Texas Rare Earth Resources Refines Round Top 80,000 tonne Per Day Economics, Introduces Alternate Flowchart and Potential Dividend 'Texas Gold and Silver? to Shareholders
Texas Rare Earth Resources Corp. (OTCQB: TRER), a heavy rare earths
exploration and development company, made remarks after 4 pm today at
the John Tumazos Very Independent Research, LLC Metals & Mining
Conference at the Westin New York Grand Central Hotel. A link to the
live webcast of the presentation, along with presentation materials,
will be available at www.trer.com.
If you are unable to listen to the live presentation, an archive will be
available on the website for 90 days after the conference. A separate
link to the webcast be available at http://www.wsw.com/webcast/vir10/
or at http://www.veryindependentresearch.com/Conferences/fall_2012.htm.
UPDATED ECONOMICS OF ROUND TOP AT 80,000 TONNES
Management presented its new economic model updating the $1,248 million
after tax NPV at a 10% discount rate estimated in the June 15, 2012
Preliminary Economic Assessment prepared for the Company by Gustavson
Associates (the 'PEA). Management′s updated economic model has not been
prepared or reviewed by third-party independent consultants and is not
compliant with Canadian NI 43-101 standards or SEC Guide 7 standards.
Management′s updated economic model is preliminary in nature, is based
on certain management assumptions, as described below, and remains
subject to risks and uncertainties. See Cautionary Note to Investors
below.
Management increased its estimate of the after tax NPV at a 10% discount
rate to $1,766 from $1,248 million based on changes in business
practices, including selling prices, a willingness to sell six
additional products, a willingness to sell an intermediate concentrate,
mineable resource assumptions and changes in capital spending plans.
TRER management did not attempt to make any changes to operating cost
assumptions, specific capital spending details, engineering or
scientific practices where management believes such intricate details
need the guidance of independent outside experts.
The updated or refined economic model has $1,627 down from $2,129
million in pre-production capital spending, an internal rate of return
after taxes of 23% up from 19%, and the ratio of cap ex-to-NPV improved
to 114% from 59%. The use of 25% lower price assumptions for Dysprosium
Dy, Yttrium Y, Terbium Tb, Europium Eu and Neodymium Nd reduced the NPV
by $1,021 million and was equivalent to raising the discount rate by
5.86%.
Applying a +/- $0.5 billion range for +/- 7.5% possible variation in
estimated recovery rates and applying lower Cap EX and lower prices for
certain REE, the sensitivity analysis of the updated model is $1.3-$2.3
billion down from $(0.3)-$5 billion of the PEA economic model varying
REE prices, Cap Ex and Recoveries.
The October 3, 2012 economic model (1) cut Dy, Y, Eu, Tb and Nd
'Critical REE? price estimates 25% to cut $1,021 million, (2) raised
prior 'nil? price estimates to $25 per pound for Ytterbium Yb and Erbium
Er and to $10 per pound for Thulium Tm, Lutetium Lu and Holmium Ho to
add $475 million in NPV, (3) introduced a $60 per pound Uranium price
estimate, 60% recovery rate and 44.6 g/t ore grade to add $319 million
of NPV, (4) anticipates a 100 million tonne or 10% resource upgrade
after incorporation of 30 completed drill holes not ready in time for
the PEA to add $57 million in NPV, (5) anticipates 95% not 75% of the
1,034 million tonne reported PEA resources to be mineable adding $101
million in NPV, (6) cut estimated feasibility study costs to add $25
million in NPV owing to closure of the Denver office, (7) cut the
'contingency? to 12.5% from 25% to add $112 million in NPV as climate,
existing road, existing rail and labor supply are good in West Texas,
(8) added $132 million in NPV from eliminating the capital cost and
another $137 million in NPV from replacing the operating cost with an
estimated 5% sales price discount to sell a concentrate rather than
operate a hydromet refinery, (9) substitute a trailer for management
office building to add $4 million in after tax NPV, (10) refusal to
budget 22% construction, management and engineering 'markups? on
standard trucks and shovels added $9 million in NPV and (11) one year of
accretion into 2013 adds $164 million after tax NPV.
SCIENTIFIC, ENGINEERING OR TECHNICAL ISSUES AHEAD
Management has not attempted to make large scientific changes without
the input or vetting of outside experts. However, we believe large
opportunities exist to improve the NPV of the Round Top project from
such further studies.
For example, our PEA estimated a $1.94 per metric tonne mining cost and
$65 million of direct cap ex for mining equipment multiplied by 169% for
indirect costs. On September 20th TRER′s chairman visited
Vale′s Carajas S11d project, which will save 77% on fuel and generate 20
MW of electricity from truckless operation, portable conveyors and
portable crushers. We estimate that Round Top is more than 10 times
taller or steeper, and engineering studies will determine whether
downhill conveyors with byproduct electricity erase the majority of the
mining operating cost, while substituting higher conveyor capital for
reduced mining equipment costs or power transmission capital.
Similarly, a flawed communication negated prior lab tests of magnetic
separation, where Dr. Roshan Bhappu of Mountain State Labs replied it
had no impact on REE under instructions to test only for REE. The
current management values all revenues and wants to minimize waste
streams. We estimate magnetic separation may recover magnetite and
colombite, where iron of 4% of the tonnes equates to a potential,
estimated $4 billion or $4/tonne future revenue stream, niobium near
0.82 lb/tonne is worth over $10/tonne, tantalum near 0.14 lb/tonne is
worth over $1/tonne and it may reduce tailings disposal needs by at
least 4% and acid consumption.
Management estimates the insertion of magnetic separation after grinding
and prior to froth floatation may generate revenues roughly equal to the
$15/tonne total operating cost estimated in the PEA at 80,000 tonnes per
day, although perhaps adding 10% to operating costs, which could roughly
double its NPV. Management believes many smaller optimization
opportunities lie ahead with outside technical help.
INTRODUCTION OF ENHANCED VAT LEACH 10,000-40,000 TONNE PER DAY FLOW
CHART
TRER has begun study of an alternative process combining (1) magnetic
separation, (2) gravity separation and (3) a 'Vat Leach? acid heap leach
contained within tanks to safeguard the environment. Lab trials have
obtained encouraging REE and uranium recoveries from acid leaching prior
to considering magnetics and gravity to recover more or additional
minerals. Such processes may permit a startup at 10,000 tonnes per day
and the gradual addition of second, third or more magnetic, gravity or
tank farm modules. Such processes may recover more of the entire suite
of minerals within Round Top, including iron, tantalum, niobium, tin,
gallium, zircon, hafnium, and 'enhance? with multiple opportunities to
recover REE, uranium or other elements that may report to more than one
recovery process.
Management believes such a combination of processes may achieve the
highest revenues per tonne and lower cap ex, less disruption to fragile
end markets and a lower environmental impact. It is possible such a
'gradual? market entry achieves higher selling prices, the most diverse
product offerings and highest rates of return on investment.
Mining, crushing, grinding, vat acid leaching and sale of a concentrate
may bypass high pressure grinding rolls, froth floatation and hydromet
refining to cut 'target cap ex.? TRER warns that these 'concepts?
require much process development to verify (1) amount of concentration
in each of three processes, (2) choice of acid, (3) acid concentration,
(4) acid temperature, (5) fineness of grinding, (6) final flow chart,
(7) exact recoveries, (8) detailed cap ex estimates, (9) detailed
operating cost estimates, (10) economic models and (11) other factors.
There is no assurance that either the 80,000 tonnes per day froth
floation or smaller enhanced vat leach approaches will perform or work.
Bulk metallurgical tests and many repeated verifications are necessary
to prepare a bankable definitive feasibility study.
'TWIN STUDY? FOLLOWED BY STRATEGIC REVIEW
TRER intends to engage its independent experts to prepare twin updated
studies, including refinements to the PEA at 80,000 tonnes per day and
the smaller 'enhanced vat acid leach? at a staged rampup from 10,000
tonnes per day. While such a 'twin study? may be presented as one
document, it may include many dozens of refinements, new ideas,
empirical tests or scientific experiments as we expect to challenge and
retest many more items than the eleven changes discussed earlier to the
80,000 tonne per day economic model that we call a 'first pass.? TRER
estimates its independent experts will require a similar time frame to
prepare an updated study of up to one year.
TRER does not expect to be able to 'efficiently? advance the projects
into 2014 as its share price fell. TRER does not intend to issue common
stock below $2.50 per share, and does not intend to issue common stock
to build the Round Top mine below $15 as such dilution would be value
destructive in view of the project′s large estimated NPV per TRER share
of more than 100 times the stock price.
TRER expects that North American or overseas rare earth, uranium,
niobium or beryllium companies or financial investors may provide
capital to advance the project more effectively, and TRER will engage a
financial advisor after advancing its analyses. TRER expects that its
$6.4 million in cash balances as of August 31st will be
enough to continue its process development for over 30 months at
estimated cash consumption near $135,000 per month.
PLANNED DIVIDEND OF 'TEXAS GOLD AND SILVER?
The Company also owns two potentially higher grade properties possibly
suitable to approximately 100 metric tonne per day operations, which are
a less capital intensive style of mining potentially within the
resources of TRER.
These include the beryllium-uranium 'contact zone? at the base of Round
Top mountain for which Cyprus Minerals prepared a historic feasibility
study in 1988 posted on our web site, which is not complaint with
Canadian NI 43-101standards or SEC Guide 7 standards. It contains a
usable large tunnel built to facilitate a bulk metallurgical sample,
which has been well maintained. TRER intends to sell this project within
TRER to (1) utilize existing tax losses and (2) retain cash to develop
gold and silver properties.
The Company also owns the 'Macho? silver-lead-zinc property in New
Mexico, which was the Company′s principal asset prior to the acquisition
of the Round Top deposit. A one kilometer host structure contains galena
veins, and historic shafts to 100, 300 and 525 feet from prior
operations before the second world war were filled. Management believes
Macho is an exploration stage project where the goal would be a 100
tonne per day mill treating high grade lead, silver and zinc minerals
profitably.
TRER believes that large publicly traded mining companies prefer 80,000
tonne per day large projects such as proposed at Round Top, and do not
have the manpower for small projects or poorly documented narrow veins.
There may be other opportunities to obtain small deposits suitable for
100 tonne per day mines, low cap ex, and simpler permitting that can
earn favorable returns at recent gold and silver prices.
PLAN TO LIFT 'TRADING BLACKOUT? OCTOBER 5TH
Under the supervision of counsel, management and directors have
implemented a new insider trading policy, and it will permit stock
purchases by officers and directors in the future from time to time.
Various recent public disclosures have made our material business
developments public and as such on October 5th, management
anticipates lifting the current insider trading 'blackout? to permit
officers and directors of the Company to trade in the Company′s stock,
subject to legal limitations. Our policy is the fullest disclosure
possible.
EARLY EXERCISE OF A MINIMUM OF 1 MILLION WARRANTS
John Tumazos, TRER′s non-executive chairman, has notified the company of
his intention to exercise a minimum of one million common share warrants
at $0.50 each, or about half of his warrants, which would roughly double
his shares owned outright and will add $0.5 million to TRER′s treasury.
He said, 'The early exercise may establish a tax basis to enjoy a
long-term capital gain in the event the company is sold after one year.
Further, the early exercise will increase my participation in the Texas
Gold and Silver dividend to shareholders.?
About Texas Rare Earth Resources Corp.
Texas Rare Earth Resources Corp.'s primary focus is exploring and
developing its Round Top rare earth minerals project located in Hudspeth
County, Texas, 85 miles east of El Paso. A preliminary economic
assessment (PEA) study was completed for the Round Top project in June
2012 by Gustavson Associates reported estimated measured and indicated
mineral resources* of 359 million tonnes at a rare earth oxide (REO)
grade of 639 ppm, as well as estimated inferred mineral resources* of
675 million tonnes at an REO grade of 638 ppm. The Company′s common
stock trades on the OTCQX U.S. Premier tier under the symbol 'TRER.? For
more information on Texas Rare Earth Resources Corp., visit its website
at www.trer.com.
Cautionary Note to Investors Regarding Mineral Estimates
The United States Securities and Exchange Commission ('SEC?) limits
disclosure for U.S. reporting purposes to mineral deposits that a
company can economically and legally extract or produce. This press
release uses terms that comply with reporting standards in Canada and
certain estimates are made in accordance with Canadian National
Instrument NI 43-101 ('NI 43-101?) and the Canadian Institute of Mining,
Metallurgy and Petroleum ('CIM?) - CIM Definition Standards on
Mineral Resources and Mineral Reserves, adopted by the CIM Council,
as amended (the 'CIM Standards?). NI 43-101 is a rule developed by the
Canadian Securities Administrators that establishes standards for all
public disclosures an issuer makes of scientific and technical
information concerning mineral projects. This press release uses the
terms 'measured and indicated mineral resources? and 'inferred mineral
resources.? We advise U.S. investors that while these terms are
recognized by Canadian regulations, the terms are not recognized under
SEC Industry Guide 7 and are normally not permitted to be used in
reports and registration statements filed with the SEC. Mineral
resources in these categories have a great amount of uncertainty as to
their economic and legal feasibility. 'Inferred resources? have a great
amount of uncertainty as to their existence and, under Canadian
regulations, cannot form the basis of a pre-feasibility or feasibility
study, except in limited circumstance. The SEC normally only permits
issuers to report mineralization that does not constitute SEC Industry
Guide 7 compliant 'reserves? as in-place tonnage and grade without
reference to unit measures. Under SEC Industry Guide 7 standards, a
'final? or 'bankable? feasibility study is required to report reserves,
the three-year historical average price is used in any reserve or cash
flow analysis to designate reserves and all necessary permits and
government approvals must be filed with the appropriate governmental
authority. U.S. Investors are cautioned not to assume that any part
or all of mineral deposits in these categories will ever be converted
into SEC Industry Guide 7 reserves. U.S. investors are urged to
consider closely the disclosure in our latest reports and registration
statements filed with the SEC. You can review and obtain copies of these
filings at http://www.sec.gov/edgar.shtml.
This press release contains statements regarding potential resource
upgrades and economics of recovery of resources that are based solely on
management′s assessment of the project resources and economics and have
not been reviewed by an independent third-party consultant. Such
statements are not compliant with NI 43-101 and do not represent SEC
Industry Guide 7 compliant reserve estimates or economic recoveries. The
estimates of management as presented in this press release are
preliminary in nature and may not occur as anticipated or estimated, if
at all. While management believes these statements have a reasonable
technical basis, they are based on assumptions of management which may
not occur as anticipated, including assumptions regarding selling
prices, ability to produce and sell additional products, ability to
produce and sell concentrates, mineral resources assumptions (including
the consistency of the grade of minerals throughout the defined resource
area), savings resulting from changes in capital spending plans,
variation in recovery rates, estimates of magnetic separation and its
potential benefits and the potential economics of a smaller vat leach
mine operation. Further, management′s economics are based on revisions
to the economics of the Company′s June 12, 2012 preliminary economic
assessment and subject to the material assumptions and risks stated
therein. Investors should be aware that the SEC considers the economics
of a preliminary economic assessment to be too speculative to include in
reports and registration statements filed with the SEC. The SEC usually
requires a 'bankable? or 'final? definitive feasibility study to
establish the economic recovery of SEC Industry Guide 7 compliant
reserves. Investors are cautioned not to assume that the economics of
recovery as detailed in this press release will ever be realized as
anticipated or sufficiently documented in a definitive feasibility study.
Forward-Looking Statements
This press release contains forward-looking statements within the
meaning of the U.S. Securities Act of 1933, as amended, and U.S.
Securities Exchange Act of 1934, as amended, and forward-looking
information under Canadian securities laws, including but not limited
to, statements regarding the anticipated selling prices, ability to
produce and sell additional products, ability to produce and sell
concentrates, mineral resource estimates, the effects of changes in
capital spending, variation in recovery rates, potential prices per
pound for REEs, potential resources to be added by inclusion of
additional drill hole data, estimates of magnetic separation recoveries,
generation of revenue streams, reduction in tailing disposal needs, the
economics of a smaller vat leach mine operation, anticipated future
studies on the Round Top project, future spin-offs and dividends of
company mineral properties and value realizations. When used in this
press release, the words 'potential,? 'indicate,? 'expect,? 'intend,?
'hopes,? 'believe,? 'may,? 'will,? 'if, 'anticipate,? and similar
expressions are intended to identify forward-looking statements. These
statements involve known and unknown risks, uncertainties and other
factors which may cause the actual results, performance or achievements
of the Company to be materially different from any future results,
performance or achievements expressed or implied by such statements.
Such factors include, among others, uncertainty of mineralized material
and mineral resource estimates, risks relating to completing
metallurgical testing at the Round Top project, risks related to project
development determinations, risks related to fluctuations in the price
of rare earth minerals, the inherently hazardous nature of
mining-related activities, potential effects on the Company′s operations
of environmental regulations, risks due to legal proceedings, risks
related to uncertainty of being able to raise capital on favorable terms
or at all, as well as those factors discussed under the heading 'Risk
Factors? in the Company′s quarterly reports on Form 10-Q as filed on
April 16, 2012, and July 16, 2012, and the Company′s latest annual
report on Form 10-K, as filed on November 22, 2011, and other documents
filed with the U.S. Securities and Exchange Commission. Although the
Company has attempted to identify important factors that could cause
actual results to differ materially from those described in
forward-looking statements, there may be other factors that cause
results not to be as anticipated, estimated or intended. Except as
required by law, the Company assumes no obligation to publicly update
any forward-looking statements, whether as a result of new information,
future events, or otherwise.
Texas Rare Earth Resources Corp.
John C. Tumazos, CFA, Chairman of
the Board
Phone: 732.444.1083
E-mail: john@veryindependentresearch.com