Prices for rare earth oxide (REO) expected to be mined at Songwe Hill in Phalombe will remain flat at US$60 per kilogramme for the next 18 years, according to recent studies.
The Songwe Hill project being run by Mkango Resources is currently under exploration stage. First production is targeted in 2018.
A recent study by Adamas Base Case indicates the Songwe Hill price basket to be at US$59.80 per kilogramme.
“Long term rare earth price assumptions were based on the Adamas Base Case pricing scenario. Prices are assumed to remain flat in real terms over the life of the mine,” reads a report from the company.
It said the study is based on a conventional open pit operation using contract mining, a mine life of 18 years with targeted first production in 2018, and is focused on the probable mineral reserve estimate.
“Based on the input parameters in the updated study, the probable mineral reserve estimate remains unchanged at 8.5 million tonnes,” reads the report.
“The annual processing capacity was assumed at 500,000 tonnes per year of ore with a view to producing an average of approximately 2,840 tonnes of REO in mixed chemical concentrate per year,” reads part of the report.
The report further said global demand growth is forecasted to be driven heavily by strong demand growth for neodymium oxide, praseodymium oxide, dysprosium oxide, lanthanum oxide, and others from 2015 through the end of the decade, with the permanent magnet and fuel cracking catalyst sectors the key drivers.
“In all three supply-demand scenarios considered from 2015 through 2020, Adamas forecasts that global demand for oxides of neodymium, praseodymium, dysprosium, terbium, lanthanum, and yttrium will significantly exceed global annual production in the year 2020 implying significantly higher prices versus those currently in 2015,” reads the report.
Mkango chief executive officer William Dawes said there is a strong market outlook for the rare earth oxide.
“The market review, completed in conjunction with the updated pre-feasibility study, validates our strategy and focus on the big four magnet rare earths, which have a strong market outlook, geared to China’s emerging green economy and growing consumer demand, and make up over 80 percent of our potential future revenue,” said Dawes.
He said benchmarking analyses completed internally by Mkango and independently by Adamas Intelligence indicates that Mkango is favourably positioned with a combination of low capex and opex versus its peer group of advanced stage rare earth projects at the pre-feasibility or feasibility stage,” said Dawes.