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Frontier Rare Earths - Analyst Coverage
|Luisa Moreno||Euro Pacific|
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Frontier Rare Earths (TSX: FRO) is a mineral exploration and development company that is principally focused on rare earth elements - critically important minerals in high demand in the fast growing electronics, automotive, energy and clean-tech sectors. Frontier's flagship asset is the Zandkopsdrift rare earth deposit, which is located in the Northern Cape Province of South Africa and is one of the largest, code compliant, rare earth deposits under development worldwide. Zandkopsdrift's favourable location and geological setting are expected to provide significant advantages in relation to capital costs, operating costs and development time compared to many other rare earth projects currently being evaluated, and makes Frontier well positioned to become one of the significant new producers of separated rare earths globally.
In December 2011, Frontier signed a definitive joint venture agreement with Korea Resources Corporation (Kores), which is controlled by the Korean Government, in relation to the development of Zandkopsdrift. Korea has designated rare earths as a strategic raw material for Korea's future economic growth and selected Zandkopsdrift as the source of their future rare earth supply.
Under this agreement Kores acquired an initial 10% stake in Zandkopsdrift together with an offtake right and obligation for 10% of Frontier's Zandkopsdrift rare earth production. The consideration for the 10% stake in Zandkopsdrift acquired by Kores was C$23.8m. Kores is the Korean Government-owned mining and natural resource investment company whose mandate is to ensure that Korean industry has secure access to strategically important mineral resources. As rare earths are critical raw materials needed to support Korea's high technology industry and future economic growth, the Zandkopsdrift project is a strategic priority project for both Kores and Korea.
In March 2012 Frontier completed a Preliminary Economic Assessment on Zandkopsdrift which estimated its Net Present Value at $3.6bn and confirms the significant economic potential of the project.
In October 2012, Frontier announced a significant expansion of their strategic partnership with Kores whereby Kores had an option to increase its participation in Zandkopsdrift from it's 10% interest up to a 50% or equal interest with Frontier in Zandkopsdrift, together with a pro-rata off-take right and obligation for up to 50% of production from Zandkopsdrift. Read on to see full announcement
In December 2012, Frontier completed a definitive joint venture agreement with Korea Resources Corporation (Kores). Under the agreement, Kores acquired an initial 10%, fully participating interest in Zandkopsdrift, along with off-take rights for 10% of the rare earth production from Zandkopsdrift for payment of $23.8m in cash. Kores has options to acquire up to a further 40% interest in Zandkopsdrift and a 10% interest in Frontier at market price following completion of a Definitive Feasibility Study on Zandkopsdrift in return for arranging project finance and contributing 50% of the total equity requirement. These options, if exercised, would give Kores an off-take obligation for 50% of rare earth production from Zandkopsdrift. Read to see full announcement.
A Preliminary Feasibility Study on Zandkopsdrift is in progress and is currently scheduled for completion in Q3 2013.