PENSANA Plc
25 May 2022
THIS ANNOUNCEMENT
CONTAINS INSIDE INFORMATION
Pensana Plc
("Pensana" or the
"Company")
Completion of FEED
and Value Engineering Study
Pensana Plc (LSE: PRE) has completed a Front End Engineering
Design (FEED) and Value Engineering Study into establishing a
UK-based world-class, independent and sustainable supply of the
magnet metal rare earths vital for the electric vehicle, offshore
wind turbine and other strategic industries.
Highlights
- Completion of FEED and Value Engineering Study for rare earth
separation hub at Saltend Chemicals Park and the Longonjo
Operations.
- Study demonstrates sustainable operations with strong economics
based on the most recent independent base case NdPr oxide price
forecasts:
- Generates an unleveraged post-tax NPV8% of US$3.5 billion
- Average annual EBITDA first five years steady state production
US$630 million
- IRR of 71%
- Payback of 1.5 years
- Initial capital expenditure of US$494
million
- Study prepared by leading technical consultants WOOD, SRK,
Snowden Mining Industry Consultants and Paradigm Project
Management.
Pensana Chairman, Paul Atherley commented:
“Completion of this study is another
important step for Pensana in its plans to establish an independent
and sustainable rare earth processing hub in the UK. The strong
fundamentals and robust economics provide a solid platform for the
financing and development of the project.
The growing concerns over supply
chain resilience and the burgeoning demand for magnet metals from
the electric vehicle and offshore wind sectors is reflected in the
growing customer demand for our products.”
The study outlines the plans to establish the world’s first
independent and sustainable magnet metal rare earth separation hub
at the Saltend Chemicals Park in the Humber Freeport, UK, treating
material sourced from the Longonjo Operations in Angola and third-party feedstock from a
variety of other sources.
Saltend is targeting production of 12,500 tonnes per annum of
separated rare earths including 4,500 – 5,000 tonnes of neodymium
and praseodymium (NdPr) oxides, representing around 5% of the
projected world demand in 2025.
The study has been prepared by Wood Plc, SRK Consulting, Snowden
Mining Industry Consultants (Pty) Limited and Paradigm Project
Management (Pty) Ltd.
Financial and Production Summary
The key material assumptions and outcomes of the results of the
study are set out below.
|
Study |
Unit |
Production
Assumptions |
|
|
Life of Mine (based on
Measured and Indicated category MRE) |
20 |
years |
Average grade,
TREO1 (Year 1-5) |
3.72 |
% |
Average grade,
TREO1 (Year 6-20) |
2.18 |
% |
Average grade,
NdPr2 (Year 1-5) |
0.78 |
% |
Average grade,
NdPr2 (Year 6-20) |
0.48 |
% |
Average strip ratio
(LOM) |
0.29 |
waste:feed |
Design ROM
throughput |
1.5 |
mtpadry |
Design concentrator
production |
107,000 |
tpadry |
Design MRES Refinery
production |
41,100 |
tpadry |
Design Saltend
Refinery capacity |
46,600 |
tpadry |
Annual Production
of Rare Earth Oxides (TREO) |
12,500 |
tpa |
Annual Production
NdPr Oxides3 (included in TREO) |
4,500 –
5,000 |
tpa |
Average concentrator
recovery (NdPr) |
45 |
% |
Average MRES recovery
(NdPr) |
72 |
% |
Average SX recovery
(NdPr) |
92 |
% |
Operating
Costs4 |
|
|
Average annual
operating cost |
199 |
US$ million |
Average operating
(total rare earth oxide) |
16 |
US$/kg |
Capital
Costs |
|
|
Saltend Refinery |
195 |
US$ million |
Longonjo Mine
Infrastructure |
49 |
US$ million |
Longonjo Concentrator
Plant |
123 |
US$ million |
Longonjo MRES
Refinery |
127 |
US$ million |
Total Capital
Pre-production |
494 |
US$ million |
Average annual
sustaining capital (year 1 - 5) |
7 |
US$ million |
Average annual
sustaining capital (from year 6) |
16 |
US$ million |
Financial
Metrics5 |
|
|
Revenue6 (average p.a. based on first five years
steady state production) |
976 |
US$ million |
EBITDA6 (average p.a. based on first five years
steady state production) |
630 |
US$ million |
NPV8
6 (un-leveraged, post-tax) |
3.5 |
US$ billion |
IRR |
71 |
% |
Payback from first
production |
1.5 |
years |
The study estimates have been prepared by Wood Plc in
conjunction with Paradigm Project Management (Pty) Ltd under the
review of Professional Cost Consultants (PCC).
All costs are estimated in United
States Dollars and are considered Class 3 as defined in the
American Association of Cost Engineers document 18R-97.
The key fiscal terms are:
- 2% royalty on revenue;
- 20% national tax and 5% municipal tax following an initial
two-year tax holiday;
- Custom duties exemption on imported mining and processing
equipment;
- Full 5-year capital repayment allowance;
- Dividend tax exemption for 3 years.
The Longonjo mining licence is renewable for a period up to 35
years and has the same basis as the internationally
accepted oil and gas contracts through which the country has
successfully financed its main revenue industry.
Production assumptions: 1st 10
years:
|
Year: |
1 |
2 |
3 |
4 |
5 |
Tonnes treated
(Longonjo) |
Mt |
1.0 |
1.5 |
1.5 |
1.5 |
1.5 |
TREO grade |
% |
3.20 |
4.67 |
4.09 |
3.45 |
3.20 |
NdPr grade |
% |
0.70 |
0.95 |
0.85 |
0.73 |
0.68 |
Concentrator recovery
(NdPr) |
% |
45 |
45 |
45 |
45 |
45 |
MRES recovery
(NdPr) |
% |
72 |
72 |
72 |
72 |
72 |
MRES tonnes produced
(Longonjo) |
Kt |
21 |
41 |
37 |
32 |
30 |
Saltend design
capacity |
Kt |
46.6 |
46.6 |
46.6 |
46.6 |
46.6 |
3rd party MRES
feed |
Kt |
1 -
3 |
2 -
6 |
6 -
10 |
11 -
16 |
13 -
18 |
Saltend SX recovery
(NdPr) |
% |
92 |
92 |
92 |
92 |
92 |
NdPr oxide
produced |
Kt |
2.30 |
4.75 |
4.75 |
4.75 |
4.75 |
|
Year: |
6 |
7 |
8 |
9 |
10 |
Tonnes treated
(Longonjo) |
Mt |
1.5 |
1.5 |
1.5 |
1.5 |
1.5 |
TREO grade |
% |
3.16 |
2.88 |
2.97 |
2.62 |
2.60 |
NdPr grade |
% |
0.69 |
0.65 |
0.62 |
0.57 |
0.58 |
Concentrator recovery
(NdPr) |
% |
45 |
45 |
45 |
45 |
45 |
MRES recovery
(NdPr) |
% |
72 |
72 |
72 |
72 |
72 |
MRES tonnes produced
(Longonjo) |
Kt |
30 |
28 |
27 |
25 |
25 |
Saltend design
capacity |
Kt |
46.6 |
46.6 |
46.6 |
46.6 |
46.6 |
3rd party MRES
feed |
Kt |
13 -
17 |
15 -
19 |
16 -
20 |
18 -
22 |
18 -
22 |
Saltend SX recovery
(NdPr) |
% |
92 |
92 |
92 |
92 |
92 |
NdPr oxide
produced |
Kt |
4.75 |
4.75 |
4.75 |
4.75 |
4.75 |
Notes:
1. TREO =
total rare earth oxides, the sum of La2O3, CeO2, Pr6O11, Nd2O3,
Sm2O3, Eu2O3, Gd2O3, Tb4O7, Dy2O3, Ho2O3, Er2O3, Tm2O3, Yb2O3,
Lu2O3, Y2O3
2. NdPr =
Neodymium + praseodymium oxide and is included within TREO (NdPr
OXIDE is expected to represent approximately 94% of total
revenue)
3. Targeted
annual production assumes sourcing third party MRES / MREC feed to
be processed at Saltend as an alternative to ramping Longonjo up to
2 Mtpa
4. Excludes
the purchase cost of 3rd party feedstock. Total cost of
US$200 million per annum is split
US$135 million for Longonjo and
$65 million for Saltend.
5. Assumes
third party feed to be purchased at same cost per tonnes of MRES
when compared to Longonjo.
6. Management
estimates, inclusive of Angolan and UK operations, are based on
underlying independent studies undertaken by:
• SRK Consulting:
Mineral resource estimates
• Snowden Mining
Industry Consultants (Pty) Limited: Mine plan schedule and pit
optimisation
• Wood plc:
Longonjo Operations and Saltend technical engineering and design;
CAPEX and OPEX cost estimates; supervision of metallurgical
testwork and pilot plant programmes
• Paradigm Project
Management (Pty) Ltd: Longonjo Mine site infrastructure and bulk
services technical engineering, design and cost estimates
• HCV Africa:
Environmental and Social Impact Assessment, Environmental
Management Programme, Relocation Action Plan, and hydrology
• Grupo Simples:
Angolan Environmental and Social Impact Assessment
• Adamas
Intelligence: Market Forecasts
7. Net Present Value is
calculated at an operational level (pre-financing) and is
anticipated to be a blend of equity and long-term debt financing.
Revenue estimates are based on NdPr oxide prices as per Adamas
Intelligence base forecast (Q2 2022). NdPr oxide prices starting at
$153/kg in 2022, escalating at CAGR
of 3.7% p.a. to 2035, flat real thereafter.
Establishing the World’s First
Independent and Sustainable Rare Earth Oxide Separation Facility at
the Saltend Chemicals Park in Humber, UK
The Saltend Refinery will be the first major new rare earth
concentrate facility to be established in over a decade once
commissioned and would be one of only three major producers located
outside China when it comes into
full production in 2024.
Benefitting from Humber’s Freeport status, the Saltend Refinery will be
a major step in establishing a magnet metal supply chain outside
China and has the potential to
bring high-value manufacturing jobs back to the UK. The
US$195 million facility will create
over 150 permanent high value jobs, with over 500 jobs during the
construction phase and an estimated 750 indirect jobs created as a
consequence of the investment.
Saltend is set to become one of the world’s largest rare earth
processing hubs, eventually importing sustainably sourced feedstock
from around the globe, and processing it into magnet metal and
other rare earth products largely for export to customers in
South East Asia, Europe and the US, as companies look to
reorientate their supply chains in light of recent geopolitical
events.
The Saltend Refinery will make use of the existing Saltend
Chemicals Plant infrastructure with the utilities and maintenance
skills provided by the pxGroup as its owner and operator.
The high value manufacturing process involves separating and
purifying the various rare earth metals. This is accomplished by
dissolving the mixed rare earth sulphate received from Longonjo and
other sources treating the resulting solution through several
chemical dissolution and solvent extraction processes before
precipitating the separated elements back into a purified solid
state for sale.
Four products are to be separated, NdPr oxide, Lanthanum
carbonate, Cerium concentrate, and the mid and heavy rare earth
elements including Terbium, Dysprosium, Samarium, Europium, and
Gadolinium carbonates.
The Saltend Refinery is designed in a manner to easily allow for
an increase in capacity, especially in the NdPr separation process
and to allow for expansion into separation of the heavy rare earths
to cater for mixed rare earth carbonates sourced from ionic clay
deposits.
Ethically Sourced Rare Earths from the
State-of-the-Art Longonjo Operations in Angola
Pensana will establish the Longonjo Operations in Angola to supply the Saltend Refinery. The
free dig, at surface, weathered carbonatite resources will be mined
and treated through a flotation concentration plant followed by
further hydrometallurgical beneficiation to produce a high-grade
mixed rare earth sulphate (MRES) in the Mixed Rare Earth Sulphate
Refinery.
The Longonjo Operations are adjacent to the fully recommissioned
Caminho de Ferro de Benguela railway line, which links directly to
the Atlantic deep-water port of Lobito and will use very low-cost
hydro-electric power from the Angolan National grid system,
recently contracted at 2 cents per
KWh for 10 years.
The Longonjo Operations will treat 1.5 million tonnes per annum
for a period of 20 years, with the material being sourced from
Measured (45%) and Indicated (55%) Mineral Resources, producing
approximately 40,000 tonnes per annum of MRES for export to the
Saltend Refinery.
The Longonjo design includes the open pit development,
concentrator and MRES Refinery plants, tailings storage facility
(designed to meet the requirements of the Global Industry Standard
on Tailings Management), process water supply, hydro-electric bulk
power supply, mine infrastructure, workshops, offices,
accommodation village, recreational facilities, and other
associated port and rail side infrastructure.
The operations will represent a major investment in the Angolan
mining sector supporting the Government’s policy to diversify the
economy away from the dominant oil and gas and diamond industries
as well as providing employment in an under-developed region.
In September 2020, a substantial
upgrade to the Longonjo Mineral Resource estimate was announced.
International mining industry consultants SRK Consulting reported
an upgraded Measured, Indicated and Inferred Mineral Resource
estimate of 313 million tonnes at 1.43% REO including 0.32% NdPr
for 4,470,000 tonnes of REO including 990,000 tonnes of NdPr making
it one the world’s largest undeveloped rare earth deposits.
Mineral Resource estimate
category |
Tonnes
(million) |
REO grade
(%) |
NdPr grade
(%) |
Contained REO
(Tonnes) |
Contained NdPr
(Tonnes) |
Measured |
26 |
2.58 |
0.55 |
664,000 |
141,000 |
Indicated |
165 |
1.51 |
0.33 |
2,490,000 |
536,000 |
Inferred |
123 |
1.08 |
0.25 |
1,320,000 |
313,000 |
Total: |
313 |
1.43 |
0.32 |
4,470,000 |
990,000 |
Table 1: Summary of Longonjo Mineral Resource Estimate, at 0.1%
NdPr lower grade cut.
REO includes NdPr. Figures may not sum due to rounding.
Rapid Route to Production
The overall Development Schedule provides 14 months for main
construction and six months for commissioning and ramp-up to full
production in mid-2024.
With a view to accelerating the Project execution phase, various
activities have been initiated to mitigate the post-Covid supply
chain disruptions, material price increases and other inflationary
pressures including:
- Over 70% of the equipment packages for both Saltend and
Longonjo have been tendered and priced externally including all of
the Tier 1, 2 and 3 packages.
- The EPCM contractual arrangements for Saltend and Longonjo are
currently being finalised. Key project execution personnel have
been identified and retained for both sites to enable a seamless
transition from FEED.
The Saltend facility will be commissioned on third party
feedstock ahead of feeding the plant with high grade MRES when
operations at Longonjo come online.
Should there be delays, Saltend will continue to treat third
party feedstock until Longonjo comes online.
Design, costing, and contractor selection for the Longonjo Mine
site infrastructure, along with the provision of bulk services,
have been completed and ready to be mobilised.
Modularisation (by ADP in Cape
Town, a company with 25 years of experience in Angola modular processing plants) of the
Longonjo plant to optimise the site construction crew size and do
pre-commissioning tests before despatch to site.
Strong Demand Growth from Electric
Vehicles and Offshore Wind Leading to Shortages Equivalent to 15
Times Saltend’s Annual Production By 2035
The following are extracts from the recent “Adamas Intelligence
– Rare Earth Market Outlook to 2035”:
- Adamas Intelligence (an independent research and advisory
company and leader in strategic metals and minerals
sector) forecasts that global demand for NdFeB magnets will
increase at a CAGR of 8.6%, bolstered by double-digit growth from
electric vehicle and wind power sectors. This will translate to
comparable demand growth for the rare earth elements (i.e.,
neodymium, praseodymium, dysprosium and terbium).
- With total magnet rare earth oxide demand forecasted to
increase at a CAGR of 8.3% and prices projected to increase at
CAGRs of 3.2% to 3.7% over the same period, Adamas Intelligence
forecasts that the value of global magnet rare earth oxide
consumption will triple by 2035, from US $15.1 billion forecast for 2022 to US
$46.2 billion by 2035.
- Constrained by a lack of new primary and secondary supply
sources coming to market from 2022 onward, coupled with the
inability of existing producers to increase output steadily at the
rate of demand growth, Adamas forecasts that global shortages of
neodymium, praseodymium and didymium oxide (or oxide equivalents)
will collectively rise to 68,000 tonnes by 2035—an amount roughly
equal to China’s total 2021 production.
The processing of rare earths is currently limited to a small
number of Chinese companies, which control nearly 90% of the global
market. The market for sustainably sourced concentrates is expected
to grow as the magnet suppliers come under pressure from their
international automotive customers to diversify away from
environmentally damaging sources.
When it comes into production in 2024 Saltend will become one of
three significant rare earth producers outside China. Lynas Corporation of Australia, (ASX: LYC, market capitalisation:
US$6.1 billion) currently the world’s
largest non-Chinese producer, last year produced around
5,461 tonnes of NdPr oxides from its facility in Malaysia. MP Materials (NYSE: MP, market
capitalisation: US$7.3 billion) is
planning to produce approximately 6,000 tonnes of NdPr oxides from
2024.
Long-Term Production Profile from
Longonjo and Third-Party Feedstock
The Longonjo Operations life may have the potential to be
extended beyond the current 20-year plan by the exposure of the
underlying un-weathered carbonatite material as mining progresses.
Subject to favourable metallurgical studies, this mineralisation
has the potential to add a further dimension to the operations and
extend the life of mine significantly.
Pensana is in active discussion with a number of potential third
party feedstock suppliers including existing producers and mines
that are either in construction or planning to be developed in the
near-term. Pensana will offer an attractive alternative to selling
to Chinese processors.
Marketing and Offtake
The Company is in discussions for ~50% of Saltend’s capacity of
NdPr oxides to supply directly to an Asian magnet manufacturer. In
addition, the Company has developed a marketing agreement with a
major Asian trading house to market 30% of the production capacity
within Asia to secure direct
offtake agreements with customers.
The Company has been in talks with most of the major automotive
original equipment manufacturers (OEMs) within Europe and the US who are seeking to secure a
sustainable source of material independent from China and will update the market on these
developments in due course.
Within Europe, there has been a
transition towards OEMs of both electric vehicles and offshore wind
purchasing rare earth materials directly to supply the magnet
manufacturers in order to secure supply of these critical
materials. Pensana has been approached by the offshore wind
industry to secure 500 tonnes per annum of NdPr oxide from 2024 in
order to meet the increased demand of the global wind energy
market.
In addition, due to challenges securing the supply of Cerium and
Lanthanum products from China, the
European customer base has approached Pensana to offer an
alternative supply from the Saltend facility. Furthermore, a UK
based manufacturer has shown interest in 1,000 tonnes per annum of
Cerium carbonate to be applied in the catalyst and water treatment
industries.
It is anticipated that this growing interest in the products
planned to be produced from Saltend will be translated into formal
offtake agreements over the forthcoming weeks and months.
Study Underway for Heavy Rare Earth
Separation
Heavy rare earths Dysprosium (Dy) and Terbium (Tb) are critical
for high technology magnets required for automotive industry.
The Company has initiated a design and cost estimate to produce
the first separated Dy and Tb independently of China and is actively looking to accelerate
this project due to the strong interest from the Japanese
market.
Moving further down the supply chain within the EU region offers
a competitive advantage for magnet manufacturers who are
investigating establishing magnet production in the EU, further
lowering the carbon footprint generated by transporting volumes of
material to and from Asia.
Positive climate impact
Increasing the supply of rare earths is essential to support the
global drive towards net zero.
Pensana has consciously embedded climate mitigation and
adaptation to climate change in its strategy and business
operations.
The Company has become a partner of the Taskforce for
Climate-related Financial Disclosure (TCFD) and will disclose
against the recommendations, including highlighting risks and
opportunities from climate change, with effect from its 2021-2022
reporting cycle.
Pensana will develop and annually report on a low greenhouse gas
emission (GHG) supply chain (scopes 1, 2 and 3) and will target
continual reduction of GHG emissions aligned to scientific
expectations to support the global drive towards net zero GHG
emissions.
This will ensure that developed products meet the requirements
of the EU taxonomy for sustainable activities for the manufacture
of low carbon technologies.
Commitment to low greenhouse gas emissions was considered from
the outset, and was a key consideration with initial planning of
the Longonjo and Saltend operations, supporting infrastructure and
across the value chain.
Positive Environmental, Social and Governance
Pensana takes its risks and opportunities from ESG seriously.
The business has an ESG sub-committee chaired by a non-executive
director and the CEO is responsible for the delivery of ESG related
targets. Additionally, the business has committed to developing
digital traceability for Saltend feedstock which will be traceable
from source to end use to meet the demand from customers to know
the source and sustainability credentials of their raw
materials.
The information contained within this
announcement is considered by the Company to constitute inside
information as stipulated under the Market Abuse Regulations (EU)
No.596/2014. Upon the publication of this announcement via a
Regulatory Information Service, this inside information will be
considered to be in the public domain. The person responsible for
arranging for the release of this announcement on behalf of the
Company is Paul Atherley,
Chairman.
-ENDS-
For further information, please
contact:
Shareholder/analyst enquiries:
Pensana
Plc
Paul Atherley,
Chairman
IR@pensana.co.uk
Tim George, Chief Executive
Officer
Rob Kaplan, Chief Financial
Officer
Virginia Skroski, Head of
Investor Relations & Communications
Media enquiries:
Finsbury Glover Herring:
Gordon Simpson / Richard
Crowley
Pensana-LON@finsbury.com
The information contained within this announcement is considered
by the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No.596/2014. Upon the publication
of this announcement via a Regulatory Information Service, this
inside information will be considered to be in the public domain.
The person responsible for arranging for the release of this
announcement on behalf of the Company is Paul Atherley (Chairman).
About Pensana Plc
The electrification of motive power is by far the most important
part of the energy transition and one of the biggest energy
transitions in history. Magnet metal rare earths are central to the
transition away from internal combustion engines and critical to
electric vehicles and offshore wind turbines.
Pensana plans to establish Saltend as an independent and
sustainable processing hub supplying the key magnet metal oxides to
a market which is currently dominated by China. The US$195
million Saltend facility is being designed to produce 12,500
tonnes per annum of rare earth oxides, of which 4,500 – 5,000
tonnes will be neodymium and praseodymium (NdPr), representing over
5% of the world market in 2025.
Pensana’s plug and play facility is located within the world
class Saltend Chemicals Park, a cluster of leading chemicals and
renewable energy businesses in the Humber Freeport and will create
over 500 jobs during construction and over 125 direct jobs once in
production.
It will be the first major separation facility to be established
in over a decade and will become one of only three major producers
located outside China.
Pensana is aiming to establish Saltend as an attractive
alternative for mining companies who may otherwise be limited to
selling their products to China,
having designed the facility to be easily adapted to cater for a
range of rare earth feedstocks.
www.pensana.co.uk