Greenland Minerals and Energy Ltd (ASX:GGG) has updated the feasibility study on its Greenland rare earth and uranium project Kvanefjeld from enhancements that would result in reduced capital costs and increased project returns from development.

Kvanefjeld is one of the world's most advanced rare earth and uranium projects.

The Kvanefjeld feasibility study was released in 2015 and recast project metrics as a result of technical improvements revised costings and third party financing options has lifted projected average annual free cash flows to US$376 million.

In turn net present value of the project gains a lift from US$1.40 billion to US$1.59 billion and the internal rate of return has increased by 99% from 21.8% to 43.4%.

Project financing was initially forecast at US$1.36 billion which has been lowered significantly to US$831.9 million.

Payback period is now 5 years instead of 6.

Conservative pricing assumptions demonstrate the viability of the project even in a low-price environment. This included the use of the current long term contract price and the price for the majority of the rare earth basket has been reduced to current spot prices.

On the plus side forecast prices for the 4 “magnet metal” rare earths: Neodymium Praseodymium Terbium and Dysprosium that were used in the earlier Study have been retained - based on their favourable long term outlook.

Recently conducted pilot plant operations demonstrated results that led to increases in recoveries and production.

These measures all contribute to significant capital and operating cost reductions from those reported in the Feasibility Study.

The project stands to be a stable longterm lowcost supplier of materials essential to clean energy generation and energy efficient technologies.

The uranium output will provide a stable revenue stream to significantly strengthen project economics of the Kvanefjeld multielement deposit (rare earth elements uranium zinc).


Third Party Infrastructure Financing

Third party financing construction and operation of a port of sufficient scale accommodation for employees power supply and supplies of key reagents would enhance strategic partner offtake and financing imperatives. Build Own Operate (BOO) arrangements would prove a significant value driver.


Hydropower for Kvanefjeld

Greenland Minerals is eyeing the use of hydroelectric power for Kvanefjeld having signed an agreement with a European multinational conglomerate to develop a "power concept" based on renewable energy to power Kvanefjeld.

Apart from reducing the carbon footprint third party infrastructure concepts could reduce capital costs and enhance the projects economic metrics. The agreement to advance third party power solution is a significant step in that direction.

Greenland Minerals has actively been investigating thirdparty infrastructure concepts that would benefit the Kvanefjeld Project.


Government support

Steps continue to be made between Greenland Minerals and the governments of Denmark and Greenland.

In February the governments of Denmark and Greenland signed a uranium export agreement addressing the regulation of future mining and export of the commodity from Greenland.

The agreements reaffirm Greenland’s full authority over its natural resources including environmental health and safety at any uranium (or thorium) production facility in Greenland.

This followed the establishment of legal framework between Denmark and Greenland regarding the special foreign defence and security policy issues of the commodity.


Background

During 2015 the key focus for Greenland Minerals was the completion of a mining license application for the Kvanefjeld Project. In Greenland a mining lease application must include a comprehensive feasibility study and environmental and social impact assessments.

The scope of both the impact assessments are only settled once the scope of the feasibility study has been determined.

Greenland Minerals settled the scope of its feasibility study in 2014 and completed the study in May 2015 which allowed for the environmental and social impact assessments to be successfully completed in Q4 2015. The application was then lodged with the Greenland Government for formal review.

Having finalised the scope for the feasibility study Greenland Minerals continued to investigate opportunities to enhance the project and also conducted pilot plant operations to evaluate continuous metallurgical performance at large scale.

A number of fundamental enhancements to the project were identified through these steps and these have now been incorporated into the company’s project valuation.


Analysis

Technical improvements by GGG have been the biggest driver behind the increase in net present valuation of the Kvanefjeld project by US$193m and big lift in IRR to 43.4%. The result is all the more positive particularly because many assumptions that have been used in the updated FS are even more conservative.

Inputs that would affect project valuation such as discount rate project operating costs and uranium recoveries have all been adjusted. This shows Greenland Minerals have taken a measured approach with their revaluation.

Future valuation drivers for GGG include: arrangement for power supply with the Government of Greenland and a major European multinational conglomerate that specialises in power provision; BOO (Build Own Operate) advancement and commercial discussions with strategic partners and offtake agreements.

<