Search Minerals Announces Positive Preliminary Economic Assessment of Foxtrot REE Project

May 1, 2012 (Source: CNW) — Search Minerals Inc. (“Search” or the “Company”) (TSXV: SMY) is announcing positive results of the Preliminary Economic Assessment (“PEA”) on its Foxtrot Rare Earth Element Project (“Foxtrot Project”).  The PEA was prepared by Roscoe Postle Associates Inc. (RPA), and demonstrates that the Foxtrot Project has robust economics and excellent potential to become a profitable producer of Rare Earth Elements (“REE”) outside of China.  Highlights of the PEA are summarized below:

Operational Highlights:

  • 4,000 tpd open pit operation
  • Mine Life: 10 years
  • Proposed production of 14.3 Mt, at a grade of 0.58% Total REE, based on the initial mineral resource estimate disclosed in February, 2012
  • Processing by gravity, magnetic separation, and flotation concentration, followed by acid leaching, producing a mixed rare earth carbonate concentrate
  • Average REE recovery of 79%
  • Total Life-of-Mine production of 66 million kg of total REE, or 6,700 tonnes per year
  • Life-of-Mine production includes 10.3 million kg of neodymium oxide (Nd2O3), and 1.4 million kg of dysprosium oxide (Dy2O3)

Financial Highlights:

  • $408 million pre-tax Net Present Value (NPV) (at a 10% discount rate)
  • 29% pre-tax Internal Rate of Return (IRR)
  • $1.1 billion pre-tax, undiscounted cash flow
  • $3.0 billion total net revenue
  • Pre-tax payback period of 2.8 years
  • $469 million initial capital cost
  • $96 per tonne average unit operating cost

Note: The PEA is preliminary in nature. It includes inferred mineral resources, which are considered too speculative geologically to have the economic considerations applied to them that would enable their categorization as mineral reserves. Mineral resources which are not mineral reserves do not have demonstrated economic viability. There is no certainty that the PEA forecast will be realized.

The Foxtrot Project shows significant upside potential.

  • Increased resources are expected from Phase III drilling results, extending mineralization at depth.
  • Test work shows significant quantities of zirconium and niobium in the flotation concentrate – further work may identify a means of extracting them as saleable products.
  • Several other REE-Zr-Y-Nb prospects, with similar geology and mineralization, occur in the Fox Harbour area; two of these, Fox Pond and Foxy Lady, exhibit similar grades of mineralization.

Jim Clucas, President of Search Minerals, stated “This is very encouraging and confirms the potential of Foxtrot to be a producing mine.  We anticipate even more robust economics when the next PEA is released which will be based on the drilling to 450m.”

PEA

Project Location
The Foxtrot Project is located in Labrador, approximately 36 km east southeast of Port Hope Simpson, and approximately 8 km west northwest of St. Lewis. The project is accessible by all-season road, and is near to port and airstrip facilities.

Geology and Mineral Resources
The Fox Harbour property contains three extensive east-west to northwest trending volcanic belts, extending upwards of 30 km in length, and 50 m to 500 m in width. These volcanic belts are interpreted to be bi-modal mafic and felsic volcanics, with intercalated volcaniclastic units.

The Fox Harbour bi-modal felsic and mafic volcanic package is host to REE-Zr-Y-Nb mineralization. The Foxtrot Project is the thickest currently identified occurrence of these volcanic rocks in the Fox Harbour area. Mineralization in the Foxtrot Project is largely allanite, zircon, and fergusonite.

Phase I and Phase II drilling targeted the Mt Belt, a zone of inter-layered bands of mafic and felsic volcanic rocks.  All of the currently discovered mineralization with economic potential lies in the felsic bands of the Mt Belt.

The Central Area of the deposit is still open at depth – the recently-completed Phase III drilling program tested the area.  Results were consistent with previous drilling, and will be incorporated into a mineral resource update.

There is also potential for the delineation of additional resources along strike, both east and west of the Central Area, and in other areas (e.g., Fox Pond and Foxy Lady Prospects) of the property.

On February 13, 2012 Search filed an independent NI 43-101 compliant Technical Report on the Foxtrot Project prepared by RPA. Indicated Mineral Resources are estimated to total 3.41 Mt at 0.89% total REE, and Inferred Mineral Resources are estimated to total 5.85 Mt at 0.80% total REE.  The resource model in the Technical Report was used as the basis for proposed production described in the PEA.

Mining
Mining will be carried out using conventional truck and shovel open pit mining methods.  Life of mine strip ratio averages 7.4:1.  A combination of owner-operated and contractor mining fleets are proposed, to balance mining equipment requirements over the life of the operation.  No pre-stripping is required, as the deposit daylights on surface.

Mining quantities consist of:

  • A short ramp-up to full production in Year 1
  • Production of 1,440,000 tonnes per year, or 4,000 tpd
  • Waste mining averaging 12 Mt per year
  • Contractor assistance with high waste mining requirements in Years 3-6

Production quantities total 14.3 Mt, at a grade of 0.58% total REE.  This includes dilution of the mineralized felsic material with the intercalated mafic material in each block (assumed to be zero grade).  As further work is completed on delineation of felsic vs. mafic interpretation, it is expected that this dilution can be reduced.

Processing and Recovery
The recovery flow sheet involves crushing, grinding and gravity concentration, followed by magnetic separation (to reject iron from the gravity concentrate) and flotation of the gravity tails. The overall recovery to concentrate is in the range of 80% to 85% for every element. 

The combined concentrate will undergo acid baking and water leaching.  Preliminary results indicate approximately 95% dissolution.  The solutions from the water leaching will then be subjected to (1) acid and iron removal, (2) purification of minor elements as necessary, and then (3) recovery of a mixed rare earth carbonate product.

Overall recovery is estimated to average 79%.  Recoveries and production of individual REE are described in the following table: