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Search Minerals Announces Enhanced Economics in Revised Preliminary Economic Assessment of Foxtrot REE Project

March 25, 2013

VANCOUVER, March 25, 2013 /PRNewswire/ – Search Minerals Inc. (“Search” or the “Company”) (TSX Venture: SMY) is pleased to announce the results of a revised Preliminary Economic
Assessment (“PEA”) on its Foxtrot Rare Earth Element Project (“Foxtrot
Project”). This PEA evaluates an open pit-underground scenario with
lower capital costs, a lower mining rate and higher grade mill feed.
The revised PEA was prepared by Roscoe Postle Associates Inc. (“RPA”)
and is compliant with National Instrument 43-101 (“NI 43-101″). It
reconfirms that the Foxtrot Project has robust economics and excellent
potential to become a profitable producer of Rare Earth Elements
(“REE”), particularly Dy, Tb and Nd, outside of China.

HIGHLIGHTS:

        --  Selective mining of High Grade Core REE material from an
            initial 4 year open pit followed by a 6year selective
            underground mining operation, with a 1,500 tpd mining mill
            rate.
        --  Reduction in capital costs to $ 221M from $ 469M, with a 3.8
            year payback, $ 219M NPV (at a discount rate of 10%) and 27%
            pre-tax IRR
        --  Net revenue has increased $ 110/tonne milled and Opex costs
            increased $ 38/tonne, for a net increase in revenue per tonne
            of $ 72; this increased margin will help protect Search from
            commodity price fluctuations
        --  The updated PEA scenario also provides for a smaller
            environmental footprint (i.e., smaller open pit, smaller waste
            dump and smaller tailings pond) and good potential for extended
            mine life.
        --  The revised project will focus on higher grade REE material
            mined over LOM of 0.89% total REE ("TREE") on average, which
            compares to the 0.58% TREE on average for the original bulk
            open pit concept

Jim Clucas, President of Search Minerals, stated: “We are pleased with
the results of the revised PEA as it reinforces our view of Foxtrot as
an exceptional project that can be developed.  The Foxtrot Project is
the cornerstone of our Rare Earth strategy, as it is the first project
of what we believe will be many in this district, which Search
controls. The smaller scale mining concept is more attractive and
achievable with respect to project financing and development without
affecting economic returns in a difficult market. The need to originate
new sources of neodymium and dysprosium, given their tight fundamentals
and dependency on China are now widely evident. The Foxtrot Project
presents itself as a unique alternative with further potential
resources at depth in the Foxtrot deposit and in additional prospects
in the Fox Harbour area”.

Operational Highlights:

        --  1,500 tpd production rate;
        --  Mine Life: 10 years;
        --  First three years of mining by open pit methods - underground
            development funded by operating profit;
        --  Proposed production of 5.3 Mt, at a grade of 0.89% TREE, based
            on the updated mineral resource estimate disclosed in November,
            2012;
        --  Processing by gravity, magnetic separation, and flotation
            concentration, followed by acid leaching, producing a mixed
            rare earth oxalate concentrate;
        --  Average REE recovery of 79%;
        --  Total Life-of-Mine production of 38,000 tonnes of TREE, or
            4,100 tonnes per year at peak production;
        --  Life-of-Mine production includes 7.0 million kg of neodymium
            oxide (Nd2O3), and 0.9 million kg of dysprosium oxide (Dy2O3).

Financial Highlights

        --  $219 million pre-tax Net Present Value (NPV) (at a 10% discount
            rate);
        --  27% pre-tax Internal Rate of Return (IRR);
        --  $640 million pre-tax, undiscounted cash flow;
        --  $1.7 billion total net revenue;
        --  Pre-tax payback period of 3.8 years;
        --  $221 million initial capital cost;
        --  $134 per tonne milled average unit operating cost;
        --  $320 per tonne milled average unit revenue.

Note: The PEA is preliminary in nature. It includes inferred mineral
resources, which are considered too speculative geologically to have
the economic considerations applied to them that would enable their
categorization as mineral reserves. There is no certainty that the PEA
forecast will be realized. Mineral resources that are not mineral
reserves do not have demonstrated economic viability.

Foxtrot Project Upside Potential

        --  Resources are open at depth;
        --  The existing resource model includes considerable additional
            mineralization that, while lower-grade, remains above a
            break-even cut-off value;
        --  Testwork shows significant quantities of zirconium and niobium
            in the flotation concentrate - further work may identify a
            means of extracting them as saleable products;
        --  The updated resource contains un-mineralized mafic material
            that may be sorted, visually in the pit or after crushing and
            before the concentration process;
        --  Several other REE-Zr-Y-Nb prospects, with similar geology and
            mineralization, occur in the Fox Harbour area; two of these,
            Fox Pond and Foxy Lady, exhibit similar grades of
            mineralization (see Search News Release, March 20,2012);
        --  Lower grade material, mined in the open pit as waste in this
            PEA but exhibiting a positive NSR, may be processed at a later
            date.

PEA

Project Location
The Foxtrot Project is located in Labrador, Canada, approximately 36 km
east southeast of Port Hope Simpson, and approximately 10 km west
northwest of St. Lewis.  The project is accessible by all-season road,
and the deep-water port and airstrip facilities in St. Lewis.

Geology and Mineral Resources
The Fox Harbour area contains three extensive east-west to northwest
trending volcanic belts, extending upwards of 30 km in length, and 50 m
to 500 m in width.  These volcanic belts are interpreted to be bi-modal
mafic and felsic volcanics, with intercalated volcaniclastic units.

The Fox Harbour bi-modal felsic and mafic volcanic package is host to
REE-Zr-Y-Nb mineralization. The Foxtrot Project is the thickest
currently identified occurrence of these volcanic rocks in the Fox
Harbour area.  Mineralization in the Foxtrot Project is largely
allanite, zircon, and fergusonite.

Three phases of drilling completed to date targeted the “Mt Belt”, a
zone of inter-layered bands of mafic and felsic volcanic rocks.  All of
the mineralization with economic potential found to date lies in the
felsic bands of the “Mt Belt”.  The central portion of the deposit is
still open below 450 m depth.

There is also potential for the delineation of additional resources
along strike, both east and west of the central portion of the deposit,
and in other portions (e.g., Fox Pond and Foxy Lady Prospects) of the
Fox Harbour area.

In a news release dated November 1, 2012, Search released an updated NI
43-101 compliant mineral resource estimate.  Indicated Mineral
Resources were estimated to total 9.2 Mt at 0.88% TREE, and Inferred
Mineral Resources were estimated to total 5.2 Mt at 0.77% TREE (both at
an elevated cut-off grade of 130 ppm dysprosium).  The updated resource
model was used as the basis for proposed production described in the
PEA.

Subsequent to the latest resource estimate, a high-grade core (HGC) was
delineated, and served as the focus for underground mining. The HGC
contains grades that are approximately 30% higher than the material
(HGC plus lower grade material) mined in the open pit.

Mining
Mining will be carried out initially by open pit methods, transitioning
to an underground operation in Year 4.  Open pit mining, using
conventional truck and shovel methods, will be carried out by a
contractor.  The strip ratio averages 1.76:1.  No pre-stripping is
required, as the deposit is exposed on surface.

Open Pit mining quantities consist of:

        --  A short ramp-up to full production in Year 1
        --  Production of 540,000 tonnes per year at peak, or 1,500 tpd;
            and
        --  Waste mining averaging 818,000 t per year

Underground mining of the HGC will commence after the open pit is
completed, using longhole mining methods and backfill. Underground
development will be funded by operating profit from the first three
years of mining by open pit methods.

Underground mining quantities consist of:

        --  Production beginning in Year 4
        --  Production of 540,000 tonnes per year at peak, or 1,500 tpd;
            and
        --  Production grades are approximately 30% higher than open pit
            grades

Production quantities total 5.3 Mt, at an average grade of 0.89% TREE. 
This includes dilution of the mineralized felsic material with the
intercalated mafic material in each block within the open pit.
Underground production quantities are higher grade (0.96% TREE) due to
selective mining of the HGC material with less mafic and lower grade
material dilution.

Processing and Recovery
There is no change to metallurgy since the last PEA.  A number of
alternative unit processes have been identified, and remain to be
tested for upside potential.

The recovery flowsheet involves crushing, grinding and gravity
concentration, followed by magnetic separation (to reject iron from the
gravity concentrate) and flotation of the gravity tails.  The overall
recovery to concentrate is in the range of 80% to 85% for every
element. 

The combined concentrate will undergo acid baking and water leaching. 
Preliminary results indicate approximately 95% dissolution.  The
solutions from the water leaching will then be subjected to (1) acid
and iron removal, (2) purification of minor elements as necessary, and
then (3) recovery of a mixed rare earth oxalate product.

Overall recovery is estimated to average 79%.  Recoveries and production
of individual REE are described in the following table:


                                     TABLE 1   REE PRODUCTION

                Element      Recovery        Average     Mine Life Total
                                              Annual          (kg)
                                            Production
                                               (kg)

    Yttrium                       80%            446,000       4,458,000

    Lanthanum                     82%            729,000       7,289,000

    Cerium                        79%          1,423,000      14,227,000

    Praesodymium                  82%            170,000       1,704,000

    Neodymium                     78%            602,000       6,016,000

    Samarium                      80%           112,0000       1,125,000

    Europium                      80%              5,600          56,000

    Gadolinium                    79%             87,000         867,000

    Terbium                       78%             14,000         137,000

    Dysprosium                    77%             79,000         790,000

    Holmium                       78%             15,000         156,000

    Erbium                        78%             43,000         433,000

    Thulium                       78%              6,000          63,000

    Ytterbium                     78%             39,000         385,000

    Lutetium                      78%              6,000          57,000

    Total Material Recovered                   3,776,000      37,760,000

    1. Note: the above table shows rare earth elements - to obtain the
       equivalent quantities of rare earth oxides, each element must be
       multiplied by a factor ranging from 1.14 to 1.27.

Testwork shows significant quantities of zirconium and niobium in the
flotation concentrate. Further work may identify a means of extracting
them as saleable products.

Revenue
There is no change in prices from the last PEA.  Both recent prices and
independent forecasts for rare earth oxide prices cover a wide range. 
Search has chosen a conservative price set, as detailed in the table
below.  These prices may be representative of a time when several rare
earth projects outside of China may be in operation.

Revenue for the Foxtrot Project is dominated by dysprosium and terbium
(heavy rare earth elements), and neodymium (light rare earth element),
elements that are projected to remain in supply deficit.


              TABLE 2   REE REVENUE

    Rare Earth Oxide  Price Net Revenue
                     ($/kg)     (%)

    Yttrium              20          5%

    Lanthanum            10          3%

    Cerium                5          0%

    Praesodymium         75          8%

    Neodymium            75         29%

    Samarium              9          0%

    Europium            500          2%

    Gadolinium           30          0%

    Terbium           1,500         14%

    Dysprosium          750         38%

    Holmium               -          0%

    Erbium               40          0%

    Thulium               -          0%

    Ytterbium            50          1%

    Lutetium              -          0%

    Total/Average        38        100%

No revenue has been included for Ho, Lu, and Tm, as the markets for
these rare earths are very small, and there is no certainty that
revenue can be realized.

Third-party separation charges have been applied at a rate of $5/kg for
light rare earths (La, Ce, Pr, Nd, Sm) and Y, and at a rate of $30/kg
for heavy rare earths.  These charges represent 15% of the gross
revenue on the payable REE.

The price set used in the PEA averages $38/kg payable rare earth oxide,
net of separation charges.

Total net revenue is $1.7 billion, averaging $170 million per year.  On
a unit basis, net revenue is $320 per tonne milled.

Capital Costs
The estimated initial capital cost has been developed to include open
pit mining, processing, infrastructure, tailings and indirect capital
costs.  The capital cost estimate includes a contingency of $49 million
(30% of direct and indirect capital costs).


    TABLE 3   INITIAL CAPITAL COST ESTIMATE

                                  Cost
    Capital Cost Item         ($ millions)

    Open Pit Mining                     2.1

    Underground Mining                    -

    Processing                         70.0

    Tailings                           10.0

    Surface Infrastructure             34.4

    Indirects/Owners                   29.1

    EPCM                               17.5

    Working Capital                     9.3

    Contingency (30%)                  49.0

    Total Capital Cost                221.2

Sustaining capital, totalling $127 million, consists of underground mine
development and mobile equipment fleet, as well as process, and
infrastructure equipment replacement, tailings expansion, progressive
environmental rehabilitation, mine closure costs, and recovery of
working capital.

Operating Cost
The Life-of-Mine operating costs have been estimated for each of three
main areas: mining, processing, and general and administration.  Table
4 summarizes the average Life-of-Mine operating unit costs.


                TABLE 4   OPERATING COST ESTIMATE

                                                  Cost
    Operating Costs Item                  ($/t milled)

    Total Mining                                    47

    Processing - Concentration & Leaching           70

    General and Administration                      17

    Total Operating Costs                          134

Preliminary Economic Assessment
Financial evaluation of the Foxtrot Project was carried out using a cash
flow model, on a pre-tax basis.  Estimates are based on constant Q1
2013 dollar basis, with no provision for escalation.  Results are
provided in the following table:


          TABLE 5   PEA FINANCIAL RESULTS

                         Value ($ millions)

    Gross Revenue        $            2,004

    Separation Charges   $              304

    Net Revenue          $            1,700

    Total Operating Cost $              713

    Operating Cash Flow  $              987

    Initial Capital Cost $              221

    Sustaining Capital   $              127

    Pre-Tax Cash Flow    $              640

    Pre-Tax IRR                       27.0%

    Payback Period                3.8 years

    Net Present Value                      

      5% discount rate   $              379

      8% discount rate   $              274

      10% discount rate  $              219

Note: The PEA is preliminary in nature. It includes inferred mineral
resources, which are considered too speculative geologically to have
the economic considerations applied to them that would enable their
categorization as mineral reserves. There is no certainty that the PEA
forecast will be realized.

Qualified Persons:
The technical and economic information relating to the PEA contained in
this press release has been reviewed and approved by Jason Cox, P.Eng.,
Director of Mine Engineering for RPA, an independent qualified person
under NI 43-101.  The PEA technical report will be filed on SEDAR in
due course.

Dr. Randy Miller, Ph.D., P.Geo, is the Company’s Vice President
Exploration and Qualified Person for the purposes of NI 43-101. Dr.
Miller has reviewed and approved the technical disclosure contained in
this news release as applicable. The company will endeavour to meet
high standards of integrity, transparency, and consistency in reporting
technical content, including geological and assay (e.g., REE) data.

Neither the TSX Venture Exchange nor its Regulation Services Provider
(as that term is defined in the policies of the TSX Venture Exchange)
accepts responsibility of the adequacy or accuracy of this release.

About Search Minerals
Search Minerals Inc. (TSXV:SMY) is a TSX Venture Exchange listed
company, headquartered in Vancouver, B.C. Search is the discoverer of
the Port Hope Simpson REE District, a highly prospective light and
heavy REE belt located in southeast Labrador where the company controls
a dominant land position in a belt 135km long and up to 12km wide.  In
addition, Search has a number of other mineral prospects in its
portfolio located in Newfoundland and Labrador, including a number of
claims in the Strange Lake Complex, where Quest Rare Minerals has an
earn-in agreement with the Company; and at the Red Wine Complex, where
Great Western Minerals Group has a Joint Venture with the Company.

Furthermore, Search Minerals is the owner of patents relating to the
Starved Acid Leaching Technology (“SALT”), a process with the potential
to economically recover nickel and cobalt from known deposits currently
considered sub economic.

Search Minerals is led by a management team and Board of Directors with
a proven track record in the mining industry. The Company has
experienced geological and metallurgical teams led by Dr. Randy Miller
and Dr. David Dreisinger respectively.

All material information on the Company may be found on its website at www.searchminerals.ca and on SEDAR at sedar.com.

Cautionary Statements

This news release contains forward-looking statements that are not
historical facts, including future plans and objectives of the Company,
potential mineralization, reserve and resource determination, price
assumptions, cash flow forecasts, projected capital and operating
costs, metal or mineral recoveries, mine life and production rates, and
other assumptions used in preliminary economic assessments. 
Forward-looking statements involve risks, uncertainties and other
factors that could cause actual results, performance, prospects, and
opportunities to differ materially from those expressed or implied by
such forward- looking statements. Factors that could cause actual
results to differ materially from these forward- looking statements
include those risks set out in Search’s public documents filed on SEDAR
at www.sedar.com.  Although Search believes that the assumptions and factors used in
preparing the forward-looking statements are reasonable, undue reliance
should not be placed on these statements, which only apply as of the
date of this news release, and no assurance can be given that such
events will occur in the disclosed time frames or at all. Except where
required by law, Search disclaims any intention or obligation to update
or revise any forward-looking statement, whether as a result of new
information, future events or otherwise.

 

SOURCE Search Minerals Inc.


Source: PR Newswire