Quest Rare Minerals’ Revised PEA Reduces Operational, Financial Risks

Quest Rare Minerals Ltd. (TSX:QRM,NYSEMKT:QRM) released a preliminary economic assessment (PEA) based on a revised development plan for its Strange Lake rare earth project. The PEA has reduced market, operational and financial risks, including:

  • construction capital costs of approximately $1.321 billion (excluding the rare earth separation plant)
  • a decrease of approximately $1.23 billion in construction capital
  • savings of $182 million in sustaining capital

As quoted in the press release:

PEA Highlights (Table 1):

  • Total project construction capital costs are $1.631 billion, based on a minimum mine life of 30 years. This total incorporates the cost of a $300 million separation plant (not previously included in the PFS)
  • Cash operating costs average $357 million per year, $232/t milled or $34.25/kg of product
  • The project will generate an average $758 million in revenue per year over the life of mine; 78% from sales of pure heavy rare earth and yttrium (‘HREE + Y’) metal oxides and 22% from pure light rare earth (“LREE”) metal oxides
  • Average annual product outputs of separated rare earth oxides are 4,404 tonnes (t) of HREE + Y and 6,019 t of LREE
  • The PEA shows a robust internal rate of return (IRR) of 20.1% pre-tax and 16.7% post-tax
  • The net present value (‘NPV’) of the project at a 10% discount rate is calculated to be $1.42 billion pre-tax and $788 million post-tax

The PEA further implements several of the process improvements identified in the PFS released by Quest in October 2013 and verified by exhaustive lab testing in January 2014. The development plan outlined in the PEA significantly reduces required capital expenditure, simplifies the process flow sheet, and reduces the project environmental footprint, all of which should enhance the long-term potential viability of the project. Quest remains convinced that this Made-in-Canada project has the potential to provide an important base for establishing a major new North American industrial sector of global importance, and could help to address the market demand for non-Chinese supply of these elements which are critical to industry in the 21st century.

Quest Rare Minerals’ president and CEO, Peter Cashin, said:

I am very pleased with the significant progress we have made since the release of the Strange Lake pre-feasibility study in late 2013. Our technical team under the leadership of Dr. Dirk Naumann has now engineered important efficiency improvements that will ensure not only the project’s long-term potential viability, but make it a more attractive investment opportunity for all shareholders. The rare earth market stakeholders have suggested that Quest should work towards simplifying all aspects of the project scope and we have delivered on this with our PEA. Market demand for non-Chinese supply of these critical industrial materials continues to grow and Quest is poised to ultimately meet that demand.

Click here to read the Quest Rare Minerals Ltd. (TSX:QRM,NYSEMKT:QRM) press release.