Sonora Lithium Project Update

RNS Number : 4527V

Rare Earth Minerals PLC

18 April 2016

 

18 April 2016

Rare Earth Minerals Plc

("Rare Earth Minerals", "REM" or "the Company")

Sonora Lithium Project Update

Rare Earth Minerals Plc (AIM: REM; OTC: REMMY) reports that Bacanora Minerals Ltd ('Bacanora') has provided a detailed update on the Sonora Lithium Project ("the Project") in northern Mexico. The full news release from Bacanora is available at http://web.tmxmoney.com/article.php?newsid=84294447&qm_symbol=BCN.

REM holds an interest in the Project though its 17.19% holding in Bacanora and the joint venture interests of 30% in each of Mexalit S.A. de CV ("Mexalit") and Megalit S.A. de CV ("Megalit") and as fully described below. The Project update, Pre-Feasibility Study, and amended Mineral Resource Estimate do not cover the Megalit joint venture

Highlights:

·     Pre-Feasibility Study ("PFS") and amended Mineral Resource Estimate ("MRE") filed

·     Discussions are ongoing with various offtake partners, banks, debt providers and strategic investors. The focus is on developing a project financing strategy as well as producing further battery grade lithium carbonate samples for distribution to potential partners in Asia, in Q3 this year:

-     Extensive trenching of the deposit undertaken - over 80 tonnes of mineralised material extracted for processing at the pilot plant in Hermosillo and at external facilities

-     There are plans to have offtake and project financing strategies finalised as part of the completion of the Feasibility Study in the first quarter of next year.

·     The Feasibility Study ("FS"), which is fully funded, has commenced with the following activities undertaken:

-     Drilling contractor mobilised to conduct infill reserve drilling - scheduled to start in this quarter and intended for completion in Q3 this year

-     Process commenced to appoint international engineering and technical consultants to undertake the geological resource modelling, metallurgical test work, mine designs and process engineering

-     Process commenced to recruit additional technical personnel with lithium development and operating expertise

·     Amended Mineral Resource Estimate ("MRE") incorporates results from metallurgical test work conducted in the previous quarter which highlighted that a potassium product can be recovered as a by-product

-     Following this test work, SRK Consulting (UK) Limited ("SRK") interpolated grades of potassium ("K") into the block model

-     Amended MRE being reported using a cut-off grade of 1,000 ppm lithium (previously 450 ppm)

-     Amended MRE comprises an Indicated Mineral Resource estimated at 259 Mt averaging 3,200 ppm Li for 4.5 Mt of LCE, in addition to an Inferred Mineral Resource estimated at 160 Mt averaging 3,200 ppm Li for 2.7 Mt of LCE

-     Amended MRE does not impact the attractive economics highlighted in the Pre-Feasibility Study.

Kiran Morzaria, Chief Executive Officer of Rare Earth Minerals, commented:

"Rapid progress continues to be made in advancing the Sonora Project, both regarding preparation for production and in discussions with offtake partners. This progress along with the excellent economics, re-affirm that the Sonora Project's emergence as low cost, market leading lithium asset. The filing of the PFS has also allowed us to identify the significant value to REM and its shareholders of both its indirect holdings in the joint ventures and its direct holding in Bacanora."

Further Information:

The NI-43-101 compliant PFS and amended MRE are available on the Sedar website; http://sedar.com/DisplayProfile.do?lang=EN&issuerType=03&issuerNo=00027876

Amended NI-43-101 Mineral Resource Estimate for Sonora

The amended report for Sonora, which has been prepared in accordance with NI 43-101, is entitled, Amended Mineral Resource Estimate for the Sonora Lithium Project, Mexico, April 2016. The lead author of the amended report is Mr. Martin Pittuck (MSc., C.Eng., FGS, MIMMM) of SRK, who is a "qualified person" within the meaning of NI 43-101 and is independent of the Company.  The amended report has been filed on SEDAR and will also be made available for download on the Company's website.

This report provides an amendment to the Mineral Resource Statement given in REM's announcement dated 3 March 2016 (as the Li cut-off grade has since changed) and supersedes the previous technical report for Sonora that was released and filed in January 2016. This amended report incorporates the results of the metallurgical test work conducted, which also highlighted that a potassium product can be recovered as a by-product from lithium carbonate production, along with updated operating cost estimates in early 2016 (subsequent to the release of the January 2016 MRE).  Following this test work, SRK interpolated grades of potassium into the block model and was requested to produce an amended MRE that includes K results. SRK has not received any further drilling data since the January 2016 MRE. 

Since the 3 March 2016 announcement, SRK has amended the MRE to reflect the economic parameters contained within the PFS, including slightly lower projected lithium prices and increased processing costs.  This has resulted in an amended MRE being reported using a cut-off grade of 1,000 ppm lithium (previously 450 ppm), which is confined to a resource pit shell based on updated reasonable optimisation parameters and lithium selling prices.

The amended MRE comprises an Indicated Mineral Resource estimated at 259 Mt averaging 3,200 ppm Li for 4.5 Mt of LCE, in addition to an Inferred Mineral Resource estimated at 160 Mt averaging 3,200 ppm Li for 2.7 Mt of LCE. Mineral Resources are stated inclusive of Mineral Reserves.

Table 1 SRK Amended Mineral Resource Statement as of 12 April 2016

Classification	Clay Tonnes (Mt)	Clay Grade		Contained Metal
		Li ppm	K %	Kt Li	Kt LCE	Kt K
Indicated	259	3,200	1.4	839	4,463	3,555
Inferred	160	3,200	1.3	515	2,740	2,130

Notes:

1.   Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability. All figures are rounded to reflect the relative accuracy of the estimate and have been used to derive sub-totals, totals, and weighted averages. Such calculations inherently involve a degree of rounding and consequently introduce a margin of error. Where these occur, SRK does not consider them to be material.

2.   The reporting standard adopted for the reporting of the MRE uses the terminology, definitions and guidelines given in the CIM Standards on Mineral Resources and Mineral Reserves (May 2014) as required by NI 43-101 and JORC.

3.   SRK assumes the Sonora Lithium deposit to be amenable to surface mining methods. Using results from initial metallurgical test work, suitable surface mining and processing costs, and LCE forecast price SRK have reported the Mineral Resource at a cut-off 1,000 ppm Li (5,320 ppm Li₂CO₃).

4.   SRK completed a site inspection of the deposit by Mr. Martin Pittuck, MSc, C.Eng, MIMMM, an appropriate "independent qualified person" as such term is defined in NI 43-101.

5.   LCE is the industry standard terminology for, and is equivalent to, Li₂CO₃.  1 ppm Li metal is equivalent to 5.32 ppm LCE / Li₂CO₃.  Use of LCE is to provide data comparable with industry reports and assumes complete conversion of lithium in clays with no recovery or process losses.

The amended Mineral Resource is inclusive of the Probable Reserves, which form the basis of the attractive economics highlighted in the PFS; the Probable Reserves remain unchanged since the 3 March 2016 announcement and are summarized in Table 2:

Table 2: Probable Mineral Reserves: (Cut-off grade of 1,200 ppm)

Classification	Clay Tonnes (Mt)	Li (ppm)	K (%)	Kt LCE
Probable	129.7	3,015	1.28	2,083

REM has a 30% direct interest in the Mexilit in Joint Venture with Bacanora Minerals.  In addition, REM also owns a 17.19% direct interest in Bacanora giving it a 17.19% indirect interest in the Mineral Resources at La Ventana and a 42.02% indirect interest in the Mineral Resources & Mineral Reserves at Mexilit. These percentage interests have been used by REM to calculate its net attributable contained LCE presented in Table 3 & 4.

Table 3: Net attributable Amended Mineral Resource as of 12 April 2016 to REM based on total economic interest.

Classification	Clay Tonnes (Mt)	Clay Grade		Contained Metal
		Li ppm	K %	Kt Li	Kt LCE	Kt K
Indicated	85	3,200	1.4	276	1,474	1,162
Inferred	45	3,200	1.3	146	777	602

Note: All figures are rounded to reflect the relative accuracy of the estimate and have been used to derive sub-totals, totals, and weighted averages. Such calculations inherently involve a degree of rounding and consequently introduce a margin of error. Where these occur, REM does not consider them to be material.

Table 4: Net attributable Probable Mineral Reserves to REM based on total economic interest. (Cut-off grade 0f 1,200 ppm)

Classification	Clay Tonnes (Mt)	Li (ppm)	K (%)	Kt LCE	Kt LCE attributable to REM
Probable	129.7	3,015	1.28	2,083	557

The Sonora Lithium Project and Details of REM's ownership:

REM owns a direct interest of 17.19% of Bacanora. The Sonora Lithium Project is comprised of the following lithium properties:

- La Ventana, La Ventana 1, and Megalit concessions, which are 100 per cent owned by Minera Sonora Borax S.A. de C.V.("MSB"), a wholly-owned subsidiary of Bacanora; REM, through its direct interest of 17.19% of Bacanora, has an indirect interest in these concessions of 17.19%.

- El Sauz, El Sauz 1, El Sauz 2, Fleur and Fleur 1 concessions, which are held by Mexilit S.A. de C.V. ("Mexilit"). REM has a 30% direct interest in Mexalit through its Joint Venture with Bacanora, and when combined with REM's direct interest of 17.19% in Bacanora, has a total economic interest in Mexalit of 42.04%.

- The Buenavista, and San Gabriel concessions, which are held by Megalit S.A de C.V ("Megalit"). REM has a 30% direct interest in Megalit through its Joint Venture with Bacanora, and when combined with REM's direct interest of 17.19% in Bacanora, has a total economic interest in Megalit of 42.04%.

Qualified Person:

Kiran Morzaria B.Eng. (ACSM), MBA, has reviewed and approved the information contained in this announcement. Kiran holds a Bachelor of Engineering (Industrial Geology) from the Camborne School of Mines and an MBA (Finance).

- Ends -

For further information, please contact: 

Rare Earth Minerals plc

Andrew Suckling                                                                                             [phone]

Kiran Morzaria                                                                                            [phone]

WH Ireland Limited (NOMAD & Broker)                                               [phone]

James Joyce

Mark Leonard

Square1 Consulting                                                                                [phone]

David Bick

Brain Alexander

Glossary:

"cut-off grade"	lowest grade of mineralised material considered economic, used in the calculation of mineral resources
"deposit"	coherent geological body such as a mineralised body
"exploration"	method by which ore deposits are evaluated
"grade"	relative quantity or the percentage of ore mineral or metal content in an ore body
"Indicated Mineral Resource" or "Indicated"	is that part of a Mineral Resource for which quantity, grade or quality, densities, shape and physical characteristics are estimated with sufficient confidence to allow the application of Modifying Factors in sufficient detail to support mine planning and evaluation of the economic viability of the deposit. Geological evidence is derived from adequately detailed and reliable exploration, sampling and testing and is sufficient to assume geological and grade or quality continuity between points of observation. An Indicated Mineral Resource has a lower level of confidence than that applying to a Measured Mineral Resource and may only be converted to a Probable Mineral Reserve. Mineralisation may be classified as an Indicated Mineral Resource when the nature, quality, quantity and distribution of data are such as to allow confident interpretation of the geological framework and to reasonably assume the continuity of mineralization. An Indicated Mineral Resource estimate is of sufficient quality to support a Pre-Feasibility Study which can serve as the basis for major development decisions.
"Inferred Mineral Resource" or "Inferred"	is that part of a Mineral Resource for which quantity and grade or quality are estimated on the basis of limited geological evidence and sampling. Geological evidence is sufficient to imply but not verify geological and grade or quality continuity. An Inferred Mineral Resource has a lower level of confidence than that applying to an Indicated Mineral Resource and must not be converted to a Mineral Reserve. It is reasonably expected that the majority of Inferred Mineral Resources could be upgraded to Indicated Mineral Resources with continued exploration. An Inferred Mineral Resource is based on limited information and sampling gathered through appropriate sampling techniques from locations such as outcrops, trenches, pits, workings and drill holes. Inferred Mineral Resources must not be included in the economic analysis, production schedules, or estimated mine life in publicly disclosed Pre-Feasibility or Feasibility Studies, or in the life of mine plans and cash flow models of developed mines.
"Kt"	thousand tonnes
"life of mine"	number of years that an operation is planning to mine and treat ore, taken from the current mine plan.
"lithium"	a soft, silvery-white metallic element of the alkali group, the lightest of all metals, with a chemical symbol Li.
"lithium carbonate"	This is an inorganic compound, the lithium salt of carbonate with the formula Li2CO3. Lithium carbonate is an important industrial chemical. It forms low-melting fluxes with silica and other materials. Glasses derived from lithium carbonate are useful in ovenware. Lithium carbonate is a common ingredient in both low-fire and high-fire ceramic glaze. Its alkaline properties are conducive to changing the state of metal oxide colorants in glaze particularly red iron oxide (Fe2O3). When added to aluminium trifluoride, it forms LiF, which gives a superior electrolyte for the processing of aluminium. It is also used in the manufacture of most lithium-ion battery cathodes, which are made of lithium cobalt oxide.
"lithium carbonate equivalent" or "LCE"	LCE is the industry standard terminology for, and is equivalent to, Li2CO3.  1 ppm Li metal is equivalent to 5.32 ppm LCE/ Li2CO3. Use of LCE is to provide data comparable with industry reports and assumes complete conversion of lithium in clays with no recovery or process losses.
"metallurgical"	Describing the science concerned with the production, purification and properties of metals and their applications
"mine planning"	The main purpose of mine planning is to ensure the enduring sustainability of the mines mining activity whilst achieving economic profitability.  Planning incorporates a coherent set of forecast figures reflecting the key aspects of company activity and desirable and possible directions for development. These forecasts provide a comprehensive framework for establishing the company's major strategic guidelines and the resources required for their implementation. This is what the strategic and operating plan is designed to achieve. Planning is seen as a system of data indicating the future development of the company as envisaged by its senior management.
"mineral reseve" or "reserve"	A Mineral Reserve is the economically mineable part of a Measured or Indicated Mineral Resource demonstrated by at least a Preliminary Feasibility Study. This Study must include adequate information on mining, processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified.  A Mineral Reserve includes diluting materials and allowances for losses that may occur when the material is mined.
"mineral resource" or "resource"	Is a concentration or occurrence of solid material of economic interest in or on the Earth's crust in such form, grade or quality and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, grade or quality, continuity and other geological characteristics of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge, including sampling. Mineral Resources are sub-divided, in order of increasing geological confidence, into Inferred, Indicated and Measured categories. An Inferred Mineral Resource has a lower level of confidence than that applied to an Indicated Mineral Resource. An Indicated Mineral Resource has a higher level of confidence than an Inferred Mineral Resource but has a lower level of confidence than a Measured Mineral Resource.
"mineralisation"	Process of formation and concentration of elements and their chemical compounds within a mass or body of rock
"Mt"	Million tonnes
"Probable Mineral Reserve"	Is the economically mineable part of an Indicated, and in some circumstances a Measured Mineral Resource demonstrated by at least a Preliminary Feasibility Study.   This Study must include adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified.
"Pre Feasibility Study"	Is a comprehensive study of the viability of a mineral project that has advanced to a stage where the mining method, in the case of underground mining, or the pit configuration, in the case of an open pit, has been established, where an effective method of mineral processing has been determined, and includes a financial analysis based on reasonable assumptions of technical, engineering, legal, operating, and economic factors and evaluation of other relevant factors which are sufficient for a Qualified Person, acting reasonably, to determine if all or part of the Mineral Resource may be classified as a Mineral Reserve.
"pit shell"	The pit shell is the outer limit or extremity of the defined area where the mining is to take place. The pit shell establishes the quality, position of the deposit, and determines the extent in three dimensions of the potential mining operation.
"ppm"	parts per million
"Sonora Lithium Project"	The Sonora Lithium Project is comprised of the following lithium properties: La Ventana lithium concession, which is 100 percent owned by Bacanora; El Sauz and Fleur concessions, which are held by Mexilit S.A. de C.V. ("Mexilit"); and the Megalit concession, which is held by Megalit S.A de C.V ("Megalit"). Mexilit and Megalit are owned 70 percent by Bacanora Minerals Ltd and 30 percent by REM.
"recovery"	Proportion of valuable material obtained in the processing of an ore, stated as a percentage of the material recovered compared with the total material present
"tonne"	A metric ton

 Lithium Classification and Conversion Factors:

Lithium grades are normally presented in percentages or parts per million (ppm). Grades of deposits are also expressed as lithium compounds in percentages, for example lithium oxide (Li₂O) content or per cent or lithium carbonate (Li₂CO₃) content or percent. Assuming the lithium content in the deposit is converted to lithium carbonate, using the conversion rates in the table included further below to get an equivalent Li₂CO₃ value in per cent. Use of LCE assumes 100% recovery and no process losses in the extraction of Li₂CO₃ from the deposit.

Lithium Mineral Resources and Reserves are usually presented in tonnes of LCE or Li. The standard conversion factors are set out in the table below:

Conversion Factors for Lithium Compounds and Minerals

Convert from		Convert to Li	Convert to Li2O	Convert to Li2CO3
Lithium	Li	1.000	2.153	5.323
Lithium Oxide	Li2O	0.464	1.000	2.473
Lithium Carbonate	Li2CO3	0.188	0.404	1.000

 

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