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Greenland Minerals Ltd

Greenland Minerals’ cost reduction drive reaping returns for Kvanefjeld

Snapshot

The company added to its share price yesterday after shaving US$38 million off its civil construction costs.

Kvanefjeld project in picturesque Greenland

Quick facts: Greenland Minerals Ltd

Price: $0.14

Market: ASX
Market Cap: $160.78 m
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  • Cost reduction efforts will improve the project’s financial metrics
  • A mining licence is a key goal for the project
  • Project financing and development are expected stages to follow

What does Greenland Minerals do?

Greenland Minerals Ltd (ASX:GGG) (FRA:G7P) (OTCMKTS:GDLNF) specialises in rare earth project development in the autonomous Danish territory of Greenland. It is run by Dr John Mair, an economic geologist who has more than 15 years of resources industry experience and a strong background in minerals exploration and geoinformatics.

Mair has been operating in Greenland for 11 years, taking up a post as Greenland Minerals’ managing director five years ago. Among the reforms he’s spearheaded at GGG are a strategic alliance with China-based rare earths manufacturer and supplier Shenghe Resources Holding Co Ltd (SHA:600392) and a close working relationship with the Danish government which he assisted as it set up a regulatory framework for uranium export.

What does Greenland Minerals own?

The key asset is the wholly-owned Kvanefjeld Rare Earth Project in Greenland which Mair has previously described as having a “simple processing path”.

The Western Australian company’s polymetallic project has its origins in a 1950s-era state-sponsored research program.

Greenland Minerals’ MD Mair spoke about the project at last year’s Greenland Day in Perth, highlighting the company had taken a multi-element approach to the project since it became involved 12 years ago.

Considered a mature project, Kvanefjeld features a 1.01 billion tonne ore reserve grading 1.1% rare earth oxides (REO) with a substantial uranium resource of 593 million pounds, as well as zinc.

Costs reductions have been a sustained effort for GGG and its partners as well as contractors such as Shenghe and Tetra Tech, with the latest outcome yesterday being a US$38 million, or 44%, reduction in civil construction costs for the project to US$175 million.

The bottom line result is significant for the project whose 2016 updated feasibility study judged the project would have a US$1.59 billion net present value (NPV) and 43.4% internal rate of return (IRR).

Based on a 37-year mine that drew on just 10% of the project’s JORC-compliant estimate, financing costs were US$831.9 million with the project then having a payback period of five years.

In October 2018, GGG had made major reductions to the amount of civil earthworks required to prepare its site for hosting a planned open-pit mine.

The Tetra Tech-assisted work involved a heavily-revised process plant pad shaped to match the contours of the land, reducing expected effort and cost, and taking cut and fill quantities to about 20% of the original design.

North American Arctic specialist port design company PND Engineers then completed a design optimisation for port facilities reported on in January 2019, modelling a Tuna Peninsula facility that would allow for increased use of local construction materials.

The positioning of the facility near materials is expected to reduce costs by enabling good quality aggregate material to be sourced for port construction.

Tuna Peninsula is at the base of Narsaq valley in a municipal rubbish dump area where PND Engineers recommended Open Cell Technology be used for least construction risk and lowest cost.

Chinese company C‐CCC worked with PND, providing design for on‐shore facilities for efficient port operation.

The design, which allows for staged development, provided detailed designs for GGG’s updated cost estimate put together by Nuna Logistics.

Design work success in January 2019 came in the same month as test work refinements were completed, finalising and further de‐risking the project’s optimised flotation circuit.

Two expert Chinese laboratories separately developed methods to significantly improve performances, with Baotou Meng Rong Fine Materials Co Ltd (BTMR) laboratories then picking up development and validation of their flotation circuit.

The output of BTMR’s additional test work was a number of simplifications and upgrades to reduce expenses and increase concentrate grades.

Baotou Meng Rong Fine Materials Co Ltd (BTMR) laboratories was selected to continue the development and validation of the flotation circuit.

Greenland Minerals lodged an environmental impact assessment (EIA) report with the Greenland Government in August 2018.

The report came after a draft EIA was submitted in late 2015 and extensively reviewed by Greenland’s Environmental Agency for Mineral Resource Activities (EAMRA) and its advisory bodies.

GHD Consulting had prepared the document with Orbicon, drawing on the technical expertise of specialists at Arcadis, the Danish Hydraulic Institute, SRK Consulting and the Wood Group.

The final EIA was to be translated into Greenlandic and Danish languages and reviewed in parallel with a public consultation period.

Greenland Minerals expects to move onto project financing and development for its project after securing a mining licence and following a similar path taken by its neighbour and peer, WA-based explorer-developer Ironbark Zinc Ltd (ASX:IBG), which has a licence for its flagship project in Greenland.

GGG had $6.7 million cash at the close of 2018, tipping in January 2019 that it expected $1.2 million of cash outflows in the March quarter of 2019.

The company’s quarterly reports are due for release at the end of April 2019.

Inflection points

  • Mining licence application progress

  • Revised feasibility study calculations given cost reduction successes

  • Project financing model and offtake and production take commitments

  • Project construction, start-up and ramp-up

  • Revenues and profits

Managing director Dr John Mair notes significant project size

“Our primary focus has been, since we stepped into Greenland — a little over 10 years (ago) — has been on a project called Kvanefjeld,” managing director Dr John Mair told Greenland Day Perth last year.

“It’s very unique, primarily a rare earths project, a very unusual polymetallic project that also involves uranium, some zinc, as well as industrial (elements) … in terms of projected product output.

“As far as projects like this go, it’s one of the more significant globally — it’s backed by a very significant resource, very unique.”

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