On April 17, 2013, Avalon announced the completion of a positive Feasibility Study on the Basal Zone of its Nechalacho property. The Feasibility Study was prepared by SNC-Lavalin Inc. and was the first feasibility-level study to be completed on a major heavy rare earth project outside of China. The results confirmed that the Basal Zone on the Nechalacho property is technically feasible and economically robust as a producer of the heavy rare earth elements.
2013 Feasibility Study Highlights
- The discounted cash flow analysis yielded a 22.5% internal rate of return (“IRR”) on a pre-tax basis and a 19.6% IRR on an after-tax basis, assuming 100% equity financing. The project’s net present value at a 10% discount rate was calculated at $1.351 billion pre-tax and $900 million after-tax.
- Total project construction capital costs were estimated at $1.575 billion, which included a 13% contingency and $122 million in sustaining capital.
- Operating costs were estimated at $264.5 million per year, while revenues were estimated at $645.8 million per year using price assumptions developed in 2011-12. With these assumptions, revenues of $456.5 million from separated rare earth oxides (“REOs”) and $189.3 million from the sale of an enriched zirconium concentrate were calculated.
- Sales of the five critical REOs (neodymium, europium, terbium, dysprosium and yttrium) accounted for over 82% of the separated REO revenues, while lanthanum and cerium sales represented less than 4.5% of total revenues.
- Total Measured and Indicated Mineral Resources would be sufficient to support continued mining operations at Nechalacho for many decades beyond the assumed 20 year mine life, assuming Mineral Resources can be continuously converted to Mineral Reserves during operations.