Lofdal Heavy Rare Earths Project Under Joint Venture with JOGMEC

Lofdal is the most advanced project in the Company portfolio with a 43-101 mineral resource estimate established in 2012 and a Preliminary Economic Assessment (“PEA”) completed in 2014. In 2016 Namibia Rare Earths Inc. (predecessor company to NMI) completed an Environmental Impact Assessment and was granted an Environmental Clearance Certificate from the Ministry of Environment and Tourism in 2017. In December of 2020 the Company received a Notice of Preparedness to Grant Application for Mining Licence from Ministry of Mines and Energy.

Partnership with JOGMEC on Lofdal

On January 27, 2020 the Company announced that it had signed an agreement with Japan Oil, Gas and Metals National Corporation (“JOGMEC”) to jointly explore, develop, exploit, refine and/or distribute mineral products from Lofdal. The agreement provides JOGMEC with the right to earn a 50% interest in the project by funding $20,000,000 in exploration and development expenditures under the following terms:

Term 1 – JOGMEC will fund $3,000,000 in exploration expenditures up to March 31, 2021. The first term funding amount is non-refundable and JOGMEC earns no interest in the Lofdal project;
Term 2 – JOGMEC is entitled to elect to contribute an additional $7,000,000 in exploration expenditures from April 1, 2021 – March 31, 2024 to earn a 40% interest in the Lofdal project;
Term 3 – JOGMEC is entitled to elect to contribute an additional $10,000,000 in exploration and development expenditures from April 1, 2024 – March 31, 2028 to earn an additional 10% interest in the Lofdal project.

Once JOGMEC has completed and exercised its 50% earn-in and a feasibility study has been completed on the project, JOGMEC has the right to purchase an additional 1% interest in the project from the Company for $5,000,000 and thereafter to exclusively provide funding to develop the project subject to the Company’s interest in the Project not being diluted below 26%.

JOGMEC is a Japanese government independent administrative agency which among other things seeks to secure stable resource supply for Japan. JOGMEC has a strong reputation as a long term, strategic partner in mineral projects globally. The mandated areas of responsibilities within JOGMEC relate to oil and natural gas, metals, coal and geothermal energy. JOGMEC facilitates opportunities with Japanese private companies to secure supply of natural resources for the benefit of the country’s economic development.

Rare earths are of critical importance to Japanese industrial interests and JOGMEC has extensive experience with all aspects of the sector. JOGMEC provided Lynas Corporation with US$250,000,000 in loans and equity in 2011 to ensure supplies of these crucial metals from the Mount Weld Project in Australia to Japanese industry.

Japan is the most important consumer of dysprosium outside of China. Adamas Intelligence estimates that from 2013 through 2017 China produced 98% of the global supply of dysprosium and was responsible for approximately 90% of global dysprosium oxide (or oxide equivalent) consumption each year. Japan was responsible for 9% of global consumption and other nations (including the United States) for 1%. With 2017 dysprosium production estimated at 1,500 tonnes, Japanese consumption is estimated at 160 tonnes per annum.

Geology and Mineralization at Lofdal

The first systematic exploration for rare earths over Lofdal was initiated by Namibia Rare Earths in 2008. In 2011 the Area 4 heavy rare earth deposit was discovered and since that time exploration results have demonstrated the occurrence of rare earth mineralization on a district scale (Figure 2).

Rare earth mineralization at Lofdal is hosted in carbonatite dykes, structural zones and plugs exhibiting grades between 0.2-3% total rare earths (“TREO” which includes yttrium) and often exhibiting exceptional heavy rare earth enrichment (“HREE”) greater than 50%. Rare earth deposits containing greater than 10% heavy rare earths (“HREO”) can be considered to be enriched in heavy rare earths. The more significant mineralized structures have associated alteration haloes which can carry anomalous concentrations of rare earth elements.  The Company uses classification nomenclature which considers heavy rare earths comprising europium (Eu), gadolinium (Gd), terbium (Tb), dysprosium (Dy), holmium (Ho), erbium (Er), thulium (Tm), ytterbium (Yb), lutetium (Lu) and yttrium (Y). Light rare earths comprise lanthanum (La), cerium (Ce), praseodymium (Pr), neodymium (Nd) and samarium (Sm). “Heavy rare earth enrichment” is the ratio of HREO:TREO, expressed as a percentage.

Mineralization at Area 4 is associated with large scale hydrothermal systems rather than primary magmatic emplacement as discrete dykes.  Many of the larger, lower grade “dykes” previously mapped on surface are in fact alteration zones associated with these systems which in some areas significantly increases the strike and width potential of the heavy rare earth exploration target. There are two intrusive carbonatite bodies on the property. The Main Intrusion is an early stage calcitic (“sovite”) body some two kilometers in strike length which does not carry significant amounts of rare earths but has potential for niobium and uranium mineralization. The smaller Emanya plug is some 350 meters in diameter in outcrop and carries anomalous concentrations of rare earths typically in the range of 0.2-1% TREO but is not enriched in heavy rare earths.

Detailed mineralogical studies have confirmed that the principal heavy rare earth mineral at Lofdal is xenotime. The potential ore mineral assemblage in Area 4 is dominated by xenotime and subordinate zircon ± generally minor amounts of aeschynite, bastnasite group minerals (including synchysite-Y), thorite, and unidentified phases (Ca-Y silicate and Th-Zr silicate). In samples with high thorium the potential ore mineral assemblage is dominated by xenotime and thorite. It should be noted that the average thorium content of the Area 4 deposit is only 306 ppm. Grain size and habit are variable with ore minerals being generally fine- to very fine-grained with much of the potential ore minerals averaging 15-20 microns but locally reaching up to 150 microns.

 

Airborne radiometric image (thorium) showing the extent of the of the Lofdal Carbonatite Complex over 200 km2 and location of Area 4 resource and satellite mineral occurrences

 

Mineral Resources at Lofdal

In September 2012, the Company released a National Instrument 43-101 compliant initial mineral resource estimate for Area 4 of the Lofdal Rare Earths Project as set out in the technical report “NI 43-101 Technical Report and Mineral Resource Estimate for Area 4 of the Lofdal Rare Earth Element (REE) Project, Khorixas District, Republic of Namibia” dated October 29, 2012 (the “Lofdal Initial Resource Report”) independently prepared for the Company by The MSA Group (Pty) Ltd. of South Africa (“MSA”), a full copy of which is available on SEDAR at www.sedar.com. The mineral resource statement was updated in the PEA. The mineral resource exhibits exceptional levels of heavy rare earths enrichment of between 75% and 93% HREE depending on cut-off grade with corresponding TREO ranging from 0.27- 1.26% TREO. The resource drilling program has provided a mineral resource estimate extending from surface to a vertical depth of approximately 150 meters. Ongoing exploration drilling, however, has intersected the deposit to 200 meters further down-dip of the initial 43-101 resource. The geological database supporting the initial mineral resource estimate is detailed and is of a high quality, comprising over 10,025 meters of diamond drilling in 93 holes and 987 meters of trenching.

MSA identified 0.1% TREO as the appropriate cut-off grade for the mineral resource which provides the following mineral resource statement:

Classification

Tonnes

(million)

LREO

(%)

HREO

(%)

TREO

(%)

REO

(tonnes)

HREO

(%)

Indicated

2.88

0.08

0.24

0.32

9,234

76.3

Inferred

3.28

0.07

0.20

0.27

8,973

74.7

Although mineral resource grades (% TREO) are relatively low, the high levels of heavy rare earths enrichment can provide significant tonnages of contained heavy REOs. The main elements of interest from the Area 4 mineral resource are gadolinium, terbium, dysprosium, and yttrium (with dysprosium and terbium being the most valuable). Based on the REO distributions, these four elements comprise over 80% of the REO distribution in mineral concentrates and represent over 90% of the value in the deposit.

 

 

Lofdal Preliminary Economic Assessment

In October 2014, the Company completed a National Instrument 43-101 (“NI 43-101”) technical report titled “Preliminary Economic Assessment on the Lofdal Rare Earths Project Namibia” (the “PEA”). The effective date of the PEA is October 1, 2014. The MDM Group is the principal author of the PEA under the supervision of David S. Dodd, B. Sc (Hon) FSAIMM. Other contributing authors were Peter Roy Siegfried, MAusIMM (CP Geology) and Michael R. Hall, B.Sc (Hons), MBA, MAusIMM, Pr.Sci.Nat, MGSSA both of the MSA Group and Patrick Hannon, M.A.SC., P. Eng. and William Douglas Roy, M.A.Sc., P.Eng. both of MineTech International Limited. The PEA has been filed on SEDAR (www.sedar.com).

The PEA concludes that the Project would have the potential to produce an average of 1,500 tonnes per annum of separated rare earth oxides (“REO”) which would generate after-tax cumulative cash flow of US$259M with a net present value10% (“NPV”) of US$148M and an internal rate of return (“IRR”) of 42% based on projected REO prices as provided in the PEA. Rare earth prices have significantly declined since 2014 and the viability of the project is dependent in part upon improved pricing for the target oxides of dysprosium, terbium and yttrium. Capital and operating costs will also have to be confirmed given the time that has elapsed since preparation of the PEA. The PEA indicates that there is considerable potential to expand the current mineral resource and recommends that additional drilling be carried out to provide for an extended mine life in conjunction with a six-month Prefeasibility Study (“PFS”) program.

Resource model shows Area 4 deposit open to depth and along strike to west

 

Conceptual underground scenarios can also be considered as resource is expanded (from PhD studies at University Freiberg)

 

The PEA should not be considered to be a pre-feasibility or feasibility study, as the economics and technical viability of the Project has not been demonstrated at this time. The PEA is preliminary in nature and includes Inferred Mineral Resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as Mineral Reserves. Furthermore, there is no certainty that the PEA will be realized.

Work Program with JOGMEC

Under terms of the agreement, JOGMEC has completed a non-refundable $3,000,000 work program with the objective of doubling the current mineral resource size through the provision of 7,700 meters of diamond drilling at Area 4. The program also investigated two exploration targets outside of Area 4 with 1,500 m of diamond drilling and will further investigate optimization of the processing flow sheet with specific metallurgical test programs. JOGMEC also retains the right to accelerate spending and in this regard has elected to move on to Term 2 of the JV Agreement with an additional budget funding commitment of $2,063,000. This brings the total funding commitment up to $6,163,000.
The initial focus of the metallurgical program has been on XRT and XRF sorting using the 18 tonne representative sample that has been prepared by Light Deep Earth at their test facility in South Africa. Sorter tests were conducted by Rados International using a Rados XRF sorter and by IMS Engineering using a Steinert XRT sorter. Products generated from this first step test work are being utilized for subsequent process stage test work.

i) Progress on Drilling Program
Drill target areas identified at Lofdal for resource development are shown in Figure 3. Drilling in Term 1 has focused on extending the mineral resource in Area 4 and confirming the resource potential in Area 2B. Reconnaissance drilling on the Northern Splay and Dolomite Hill targets did not return significant results for resource development. Total drilling completed for the Term 1 program is summarized as follows:

 

Figure 3 – Drill target areas at Lofdal for resource development. Focus is on Area 4 to double the current resource. Area 2B is the first satellite deposit with resource drilling.

Drill results to date in Area 4 have been consistent with expected grades and thickness as predicted from the resource model (Table 3). Intercepts confirm that the highest levels of heavy rare earth enrichment occur in the central portion of the deposit together with the highest concentrations of dysprosium. A number of significant intercepts have been noted in both the hanging wall (“HW”) and foot wall (“FW”) to the Main Zone which are expected to contribute to the updated resource estimate. Drilling at Area 4 has extended the strike length of the mineralized zone from 700 meters to 1,100 meters and to depths of 250-350 vertical meters.

Development of Area 2B as Satellite Deposit

JOGMEC provided additional funds to the Term 1 budget that provided for drilling in Area 2B with the objective of confirming the potential to develop additional resources in satellite deposits at Lofdal. Area 2B is located three kilometers northwest of Area 4 and was first identified by trenching and reconnaissance drilling in 2011. Seventeen holes were drilled in the area for a total of 2,133 meters, however no historic resource estimate was developed. An additional 4,400 meters of drilling has been completed in 29 holes and following consultation with MSA, it has been agreed that sufficient work has been completed to undertake a maiden resource for this zone. Mineralization at Area 2B is very similar to Area 4 with two to three narrow dysprosium mineralized zones. Drilling at Area 2B has confirmed mineralization over a strike length of 600 meters to depths of 190 meters