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Frontier Corporate Presentation - Nov 2012

Frontier Corporate Presentation - Nov 2012



Frontier Corporate Presentation - Nov 2012

Frontier Corporate Presentation - Nov 2012



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    Frontier Corporate Presentation - Nov 2012 Frontier Corporate Presentation - Nov 2012 Presentation Transcript

    • DRAFTZandkopsdrift – the next major western RE producerNovember 2012 Frontier Rare Earths Limited TSX:FRO
    • Safe Harbour StatementForward-looking informationCertain statements contained in or incorporated by reference into this presentation constitute “forward-looking statements”.Officers and representatives of Frontier Rare Earths Limited (the “Company”) may, in their remarks or in response toquestions regarding this presentation, make certain statements which are “forward-looking statements” and are prospective.Forward-looking statements are neither promises nor guarantees, but are subject to risks, uncertainties and assumptionsthat may cause the actual results, performance or achievements of the Company, or developments in the Company’sbusiness or its industry, to differ materially from the anticipated results, performance, achievements or developmentsexpressed or implied by such forward-looking statements. Forward-looking statements are based on management’s beliefsand opinions at the time the statements are made or presented, and undue reliance should not be placed on any of theseforward-looking statements. There should be no expectation that these forward-looking statements will be updated orsupplemented as a result of changing circumstances or otherwise, and the Company does not intend, and does not assumeany obligation, to update these forward-looking statements. 2│
    • Topics Rare Earth Market Frontier Rare Earths overview Background to the Zandkopsdrift Rare Earth Project Preliminary Economic Assessment and Project Development Plans Strategic Partnership Outlook Appendices 3│
    • Rare Earths – Overview Series of 15 chemically similar elements that occur and are recovered together  Distribution of elements varies from deposit to deposit  Two distinct categories based on atomic weight: Light Rare Earths and Heavy Rare Earths Each element has a range of distinctive physical properties which allow them to be used in a variety of technological applications  Magnetic, optical, electrical, catalytic and metallurgical Underpin the “green” technology economy  Hybrid motor and battery technology  Energy efficiency  Wind power  Consumer electronics  Defense  Transport Most have no substitutes and are indispensable in many applications 4│
    • Rare Earths – Uses Biggest, fastest-growing use is for magnet applications which, together with phosphors and metal alloys, accounts for >80% of demand by valueValue of RE usage by application 40% 37% 35% 31% 30% 25% 20% 15% 14% 10% 5% 5% 4% 4% 3% 2% 0% Magnets Phosphors Metal Alloys Catalysts Ceramics Polishing Other GlassSource: Roskill 5│
    • Rare Earth Market DevelopmentsChinese Export Quota China 70,000  Continued restructuring of export quota system, forced industry 60,000 consolidation and clampdown on illegal mining & processing likely to have significant price implicationsTonnes REO 50,000  China has confirmed only 15-20 years reserves of heavy and 40,000 medium REOs and are expected to be a net importer of these 30,000 elements by 2015 20,000  Chinese export quotas have been reduced significantly since 2005 however export quotas have stabilised at c.30kt per annum 10,000  US/ Europe and Japan have jointly lodged a complaint with the 0 2005 2006 2007 2008 2009 2010 2011 2012E WTO in respect of China’s quota system and export taxes on rare earths Frontier Basket $/kg Since 2010300 Rest of World250  Plans by several countries including China, Japan, South Korea200 and US announced to stockpile rare earths150 3 Year Avg FOB  Major industrial users seeking to lock in long-term Spot Price FOB supply/partnership from credible potential producers i.e.100 Frontier/KORES, Lynas/Siemens 50 0 6│
    • Rare Earths – Supply/Demand Forecasts Demand CAGR projected at 6-10% through 2016 and beyond China’s domestic demand, particularly for medium and heavy rare earths, forecast to increase faster than domestic supply Future supply deficit widely forecast  Significant opportunity for new producers of separated rare earth oxides outside of China 275,000 Global Supply and Demand (tonnes REO) 250,000 225,000 200,000 175,000 150,000 125,000 100,000 75,000 50,000 25,000 0 2004 2005 2006 2007 2008 2009 2010 2011 2015f 2020f China supply ROW supply China demand ROW demand Total demandSource: Roskill,Freedonia Group 7│
    • Frontier Overview Flagship asset is the Zandkopsdrift Rare Earth project in South Africa World-class deposit in terms of size, rare earth grade, distribution and value Preliminary Economic Assessment competed March 2012  confirms Zandkopsdrift’s potential to become a major low cost RE producer  NPV11% of $3.7bn generating a post-tax IRR of 53% and 2 year payback Pre-feasibility Study targeted for completion in Q1 2013 and Definitive Feasibility Study scheduled 9-12 months thereafter Strategic Partnership signed with Korea Resources Corporation Frontier is the only rare earth junior advancing a major rare earth resource with a definitive strategic partnership agreement in place Initial Kores investment of $23.8m for 10% interest Kores option to acquire up to a 50% interest in Zandkopsdrift if arranges project finance for development Strong financial position: c.$30m cash (excl. Kores investment) and fully funded through completion of DFS Listed on the Toronto Stock Exchange  Experienced Board, management and technical teams 8│
    • Zandkopsdrift Project Location Zandkopsdrift is well-situated in the Northern Cape Province, South Africa’s oldest mining region Excellent mining and related infrastructure available Close to N7 highway from Cape Town (c.450 km)  35km to nearest railhead (Bitterfontein)  300km north of deep water port of Saldanha Bay Strong support in local communities for the development of the Zandkopsdrift Frontier controls mineral rights over c.60,000 ha around Zandkopsdrift and owns the land on which the deposit is located 9│
    • Cape Town – a first world destination 10 │
    • Satellite Image of Zandkopsdrift Carbonatite Zandkopsdrift Gravel road to N7 carbonatite complex N7 tarred road to Cape Town Exxaro Resources Namakwa Sands Mine (c.45 km) Bitterfontein rail head (c.35 km) 11 │
    • Zandkopsdrift Deposit 12 │
    • The Zandkopsdrift Deposit The biggest intrusion in a complex of carbonatite intrusions One of the largest known rare earth deposits, containing approx. 950k tonnes TREO  Contains significant high grade zones extending from surface that will allow preferential mining The majority of rare earths in Zandkopsdrift (~ 97%) are contained in monazite  Proven commercial extraction processes  Metallurgical test work to optimise process flowsheet on going in Canada, South Africa and China  Rare earth minerals in many other new RE projects have never had commercial processes developed, which will increase their development time, cost, and process risk Attractive distribution of light and heavy rare earths and very low radioactivity Potential for rapid development and production start-up  Good regional infrastructure available (road, rail, power and water) will also facilitate development  Targeting total annual production of 20,000 tonnes of separated rare earths 13 │
    • Geological Interpretation The Zandkopsdrift deposit is a REE enriched carbonatitic breccia pipe  Occurs as a 1km diameter circular intrusive rising 40 meters above the surrounding plain Extensive drilling in excess of 20,000 meters completed  313 boreholes drilled for a total of 21,037 meters  19,166 meters assayed at 1 meter intervals for resource estimation purposes Good understanding of geology and controls on mineralisation  Series of vertical to sub vertical RE-enriched dykes (“REDs”) intruded into a RE bearing carbonatitic phlogopite breccia phase (“CPB”)  The CPB and REDs have undergone several stages of alteration and deep weathering resulting in the development of supergene enriched high grade REE-bearing horizons from surface to 80-100m depth (see slide 53)  Geologically similar to Lynas’ Mount Weld deposit in Australia 14 │
    • Zandkopsdrift Geological Map and Drill Locations Assay results from final phase of resource drilling (14,200 meters drilling) to be incorporated into a revised resource estimate for PFS, and are expected to upgrade the majority of the resource into the Measured and Indicated resource categories 15 │
    • Zandkopsdrift Resource Estimate Large, high confidence resource estimate(c.950k tonnes TREO) with c.80% of the contained TREO at the Indicated Resource level (2011) Final phase of resource drilling (14,200 meters) at Zandkopsdrift completed in Q4 2011 Assay results from final phase of drilling expected to advance majority of the 2011 resource into the Measured and Indicated categories and PFS will convert such resources to Proven and Probable reserves reservesRelative distribution of REOs in Zandkopsdrift is shown on page 54.The resource estimate is NI 43-101 compliant and presented in accordance with CIM definitions The mineral resourceestimates reflect 100% of the estimated resources at Zandkopsdrift. Frontier’s 74% owned subsidiary, Sedex, has complied with the BEE equity ownership requirements as laid down by theMining Charter and MPRDA, through shareholder agreements with historically disadvantaged South African individuals and entities that together hold the remaining 26% of the issued sharecapital of Sedex. In addition to Frontier’s direct interest in the Zandkopsdrift Project through its 74% shareholding in Sedex (prior to Kores’ initial 10% acquisition), Frontier shall also beentitled to, in consideration for Frontier’s funding of the BEE Shareholders’ share of Sedex’s expenditure on the Zandkopsdrift Project up to bankable feasibility stage, a payment fromcertain of the BEE Shareholders following the completion of the bankable feasibility study equal to 21% of the then valuation of the Zandkopsdrift Project. This gives Frontier an effective95% interest in the Zandkopsdrift Project until such payment has been received. 16 │
    • Zandkopsdrift Absolute and Relative RE Distribution Element Tonnes Relative Distribution Lanthanum 240,833 25.37% Cerium 418,225 44.06% Praseodymium 43,870 4.62% Neodymium 150,723 15.88% Samarium 21,538 2.27% Europium 5,597 0.59% Gadolinium 13,441 1.42% Terbium 1,570 0.17% Dysprosium 7,364 0.78% Holmium 1,230 0.13% Erbium 3,015 0.32% Thulium 377 0.04% Ytterbium 2,090 0.22% Lutetium 283 0.03% Yttrium 39,145 4.12% TTt 949,301 100.00% 17
    • Zandkopsdrift Resource Block Model (2011) 18 │
    • Zandkopsdrift Sample Geological Section 7.98% TREO over 16 meters with 17.98% TREO over 1 meter 19 │
    • Weathered CPB intruded by weathered RE enriched REDs Weathered CPB 1-3% TREO Weathered REDs 6-8% TREO 20 │
    • Contact Between REDs and CPB in Bulk Sample Trench Weathered CPB 1-3% TREO Weathered REDs 4-5% TREO 21 │
    • Bulk Sample Trench for Pilot Testwork (Q1 2012) Average XRF TREO grade 3% for 174 metre trench 22 │
    • Preliminary Economic Assessment - March 2012 PEA Financial Highlights Post-Tax Net Present Value @ 11% discount rate $3.65bn Post-Tax NPV & IRR NPV attributable to Frontier Rare Earths $3.60bn Post -Tax Internal Rate of Return 52.5% Pre-Tax Net Present Value @ 11% discount rate $4.3bn Pre -Tax NPV & IRR Pre-Tax Internal Rate of Return 57.6% Average annual revenue $1.1bn Revenue and Cashflow Annual after-tax free cashflow in full production $711m Total construction Capex excluding contingencies $910m Capital Expenditure Start-up costs excluding contingency $27m Project payback from commencement of full production 2 years Revenue/kg and cost/kg “Basket price” per kg of separated REO from Zandkopsdrift $58.23xSeparated REO Total cash operating cost/kg separated REO $13.08 23 │
    • Location of Zandkopsdrift Project Components Mining, flotation and cracking plants to produce mixed rare earth carbonate Mixed rare earth carbonatetransported 300kms by road (N7) to Saldanha Bay Saldanha Bay Rare Earth Separation Plant-20,000 tonnes p.a. TREO 24│
    • PEA Operating Assumptions and Parameters PEA Operating Assumptions and Parameters Target annual mining rate 1 m tonnes Average stripping ratio* 3:1 Mining Life of mine 20 years Average production grade 3.1% TREO Mining dilution 7.50% Target annual production rate 20,000t separated TREO Metallurgical recovery 67% Processing Production start-up H2 2015 Time to full production 1 year * including all stockpiled <2% grade material and waste 25 │
    • Zandkopsdrift Preliminary Mine Pit Design (looking southwest) Pit Dimensions (approx.) East -West extent 830m North-South extent 900m Maximum no. benches planned 12 • 19.5 mt to be mined over 20 years • Average 3:1 stripping ratio • Significant LoM extension possible, as only 60% of current resource is exploited 26 │
    • Zandkopsdrift Mine Detailed Layout 27 │
    • Zandkopsdrift Mine Concentrator Plant -Metallurgical flow sheet 28 │
    • Zandkopsdrift Mine Process Plant Layout• “Conventional” metallurgical process• Crush, grind, float and sulphuric acid crack• 99% pure mixed rare earth carbonate produced 29 │
    • Zandkopsdrift Mine Acid Cracking Plant –Metallurgical flow sheet 30 │
    • Saldanha Bay- (300km from Zandkopsdrift) Sichen to Saldanha iron ore export rail line Saldanha Port Arcelor Mittal Saldanha Steel Works Exxaro ilmenite smelter-Saldanha Bay 31 │
    • Saldanha Bay Industrial Development Zone 32 │
    • Rare Earth Separation Plant Location and Layout 33 │
    • Saldanha Separation Plant-Metallurgical flow sheet 34 │
    • Saldanha Separation Plant-Illustrative Production andRevenue Contribution by REO 10,000 8,833  Assumes production of 8,000 20k tonnes separated Tonnes per Annum REOs p.a. and elemental recovery in line with in 6,000 5,083 situ Zandkopsdrift 4,370 distribution 4,000 3,154  Zandkopsdrift has an 2,000 attractive distribution of 910 814 both the high value light 462 288 118 34 154 150 and heavy rare earth - elements (the “Big 5”)  These Big 5 elements represent c.22% of illustrative production 0.0% volumes but contribute 0.0% 2.3% 2.2% c.69% of project revenue** 10.0% 5.2% 5.6% 7.4% 7.4%  Cerium and lanthanum Contribution to revenue 13.6% 11.7% 20.0% would represent c.70% of 19.2% the illustrative production 30.0% 25.4% volume but contribute only 21% of potential project 40.0% revenue** 50.0% 60.0% 70.0% 68.9% *Big 5 – Neodymium ,Praseodymium ,Europium, Terbium and Dysprosium **Revenue contributions are calculated using current FOB China prices from Metal Pages as at 1 November 2012 No value is attributed by Frontier to the five heavy rare earths from Holmium to Lutetium 35│
    • Environmental Assessments Completed for PEA Preliminary Environmental Assessments completed  Botany  Archaeology  Air and water quality  Human health risk and radiology impact Uranium and Thorium are at very low levels  Although the rare earths at Zandkopsdrift are contained (97%) in monazite the grades of both uranium (60-70ppm) and thorium (215-235ppm) are unusually low  Uranium and thorium removed by precipitation and disposed to double-lined tailings disposal facility at Zandkopsdrift  Environmental studies concluded that “the environmental impact of the radionuclides will be negligible” 36 │
    • Zandkopsdrift Project Capital Expenditure Estimate Sulphuric acid Total construction Capex PEA plant, $87.7m (9.6%) estimate of $910m* (including Mining and Separation plant, infrastructure at c.$100m for sulphuric acid and $498.4m (54.8%) Zandkopsdrift, $79.4m (8.7%) seawater desalination plants) Split 67% for the Saldanha Bay rare earth separation plant & infrastructure and 33% for Concentrator Zandkopsdrift mining, Plant, $132.1m concentration plant, sulphuric (14.5%) acid plant and infrastructure Additional $27m required in start-up and indirect Capex on commissioning Infrastructure at Saldanha, $112.6m (12.4%)*excludes contingency but contingency isincluded in the PEA financial model and valuation 37 │
    • Zandkopsdrift Project Capex versus Western Peers Actual & Forecast Capex of Projects to produce separated REOs  Total Capex for Zandkopsdrift compares well 2,500 $2,046m with similar scale projects worldwide 2,000  Circa 2/3rds of Capex relates to the Saldanha Separation 1,500 $1,213m Plant and data from peers $1,128m US$m $937m indicates comparable capital $895m 1,000 split $645m 500 -(1) Capex based on refurbishment of existing mine and infrastructure Separation Plant(2) US$/A$ exchange rate of 1.07 Mine & Concentrator Start-up Capex 38 │
    • Zandkopsdrift Project Operating Cost Breakdown (PEA)$15.00  PEA estimates total cash $7.03 operating cost per kg/separated REO from Zandkopsdrift at $13.08  The main opex components are$10.00 c.54% for the separation plant and c.39% for the concentration plant, the bulk of which comprises reagent costs $0.06 $0.07 and the operation of the $5.06 sulphuric acid plant $5.00  Mining and shipping costs are low due to the ease of mining, the high grade and the availability of infrastructure $0.86  Opex estimate excludes 15% contingency but this $0.00 Mining Concentrator Other costs Transport Separation contingency has been included & H2SO4 Plant in the Zandkopsdrift PEA Plant financial model and valuation 39 │
    • PEA Rare Earth Pricing Methodology (March 2012) At 1 November 2012, the Zandkopsdrift basket price (China FoB) was $47.81/kg Applying the trailing 3 year FoB China prices, the Zandkopsdrift “basket price” per kg of separated REO is $85.49/kg Applying the mid-point of Roskill’s 2015 price forecast ranges for the principal REOs, the Zandkopsdrift basket price is $52.10/kg The PEA utilised the average of the 3 year China FoB price (to Dec 2011) and the mid-point of Roskill’s 2015 price forecast. This methodology reduces the impact of the high rare earth prices in 2011 and resulted in a Zandkopsdrift PEA basket price of $58.23/kg No value assumed in Zandkopsdrift price basket for five heavy rare earths (holmium, erbium, thulium, ytterbium and lutetium) Rare Earth Oxide FOB China Price FOB China 3yr Avg China Domestic Price Roskill 2015 Price (1 Nov 2012) (Nov 2009-Nov 2012) (1 Nov 2012) forecast Lanthanum 12 49 7 20-35 Cerium 15 48 7 10-15 Praseodymium 82.5 115 54 80-120 Neodymium 82.5 129 54 80-120 Samarium 29.5 59 8 * Europium 1810 1877 812 1,000-1,200 Gadolinium 64.5 84 18 * Terbium 1300 1555 607 1,000-1,200 Dysprosium 615 866 379 800-1000 Yttrium 52.5 82 18 40-60 Zandkopsdrift ‘Basket Price’/kg $47.81 $85.49 $26.04 $52.10 40 │
    • Korea Resources Corporation Korea Resources Corporation (“KORES”) is wholly-owned by the Korean government Objective of becoming a global top 20 mining company by 2020, principally through international investments and joint ventures Policy mandate to further Koreas access to strategically important mineral resources Works with major Korean industry groups and assembles consortia of Korean companies to participate with KORES in commercial ventures Korean government has designated rare earths as a strategic raw material for Korea’s future economic growth and selected Zandkopsdrift source of their future rare earth supply“In order to support Korea’s high technology, automotive and other industries, the development ofZandkopsdrift will be a strategic priority project for the KORES Consortium and a critical element ofKORES’ efforts to secure a long term, stable source of rare earth supply for Korean industry.”Shin-Jong Kim, Kores President and CEO (Dec 2011) 41 │
    • KORES Joint Venture Highlights KORES to acquire initial 10% interest in Zandkopsdrift for $23.8m in cash (Nov 2012) KORES options on completion of a positive Definitive Feasibility Study for Zandkopsdrift:  Kores may increase participation up to a 50% interest* in Zandkopsdrift, together with an off-take right and obligation for up to 50% of production from Zandkopsdrift (the “50% Option”)  The exercise of the 50% Option will be conditional upon Kores arranging project finance for entire Zandkopsdrift development on best available market terms and, if such project finance is accepted by the Frontier Board in its absolute discretion, Kores providing its pro rata funding for the portion of Zandkopsdrift development costs not covered by the project finance  Alternatively, Kores may acquire an additional 10% interest in Zandkopsdrift at the DFS project valuation (NPV) and, if so acquired, Kores may then also acquire 10% shareholding in Frontier at market price. If these options are exercised by Kores in full it will also procure an off-take right and obligation for 31% of production from Zandkopsdrift  Frontier may introduce an Alternative Strategic Partner into Frontier/Zandkopsdrift prior to the exercise of the above options by Kores and in such event the 50% Option will be cancelled  Kores will provide technical and operating experience for the design, construction and operation of the Zandkopsdrift facilities  Frontier and Kores will cooperate in relation to downstream opportunities in the area of rare earth metals, alloys and magnets Zandkopsdrift is Kores’ only investment in a rare earth mine development worldwide. *Full details of the Frontier Kores JV are set out in the news release dated October 23 2012 42 │
    • Zandkopsdrift Current Estimated Project Timeline 2011 2012 2013 2014 2015 PEA Resource PEAPFS/DFS Resource Pre Feasibility Study DefinitiveFeasibility Study Financing Construction Production Start-up 43 │
    • Corporate Information TSX:FRO Frontier Relative Share Price (rebased) Shares Outstanding: 89,562,781 120 Market Cap c.$53m Share Price $0.60 (52 week hi/low $1.44 - 100 $0.43) Working Capital c.$30m (excl. Kores $23.8m) 80 Research Coverage: 60  CIBC  Euro Pacific Capital 40  Cormark Securities Frontier Share Price  Byron 20 Peer Average (RER, Quest, Arafura & Avalon) Industry Leader Average (MCP + LYC) 0 44 │
    • Frontier Peer ComparisonCompany Lynas Molycorp Avalon Rare Element Quest Arafura Tasman Frontier ‘Central ZandkopsDeposit Mt Weld Mtn Pass Nechalacho Bear Lodge Strange Lake Nolans Bore Norra Karr Zone’ driftLocation Australia California NW Territories Wyoming Quebec Australia Sweden South AfricaTREO Grade 8.08% 7.04% 1.70% 3.45% 1.20% 2.80% 0.54% 3.12% 2.28%Tonnes per annum 11kt / 22kt 19kt / 40kt 10kt 10kt 12kt 20kt 6kt 20ktRare Earth Product Separated REO Separated REO Separated REO Concentrate Concentrate Separated REO Concentrate Separated REOProject stage Commissioning Commissioning PFS PEA PEA PFS PEA PEA Ancylite & Fluorapatite &Primary RE Mineral Monazite Bastnaesite Fergusonite Kainosite Eudialyte Monazite bastnaesite CheraliteDeposit type Pipe Pipe Tabular Dykes/veins Veins Veins Tabular PipeMining Method Open Pit Open Pit Underground Open Pit Open Pit Open Pit Open Pit Open PitClimate Arid Arid Arctic Cold Cold Arid Moderate GoodInfrastructure Poor Good Poor Good Poor Poor Good GoodIndustry Partner Yes Yes No No No No No YesStart-up year (est.) 2012 2012/13 2016 2016 2017 Unknown 2016 2015Market Cap $1,222m $1,054m $171m $185m $76m $86m $85m $53mEnterprise Value ($m) $1016m $684m $111m $149m $60m $59m $74m $23m 45 │
    • Summary World-class rare earth deposit  high grade, attractive REE distribution, large tonnage, on surface, low radioactivity Well positioned to become the next major, low cost producer of separated rare earthaoxides and the largest non-Chinese producer of separated heavy rare earth oxides  Confirmed by results of PEA  PFS in progress and targeted for completion in Q1 2013 Only rare earth junior with a definitive agreement with a strategic industry partner Experienced management and technical teams Strong financial position and fully funded to complete PFS and DFS Share price trading at significant discount to peers Share buy-back commenced late Q2 2012 46 │
    • DRAFTAppendices
    • Senior Management TeamSenior Management team with extensive experience of exploration and development ofmineral projects in Southern Africa, rare earths, financing and corporate developmentJames Kenny B Comm, MBS Philip Kenny B Eng, MBAChief Executive Officer Chairman20+ years experience in natural resources sector as an 25+ years experience in natural resource sector.executive, adviser and broker. Co-founder of Frontier and Founder and former Executive Chairman and CEO ofcentrally involved in all aspects of Frontiers Firestone Diamonds plc, an AIM-listed diamond miningdevelopment, corporate, strategic and financing activities company focused which built and operated diamondsince incorporation. mines in South Africa, Botswana and Lesotho. Derick de Wit B Tech, Chem. Eng.Paul McGuinness B Comm, ACA Vice President, Project DevelopmentChief Financial Officer 15+ years experience in minerals industry. Has managed15+ years experience in investment banking and or prepared more than 30 independent reviews, scoping,financial control with Arthur Anderson, Salomon Brothers, pre-feasibility and definitive feasibility studies in AfricaSchroders, Collins Stewart and MG Capital. and Canada.Dr. Stuart Smith B Sc, PhD Ms Vivian Wu B Sc, EMBAVice President, Exploration Business Development Director- Greater China30+ years experience in mineral exploration with 20+ years experience in rare earth industry in seniorparticular experience in rare earths, uranium, base roles with China Minmetals Corporation, Rhodia (China)metals and diamonds. Investment Co and Treibacher Industrie AG. 48 │
    • Independent Non-executive DirectorsAnu Dhir (Canada) B.A., J.D. Eamonn Grennan (Ireland) B.Sc, M.ScFormer VP Corporate Development and Company (Ireland)Secretary of Katanga Mining Limited. Managing Director Independent consulting geologist with over 40 yearsof Miniqs Limited, Non-executive Director of Anooraq experience as an exploration manager, geologist,Resources Corporation and Non-executive Director of consultant and senior lecturer. Former President of theCompass Asset Management. Irish Association for Economic Geology and member of the Consultative Committee of the Irish GeologicalCrispin Sonn (South Africa) B.A., B.Comm Survey.Executive Director of Old Mutual South Africa, the largestintegrated financial services company in South Africa.Chairman of the Old Mutual Foundation, foundingChairman of Foodbank South Africa and Non-executiveDirector of Capespan (Pty) Ltd. 49 │
    • Principal Zandkopsdrift ConsultantsConsultant Responsibility Archaeological, botanical, air quality, human health risk and radiological impact assessmentsAfrica Geo-Environmental Services Mine closure plan and estimate of financial provision Water fatal flaw analysis and water baseline studyAfrica Remediation Technologies Sea water desalination plant scoping studyBenchmark Risk Advisory Independent risk assessmentCameron Cross Incorporated Environmental permitting legal opinionCorli Havenga Transportation Engineers Access routes and logistics surveysEHL Consulting Engineers Eskom bulk power supply applicationEpoch Resources Tailings disposal facility designKPMG Tax and corporate structureMetallurgical Development Services Independent process consultantMSA Group Geological model and mineral resource estimationSGS Minerals Services and Beneficiation and hydrometallurgical studiesMintek SA Design of the concentrator, acid cracking, sulphuric acid and separation plants, includingSNC Lavalin Group associated infrastructure and services, and capital and operating cost estimatesSound Mining Solution Geotechnical assessment and mine design Technical and economic review of the project, preparation of financial model and projectVenmyn Rand valuation, preparation of independent technical report on the results of the PEA and the PFS 50 │
    • Zandkopsdrift opex versus peersOpex of Projects planning to or producing separated REOs  Zandkopsdrift’s concentrator and 30.00 separation plant opex compares well with other rare earth projects Separation cost per kg globallyUS$ per Kg of Separated REO 25.00 Mining, conc. & transport cost per kg  Opex primarily driven by reagent 20.00 and energy costs 15.00  The PEA assumes that HCL for the Saldanha Separation plant will be 10.00 purchased at market rates and that a sulphuric acid plant will be built at 5.00 the mine site which will also provide power to operate the mine and 0.00 concentrator Lynas (2) Frontier (2) Arufura (2) Molycorp (1)  Frontier will continue to further optimise the Zandkopsdrift Project (1) Molycorp Q1 2012 actual cost. Molycorp forecasts a 90% reduction in opex but does not break down costs between separation and other operating costs opex including looking at ‘over the (2) Based on a US$/A$ exchange rate of 1.07 and a USD/ZAR rate of 7.8 fence’ reagent supply opportunities 51 │
    • Opex versus peers producing a mixed RE concentrate Projected Opex of projects producing RE concentrate 20  Frontier’s operating cost for the 18 17.27 production of a mixed rare earth 16 concentrate is considerably lower than US$ per Kg of Concentrate for other projects that are planning on 14 producing a concentrate 12 10.93 11.28 10 10.09  The Opex cost advantage of Zandkopsdrift deposit is driven by its 8 6.05 favourable location, relative ease of 6 mining, the monazite host mineral, and 4 the nature of the deposit. 2 0 Frontier (1) Rare Element Tasman Quest Matamec (1) Based on a USD/Rand rate of 7.8 52 │
    • Capex versus peers producing mixed RE concentrate Mine & Concentrator - Total Costs 600  Several of Frontier’s peers plan to produce a mixed 500 rare earth concentrate rather than separated rareTotal Cost US$m earth oxides 400  The production and sale of rare earth concentrate 300 may be a more challenging business model as, at 200 present, there are no available western separation 100 plants that can toll separate rare earth concentrate. In addition sales of RE concentrate to China may - be impacted by the export quota system (and Frontier Matamec Rare Element Quest (12kt) (20kt) (5kt) (10kt) therefore the price achievable for the RE Mine & Concentrator Costs per kt of RE product concentrate could be based on a discount to the 70 China domestic price rather than the China FOB Total Cost Per Kt REO - US$m 60 price as many projects have assumed) 50  The cost advantage of the Zandkopsdrift Project 40 can also be seen in the Capex cost of the 30 Zandkopsdrift mine and concentrator plants to produce a mixed rare earth concentrate . 20 10 - Frontier Rare Element Quest (12kt) Matamec (20kt) (10kt) (5kt) 53 │
    • Relative REO Distribution of Major Western Deposits Lynas Molycorp Frontier Rare Element Arafura Avalon Quest REO price Rare Earth Oxide ($/kg)2 Mt Weld Mtn Pass Zandkopsdrift Bear Lodge Nolans Bore Nechalacho Strange Lake Lanthanum $14 25.2% 34.0% 25.4% 27.1% 19.8% 17.1% 14.4% Cerium $15 45.2% 48.8% 44.2% 43.7% 47.6% 39.5% 30.0%LREO Praseodymium $83 4.9% 4.2% 4.5% 5.1% 5.8% 4.9% 3.3% Neodymium $83 17.1% 11.7% 15.8% 18.0% 21.2% 19.2% 12.2% Samarium $33 2.4% 0.8% 2.3% 2.7% 2.4% 3.8% 2.2% Europium $1810 0.6% 0.1% 0.6% 0.7% 0.4% 0.5% 0.0% Gadolinium $65 1.5% 0.2% 1.4% 1.4% 1.0% 3.1% 2.2% Terbium $1400 0.2% 0.0% 0.2% 0.0% 0.1% 0.4% 1.1% Dysprosium $735 0.5% 0.1% 0.8% 0.3% 0.3% 1.8% 3.3%HREO Holmium* $0 0.1% 0.0% 0.1% 0.0% 0.0% 0.3% 1.1% Erbium* $0 0.2% 0.0% 0.3% 0.0% 0.0% 0.8% 2.2% Thulium* $0 0.0% 0.0% 0.0% 0.0% 0.0% 0.1% 0.0% Ytterbium* $0 0.1% 0.0% 0.2% 0.0% 0.0% 0.6% 2.2% Lutetium* $0 0.0% 0.0% 0.0% 0.0% 0.0% 0.1% 0.0% Yttrium $58 2.0% 0.0% 4.1% 1.0% 1.3% 7.8% 25.6% Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Total – HREO 5.1% 0.5% 7.8% 3.4% 3.1% 15.5% 37.8% Total – ‘Big 5’ 23.3% 16.1% 21.8% 24.1% 27.9% 26.8% 20.0%*No value attributed to Holmium, Erbium, Thulium, Ytterbium and Lutetium as these elements have small markets, are typically produced to order and do not have regularly published prices.REO prices from Metal Pages 1 November 2012Peer group includes selected advanced rare earth projects with >200k TREO calculated on a code-compliant basis 54 │
    • Metallurgical Sample Recovery Sites ( Q1 2011) Metallurgical sample recovery sites 55 │
    • Frontier/KORESJoint Venture Signing December 2011Shin-Jong Kim, President and CEO of KORES (seated lhs) said:“In order to support Korea’s high technology, automotive and other industries, thedevelopment of Zandkopsdrift will be a strategic priority project for the KORES Consortiumand a critical element of KORES’ efforts to secure a long term, stable source of rare earthsupply for Korean industry.” 56 │
    • Transition from Weathered to Fresh CPB (circa 90 meters depth) Transition from Weathered CPB High Grade Weathered CPB Lower Grade Fresh CPB 57 │