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Vol. 20, No. 10 Week of March 08, 2015
Providing coverage of Alaska and Northwest Canada's mineral industry

Mining News: Refining rare earths

Ucore pioneers new method of separating REEs into high purity salts

Shane Lasley

Mining News

Continental Resources expects its production to grow in 2015, powered primarily by momentum from 2014, but as 2015 wears on, the company’s slashed capital expenditure budget will move it into maintenance mode.

While Continental reduced its capex guidance by approximately 40 percent, it is planning to grow production in 2015.

“Looking ahead, our 2015 budget targets cash flow neutrality in the second half of the year,” Chairman and CEO Harold Hamm said in a February press release. “We believe that our momentum coming out of 2014 will allow us to grow our production 16 percent to 20 percent this year; however, we are deferring completions in the Bakken to minimize the volumes we sell into this low price environment,” Hamm continued.

Chief Financial Officer John Hart told industry analysts in an earnings conference call in February that Continental is looking for most of 2015 production growth to occur in the first half of the year. “We expect 2015 production to rise through midyear and level off in the second half of the year,” Hart said. “Looking forward to 2016, we expect we can maintain a growth rate in the mid-single digits with flat capex at $2.7 billion, so in essence, maintenance capex.”

Continental took a one-time $338 million gain from the sale of crude hedges in November when oil prices fell, basically leaving it exposed to market prices in 2015, but the company has a plan to ride out the downturn.

“Our deep and diverse inventory provides us with a lot of optionality when designing our development plans,” Hart said. “For 2015, our current $2.7 billion capex plan was developed with a focus on aligning capex to be near discretionary cash flow by mid-year 2015.”

At a $60 benchmark WTI, Continental calculates it would be cash flow neutral by mid-year, but at $50 oil, the outspend in the back half of the year would be around $200 to $250 million.

The Bakken will see most of the capex spending, consuming 65 percent of the company’s drilling capital in 2015.

Continental entered 2015 with 10 stimulation crews in the Bakken and expected to be down to four in early March due to deferring completions. The company plans to continue with four stimulation crews through year end. Continental operated an average of 23 rigs in the Bakken play during the fourth quarter 2014, but expected to be down to 10 rigs in March and to hold its rig count at 10 for the balance of 2015.

Acquisition-minded

While exploration and production have been scaled back, Continental has not scaled back its hunt for opportunities in its Bakken or its south-central Oklahoma SCOOP core areas, according to company President and Chief Operating Officer Jack Stark.

“We continually evaluate our opportunities; we haven’t really slowed down from an acquisition or a leasing standpoint in any of our plays at this time,” Stark said, adding that the company plans to negotiate prices in line with the market.

Smartly grabbing leases

Continental moved boldly in an online auction offering of two 80-net acre North Dakota Department of Trust Lands oil and gas leases on March 10. With literally less than a minute remaining, Continental stepped in with its only bid, trumping the previous bid by $100, picking up the leases for $14,200 per acre and netting Trust Lands $2.272 million.

State records show no existing wells on the leases, which lie under and along the east shore of Lake Sakakawea in the Sanish field in southwest Mountrail County, but Continental has one active well on an adjacent section onshore with another six wells permitted.

Drew Combs, who heads Trust Lands’ Minerals Management Division, said that even though the tracts are in a very productive region of the Bakken, he didn’t think the tracts would bring that much money. “Our benchmark for those tracts was $10,000,” Combs told Petroleum News Bakken.

Production up

In its Bakken development report, Continental said Bakken production averaged 130,783 barrels of oil equivalent per day in fourth quarter 2014, up 8 percent compared to third quarter and up 40 percent from fourth quarter 2013. Full-year 2014 Bakken production averaged 114,715 boe per day, up 30 percent compared to 2013.

The company completed 72 net (234 gross) operated and non-operated Bakken wells during fourth quarter 2014 and 312 net (921 gross) operated and non-operated Bakken wells for the year.

Continental said that in 2015 it will focus on further cost-cutting and increasing efficiencies.

The company will concentrate its drilling in high rate of return areas of Williams and McKenzie counties and to a lesser extent in Dunn and Mountrail counties.

Continental is employing enhanced completion techniques utilizing a combination of slickwater and hybrid stimulations, targeting an average estimated ultimate recovery of 800,000 boe per well.

Results of the enhanced completions are being monitored closely and continue to deliver 30 percent to 45 percent uplift in initial 90-day rates and an estimated 25 percent to 30 percent increase in EURs based on early results.

Based in Oklahoma City, Continental is the largest leaseholder and one of the largest producers in the Bakken play of North Dakota and Montana. It has significant positions in Oklahoma, including its SCOOP Woodford and SCOOP Springer discoveries and the Northwest Cana play.

Ucore Rare Metals Inc. has reached another milestone in its quest to separate rare earths into the individual elements needed in high-tech devices.

In testing molecular recognition technology, a proprietary method of separating rare earths developed by Utah-based IBC Advanced Technologies, the rare earths found at Ucore’s Bokan Mountain project in Southeast Alaska have been segregated as individual salts exceeding 99 percent purity.

“MRT offers a means of separating REEs to high purity in a rapid and cost effective manner, and with an exceptional level of selectivity and precision,” said Ucore President and CEO Jim McKenzie.

The avant-garde technology could turn the company into a front-runner in economic and environmentally sound rare earth separation worldwide.

“It’s very gratifying to see the fruition of this work and achieve such a high level of success. It is exciting to think of the business opportunities this can create for Ucore and for Alaska,” said Ucore COO Ken Collison.

Sen. Orrin Hatch, R-Utah, says opportunities offered by MRT could touch numerous industrial sectors across the United States.

“This breakthrough represents advanced American technology being used to address a uniquely American challenge. Securing the most critical specialty metals is essential to fuel our nation’s technology engines,” said Hatch. “Rare earths such as dysprosium, terbium, and neodymium are increasingly important to U.S. military, transportation, medical, and super-computing applications as we compete across the globe.”

Three-step process

The MRT process is designed to bind selectively with ions based on multiple parameters such as size, chemistry, and geometry. Conventional technologies such as ion exchange, solvent extraction and precipitation generally recognize differences between ions based only on a single parameter.

MRT can separate tightly interlocked rare earths into individual salts in three steps, an achievement that took up to dozens of phases using forerunner technologies.

The basic idea behind the MRT process is that certain resins, known as SuperLig® resins, grab ions based on a number of traits. The technology has already been proven in mining, especially for applications in platinum group metal recovery and removing bismuth impurities from copper.

In creating a REE separation process for Ucore, IBC created resins specifically to bind to the parameters of ions associated with rare earths.

Using a pregnant leach solution prepared from material taken from the Dotson Ridge deposit at Bokan, IBC developed a three-step process for creating nearly pure rare earths.

In the first step, scandium and cerium were extracted. The remaining rare earth elements were then separated into two groups roughly defined as heavy and light rare earths. A final step caused the mixtures to separate into individual rare earth salts. Individual rare earths are cleaned from the SuperLig® resin columns with a small amount of acid.

The technique created 99.9 percent pure dysprosium and neodymium salts and a 99.1 percent pure terbium salt. All three of these heavy rare earth elements are considered critical to military, high-tech and green sector applications.

“Among other firsts, this is the first time that high-purity dysprosium has been generated in the U.S. using American feedstock. What’s more, the accomplishment was made without the use of traditional solvent extraction, a technology long known for the generation of unavoidable environmental pollutants,” said Jack Lifton, principal co-founder of Technology Metals Research and consultant to Ucore.

The new process also recovered more than 99 percent of the REEs available in the pregnant leach solution.

The MRT breakthrough is another advance in the Bokan Mountain project becoming a domestic source of heavy rare earths.

“In my opinion, Ucore now has the opportunity to both extract and purify heavy REEs completely within the U.S. This is a remarkable win for American technology independence from China,” said Lifton.

Exclusive rights

To further strengthen Ucore’s foothold in the rare earths sector, the company has cut a deal with IBC for exclusive rights to the SuperLig® REE separation technology.

Upon delivery of a fully functional pilot plant, Ucore has agreed to pay IBC US$2.9 million for the rights to the potentially sector-changing technology.

“This is an important step for Ucore in obtaining the capabilities of an integrated provider of rare earth products from mine to metal,” Ucore’s McKenzie said March 3 in announcing the agreement.

“Perhaps most importantly, our licensing arrangement includes the application of SuperLig® technology to the world recycling and tailings processing sector – both for the recovery of rare earths and all other metals,” he added.

Under the agreement, Ucore will hold 60 percent interest in a joint venture with IBC to market and sell the REE separation technology to others.

“My congratulations to Ucore and Utah-based IBC Advanced Technologies, Inc. for delivering a prospective ‘missing link’ in the domestic technology metals supply stream,” commended Hatch.

Feasible mining

While critical, rare earth separation is only one part of the equation when it comes to securing a domestic supply of REEs – mining is another.

A preliminary economic assessment completed for Ucore in 2012, envisions the production of 2,250 metric tons of rare earth oxides per year during the first five years of full production; including an annual output of 95 metric tons of dysprosium oxide, 14 metric tons of terbium oxide, and 515 metric tons of yttrium oxide.

The PEA predicts a pre-tax net present value of US$577 million, at a 10 percent discount rate; an internal rate of return of 43 percent; a payback period of 2.3 years; and an 11-year mine life.

A feasibility study currently underway will benefit from the new recovery process and an updated resource estimate based on drilling completed since 2012, including 3,960 meters in 2014.

A 2013 resource update for the Dotson Ridge deposit, not included in the PEA, outlines an indicated resource of 2.9 million metric tons averaging 0.614 percent (39.7 million pounds) total rare earth oxides and an inferred resource of 2 million metric tons averaging 0.605 percent (26.6 million lbs.) TREOs. Roughly 40 percent of the TREOs are the higher valued heavy rare earths.

A 17-hole drill program completed in 2014 included 12 infill holes aimed at confirming the resource and five deeper holes.

Ucore said 10 of the confirmation holes cut significant mineralization, including 2.42 meters grading 1.03 percent TREO; 2.76 meters grading 1.65 percent TREO; 3.37 meters grading 1.9 percent TREO; and 2.88 meters grading 1.12 percent TREO.

The deep drilling tapped similar widths and grades some 100 meters below any previous intercepts. With the current resource extending only to an average depth of 220 meters, this evidence that the deposit runs deeper shows the potential for adding years to the life of a heavy rare earths mine being planned for Southeast Alaska.

The final blueprint of what that mine might look like will be outlined in the feasibility study due out later this year.



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