But while the platinum market is forecast to remain in oversupply this year, the palladium market is expected to return to deficit, the company said.

Gross platinum demand rose by 2% in 2011 to 251.8 tonnes, with growth in every sector apart from investment, according to Johnson Matthey in Platinum 2012. Supplies increased to a four-year high of 201.6 tonnes, supplemented by releases of in-process and refined inventories from South Africa in the second half, while recycling increased to 63.6 tonnes. As a result, the platinum market swung into oversupply of 13.4 tonnes.

Illustration of autocatalyst from Johnson Matthey.

Global supplies of platinum grew by 7% last year to 201.6 tonnes. Underlying mine production in South Africa fell by around 3.7 tonnes. However, releases of metal from inventories meant that total shipments from South Africa rose by 5% to 151.0 tonnes. A ramping up of mined output in North America following shutdowns in 2010, and new and expanding operations in Zimbabwe coming on-stream, together contributed significant additional output.

Demand by vehicles grows 1%

Gross platinum demand in vehicle emissions control grew by 1% to 96.6 tonnes. Purchasing of platinum in the heavy duty diesel sector increased by 27% to 16.0 tonnes last year. Much of this growth was due to pent-up demand for large trucks in North America as fleet operators returned to the market following the recession of 2009-2010. However, there was lower use of platinum in light duty emissions control due to substitution by palladium, as well as reduced buying by Japanese manufacturers in the wake of the Great East Japan Earthquake.

Purchasing of platinum for industrial applications rose by 17% to 63.6 tonnes. Recovery from recession in developed markets and rapid growth in emerging ones drove a period of capacity building in a number of industrial sectors. In particular, demand for LCD panels in consumer electronics led to the installation of several new melting tanks in Asia, used in the manufacture of LCD glass.

Jewelry manufacturers bought 77.1 tonnes of platinum last year. In the second half, when platinum prices dropped and gold began to trade at a premium to platinum, there was a surge in buying by Chinese manufacturers, raising gross jewelry demand in China by 2% to 52.3 tonnes for the year as a whole. In India, an increase in retail outlets offering platinum and rising consumer purchases drove platinum jewelry demand up by a third to 2.5 tonnes.

Physical investment demand for platinum remained positive but was 30% lower than in 2010, at 14.3 tonnes. There was net investment into exchange traded funds, with inflows tending to coincide with periods of rising prices. Substantial purchasing of large platinum bars by Japanese investors once again occurred during price dips.

Recycling of platinum increased by 12% to 63.6 tonnes. Recovery of platinum from spent autocatalysts rose by 4.4 tonnes to 38.1 tonnes last year as more highly-loaded catalysts from end-of-life vehicles were collected and refined. Stimulated by higher average metal prices, recycling of platinum in the jewelry sector rose by 10% to 25.2 tonnes.

The balance of the platinum market this year is expected to be similar overall to that in 2011. A comparatively low level of inventories in South Africa after the drawdowns of last year means that the industry has less flexibility to supplement platinum supplies with metal from stocks.

Recent disruptions to underlying output from strikes and stoppages increase the likelihood of lower supplies in 2012.

Flat autocatalyst demand and more moderate levels of purchasing in cyclical industrial applications will lead to a slight fall in gross demand. The platinum market is forecast to remain in surplus in 2012, which is likely to keep the price in a range of $1,450 to $1,750 per ounce in the next six months, averaging $1,600.

Palladium market surplus

The palladium market was in a 39.0 tonne surplus in 2011. Although autocatalyst and industrial demand for palladium rose, the sale of metal from Russian government-controlled inventories, together with a large amount of metal released from ETFs, meant that the palladium market moved into oversupply last year.

Supplies of palladium remained almost flat at 228.9 tonnes in 2011. Once again, substantial quantities of palladium were sold from Russian state stocks. However, the volume of these shipments, at 24.1 tonnes, was the lowest for several years. This year-on-year decline largely offset growth in primary output from North America and Zimbabwe. In South Africa, palladium supplies fell as producers added to stocks, while primary output from Russia was largely flat.

Gross demand for palladium fell by 13% last year to 262.8 tonnes. Purchasing strengthened in the core autocatalyst and industrial markets, which accounted for 94% of gross demand. The year-on-year decline in total demand in 2011 was primarily due to the investment sector switching from extremely high net demand in 2010 (of over 30 tonnes) to effectively supplying over 17 tonnes back to the market.

 Autocatalyst demand hits record

Gross demand for palladium in autocatalysts reached record levels in 2011 of 187.6 tonnes. Higher vehicle output in all regions apart from Japan as well as the greater use of palladium in light duty diesel autocatalyst formulations helped spur demand for palladium in emissions control.

Demand for palladium in industrial applications increased marginally in 2011 to 77.1 tonnes. Recovering demand in the chemical industry in China led to new orders for palladium process catalyst charges. In the electrical sector, purchasing of palladium softened as competition from cheaper alternatives eroded palladium’s market share.

Purchasing of palladium by the global jewelry industry declined once again in 2011. Palladium continued to suffer from a lack of positioning in the key Chinese market. In Europe and North America, demand responded to price increases; palladium traded on average 39% higher than in 2010, leading manufacturers to offer lower weight and lower fineness alloys to meet retail price points.

Investment demand for palladium turned negative in 2011, returning 17.6 tonnes to the market. Deep liquidations in exchange traded funds, especially in the final quarter of the year when prices were falling, left physical investment demand in starkly negative territory by the year-end. This was in contrast to the high level of net investment in 2010.

Recycling of palladium in the autocatalyst, electrical and jewelry sectors increased by 15.4 tonnes to 72.9 tonnes. Recovery from end-of-life vehicles soared by 26% to 51.5 tonnes as highly-loaded gasoline car catalysts were returned for recycling, particularly in North America. Palladium jewelry recycling more than doubled as a result of returns from unsold retailer stock and old consumer jewelry.

Swinging back to deficit

The palladium market is forecast to swing back into deficit this year. Johnson Matthey said it expects that there will be one further year of sales from Russian state stocks in 2012, albeit at a much reduced level than previously, which will represent the bulk of the remaining government-controlled inventories.

Gross demand for palladium in autocatalysts is expected to rise in line with higher gasoline vehicle output and greater use of the metal in light duty diesel emissions control systems, resulting in a modest increase in overall gross demand and pushing the market into a deficit.

The positive fundamentals are likely to support the price between $620 and $800 per ounce and on average at $715 in the next six months.

The company also announced a 36% expansion of its proven and probable rare-earth reserves at Mountain Pass, confirming 18.4 million short tons of rare-earth ore at an average ore grade of 7.98%.

Molycorp recorded 1Q12 net sales of $84.5 million, up 221% over 1Q11 net sales of $26.3 million and recorded 1Q12 gross sales of $89.5 million.

Paste tailings facility at Mountain Pass under construction in March.

Revenues for 1Q12 at Mountain Pass increased 69% year over year to $44.5 million, based on 586 tonnes of REO-equivalent. Consolidated sales volume across all segments was 719 tonnes of REO-equivalent and 75 tonnes of rare metals, the company reported.

Molycorp, which is listed as a company in the development stage, reported a net loss of $545,000 in the recent period vs. a loss of $1.97 million a year earlier.

The company also reported that its planned acquisition of Neo Material Technologies is proceeding on schedule and is expected to close as planned in the second or third quarter of the year.

Hitting each milestone

“The start of 2012 has been tremendously productive as we continue to hit each of our major milestones on the path to completion of Project Phoenix,” said Mark Smith, president and CEO.

“The start up of our concentrate production circuit is a major accomplishment for the company.

“I could not be more proud of the effort the Molycorp family has devoted to get to this point, especially in light of the more than 2.3 million hours we have worked in the construction of Project Phoenix without a lost-time incident.

“As we continue to build out Project Phoenix to its full Phase 1 and Phase 2 capacities, we remain on track to establish one of the world’s premiere and fully integrated rare earths and rare metals companies.”
Detailing its milestones, Molycorp said that the startup of the Mountain Pass facility completes the rare-earth concentrate production circuit of Project Phoenix and initiates the production of rare-earth concentrate via the following:

→ Mining of fresh rare-earth ore at a daily rate of 2,800 tons, four days per week;
→ Crushing and blending of fresh ore;
→ Start up of milling and flotation of fresh ore to produce rare earth concentrate, to be followed by processing of mine tailings in its Paste Tailings Plant and permanent disposal of mine paste tailings in a fully permitted, on-site facility;
→ Expanded by 36% its proven and probable reserves of rare earth minerals at Mountain Pass. The independent analysis used the SEC “Industry Guide 7” methodology and confirmed 18.4 million short tons of rare earth ore at an average ore grade of 7.98%;
→ Signed a three-year take-or-pay agreement for the annual sale of 100 tonnes of proprietary XSORBX™ water purification products into the recreational water markets. This single agreement will increase Molycorp’s 2012 XSORBX™ sales by 81% as compared to all XSORBX™ sales completed during 2011;→ Announced an agreement to acquire Neo Material Technologies. The transaction will create the world’s most integrated rare earth producer, combining a world-class rare-earth resource with the world’s leading producer of value-added rare-earth products; and→ Completed the $390 million capital investment from Molymet.

2012 outlook

As of May 10, Molycorp reaffirmed its annual production of REO-equivalent products to be in a range of 8,000 to 10,000 tonnes for the full year across all of its facilities.

The company said it continues to believe it is well-positioned for year-over-year sales growth, given existing customer orders and a growing pipeline of global business opportunities.

Molycorp said it has completed an extensive formal review of the Project Phoenix capital expenditure budget and that it anticipates no material changes to its Project Phoenix EPC (engineering, procurement and construction) capital budget of $895 million, assuming that the measures it has implemented to mitigate certain adverse cost trends are successful and there are no unanticipated project close-out events.

Certain additional capital expenditures for other capital projects related to operations at Mountain Pass are expected to total $105 million. These Mountain Pass operations capital projects are covered in the company’s annual operating plans.

To date, $673.5 million has been spent toward Project Phoenix and these other operations-related capital projects. Molycorp said it continues to generate positive cash flow from operations, maintain sufficient working capital to execute on its stated strategy, and its balance sheet remains strong.

Commenting on recent market conditions, Smith said: “It appears the highly volatile pricing environment we experienced in 2011 has moderated and that is a very positive development for our business.

“Customer orders are steadily picking up across the industry and pricing has not only stabilized but has increased in some products.

“We continue to strengthen the reliability of our overall supply chain through Project Phoenix, and we are positioned to broaden and expand that supply chain through our proposed acquisition of Neo Materials.

“While this year remains a year of transition, we are confident that we are on target to build one of the world’s leading, fully integrated rare earths and rare metals companies.”

Cash flow from operations (before changes in non-cash working capital items) was $7.1 million in 1Q12, compared to $0.2 million in the same quarter of 2011 and net loss in 1Q12 was $20.5 million.

“In 1Q, we were able to overcome operating challenges at the Mineral Park mine in Arizona and have continued to focus on our controllables: operating safely, increasing throughput, reducing unit costs and increasing recoveries,” said Bruce McLeod, president and CEO.

“We believe continual improvement of our goals will increase our cash flows and improve our financial position.

“Even with reduced throughput and recoveries in the quarter, we were able to generate positive cash flows at Mineral Park. The recent guidance provided by the company shows increased metal production for the remaining three quarters, which should allow for even stronger cash flows going forward.”

In the recent period, copper-equivalent production was 20.1 million pounds, consisting of 9.9 million pounds of copper in concentrates and cathode, 2.3 million pounds of molybdenum in concentrates and 211,431 ounces of silver.

Copper-equivalent production is calculated using a molybdenum/copper ratio of 4.53, based on the company’s estimated 2012 metal prices, including copper hedges.

Mineral Park set a new throughput record, averaging 48,666 tpd for the quarter.

Total cash costs on a co-product basis were $2.31 per pound of copper produced and $11.75 per pound of molybdenum produced, which are, respectively, 8% and 19% lower than the same quarter in 2011.

Mineral Park operations

At Mineral Park in northwest Arizona, during 4Q11 and the first half of 1Q12, copper production was impacted by lower-than-expected throughput rates from processing harder ore portions of the Turquoise pit at the mine.

At the beginning of 2012, the company initiated a program of testing the SAG mill circuit grinding capacity and has been successful in identifying the optimized size and quantity of grinding media and operating parameters in the two SAG mills.

This has enabled the mill to process a blend of harder ore from the Turquoise pit at the designed throughput rate of 50,000 tpd.

From the beginning of the year to Feb. 15, the average throughput through the mill was 44,748 tpd. After implementing the SAG mill changes, from Feb. 16 to March 31, the average throughput was 52,650 tpd; thus averaging the daily throughput for the first quarter 2012 to a record of 48,666 tpd.

Recoveries in 1Q12 were 72.6% and 70.9%, respectively, for copper and molybdenum, which was lower than expected.

The harder ore necessitated blending and processing of stockpiled ore material that had higher than normal oxide levels, which resulted in lower than normal recoveries.

However, sulfide recoveries were 82.5% for copper and 74.7% for moly in 1Q. Processing of the stockpiled partially oxidized ore material has now been completed.

In the recent period, Mineral Park invested $2.5 million for property, plant, and equipment. The company said it estimates an additional capital spending of $6.5 million for the remainder of 2012 at the site.

These 2012 investments include some $3.0 million for the turbine-to-grid interconnect facility, $1.6 million for crusher hopper modifications, $1.3 million for water treatment facilities and the remaining $3.1 million for light vehicle/large engine replacements and various sustaining capital requirements.

2012 Mineral Park outlook

As announced on May 4, the 2012 mine plan at Mineral Park includes mining through the transition from supergene enriched copper material into primary hypogene copper mineralization.

Mining of the transition zone has encountered a lower percentage of higher-grade supergene copper mineralization than expected from the mineral resource model, resulting in a lower copper grade from this material than anticipated, while molybdenum grades are unaffected.

Approximately 20% of the material expected to be processed under the 2012 mine plan is transition zone ores. The company said it believes that, as mining passes through the transition zone, copper grade and tonnage reconciliation should better correlate with the block model since the copper grades in hypogene mineralization both within and below the transition zone are less subject to the variability associated with secondary enrichment.

Overall, the transition zone represents a small percentage of the overall mineral resource and the life-of-mine mineral reserves for Mineral Park.

The company is presently evaluating the impact on the five-year mine plan of mining other areas of the deposit that have a component of similar transitional material.

As there is less transitional material post- 2012, it is expected to have less impact on production in 2013 and beyond, Mercator said.

El Pilar on hold

Mercator Minerals said it has concluded that, given the present financial market conditions, a reasonable financing package is not currently available for its wholly owned El Pilar copper project in Sonora.

The project is well advanced and has obtained all the permits required to commence construction, but until financing is obtained, the company will defer further capital funding for the project.

“The El Pilar project is a very attractive project that would propel Mercator into the next tier of base metal producers, however, we have always stated that a financing package to construct El Pilar must be value accretive for shareholders,” McLeod said.

“At present, we are not able to deliver a financing agreement that is in the best interests of shareholders.

“With a short 15-month construction timetable to build El Pilar, we can quickly reactivate the process to advance the project when market conditions improve.

“Our focus is on continuing to improve operations at Mineral Park to generate stronger cash flows, while continuing to evaluate accretive financing options for the construction of El Pilar.”

Reported net earnings, however, were $105.7 million in the recent period, down from $250.1 million a year earlier.

The company’s 1Q12 revenue was $1,036.6 million, an 11% increase from a year earlier.

The company’s production cost of sales was $742 per gold-equivalent ounce, compared with $545 in 1Q11.

Nevertheless, with a higher price for gold, atttributable margin was $902 per ounce sold, a 15% increase over 1Q11.

The 6% decrease in output was, mainly due to a scheduled decline in grade at Kupol (Russia), a scheduled increase in processing lower-grade stockpile ore at La Coipa (Chile), and below plan production at Tasiast (Mauritania.)

Based on the full-year mining plan for 2012, Kinross said it expects an increase in production during 2H in the North America, South America and West Africa regions.

The higher cost of production in the recent period was mainly due to increased processing of lower-grade ore, as well as higher power, labor and contractor costs, Kinross said.

Production cost of sales per gold ounce on a by-product basis was $657 in 1Q12, compared with $472 in 1Q11, based on 1Q12 attributable gold sales of 570,486 ounces and attributable silver sales of 2,652,808 ounces.

Still within guidance

Kinross said it expects to be within its 2012 forecast guidance for production (2.6 million – 2.8 million attributable gold-equivalent ounces) and production cost of sales ($670 – 715 per gold-equivalent ounce.)

“Our operations continue to generate robust revenue, cash flow and earnings,” said Tye Burt, president and CEO.

“While production was lower and costs were higher than 4Q11, based on our annual plan, production for each of the remaining quarters of 2012 is expected to exceed 1Q. We expect to be within our previously-stated full-year guidance for production and costs.

“Kinross remains in a strong operating and financial position. We are committed to maintaining our financial strength and liquidity as we advance our growth projects in the framework of our capital and project optimization process,” Burt added.

“At Tasiast, mining activity has accelerated, infrastructure construction and permitting remain on plan and we are making progress towards selecting an optimum processing approach for a further expansion.

“Our exploration focus has shifted from infill drilling to step-out and district targets along the 75-kilometer land position.

“The board has approved the Dvoinoye (Russia) feasibility study and full construction funding and the project is proceeding on schedule to begin shipping high-grade ore to increase Kupol production in 2H13.

“We continue negotiations with the Ecuadorean government on an improved economic package to develop FDN and are exploring opportunities to improve project economics at FDN as part of our optimization process.”

North American operations

Production for the North American region remains on target for the year, Kinross said, despite a slight decrease year-over- year and compared with the previous quarter.

The decrease from 4Q11 was a result of lower mill feed grades at Fort Knox (Alaska) and slightly lower gold release from the heap leach, reflecting winter conditions.

Round Mountain (Nevada) and Kettle River (Washington) performed at the same level as in 4Q11, the company said.

Regional production is scheduled to be higher in 2H as a result of accelerated heap processing and improved mill processing grades at Fort Knox.

Regional production costs were higher compared with the same period last year due to lower grades at Fort Knox and Kettle River. In addition, Fort Knox experienced higher energy costs.

In a speech to members of the St. John’s Board of Trade, MAC President and CEO Pierre Gratton said strong commodity prices, driven by growing demand in rapidly developing nations such as China and India, are creating more opportunities for new mine development and major mine expansions not seen in many years.

First gold pour at Rambler's Ming mine.

“The overall strength of the mining industry is evident in virtually all regions of Canada and will result in numerous economic benefits. This includes the mineral-rich province of Newfoundland and Labrador, which is currently the fifth-largest mining jurisdiction in the country,” said Gratton.

$140 billion of mining projects proposed for Canada

MAC estimates that about $140 billion in mining-related projects are currently proposed in Canada.  In Newfoundland and Labrador, that includes billions worth of investments in the iron ore sector from many of the world’s leading mining companies. For example, Vale’s hydrometallurgical nickel plant now under construction at Long Harbour, which represents the largest capital project in the metals sector in Canada at a cost of $3.6 billion.

The value of mineral production in Newfoundland and Labrador is estimated at $4.6 billion in 2011 and is forecast to increase to $5.7 billion in 2012, which is about 10% of total mineral production in Canada. In the goods-producing sector, mining is second only to oil, representing 8.6% of provincial GDP in 2010. Exploration investment in the province is forecast to be a record high of $234 million in 2012, up from an estimate of $172 million in 2011. This increase is being driven largely by increased interest in iron ore in western Labrador.

“Newfoundland and Labrador’s mining industry is providing unprecedented opportunities for business and careers,” said George Ogilvie, Chair of Mining Industry NL and President of Rambler Metals and Mining.  “With continuing supportive policy from our government we can continue our industry’s expansion to create local economic and social benefits and supply the world with the products needed for our modern society.”

308,000 workers employed in mineral industries

MAC estimates that about 308,000 workers in Canada are employed in mineral extraction, smelting, fabrication and manufacturing. The sector also offers higher compensation as compared to many other sectors such as forestry and manufacturing, with the average weekly pay of $1,632 for a Canadian mining worker in 2010. Mining is also the largest private sector employer of aboriginal people in Canada.

Gratton also highlighted the federal government’s recent decision to modernize Canada’s environmental review and permitting processes for resource projects under the Canadian Environmental Assessment Act. The “one project, one review” system, outlined in the government’s Responsible Resource Development program as part of its Economic Action Plan 2012, also commits to set fixed timelines for project reviews and permitting to help prevent delays that can cost companies billions in lost investment and stunt job creation.

“The efficiency and clarity that will result from these reforms will allow Canada to take advantage of growing emerging market demand for commodities,” Gratton said. “It will also accelerate investment, job growth and enhance Canada’s international competitiveness and position as a mining superpower.”

Some of the province’s operations

Among the mines the province supports, according to its Department of Natural Resources, are Vale Voisey’s Bay mine, Iron Ore Co. of Canada, Wabush Mines, Teck Duck Pond operations, Anaconda Mining Inc.’s Pine Cove operation, Beaver Brook antimony mine, Labrador Iron Mines’ James mine and the Rambler copper/gold project.

Moore, a leader of the international environmental movement for more than 30 years, speaks and writes about the myths and misinformation that distort current environmental debates. He calls for issues to be discussed on the basis of accurate scientific data, a search for consensus and the creation of sustainable solutions.

“Since my entry into the global environmental movement in 1971 — and especially in the last decade — mining has contributed significantly to a more sustainable world economy and key beneficiaries of this progress are mining workers, families and communities,” says Moore.

Scott Jobin-Bevans, PDAC past-president and one of the founders of S-IMEW, says, “S-IMEW has evolved into a world-class workshop for students. There’s nothing else like it in Canada. Each day, students participate in hands-on learning experiences in the field and in the evenings they network with industry and hear from a phenomenal group of speakers. Everyone is looking forward to hearing Dr. Moore speak — his experience with sustainability issues is unique.”

S-IMEW provides the top geoscience students in Canada with an intensive two-week workshop on mineral exploration and mining. The program was created to encourage students to pursue a career in mineral exploration and development and give them a foothold in the industry.

It is estimated that 100,000 skilled workers will be needed over the next 10 years to meet the labor needs of the mineral exploration and mining sector.

S-IMEW runs from May 4-19. For more information, visit www.pdac.ca/students/.

The basis of the lawsuit is that the federal government, through the Secretary of the Interior and the BLM, did not adhere to mandated statutory procedures when it issued a decision to close more than one million acres of federal ly managed land to all mining.

Specifically, the suit alleges that the facts and science demonstrated that mining would not harm the Grand Canyon watershed and that the withdrawal of federal lands regardless of this evidence was arbitrary and capricious; the decision arbitrarily withdraws over one million acres to address subjective sensibilities which enjoy no legal protection; the Secretary did not comply with the procedural requirements of the National Environmental Policy Act; and the Secretary did not address scientific controversies and failed to coordinate with local governments in making his decision.

The remedy sought is a judicial declaration that the withdrawal oorder is unlawful and setting it aside, together with issuance of a permanent injunction enjoining the defendants from implementing any aspects of the withdrawal. A decision finding that the Secretary failed to follow the criteria and procedures for a withdrawal and setting the withdrawal aside would restore the public lands to the status quo ante and allow Quaterra to proceed to develop the mineral deposits that it has lawfully claimed and worked.

Quaterra’s claims

Quaterra holds 1,000 mineral claims located in the Arizona Strip upon which it has expended approximately $12 million to fund the costs of exploration and development work. It has discovered three uranium-mineralized breccia pipes, four probable pipe structures that remain untested by drilling in the favorable horizon for uranium mineralization, and five possible pipe structures that have been defined by shallow drilling or have pipe structures clearly visible at the surface.

Since completing an airborne geophysical survey in 2007, Quaterra has had a 70% success ratio in the initial exploration of seven of a total of 157 high- and moderate-priority geophysical targets that Quaterra staked on federal lands now withdrawn in Northern Arizona. Quaterra said it believes that it holds “valid existing rights” to certain of its mineral claims where it has identified uranium minerals.

The withdrawal is stated to be subject to such rights and Quaterra’s exploration and development efforts have enhanced several claims to the category where they could be developed based upon existing rights.

The co-plaintiff, the Mohave County supervisors, alleges in the suit that without the withdrawal, uranium mining would contribute $168 million to Arizona over a 42-year period from severance taxes alone. Corporate and individual income tax revenues would contribute another $2 billion over the same time period. The Northern Arizona Withdrawal (NAW) will cost the State of Arizona nearly 400 jobs directly related to mining and 688 jobs indirectly related to mining.

“The NAW locks up a national treasure of clean energy and jobs at a time when both are critical to the needs of the country,” said Eugene Spiering, Quaterra’s vice president for exploration. “With a withdrawn endowment of 326 million pounds of uranium as estimated by the U.S. Geological Survey (Otton, 2010) and the energy equivalence of the largest oil field in North America, it is a tragedy that the potential resources of this district have been quietly erased by a fiat decision of the current Administration.”

For specific details of the legal pleadings, visit the company’s website.

The objective of the study was to recommend the most advantageous mining methodology from a range of alternatives and estimate the capital and operating costs for the underground mine. The design is a component of  a preliminary economic assessment for Bokan, due in the near term, the company said. The full report will be released in conjunction with the PEA.

“As our PEA moves to completion, this underground mining study is an important component of logistical analysis,” said Jim McKenzie, Ucore president and CEO. “The report affirms the mining potential at Bokan and offers insight into the comprehensive PEA which is pending in the near term. The study sets out a crown pillar where the mineralization outcrops at surface, resulting in a daylight expression that yields minimal environmental disturbance.

“The report also affirms that high-grade content can be accessed close to mine mouth, with a prospective positive effect on initial construction cost and turnaround,” he added.

“Further, the prospective minable resource size has been increased by 44% over prior estimates (from 3.7 million tonnes to 5.3 million tonnes),” McKenzie said, “due to a reduction of cutoff grade. The expected daily production rate for Bokan has also been increased by 50% over previous interim estimates (from 1,000 to 1,500 mtpd), with a potentially material impact on rate of return.”

The mine-design report was based on the inferred mineral resource block model provided by Aurora Geosciences (Alaska) Ltd. and released by Ucore in March of 2011. After a review of the block model inventory at various TREO (total rare earth oxides) cutoff grades, it was determined that 0.4% TREO would be utilized as an economic cutoff for the mine design. At this cut-off, the resource consists of 5.3 million tonnes of mineralization at an average grade of 0.65% TREO, of which 40% are HREO (heavy rare earth oxides.)

Blasthole stoping most efficient

Based on a review of the geometry of the mineralized body, Stantec determined that blasthole stoping is the most appropriate mining methodology for the project. Blasthole stoping is a very productive and efficient underground mining method and is based on a designed mine production rate of 1,500 mtpd.

The resultant production schedule forecasts 540,000 mtpy. The report suggests the use of mill tailings as paste backfill to fill the mined out areas of the underground. This technique promises to minimize the need to store tailings in a management facility at surface.

The total required operating manpower of the underground mine is estimated at 118 persons, including mine administrative personnel. Mine personnel calculations are based solely on the underground portion of the mine and are exclusive of personnel required for subsequent administration, surface operations and processing. Detailed capital and operating cost estimates will be released in conjunction with the PEA.

Ucore has multiple projects across North America, with the Bokan project being its primary focus. Bokan is some 60 kilometers southwest of Ketchikan and 140 kilometers northwest of Prince Rupert, B.C. and has direct ocean access to the western seaboard and the Pacific Rim, a significant advantage in expediting mine production and limiting the capital costs associated with mine construction.

The Bokan properties are located in an area reserved for sustainable resource development with an existing road network providing access to the main target areas. Rare-earth mineralization at the project occurs in a well-demarcated vein system related to a Mesozoic Bokan peralkaline granitic complex. However, a number of other occurrences of rare-earth mineralization are also located within or at the margins of the complex.

The parties also have agreed that Rio Tinto, which currently owns 51% of Ivanhoe, will replace a number of the directors on the Ivanhoe board with Rio Tinto-nominated directors and also nominate a new management team.

Financing package

The comprehensive financing package, together with the proceeds from any potential future asset sales by Ivanhoe, are intended to cover Ivanhoe’s total funding needs to complete the development of Oyu Tolgoi, Rio Tinto said.

Rio Tinto will provide a standby commitment for the full amount of a $1.8 billion rights offering by Ivanhoe. Rio Tinto also will provide $1.5 billion of bridge financing to Ivanhoe, in addition to the $1.8 billion interim funding facility that was agreed in December 2010.

Rio Tinto said it remains committed to continue working with Ivanhoe to secure project financing for the Oyu Tolgoi project and has agreed to provide a guarantee of certain obligations of Ivanhoe under the project financing. Once project financing is in place, both the $1.5 billion of bridge financing and the $1.8 billion interim funding facility will be repaid to Rio Tinto in full.

Board and management changes

Under the agreement, a new 13-member board will be formed, the majority of which will be independent directors comprising:

• 11 Rio Tinto-nominated directors, six of which will be independent; and
• Two directors nominated by Robert Friedland, one of which will be independent.

There will be an interim board in place until the new board is formed. Seven Ivanhoe Board directors will step down immediately.  David Huberman will step down from his role as chairman but continue to serve as a board member. Michael Gordon has been appointed as interim chairman pending the formation of the new board.

Friedland has stepped down from the board and from his role as CEO of Ivanhoe.  In addition, the CFO and certain other senior executives of Ivanhoe have stepped down.

Kay Priestly, a director of Ivanhoe and CFO of Rio Tinto Copper, has been appointed interim CEO and Catherine Barone, vice president of finance of Ivanhoe, has been appointed interim CFO.

The interim board will approve the appointment of six new board directors nominated by Rio Tinto by April 25 to complete the new board composition.  The appointment of a new CEO and CFO nominated by Rio Tinto will be also approved by the board.

“Since 2006, Rio Tinto has provided funding of $3.5 billion to Ivanhoe for the development of Oyu Tolgoi,” said Andrew Harding, chief executive of Rio Tinto Copper. “Today’s agreement provides future financial certainty for Ivanhoe and stability for the timely development of Oyu Tolgoi. We will also undertake a strategic review of Ivanhoe’s assets with a view to maximising value for all Ivanhoe shareholders.

“Working with our partners in Mongolia, we are dedicated to meeting our target of starting commercial production from Oyu Tolgoi in the first half of 2013 and bringing the benefits of the mine to the people of Mongolia.”

In production by third quarter

Ivanhoe reported Feb. 27 that construction of the first phase of Oyu Tolgoi was 75% complete, with a then-current major project being bring

“Installation of the two production lines in the concentrator and pre-commissioning works are progressing ahead of plan,” Friedland said. “The concentrator, which will have an initial capacity of 100,000 mtpd, now is more than 80% complete. The first production line is scheduled to be completed during the third quarter, followed by completion of the second production line in the fourth quarter this year,” he added.

“After achieving the scheduled milestones of the production of first ore and the production of the first copper, gold and silver concentrate this year, Oyu Tolgoi will ramp up to reach commercial production during the first half of next year.”

Denison then will distribute the EFR shares to its shareholders, who will get 1.106 common shares of EFR for each common share of Denison owned and will in aggregate own about 66.5% of EFR common.

Headframe at Denison's Arizona 1 mine in the Arizona Strip.

Energy Fuels and Denison said they believe this structure will provide a number of substantial benefits for shareholders of both companies, including:

• Creation of the largest 100% U.S. pure-play uranium producer and one of the largest holders of National Instrument 43-101(“NI 43-101″) compliant U.S.-based uranium resources;
• 2012 production forecasts totaling greater than 25% of total U.S. estimated production;
• Measured and indicated resources of 49.8 million pounds of U3O8, plus inferred resources of 17.9 million pounds of  U3O8;
• U.S. focus provides compelling fundamentals: domestic consumption of 55 million pounds of U3O8 per year vs. domestic production of only 4 million pounds of U3O8 per year;
• Clear operational synergies and capital efficiencies to increase production;
• Combination of mining and development assets which will accelerate the rate of development of EFR mines, provide higher throughput of mill feed and extend the number of years of production at the White Mesa mill;
• EFR’s Sheep Mountain project is an advanced-stage development asset which provides flexibility to bring an additional 1.5 million ppy of U.S.-produced U3O8 on-line;
• Creation of a strategic platform for continued uranium consolidation within the U.S.;
• Substantial vanadium by-product from the White Mesa mill and Colorado Plateau properties, where historic uranium-to-vanadium ratios have averaged approximately 5:1;
• Combined management expertise, with decades of combined uranium-mining and -processing experience; and
• Denison shareholders to benefit from the division of two distinctly different business profiles as well as exclusive management focus on exploration and development, such as DML’s high-profile Wheeler River project in the Athabasca Basin region of northern Saskatchewan and its Mutanga project in Zambia.

Company perspectives

“This transaction is transformational for Energy Fuels and reshapes the landscape of the uranium sector within the U.S.,” said Steve Antony, president and CEO of Energy Fuels.

“It combines the highly strategic asset of the only operating uranium mill in the U.S., White Mesa, with a significant resource base that substantially increases White Mesa’s available feedstock.

“The result is an unmatched production growth profile and the opportunity for both Energy Fuels and Denison shareholders to benefit from the clear operational synergies that result from this transaction. I look forward to working with Denison’s U.S. team to maximize the benefits of this important combination.”

“This transaction is an important step forward for Denison,” said Ron Hochstein, that company’s president and CEO. “The company has evolved on two parallel but different tracks, being both an exploration and development entity with a global footprint and an established producer in the United States.

“We are pleased to have the opportunity to combine our U.S. operations with such a complimentary set of assets and people. I’m excited about the opportunities that lie ahead for both Denison and Energy Fuels shareholders and believe that this transaction only serves to strengthen the operations of both companies.”

Energy Fuels’ assets

Energy Fuels Inc. is a uranium and vanadium mineral development company. The company recently acquired Titan Uranium Inc., including the Sheep Mountain project in the Crooks Gap District of Wyoming.

The company also received a Final Radioactive Materials License from the State of Colorado for the proposed Piñon Ridge uranium and vanadium mill in March 2011. The mill will be the first uranium mill constructed in the United States in over 30 years.

With about 61,000 acres of highly prospective uranium and vanadium properties located in Colorado, Utah, Arizona, Wyoming and New Mexico, as well as exploration properties in Saskatchewan’s Athabasca Basin totaling 32,000 additional acres, the company has a full pipeline of additional development prospects.

Energy Fuels, through its wholly owned subsidiaries, said it has assembled this property portfolio along with a first-class management team, including highly skilled technical mining and milling professionals.

On March 1, Energy Fuels announced an updated Preliminary Feasibility Study for Sheep Mountain. The study contemplates the concurrent development of the underground and open-pit deposits for a 15-year mine life.

This option generates a pre-tax Internal Rate of Return (IRR) of 42% and a Net Present Value (NPV) of $201 million, at a 7% discount rate and a $65 per pound long-term U3O8 price. This option has an expected initial CAPEX requirement of $109 million and OPEX of $32.31 per pound recovered. The Sheep Mountain project is currently at an advanced stage of permitting. Production is expected to commence in 2015, with a peak production rate of 1.5 million pounds of U3O8 per year.

Sheep Mountain contains an indicated resource of 12.9 million tons at an average grade of 0.12% eU3O8 (30.3 million pounds of eU3O8). This figure includes probable reserves of 7.45 million tons at an average grade of 0.123% eU3O8 (18.4 million pounds eU3O8).

Energy Fuels’ Colorado Plateau properties additionally contain measured + indicated resources of 1.95 million tons at an average grade of 0.24% eU3O8 and 0.89% V2O5 (9.4 million pounds eU3O8 and 34.9 million pounds V2O5).

Denison’s U.S. Mining Division assets

All of Denison’s U.S. assets are held directly or indirectly through its wholly owned subsidiary Denison Mines Holdings Corp., which holds its uranium mining and milling assets through subsidiaries, as follows:

• The White Mesa mljkill, a 2,000-ton per day uranium- and vanadium-processing plant near Blanding, Utah through Denison White Mesa LLC;
• The Colorado Plateau mines, straddling the Colorado and Utah border, through Denison Colorado Plateau LLC;
• The Daneros uranium mine in the White Canyon district of southeastern Utah and other exploration properties through Utah Energy Corp.;
• The Arizona Strip properties through Denison Arizona Strip LLC;
• The Henry Mountains uranium complex in southern Utah and other exploration properties through Denison Henry Mountains LLC; and
• Miscellaneous properties through Denison Properties LLC.

All of the U.S. properties are operated by Denison Mines (USA) Corp., a wholly-owned subsidiary.

Denison’s White Mesa mill in Utah is the only conventional uranium mill currently operating in the U.S. It is fully licensed and permitted to process 2,000 tpd, producing up to 8 million pounds of uranium per year.

A vanadium co-product recovery circuit allows for the processing of vanadium ore within the Colorado Plateau mines and its central location allows for hauling of uranium ore from Arizona, Utah, Colorado and New Mexico.

The Arizona Strip has higher grade production from breccia pipes. The Arizona 1 mine is currently producing with a track-record of resource replacement. A second mine (Pinenut) is expected to open in 2012. Shaft sinking is expected to begin at the Canyon mine in the fourth quarter 2012, pending regulatory approval, and the EZ1 & EZ2 properties are progressing through permitting.

The Henry Mountains Complex in Utah consists of the Bullfrog and Tony M deposits and represents Denison’s largest resource in the U.S. (12.8 million pounds indicated resources, 8.1 million pounds inferred resources). Currently the complex is on care and maintenance. It was fully permitted in September 2007 and has excellent infrastructure, access and is production ready, the company said. Haulage to the mill is along County and State highways.