Pensana Metals’ Longonjo REE feasibility indicates up to $2.73bn in gross revenue

Pensana Metals (ASX: PM8) has unveiled a pre-feasibility study for its Longonjo rare earth neodymium and praseodymium project in Angola, which indicates high-case gross revenue of $2.73 billion over nine years.

The study estimates capital expenditure of US$131 million would be required to build a 2 million tonne per annum processing plant that would generate 60,000tpa of rare earth concentrate.

Using Roskill forecasts, the study anticipates high-case gross revenue of US$2.73 billion, with a low case of US$1.45 billion and a base scenario of US$1.98 billion.

Under the base price, earnings before interest tax depreciation and amortisation of US$1.32 billion is predicted with a 13 month capital payback period.

According to Pensana, the project’s proximity to major rail and power infrastructure “significantly reduces the capital cost” and paves the way for the mine to be developed as a simple flotation operation that produces a concentrate for export without the need for investment in a more costly downstream processing plant.

Pensana anticipates Longonjo will become the first major rare earth mine to be developed since 2012 – making it a substantial producer outside of China.

During the first three years, Pensana is looking to process 1.5Mtpa of the higher grade resources to produce 60,000tpa of concentrate comprising 4,600tpa neodymium and praseodymium and 20,700tpa total rare earth oxides.

Pensana plans to expand this to 2Mtpa in the fourth years to maintain the same level of concentrate and neodymium and praseodymium output.

Pensana chairman Paul Atherley said he was “delighted” with the pre-feasibility results, particularly, the “strong economics”.

“The work by the team in ensuring that the upfront capital costs are low while designing in the highest standard of ESG [environmental, social and governance] and scope three emissions compliance will make the project very attractive to offtake parties and financiers,” Mr Atherley added.

Neodymium and praseodymium market

Mr Atherley noted that Longonjo would become a major neodymium and praseodymium supplier outside of China during a time of increasing demand.

The elements are essential to the manufacture of magnets used in electric vehicles and offshore wind turbines with both these sectors forecast to experience large growth.

Pensana pointed out that analysts are predicting the neodymium and praseodymium market will shift into a deficit as a result of the magnet demand in EVs, green energy and military applications.

The company cited Adamas Intelligence’s report which forecasts demand will “substantially exceed production” by 2030 and result in supply shortages.

Due to the critical need for rare earths in new technologies, numerous governments including the US have been looking to lock-in stable supply outside of China.

Additionally, a number of companies globally are planning to develop local processing capability, which Pensana sees as potential future customers for its Longonjo production.

As well as promising demand dynamics, Pensana has pointed out the Angola Government has taken a number of steps to promote foreign mining investment in the region.

The county is now regarded as the UK’s number one investment destination in Africa.