Lindian Resources (ASX: LIN) has lifted the lid on a compelling new set of financial numbers for its giant Kangankunde rare earths project in Malawi, including a whopping annual EBITDA of US$84 million (AU$124.5 million) – that is for every year during a 45-year mine life.
The company’s recent feasibility study on the project’s stage-one development also shows a post-tax payback period of just 1.5 years for a US$40 million (AU$60 million) pre-production capital outlay, a figure that includes a 12.5 per cent contingency.
That is on the back of a solid post-tax internal rate of return (IRR) of 80 per cent and a low average annual free-on-board (FOB) operating cost of just US$2.92 per kilogram of total rare earth oxides (TREO). Management says that stands Kangankunde up in the lowest cost quartile in the global rare earths industry and claims its post-tax net present value (NPV) to capex ratio of more than 10:1 is “outstanding”.
The news triggered the company’s biggest trading volumes since September last year, kicking its share price up from a close last week of 10.5c up to an intraday high of 15c – a jump of nearly 43 per cent.
Lindian says the low-cost structure defined by the latest figures means the project, with maiden ore reserves of 23.7 million tonnes at 2.9 per cent TREO, is capable of delivering a rare positive annual EBITDA at a time of low rare earths prices.
And there could be more blue sky ahead, with industry forecasters predicting a near-to medium-term improvement in rare earths pricing.
The feasibility study uses independent prices from market researchers Project Blue, ranging from a current NdPr oxide mark of about US$50 (AU$75) a kilogram to US$115 (AU$1.72.45) in the next 10 years. It is believed likely to increase substantially in the following decades as global electrification continues to ramp up, with an accompanying increase in demand for its vital commodities.
The Feasibility Study results reaffirm the world-class status of the Kangankunde Project and its competitive positioning to meet a rising demand for rare earths. It is distinguished by its high-grade, low levels of impurities and attractive cost structure that positions the Project in the lowest cost quartile of rare earths projects globally. The Stage 1 development will require low upfront capital cost, presents low commissioning risk, and generates strong financial returns.
Lindian Resources CEO Alwyn Vorster
Vorster said it was also important to note that stage one could be a “logical springboard” for future expansion options at Kangankunde, which is fully permitted for construction to begin. The project is slated to generate about 15,300 tonnes per year of clean, high-grade concentrate running at about 55 per cent TREO to produce about 8400 tonnes of rare earth oxides and 1640 tonnes of the valuable magnet rare earths, neodymium and praseodymium (NdPr).
It is anticipated that the operation will produce some 369,600 tonnes of TREO and 72,000 tonnes of NdPr in concentrate and it is further enhanced by only having minimal deleterious radio-nuclide elements, such as thorium and uranium, and low acid consumption.
Lindian executive chairman Asimwe Kabunga said funding negotiations are ongoing with several parties and believed the study results had the potential to fast-track the discussions and attract interested new entities. He said Kangankunde had strong support from the Malawian Government and the local community and would create hundreds of jobs and improved local infrastructure to become a major source of income for the Malawian economy.
About 40 per cent of its proposed production output has already been taken up by United States-based commodity traders Gerald Metals Group.
The project has one of the biggest high-grade rare earths deposits in the world and because it lies at shallow depth or in outcrop, it features a low strip ratio. It is also characterised by relatively uniform mineralisation throughout, reducing mine design complexity and dilution risk.
From a processing point of view, the flowsheet remains simple, relying principally on particle size reduction (grinding) before gravity and magnetic separation, followed by minimal reagent consumption to produce the clean 55 per cent TREO concentrate. Further site-related attributes include low-cost hydroelectric grid power, a good water supply from an on-site bore-field, proximity to vital infrastructure including sealed roads and a railway and accommodation in nearby towns.
Lindian is on a mission to shore up funding in this year’s third quarter so it can kick off site construction in the following quarter before commissioning its plant late in 2025.
Kangankunde’s strong stage one economics for its huge resource endowment, with continuing positive market demand forecasts, offer a high degree of confidence for a potential stage two expansion, which would vastly increase annual production. Management says it intends to formally launch a stage two expansion study sometime this year.
It is difficult to pick any holes this boomer of a rare earths project and the big numbers in stage one beg the question on what subsequent stages may be able to bring … especially if the rush away from fossil fuels towards “renewable” electrification continues and new opportunities emerge.
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