Northern Minerals & the Sexiness of Xenotime

As I have noted before, in the film, “The Graduate”, the unworldly character Benjamin (played by Dustin Hoffman) is told at a cocktail party that there is one word that he should know and that word is “plastics”. We are not sure in light of plastic’s progress over the last 40 years whether that would have been the best of tips. However, in the Rare Earth space we have been convinced for some time that the word is “Xenotime” and this is what arouses our interest in Northern Minerals (ASX:NTU), the only Xenotime player of substance in the rapidly depopulating REE space. In respect to Xenotime it has two projects Brown’s Range and John Galt, both in the far northwest of Australia. It is the preponderance of Xenotime that is the key to the Brown’s Range deposit’s massive preponderance of Heavy Rare Earths.

The mineral in question is a REE phosphate mineral, whose major component is yttrium orthophosphate (YPO4). The rare earths dysprosium, erbium, terbium, and ytterbium, and metal elements like thorium and uranium (all replacing yttrium) are the expressive secondary components of xenotime. Xenotime is used chiefly as a source of yttrium and heavy lanthanide metals (dysprosium, ytterbium, erbium, and gadolinium). Occasionally, gemstones are also cut from the finer xenotime crystals.

Prior to Northern Mineral’s discovery at Browns Range, the main occurrences of note of Xenotime were at Hidra (Hitterø), Flekkefjord, Vest-Agder, Norway (the mineral first being described in 1832 from an occurrence at the latter location). Other notable localities include Arendal and Tvedestrand in Norway, in Brazil at Novo Horizonte, São Paulo, Novo Horizonte, Bahia, and Minas Gerais and in Madagascar. In the U.S., California, Colorado, Georgia, North Carolina and New Hampshire have occurrences.

The beauty of Xenotime is the mix of REE in the mineral. The lanthanide content is typical of “yttrium earth” minerals, and runs about two-thirds yttrium, with the remainder being mostly the heavy and medium lanthanides, where the even-numbered lanthanides (such as Gd, Dy, Er, or Yb) each being present at about the 5% level, and the odd-numbered lanthanides (such as Tb, Ho, Tm, Lu) each being present at about the 1% level.

The Browns Range project

This 100%-owned property formerly was part of the Gardiner-Tanami Project (which was the focus when NTU was a uranium explorer), but since 2009 has become a focus for its HREE exploration program. The project consists of four granted exploration licenses, covering an area of 400km2, located adjacent to the WA/Northern Territory border in the Tanami Desert, approximately 150km south-east of Halls Creek. The company also has permit applications for most of the rest of the Brown’s Range Dome in its larger manifestation across the border in the Northern Territory. In December 2011, it signed a JV with Toro Energy for the non-uranium rights over several very large concessions (1,403 sq kms) on the Dome.

browns_range

Source: Northern Minerals

The hydrothermal xenotime mineralisation targets at Browns Range are shown on the map above. They sit on the Western extremities of a geological formation known as the Browns Range Dome, a Paleoproterozoic dome formed by a granitic core.

Exploration Work and the Resource

Xenotime was first identified in the Browns Range area in the 1980s by PNC Exploration while exploring for uranium.  PNC tested one of the larger quartz-xenotime veins (10cm-30cm wide, 15m long) by costeaning and shallow drilling and obtained results up to 16% Yttrium, 0.2% Uranium, 0.5% light REE and 12% HREE.

Since changing tack to the pursuit of Rare Earths, Northern Minerals has conducted a sizeable exploration program at Browns Range in 2011, including a 166-hole RC drilling campaign. To date, four rare earth prospects with xenotime mineralisation have been identified within the project area – Wolverine, Gambit, Area 5 and Area 5 North prospects – all shown on the preceding map. The mineralisation at Browns Range is characterised by a dominance of Heavy Rare Earths (>80% HREE) as well as low levels of Uranium and Thorium.

The drilling in 2011 showed high-grade HREE mineralisation at all four prospects, with significant widths.

Examples of some intersections at the Wolverine prospect included:

  • 33m @ 1.53% TREO (1,470ppm Dy2O3) from 54m depth
  • 41m @ 1.01% TREO (881ppm Dy2O3) from 24m depth
  • 11m @ 1.89% TREO (1,806ppm Dy2O3) from 50m depth

The Browns Range resource is shown below:

NTU_resource

Metallurgy

The metallurgical test work was conducted in 2010, by the Perth-based metallurgical consultants Nagrom, on surface samples. The results from a floatation test have reported an 89.5% recovery of Yttrium (Y2O3). The test work completed to date indicates the ore is amenable to floatation beneficiation techniques, which would represent a considerably lower cost of extraction than most other projects currently being touted around the markets.

Previous metallurgical testing has indicated the mineralisation will be relatively easy to process, and is capable of producing a low cost, high grade concentrate.

Metallurgical beneficiation studies were completed by Nagrom with surface rock chip samples from Wolverine, Gambit and Area 5 North. These have reported a maximum Yttrium recovery of 89.5% and a maximum concentration of 42%

In November of 2011 a bulk sample of three tonnes (comprised of nine composite RC samples) from Brown’s Range was submitted to Nagrom for metallurgical testing, essentially to determine the economic cut-off grade. The nine samples comprise of three samples from each of the main Browns Range prospects – Wolverine, Gambit and Area 5 at cut-off grades of 0.25%, 0.5% and 1%.

Metallurgy work in recent months (to feed through data to the latest DFS) showed a significant improvement  in metal recoveries, following optimisations in the processing flowsheet, particularly the hydrometallurgical plant where pilot testwork improved recoveries from 88% to 93%.

The Definitive Feasibility Study

In early March the DFS hit the wires. The project is based upon a conventional mining operation involving both open-pit and underground mining. As a pleasant change from the industry norm there is a relatively simple processing flowsheet with all infrastructure on site. There is a projected production rate of 279,000 kgs of Dysprosium per annum contained within 3,098,000 kgs of TREOs.

The plan was welcomed as it resulted in an increase in NPV of $106mn to $552mn with an IRR of 34% and a payback period of 3.2 years. Mine life was increased to eleven years.

The one fly in the ointment here is that pre-production capex at $329mn is still chunky in a rather parched financing environment.

The Partner & Funding

Back in mid-February, NTU announced a financing deal with Jien Mining, is an Australian subsidiary of Jilin Jien Nickel Industry Co Ltd., a nickel mining group from China. We had previously encountered this company at the time of its tussle, several years back, with Goldbrook Ventures, a Canadian nickel explorer/developer.

Northern Minerals has signed a binding Memorandum of Understanding with Jien Mining Pty Ltd, for equity funding of up to AUD$49.5 million. NTU claims that the transaction will preserve Northern Minerals’ 100% ownership of the Brown’s Range project and facilitate the completion of detailed engineering design. It will also support the commencement of early works construction activities once final project financing is in place.

Jien Mining’s investment will be made through:

  • a AUD$5mn convertible note facility to provide immediate working capital
  • a placement of fully paid shares and options to Jien Mining.

The convertible note facility is based on the provision of 25 million shares at 20 cents per share. The first tranche of AUD$3mn has been received with the remainder to be paid through two AUD$1mn installments due in March.

Following a due diligence process, to be completed before early June 2015, formalisation of final agreements, FIRB approval and Northern Minerals’ shareholder approval, Jien Mining will be issued 110 million shares at 20 cents (less the 25 million shares at 20 cents subject to the convertible note) raising a further AUD$17mn. In addition, 110 million options with an exercise price of 25 cents and a term of one year to raise a further AUD$27.5mn, if and when the options are exercised.

Jien Mining will also be entitled to two board positons; one at the completion of the share placement, and the other upon exercise of all of the options.

Conclusion

Northern has managed to bag an enthusiastic and deep-pocketed backer which is more than we can say for most other players in the Rare Earth space. With Xenotime as its main mineralisation we can see why the Chinese “get it” and want a piece of the action here.

Capex is still an issue, with the number from the latest Feasibility Study coming in with too many zeros for our liking, but then again I am critical of virtually every capex number I see in the Rare Earth space. If this could be massaged even lower I would be a very happy camper.

Northern Minerals, in doing its deal with Jien, has leapfrogged some of the more torpid players in the space and put itself firmly in contention to parade around in the winner’s circle. There are few others at the moment of which we can say the same.

 

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