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Greenland Minerals and Energy MD John Mair in Q&A with Proactive Investors

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Greenland Minerals and Energy is positioned to become a critical rare earth producer of international significance.

Greenland Minerals and Energy (ASX:GGG) has reached a major milestone with the completion of a Feasibility Study that places the Kvanefjeld rare earth-uranium Project amongst the lowest cost producers after by product credits.

This is also a key component for the application for an exploitation licence.

The Kvanefjeld resource hosts over a billion tonnes and will support a mine life of 37 years, with scope to both expand production and extend the life of the mine significantly.

Proactive Investors is joined exclusively by Greenland Minerals and Energy's managing director, John Mair.


PROACTIVE INVESTORS: Welcome John.


In regards to the siting the refinery in Greenland, were you surprised about the requirement that as much downstream processing be located within the country as possible?

Dr John Mair: We have worked through the development strategy with Greenland over the last two years, and there was a strong desire to see at least some chemical processing conducted in the country.

We looked at how we could incorporate that, and announced the strategy to conduct the refining stage in Greenland in mid-2014.

Whilst there is an additional infrastructure cost, there are also some operational cost benefits.

Obviously, the cost of shipping a large volume of mineral concentrate is significant, and that is no longer an issue.

The off-shore refining scenario generated a similar project NPV to the Greenland scenario, even with the Greenland scenario carrying a higher capital cost, so the project is clearly strong with the refining conducted domestically.


What changes will this move have on the development time line?


Dr John Mair: We are working with Greenland to provide further detail on the permitting timeline and we hope to be able to update on that soon.

The development strategy has been presented to Greenland stakeholders through 2014, and went through a public pre-hearing in Greenland in late 2014, so this has been factored in for some time – the development strategy is not new.

Importantly, we’ll be ready to hand over a full exploitation license application once the environmental and social impact assessments are completed later this year.

An advantage of the Greenland system is that you set your terms-of-reference for the project and the development strategy before feasibility studies are finalised.

That way you already have a project that is aligned with system requirements and expectation. 


Will the increased capital cost be a hurdle to the project’s development?

Dr John Mair: There is an increase in capital cost, but the project is strong enough to absorb it.

It is important to note that the development strategy takes on board regulatory requirements and works to consider Greenland’s Mining Act.

There is little point pursuing a development scenario with a lower capital cost if there are questions around regulation or alignment with in-country mining policy.

So if anything, it’s not a hurdle, it is a matter meeting the requirements.

Moving forward, we are confident of locking in on third party investment in supporting infrastructure, which will reduce the capital cost requirements and boost the internal rate of return significantly.

We have forums set up for later this year in which we’ll be advancing the dialogue on infrastructure investment opportunities with a cross section of Danish entities.


What have been some of the assumptions used?


Dr John Mair: Overall, we’ve used some pretty conservative assumptions, so there is a lot of upside in the project – we’ve deliberately taken a conservative view point.

Reductions to rare earth separation costs will have a big impact, and the introduction of hydropower could have a strong impact on further reducing operating costs.

These are just two areas we’ll be looking at, but for now, the base-case as outlined it the Feasibility Study, is already strong.


Can you outline news flow for the remainder of 2015?

Dr John Mair: Much of our focus this year is on finalising all material for project permitting, and starting to structure the project development vehicle.

Moving through the year we’ll be looking to update on regulatory developments which will firm up the project timeline.

Completion of the impact assessments and the submission of an exploitation (mining) license application will be a really important achievement.

But that aside, there are many other activities underway that are all news flow drivers.

We have just finished up a large pilot plant operation in Europe, and we’ll be updating on the outcomes soon, and we have a second pilot plant operation coming up in August.

Another important area is the continued progress with NFC and there is an increasing focus on commercial aspects now the feasibility study has been completed.

We also are looking to firm up other groups that are interested in investing in the support infrastructure – that is the port, power and accommodation village.

Then there is the uranium off-take and how we can best structure the uranium business.

So 2015 is a big year, with a lot on.

It’s about permitting, progressing the dialogue with development partners, and structuring the company for development.


Finally, why should an investor consider adding Greenland Minerals and Energy to their portfolio?

Dr John Mair: Prices for both rare earth metals and uranium are now on upward trends, following a few years of suppressed prices.

China’s consolidation program of their rare earth industry is now having a positive effect on pricing, and demand for key rare earths (the critical rare earth mix) is growing substantially.

The outlook for uranium is also strengthening, with strong growth projections for nuclear power.

This is excellent timing as Kvanefjeld moves toward the development phase.

Rising prices will see renewed sector interest, and with Kvanefjeld being an advanced rare earth and uranium project, in a politically-stable, pro-mining country, Greenland Minerals and Energy is well positioned to capture broad market attention.

We’re one of few companies operating in the rare earth and uranium sectors that has made solid progress over the last couple of years.

The feasibility study confirms the strength of the Kvanefjeld Project, and highlights the potential to become the dominant producer at the low end of the cost curve for rare earths, for a very long time; this is a pretty unique situation.

That’s why the project attracts interest from the likes of NFC.

The project does not rely on selling lanthanum and cerium and unrealistic prices, which has been a sector weakness. These represent by-product revenue streams for Kvanefjeld, with low pricing sensitivity.

The incremental cost of producing uranium and other by-products is low. In addition, we believe the uranium-off-take will definitely be attractive given the politically stable nature of Greenland, and the robust project economic metrics.

Kvanefjeld will be a big statement for Greenland’s emerging minerals industry – no doubt. The profile is only going to grow.


PROACTIVE INVESTORS: Thank-you John.


Proactive Investors Australia is the market leader in producing news, articles and research reports on ASX “Small and Mid-cap” stocks with distribution in Australia, UK, North America and Hong Kong / China.

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