sonora Lithium Project – Pre-Feasibility Study

Rare Earth Minerals Plc (LON:REM; OTCMKTS:REMMY) has today announced that Bacanora Minerals Ltd (LON:BCN) has today published a summary of the Pre-Feasibility Study (“PFS”) for the Sonora Lithium Project (the”Project”) in northern Mexico. The results confirm REM’s belief that the Sonora Lithium Project could represent a significant low cost lithium producer supplying a rapidly growing market.

REM holds an interest in the Project though its 17.19% holding in Bacanora and the joint venture interests of 30% in each of Megalit S.A. de CV and Mexalit S.A. de CV as fully described below. Following the results of the PFS, Bacanora will immediately commence a Feasibility Study with an aim to bring the Project into production, with indicative timetable of the commencement of commissioning in Q4 of 2018. The full news release from Bacanora is shown below.

A technical report on the PFS will be available within forty-five days of the date of this news release.

Highlights:

PFS confirms the Sonora Lithium Project as a strategic asset in the future global lithium market based on:

· Phased production approach: from 17,500 tonnes per year of battery grade lithium carbonate product increasing to 35,000 tonnes per year of battery grade lithium carbonate representing approximately 20% of current global lithium production
· Robust project economics:
o Payback period of 5 years
o Average EBITDA of US$ 134 million per annum
o Pre-tax net present value estimated at US$776 million (based on 8% discount rate)
o Pre-tax internal rate of return estimated at 29%
o Average life of mine (“LOM”) operating cost per tonne (US$/t Li2CO3 net of K2SO4 credits) at US$2,100
· Long-term mine life:
o 20 year mine life with an annual average production capacity of 35,000 of lithium carbonate
o Probable Mineral Reserves of 2.1 million tonnes (“Mt”) of lithium carbonate equivalent (“LCE”)
o Indicated Mineral Resource estimate of 5.0 Mt of LCE and an Inferred Mineral Resource of 3.9 Mt of LCE

 

Key findings of the PFS are shown in table 1

Pre-Feasibility Study Key Indicators

Value

Pre-tax Net Present Value

$776M

Pre-tax IRR (%)

29%

Simple Payback (years)

5

Initial Construction Capital Cost

$240M

Stage 2 Construction Capital Cost

$177M

Average LOM operating costs ($/t Li2CO3)

$2,698

Average operating costs ($/t Li2CO3 net of K2SO4credits)

$2,100

Post-tax NPV (at 8% discount)

$542M

Post-tax IRR (%)

25%

Average annual EBITDA with co-products (US$)

$134M

Average annual Li2CO3 production capacity (Years 1 and 2)

17,500 t

Average annual Li2CO3 production capacity (Years 3 to 20)

35,000 t

Average annual K2SO4 production (Years 3 to 20)

50,000 t

(* All costs are in US dollars and, rounded to nearest $’000)

 

Commenting on the PFS, Andrew Suckling, Chairman of Rare Earth Minerals Plc, said: “We are very pleased with the outcome of the PFS for the Sonora Lithium Project. The results support our long-held view that this Project has the potential to become a highly profitable and significant supplier of battery grade lithium to high growth, technology-based businesses.

With a potential lower quartile production cost and long mine life, the Project represent precisely the type of asset that we believe to have long term competitive advantages in the lithium market. The conservative approach that has been taken in terms of revenue parameters, in my view, represents some potentially substantial upside in the project economics.

We look forward to further updates from the project over the coming year”

 

The Sonora Lithium Project and Details of REM’s ownership:

REM owns a direct interest of 17.19% of Bacanora. The Sonora Lithium Project is comprised of the following lithium properties:

· La Ventana, La Ventana 1, and Megalit concessions, which are 100 per cent. owned by Minera Sonora Borax S.A. de C.V.(“MSB”), a wholly-owned subsidiary of Bacanora; REM, through its direct interest of 17.19% of Bacanora, has an indirect interest in these concessions of 17.19%.

· El Sauz, El Sauz 1, El Sauz 2, Fleur and Fleur 1 concessions, which are held by Mexilit S.A. de C.V. (“Mexilit”). REM has a 30% direct interest in Mexalit through its Joint Venture with Bacanora, and when combined with REM’s direct interest of 17.19% in Bacanora, has a total economic interest in Mexalit of 42.04%.

· The Buenavista, and San Gabriel concessions, which are held by Megalit S.A de C.V (“Megalit”). REM has a 30% direct interest in Megalit through its Joint Venture with Bacanora, and when combined with REM’s direct interest of 17.19% in Bacanora, has a total economic interest in Megalit of 42.04%.

The net present and data in the study is based on the whole of the Sonora project and it does not provide data by each joint venture licence area to show REM’s combined proportionate direct and indirect interest over the joint venture licence areas.

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