Kores 10% interest now complete.....
Frontier Rare closes sale of Zandkopsdrift interest
2012-12-14 08:10 ET - News Release
Mr. James Kenny reports
KOREA RESOURCES CORPORATION COMPLETES ACQUISITION OF A 10% INTEREST IN FRONTIER RARE EARTHS' ZANDKOPSDRIFT PROJECT FOR C$23.8 MILLION
Korea Resources Corp., the Korean government-owned mining and natural resource investment company, has completed the previously announced acquisition of a 10-per-cent interest in Frontier Rare Earths Ltd.'s Zandkopsdrift rare earth project in South Africa, along with an offtake right and obligation for 10 per cent of Zandkopsdrift rare earth production, by payment of a cash consideration of $23.8-million. This acquisition makes Frontier the only junior company in the rare earths sector to have signed and completed a definitive agreement with a significant strategic partner.
James Kenny, President and CEO of Frontier Rare Earths commented: "The acquisition by Kores of a 10% interest in Zandkopsdrift is a strong vote of confidence in both the potential of the Zandkopsdrift project and the management of Frontier. With our partnership with Kores and a significantly strengthened balance sheet, we believe that Frontier is very well positioned to meet its objective of becoming the next major producer of separated rare earths outside of China."Strategic Agreement
Under the terms of the revised strategic partnership agreement between Frontier and Kores (the "Strategic Agreement"), which was signed in October 2012, Kores has an option to increase its participation in Zandkopsdrift from its current 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. The exercise of this option is conditional on Kores arranging project finance for the entire Zandkopsdrift development on terms acceptable to Frontier in its absolute discretion, and on Kores committing to provide its pro rata share of funding for the portion of Zandkopsdrift development costs not covered by the project finance.
Under the terms of the Strategic Agreement, Kores will also provide Frontier with technical and operating assistance for the design, construction and operation of the proposed Zandkopsdrift facilities. Frontier and Kores will also cooperate in relation to downstream opportunities in the area of rare earth metals, alloys and magnets. Further information and details on the Strategic Agreement are available in the Company's news release dated October 23, 2012 (https://www.frontierrareearths.com/media-cover/press-releases-2012)
Working Capital
Following receipt of the payment from Kores Frontier's cash balance is approximately C$52 million. This is expected to be sufficient to fund the completion of a Preliminary Feasibility Study and a Definitive Feasibility Study at Zandkopsdrift, work on the Company's other proposed exploration and development programs and corporate overheads. Kores is also required to pay Frontier 10% of all operating costs and expenses related to Zandkopsdrift from July 2012 onwards, amounting to approximately C$0.4 million as of the end November 2012. The Company has no debt.
Preliminary Feasibility Study
In March 2012, Frontier published a National Instrument 43-101 ("NI 43-101") compliant Preliminary Economic Assessment ("PEA") on Zandkopsdrift, the results of which confirmed the proposed development to be both technically feasible and economically robust with a low risk profile. In April 2012 Frontier commenced work on a NI 43-101 compliant Preliminary Feasibility Study ("PFS") on Zandkopsdrift. Good progress has been made on the PFS, with most of the requisite studies now either completed or at an advanced stage. A detailed update on Frontier's PFS activities and progress is available in the news release dated November 7, 2012 (https://www.frontierrareearths.com/media-cover/press-releases-2012)