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Peak Resources On Track With PFS For Ngualla Rare Earth Project, Tanzania

Peak Resources (ASX: PEK) is on track to complete in the first quarter of 2014 the key Preliminary Feasibility Study for its wholly-owned Ngualla Rare Earth Project in Tanzania.

Notably, this will include a revised economic assessment that is likely to reflect the benefit that rising prices for the key high value rare earths will have on projected annual revenue.

The PFS will be followed by a maiden Reserve estimate in the same quarter.

Peak noted that Ngualla is now significantly de-risked with a proven, low cost metallurgical process demonstrated 'end-to end' from mineralisation to high purity separated rare earth oxide products.

It continues to engage with suitable strategic partners with the objective of seeing Ngualla fully-funded through to production, which is on track to begin in 2016.

Rare Earth Value Drivers

In the five months since 1 July 2013, prices for high value rare earths including neodymium, praseodymium and europium that underpin Ngualla have improved substantially.

Neodymium, the largest single contributor at 48% of Ngualla's predicted revenue, has increased in price by 36%.

Praseodymium and europium, the next two highest revenue contributors, have also seen price increases of 50% and 18%.

Together, these more than offset falls in the lower value cerium and lanthanum, which together make up just 14% of Ngualla's predicted revenue, leading to an overall increase of 22% in Ngualla's 'basket price'.

Neodymium and praseodymium are both in high demand for the manufacture of permanent magnets used in the expanding wind turbines, hybrid cars and personnel electronics industries.

These high value and strategic rare earths have predicted demand growth forecasts* of +10% per annum and underpin the projects future revenue.

Preliminary Feasibility Study

With the metallurgical test work and most other major work components and associated expenditures now completed, the Preliminary Feasibility Study for the Ngualla Project is on track for completion prior to the end of the first Quarter 2014.

This will build on the revised Scoping Study released on 29th May 2013 that showed the project to have low capital and operating costs along with robust project economics.

This includes estimated NPV of US$1.768 billion and IRR of 60%, on the December 2012 10,000 tonne per annum base case scenario, capital costs of US$373 million and operating costs of US$10.18 per kilogram of rare earth oxides.

Detailed engineering, cost estimations and data from additional metallurgical test work programs and other studies are all included in the PFS to evaluate a series of production scenarios and determine the optimum development pathway for Ngualla.

Work carried out by ANSTO Minerals has successfully demonstrated the end to end metallurgical process from mineralisation to high purity separated rare earth oxide products.

These include a ultra-high purity (99.9%) neodymium - praseodymium rare earth oxide as well as a mid+heavy rare earth oxide.

ANSTO have also been engaged to evaluate a series of options regarding the production of cerium, giving the company the flexibility to either remove cerium early at lower cost, or process it through to a higher purity, higher value product, depending on market demand and prevailing cerium prices.

Specialist consultants Simulus Engineers have developed a sophisticated computer based simulation model for the entire mineral process s as part of the Pre-Feasibility Study.

This will enable Peak to quickly simulate a number of differing operating conditions and processing scenarios, and identify the impact that these variables have on the overall efficiency and productivity of the process.

The simulations will identify the key value drivers in the process and form the basis for the optimisation work to be completed during the feasibility study by directing the engineering and metallurgical effort to those areas that have the most significant impact on operating and capital costs.

The Ngualla processing plant can be divided into several separate modules, which do not need to be located together on site.

The PFS will evaluate the economic benefits of siting some portions of the operation closer to power, major roads, rail or port facilities.

It will also include studies to evaluate the potential for the phased development of Ngualla in order to reduce start-up capital costs and lead time to production.

Scenarios under consideration include the production of intermediate products of a bastnaesite mineral concentrate that can be transported anywhere in the world due to the absence of radioactivity; a mixed rare earth carbonate product; commencing production at a smaller scale than the 10,000 tonne per annum contained rare earth oxide (REO) base case, and subsequently increasing production through to 20,0000t REO per annum.

Maiden Reserve Estimate

A maiden Reserve estimate for the Ngualla Rare Earth Project is also on track to be completed in the first quarter 2014 and will follow shortly after the completion of the PFS.

This will be centred on the weathered Bastnaesite Zone portion of the greater Ngualla rare earth deposit that is targeted for first production.

The completion of a Reserve estimate will be another significant milestone for Peak and will place Ngualla amongst a small number of rare earth development projects to have advanced to this stage.

Project Development

Peak is continuing to engage with a number of varied parties regarding technical partnerships, cornerstone investors, toll treating arrangements for a phased development approach an potential offtake customers in order to progress the commercialisation of the Ngualla Rare Earth Project.

Positive expressions of interest have been received and Peak remains in discussion with a number of these parties regarding the range of issues listed above.

The PFS will be followed by the commencement of a Definitive Feasibility Study (NYSE:DFS).

Additional metallurgical optimisation of the beneficiation and acid leach recovery stages, together with acid recycling test work will be completed early with the aim of reducing the already low operating costs of the project.

Pilot plants for these sections of the process will provide detailed engineering and operating data for the DFS after the optimisation work.

Environmental permitting will also commence in 2014 to support a mining licence application and a production start-up that remains on track for 2016.

Analysis

The rising prices of neodymium, praseodymium and europium, which make up the vast majority of the Ngualla Project's projected annual revenue, can only be a positive for Peak Resources.

An overall increase of 22% in Ngualla's 'basket price' will undoubtedly have a highly positive effect on project economics, which the revised Scoping Study has estimated an NPV of US$1.768 billion and an IRR of 60% in the base case scenario.

Share price catalysts ahead include the release of the Preliminary Feasibility Study due to be released in the first quarter of 2014 to be followed by the maiden Reserve estimate prior to the end of the same quarter.

The Ngualla Project remains on track to achieve rare earth production in 2016.

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