Ucore's Bokan: Baby bear of REE projects
Just right in terms of size and porridge of heavy rare earths, the Southeast Alaska project passes the 'Goldilocks Principle' test
Last updated 3/31/2013 at Noon
The right size operation, recovering the right rare earth elements in the right location; this is how market experts and policymakers are describing Ucore Rare Metals' Bokan Mountain REE project in Southeast Alaska.
In a March 9 article, "The Rare Earth Space, 'A Culling of the Herd, and the Survivors' (Part 1: North America)," pre-eminent technology metals expert Jack Lifton said Ucore and its Bokan Mountain project has the right elements to survive "the Darwinian nature of the markets."
"As I mentioned some time ago, the Goldilocks Principle will gain new credibility in the REE space, as it's the right-size project with the right products, critical rare earths that will ultimately prevail. Ucore's Bokan is such a project," Lifton wrote.
Aside from being just right in terms of size and its porridge of heavy rare earths such as dysprosium, terbium and yttrium, Lifton notes another big advantage for the future of Bokan Mountain.
"Ucore has yet another ace (in) the hole with the State of Alaska in their corner," noted the co-founder of Technology Metals Research.
Lifton's assertion that Ucore has state backing is exemplified by SJR 8, an Alaska Senate resolution that supports rare earth exploration and development in the 49th state and Bokan Mountain, in particular.
"Several experts have said it is likely that Alaska has one of the most significant rare-earth prospects in North America," said Sen. Lesil McGuire, R-South Anchorage, sponsor of Senate Joint Resolution 8. "If we play our cards right, this could secure our future as the lead supplier of America's rare earth mineral needs."
SJR 8 recognizes the deposits at Bokan Mountain as "rich in the heavy rare earth elements of europium, gadolinium, terbium, dysprosium, thulium, holmium, erbium, ytterbium, lutetium, and yttrium" and "the only known (heavy rare earths) deposits in the world that have deep water access, accessible labor, and prospective power sources."
"There are actually two opportunities developing REEs offer for Alaskans. One is the value of the actual minerals and the other is creating a whole new layer of the economy by refining those minerals here," said Sen. McGuire.
This resolution, which the Senate passed to the House with a 20-0 vote on March 13, is being considered alongside its companion bill, House Joint Resolution 9. Rep. Mia Costello, R-Anchorage, sponsor of HJR 9, has signed on as a House sponsor of SJR 8.
In addition to lending its support to the exploration for and mining of rare earths, SJR 8 urges Alaska permitting agencies to expedite consideration and issuance of permits required for the development of REE projects in the state and urges "the United States Congress to support efforts of the state to develop rare earth elements in the state for the benefit of the economic and national security of the United States."
As state legislators demonstrate resolve to support Ucore from Juneau, Alaska's delegation in Washington D.C. have introduced legislation aimed at paving the way for construction of a road to the Bokan Mountain project.
U.S. Sens. Lisa Murkowski, R-Alaska, and Mark Begich, D-Alaska, Jan. 30 introduced S.181, a bill that calls for building some 75 miles (120 kilometers) of road that connects Bokan Mountain and Heatherdale Resources' Niblack mine project to the roughly 2,500 miles of roads that connect most of the communities on Prince of Wales Island.
Murkowski noted that this bill would permit development of a road that minimizes costs, while also minimizing the effects on surface resources, preventing unnecessary surface disturbances and complying with all environmental laws and regulations.
U.S. Rep. Don Young introduced a companion bill, HR 587, in the House.
"We're highly encouraged by these two initiatives to expedite the development of the Bokan project," said McKenzie. "Alaska legislators have been exceptionally supportive of our development, which promises to bring skilled employment and numerous ancillary economic benefits to an area with tremendous potential. The bills additionally acknowledge and complement Ucore's commitment to complying with existing laws, fostering economic development in the region, and advancing production of materials designated as critical to national security by the U.S. Congress."
Bokan Mountain does not only enjoy support from Juneau and Washington, D.C., but has garnered a similar level of enthusiasm from the governments on Prince of Wales Island where the project is located.
Prince of Wales Community Advisory Council, an organization representing 12 communities on Prince of Wales Island, passed a resolution in support of building a road that would connect the majority of the island's roughly 6,000 residents to the two mine projects at the southern end of Prince of Wales.
Baby bear CAPEX
Ucore's hand is further strengthened by the baby bear-sized capital needed to build a mine and rare earth processing facility at Bokan.
A preliminary economic assessment released by Ucore in November, projects that it will cost US$221 million to get the Southeast Alaska rare earth mine up and running. In addition to building the typical mine infrastructure and facilities needed to produce a concentrate, the upfront capital expenditure includes funds to build a separation plant capable of producing market-ready rare earth oxides and a contingency of US$25 million.
"Bokan's unique features have generated a (capital expenditure) that is among the absolute lowest in the industry, remarkably including full downstream separation facilities that promise to render high purity oxides both economically and on-site. In turn, the Bokan PEA has delivered highly robust (internal rate of return) and (net present value) calculations," Ucore President and CEO Jim McKenzie.
The PEA predicts a pre-tax NPV of US$577 million, at a 10 percent discount rate; an IRR of 43 percent; and a payback period of 2.3 years.
"In the case of Ucore, their recent PEA delivered some metrics that set its Bokan property apart from the crowd not the least of which is an almost absurdly low projection of the CAPEX required to get into production ($221 million) and a product mix and form stated to be valuable enough to generate close to US$100 million per year in pre-tax profit (with a 43 percent IRR). That's a bullish return on limited input capital," Lifton observed.
The technology metals expert also pointed out that the total cost of developing the mine and processing facility at Bokan Mountain is less than the US$267 million state-owned Alaska Industrial Development and Export Agency spent to build and upgrade the 52-mile road and port facility that connects the Red Dog zinc mine in Northwest Alaska to world markets. AIDEA is being paid back through annual fees paid by the owners of the mine.
The projected low capital costs and high return on investment for Bokan Mountain is as much about innovative engineering as it is about heavy rare earth-enriched rocks that set it apart from most other REE projects.
"It's a peralkaline granitic-type deposit, which is just about the extent of the geology you are going to get," Ucore COO Ken Collison quipped during his presentation to a geologist heavy crowd at the 2013 Mineral Exploration Roundup.
Based on 9,550 meters of drilling completed at Bokan, Ucore released an inaugural resource estimate for the Dotson Zone deposit in 2011. At a 0.4 percent total rare earth oxide cut-off grade, this 2,140-meter-long deposit hosts an inferred resource of 5.3 million metric tons averaging 0.65 percent TREO. Some 40 percent of the rare earths in the resource are the higher value heavy rare earth oxides.
Collison said the important geological aspect of the Dotson deposit, from an engineering standpoint, is that the REE mineralization is concentrated in a swarm of steeply dipping veins.
"The key thing is the waste rock in between the veins is absolutely barren," the mining engineer explained.
This stark contrast between REE-enriched veins and barren rock allows for the use of an x-ray sorter to scan the material as it heads up a conveyor and use a blast of high pressure air to reject REE-barren rocks before they drop into the grinder, reducing the mill feed by 50 percent. After initial grinding, half of the remaining material can be skimmed by magnetic separation.
"So we are going to have 1,500 tons per day coming out of the mine, but we are going to have a 750-ton-per-day grinding circuit and then the leaching circuit, which is extensive, is only 375 tons per day," explained Collison.
In addition to the immediate economic advantage of needing to build and power a smaller grinding circuit, the initial rejection of barren granite provides environmental and longer term economic benefits for the project.
Collison said that at a certain point the mine will consume 1,025 tons of tailings per day to backfill the voids, or about 275 tons per day more than the mine is producing.
"So when this mine finishes, we will not have any tailings on surface," the mine engineer beamed.
Ucore has been working with Montana-based IntelliMet LLC to develop a state-of-the-art method for processing the rare earths, referred to in scientific circles as solid-phase extraction.
Considered to be a scientific leap beyond solvent exchange extraction, the method traditionally used to separate REEs, solid-phase extraction utilizes nanotechnology. This less-complicated process is resulting in a smaller and more efficient facility for transforming Bokan Mountain ore into rare earth oxides.
Though cutting edge, the SPE procedure follows a much simpler flow-sheet than traditional REE extraction methods.
In bench-scale tests, IntelliMet treated a representative sample of Bokan ore with nitric acid, generating a solution containing the rare earths and other elements contained in the ore. Before precipitating the REEs out of solution, the Montana-based lab was able to pull out more than 99 percent of the non-REE elements - including iron, uranium and thorium.
Once these "nuisance" elements are removed, the proposed SPE processing facility will use three stages of subclass segregation to result in pure REE oxides precipitated out of the solution.
The PEA anticipates the mill and state-of-the-art processing facility to recover 81.6 percent of the rare earths, averaging 2,250 metric tons of rare earth oxides per year during the first five years of full production; including an annual output of 95 metric tons of dysprosium oxide, 14 metric tons of terbium oxide, and 515 metric tons of yttrium oxide.
Target: 2016 production
Lifton said the annual dysprosium output would supply nearly half of the current automotive requirements in the United States and about 10 times the need of the U.S. Department of Defense.
In October, DoD entered into a contract with Ucore to conduct a mineralogical and metallurgical study aimed at determining whether a mine and processing facility at Bokan Mountain could supply the U.S. Military with a domestic source of the heavy rare earths.
"Remarkably, the PEA supports a very straight-forward mine development plan in combination with a near-term production horizon at Bokan," said McKenzie. "What's more, this affordable, high-return facility will generate product that the US critically requires to sustain competitiveness in multiple high growth fields, including high tech, renewable energy, medical science and defense systems."
Ucore hopes the broad support, positive economics and relatively simple development plan will result in a short runway to production at Bokan Mountain. With permitting and feasibility level studies beginning this year, the company plans to have detailed engineering studies completed in 2014 and a construction start by 2015. If this schedule holds, Ucore has a target of 2016 to begin providing the United States with heavy rare earths from the Southeast Alaska deposit.
"Every so often, a low cost, right-size facility with a resilient high-demand product presents itself in the mining sector. Bokan is such a facility," touted McKenzie.