MBAC advances high-grade REO deposit

Toronto-based MBAC Fertilizer Corp. (MBC-T, MBCFF-O) has carved out a near-surface and high-grade rare earth oxide deposit that includes niobium and phosphate in the municipality of Araxá in Brazil’s Minas Gerais state and plans to complete a prefeasibility study in the second quarter of 2013 and a bankable feasibility study in early 2014.

In September, the company released a preliminary economic assessment of its Araxá project outlining a mine life of forty years, based on a measured and indicated resource of 6.34 million tonnes grading 5.01% total rare earth oxides (TREO) and inferred resources of 21.94 million tonnes at 3.99% TREO.

The PEA breaks down the operation into three phases. Phase I will run from 2016-2020, Phase II from 2021-2023 and Phase III from 2024 to 2056. Run-of-mine tonnes per year will start at 120,000 tonnes in the first phase, expand to 240,000 tonnes in the second phase, and to 385,000 tonnes in the third phase.

During Phase I, the project is forecast to produce 8,750 tonnes a year of individual rare earth oxides. After the first five years that number will climb to 17,500 tonnes annually.  Niobium oxide will be produced as a by-product. In the first five years, the mine will produce 740 tonnes of niobium oxide a year, which will grow to 1,832 tonnes during Phase III.   

Capital costs are forecast in the range of US$406.5 million for Phase I, with an additional US$214.5 million for expansion required after the fifth year. Cash operating costs are estimated at US$10.50 per kilogram of REO in Phase 1, US$9.60 per kg in Phase II and US$12.20 per kg in Phase III.

At a discount rate of 10%, the PEA estimated an after-tax net present value of US$967 million and an internal rate of return of 30%.

The Araxá resource estimate was based on 67 diamond drill holes or 3,764 metres drilled at a spacing of about 40 metres by 40 metres down to 20 metres by 20 metres in the centre of the deposit. The resource estimate focused on the main oxide mineralization within a flat-lying mineralized domain defined down to a depth of about 60 metres and employed a 1% TREO grade cut-off.

The company says the main REO mineralization is derived from the residual enrichment of a REO-rich protholite, and possibly a carbonatite. Monazite is the principal REO mineral present at Araxá, while apatite is the most common and important phosphate mineral in the Araxá carbonatite.

MBAC has already started laboratory work to examine recovery scenarios for the rare earth oxides and run tests on alkaline digestion, hydrochloric acid leach, nitric acid leach, ammonium chloride fusion and sulphuric leach. So far, acid leach by salt precipitation returned the best recovery averaging 92%, the company said.

In mid-September, the company said it has started to put a pilot plant together to test the acid leaching route. Once that has been completed, MBAC plans to analyze oxide separation using a solvent extraction technology. Pilot plant testing is expected to be finished by the second quarter of next year.

While MBAC has signed a number of confidentiality agreements for possible off-take agreements, most of the companies are waiting to see the results of the pilot plant tests, Steve Burleton, MBAC’s vice president of corporate development said.

In terms of location, Araxá is surrounded by good infrastructure, and is less than 10 km away from Vale’s (VALE-N) Arafertil phosphate mine and processing plant. It is also adjacent to a niobium mine owned by Companhia Brasileira de Metalurgia e Mineracao. (CBMM supplies 85% of the world’s niobium.) The deposit is also a couple of kilometres outside of Araxá, a city of about 100,000 people that caters to the phosphate and niobium mines in the region.

When it comes to financing, Burleton says the company is trying to determine what the best structure will be. “We’re an agricultural input company so this falls a bit outside of our bailiwick,” he concedes. “I don’t see us doing the project ourselves; this is something where we’ll likely be a minority partner or it will be sold later on to maximize value for our shareholders.”

At presstime in Toronto MBAC was trading at $3.24 per share within a 52-week range of $2.50-3.75. The company has 118 million shares outstanding.