Avalon Rare Metals (AVL-T, AVL-X) has added significantly to the indicated and inferred resources at its Nechalacho rare earth elements (REE) deposit in the Northwest Territories after a summer of drilling.
The resource update confirms the possibility of high-grade early mining while also providing future growth potential for the project.
The resource on the Basal zone now stands at 57.49 million tonnes grading 1.56% total rare earth oxides (TREO) with the more valuable heavy rare earth oxides (HREO) constituting 20.72%, using a base case $260 net metallurgical return (NMR) cutoff. It was only last September that the company updated its indicated resource on the zone to 20.45 million tonnes grading 1.75% TREO with 23% HREO.
Avalon highlights that using a much higher $600 NMR cutoff, the indicated resource stands at 14.67 million tonnes of 2.19% TREO and 24.68% HREO. The resource size is in line with what it factored into the prefeasibility study using a $260 NMR cutoff, but the TREO grade is 20% higher and there is a 35% higher HREO content.
The company reports that these latest findings confirm that the Basal zone has high-grade sub-zones that are suitable for selective high-grade mining in early years of production. Based on a 2,000-tonne-per-day production rate that Avalon used in its prefeasibility study, the higher-grade resource could support a 20-year mine life.
The combined resource of the Upper and Basal zones now stands at 226.88 million inferred tonnes of 1.3% TREO and 14.33% HREO, up from 182.56 million inferred tonnes of 1.4% TREO with 15% HREO.
The company has already started its next drill program, with one rig producing HQ-sized core and the other producing larger PQ core. Avalon is drilling the PQ core to use in an upcoming metallurgical pilot plant program. To gather the necessary 30 tonnes of ore from the Basal zone, the company will need to drill an estimated 29,000 metres of definition drilling.
The Nechalacho deposit is near Thor Lake in the Northwest Territories and is considered the most advanced rare-earth project in Canada, and the largest defined resource outside of China.
The company continues to advance the project with environmental, metallurgical, and permitting work underway and a feasibility study expected next year. As of Jan. 12, the company still had $38 million in cash from an October 2010 financing to cover the cost of the feasibility study, and no debt. Production start up is targeted for 2015.
Along with Nechalacho, the company has four other rare-earth projects in Canada.
Avalon’s share price was up 19¢ or 3.3% to close at $5.93 on 1.2 million shares traded. The company has a 52-week trading range between $1.89 and $8.14, with 92.6 million shares outstanding.
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