Greenland Minerals and Energy : Kvanefjeld Feasibility Study Update: Conservative Assumptions, Robust Metrics, High‐Value Rare Earth and Uranium Project

Microsoft Word - Feasibility Study Update April 2016

Company Announcement 6thApril, 2016

Kvanefjeld Feasibility Study Update: Conservative Assumptions, Robust Metrics, High‐Value Rare Earth and Uranium Project

Greenland Minerals and Energy Limited ('GMEL' or 'the Company') has completed an update to its Kvanefjeld Project Feasibility Study (FS), released May 25, 2015. The study update incorporates several modifications to the Kvanefjeld project ('the Project") which significantly improve the Project's financial outcomes. The study update utilises lower pricing assumptions and a higher discount rate than those used previously, in order to more accurately reflect prevailing economic conditions. The study update reiterates the clear potential to develop Kvanefjeld as a stable, long‐ life, low cost producer of critical rare earths and uranium.

Highlights of the update:

• Following pilot plant operations, recoveries and production are higher

  
  

• Capital and operating costs are down; GMEL's capital cost now US $832M

  
  

• Project NPV has increased to $1.59B (post tax)

  
  

• Project IRR has increased to 43.4%

  
  

• Average annual free cash flow of US $376M

  
  

• Cumulative free cash flow of US $8.88B

  
  

• Third party infrastructure financing initiatives are progressing

  
  

• Major progress by Greenland Government on uranium regulation demonstrates a supportive and progressive political backdrop

GMEL's Managing Director John Mair:

'Since closing out the Feasibility Study we have made some material technical improvements to the Project that have allowed us to update Kvanefjeld's economic metrics. The substantial improvements to the Project's NPV and IRR are outstanding, particularly given that they are based on more conservative pricing assumptions and an increased discount rate.

All rare earth prices, other than prices for the four "magnet metals" for which the demand outlook is strong, have been reforecast at current spot levels. Our forecast for uranium oxide has also been reduced to reflect the market impact of the slow reactor re‐starts in Japan.

Overall, the results demonstrate the economic advantage of the Project's unique, efficient metallurgy and the advantage of multiple projected revenue streams.

PERTH: Unit 6, 100 Railway Road, Subiaco Western Australia 6008POSTAL: PO Box 2006, Subiaco WA 6904 Telephone: [phone] Facsimile: [phone]

GREENLAND: PO Box 156, Narsaq, Greenland 3921

WEB:www.ggg.glEMAIL:[e-mail] ABN: 85 118 463 004

We have had excellent outcomes from pilot plant operations conducted as part of the European Union funded EURARE program. The piloting has demonstrated that significantly improved rare earth leach extractions can be achieved.

We have also started to develop infrastructure funding concepts that will significantly benefit the Project.

In depth reviews of the mining license application for Kvanefjeld are progressing, with feedback on a number of key components having been received. We look forward to providing further updates on progress of the overall review in the coming weeks.'

Background

During 2015, the key focus for GMEL was the completion of a mining license ('ML') application for the Kvanefjeld Project. In Greenland, an ML application must include a comprehensive feasibility study and environmental and social impact assessments. The scopes of both of the impact assessments are only settled once the scope of the feasibility study has been determined.

GMEL settled the scope of its feasibility study in 2014 and completed the study in May, 2015, which allowed for the environmental and social impact assessments to be successfully completed in Q4 2015. The ML application was then lodged with the Greenland Government for formal review

Having finalised the scope for the FS, GMEL continued to investigate opportunities to enhance the Project and also conducted pilot plant operations to evaluate continuous metallurgical performance at large scale.

A number of fundamental enhancements to the Project were identified through these steps and these have now been incorporated into the Company's Project valuation.

Results

The combined financial impact of the Project enhancements developed in 2015, as compared to the results of the Company's FS, can be summarised as follows:

1. The Project's net present value (NPV) has increased from $1.36 to $1.59B

2. The Project's internal rate of return (IRR) has increased from 21.8% to 43.4%

3. GMEL's project finacing requirement has been reduced to$832M

The table below summarises the impact on Project financial metrics of 2015's enhancements.

Table 1. A summary of the key financial metrics for the Kvanefjeld Feasibility Study Update (2016), with comparisons to those from the Feasibility Study, released May, 2015.
FINANCIAL METRICS	2015	2016
GMEL project financing requirements	US$M	1,361.1	831.90
Net Present Value (NPV)	US$M	1,399.80	1,592.98
Discount Rate	%	8	10
Internal Rate of Return (IRR)	%	21.8	43.4
Cumulative free cash flow**	US$M	7,177.10	8,879.10
Payback period	Years	6	5
REVENUE ‐ ANNUAL AVERAGE
Total	US$M	755.1	710.9
Uranium	US$M	73.2	51.0
Critical Rare Earth Mixed Oxide [CMREO]	US$M	584.7	611.8
Lanthanum and Cerium products	US$M	82.7	33.6
Other by products	US$M	14.5	14.5
COSTS ‐ ANNUAL AVERAGE
Project Operating Costs	US$M/a	237.4	252.10
Separation Costs	US$M/a	190.4	82.80
Total Cost	US$M/a	427.8	334.9
Total Cost ‐ US$/kg	19.32	11.18
MARGIN
Operating margin after separation costs REFINERY RECOVERIES	US$M	329.6	376.1
Uranium	%	90	86
Rare Earth Elements	%	70	87

The updates to the FS can be grouped into:

• Technical improvements
• Revised cost and price assumptions
• The impact of third party financing options

Figure 1. Graphical representation highlighting the impacts of key areas addressed in the feasibility update. Of the three main areas addressed, technical improvements have the largest positive impact on both the project Net Present Value, and Internal Rate of Return.