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Event

• Completion of Pre-Feasibility Study (PFS) on the Kvanefjeld rare earth and uranium orebody, and now moving to Full Feasibility Study and completion of Environmental and Social Impact Assessments (EIA & SIA respectively) by year end.

Highlights

• The main conclusion of the PFS is that the Kvanefjeld project generates a pre-tax NPV_10% of US$4,631M based on a long term uranium price of US$70/lb and price basket of Total Rare Earths Oxides of US$41.60/kg. In a "post-tax" basis, the NPV10% is US$2,947M. Evaluation of a mine, mineral concentrator and intermediate refinery to treat 7.2Mtpa of ore to extract rare earth elements (REE), uranium and zinc has been assessed by the PFS.
• GGG has identified a processing flow-sheet based on beneficiation of the mined ore to produce a high grade REE-uranium mineral concentrate, followed by conventional atmospheric acid leach, solvent extraction and precipitation to separate the uranium and rare earths into high quality, high value products. The processing plant is expected to produce four (4) main products including 2.6Mlbs of U₃O₈, 26,200tpa of Light Rare Earth Carbonates, 10,400tpa of mixed Rare Earth Carbonates and 4,200tpa of Heavy Rare Earth Hydroxide as well as a high grade Zinc Sulphide (ZnS) concentrate. Production startup in 2016. This new processing system is significantly more simplified and less risky than the 2009 high pressure leaching system, that incorporated autocalve technology.
• Unit costs of production of less than US$31/lb U₃O₈ and US$8/kg TREO places Kvanefjeld in the bottom half of the cost curve for uranium producers and the lowest cost of the REE producers in the world. Capital costs of US$1.53bn have been reduced from the 2009 PFS of US$2..4bn due to operational efficiencies identified in the new processing system. Current resources of 861Mt of ore containing 512.8Mlbs of uranium, 9.22Mt of TREO and 1.98Mt of zinc with a project mine life of +100 years.

Shaw Stockbroking Recommendation

• We have modelled the main components of the PFS to look at sensitivities to capital costs, the uranium price and a basket of rare earth products. Our key modelling uses a uranium price assumption of US$60/lb (GGG = US$70/lb) for the project life and a basket of rare earths pricing at US$41..65/kg (equal to the company's assumptions and assuming a 40% price discount for processing). These parameters give us a valuation for the project (ungeared) at the pre-tax level of US$3.808bn and US$3.080bn after tax using a discount rate of 10%. We have discounted this valuation by 50% for the binary nature of a zero-tolerance uranium stance by the Greenland Government on uranium mining and GGG's 61% interest in the project. On these assumptions, we have increased our price target to $2.25 from $1.80/share, a 350% premium to the current share price of $0.41. Shaw Stockbroking recommends BUY.

To read the full Company Report go to:
 http://www.ggg.gl/docs/shaw-research/company-report-16-May-2012.pdf