FWP 1 d74323fwfwp.htm FWP fwp
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Issuer Free Writing Prospectus
Filed Pursuant to Rule 433 under the Securities Act of 1933
Registration No. 333-166129
(MOLYCORP LOGO)
  1.   SRK Consulting (U.S.), Inc., “Alternative Technical Economic Model for the Mountain Pass Re-Start Project” (July 2, 2010).
 
  2.   SRK Consulting (U.S.), Inc., “Engineering Study for Re-Start of the Mountain Pass Rare Earth Element Mine and Processing Facility Mountain Pass, California” (April 28, 2010).

 


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The issuer has filed a registration statement (including a prospectus) with the SEC for the offering to which this communication relates. Before you invest, you should read the prospectus in that registration statement and the other documents the issuer has filed with the SEC for more complete information about the issuer and this offering. You may get these documents for free by visiting EDGAR on the SEC Web site at www.sec.gov. Alternatively, the issuer, any underwriter or any dealer participating in the offering will arrange to send you the prospectus if you request it by calling toll-free Morgan Stanley & Co. Incorporated at 1-866-718-1649 or J.P. Morgan Securities Inc. at 1-866-803-9204.

 


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(SRK CONSULTING LOGO)
    SRK Consulting (U.S.), Inc.
7175 West Jefferson Avenue, Suite 3000
Lakewood, CO
USA 80235
 
     
 
    denver@srk.com
www.srk.com
 
     
 
    Tel: 303.985.1333
Fax: 303.985.9947
July 2, 2010
SRK Project 19600.050
Molycorp Minerals, LLC
5619 DTC Parkway, Suite 1000
Greenwood Village, CO 80111
Attention: Mark Smith
Dear Mark:
Alternative Technical Economic Model for the Mountain Pass Re-Start Project
At the request of Molycorp Minerals, LLC (Molycorp) on July 1, 2010, SRK Consulting (U.S.), Inc. (SRK) assessed the impact of current rare earth oxide, metal and alloy pricing on the base case Technical Economic Model. SRK presented the Technical Economic Model (TEM) in the April 2010 Engineering Study for ReStart of the Mountain Pass Rare Earth Element Mine and Processing Facility. This assessment is limited to a comparison of the base case price structure and the current market prices reported by Metal Pages Ltd ©, and the impact on the estimated Internal Rate of Return (IRR) and Net Present Value (NPV) of the project.
Base Case TEM
Table 1 presents rare earth products, annual production, assigned pricing and percentage of net revenue in the base case TEM.
Table 1: Base Case TEM Parameters
                         
    Annual Production           Percentage of
Product   (k-lbs)   Price (USD/lb)   Net Revenue
Lanthanum Oxide
    6,829       3.00       4.1 %
Cerium Oxide (Glass Products)
    3,196       1.86       1.2 %
Cerium – Water Filters
    7,456       6.00       8.9 %
Cerium Hexahydrate
    10,652       4.50       9.5 %
Europium Oxide
    42       215.00       1.8 %
Lanthanum Metal
    5,515       6.00       6.6 %
Neodymium/Praseodymium Metal
    255/688       17.27       3.3 %
Nd-Iron-Boron Alloy
    18,000       16.00       57.2 %
Samarium Cobalt Alloy
    1,668       23.00       7.6 %
                                   
 
 
 
      Group Offices:     Canadian Offices:
    U.S. Offices:
 
    Africa     Saskatoon     306.955.4778       Anchorage     907.677.3520  
 
    Asia     Sudbury     705.682.3270       Denver     303.985.1333  
 
    Australia     Toronto     416.601.1445       Elko     775.753.4151  
 
    Europe     Vancouver     604.681.4196       Fort Collins     970.407.8302  
 
    North America     Yellowknife     867.445.8670       Reno     775.828.6800  
 
    South America                   Tucson     520.544.3688  

 


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SRK Consulting   Page 2 of 2
Pricing values shown in Table 1 reflect a combination of 3 year averages, Molycorp product pricing, and 2009 market studies. The Nd-Fe-B alloy represents a 57.2% contribution to net revenue while the remainder of RE products each account for less than a 10% contribution. Nd-Fe-B alloy pricing is based on confidential market information from an alloy producer. This price is directly proportional to the Nd/Pr metal price.
Based on these parameters and other production inputs, the base case TEM estimates a pre-tax IRR of 34% and a NPV of 1.46 billion USD. This is the base case scenario that supports the reserve statement presented in the April 2010 engineering study by SRK.
Current Oxide, Metal and Alloy Pricing
Rare earth metal market studies by others (IMCOA 2009, Roskill 2009) document the recent substantial fluctuation (+/- 30%) in published market prices within the last three years. These same market studies predict increasing demand with supply constraints in the future. Table 2 presents current rare earth product prices, effective June 15, 2010, published by or derived from Metal Pages Ltd ©.
Table 2: Current Oxide, Metal and Alloy Pricing
             
    June 15, 2010 Price    
Product   (USD/lb)   Source
Lanthanum Oxide
    3.81     Metal Pages
Cerium Oxide (Glass Products)
    2.95     Metal Pages
Cerium – Water Filters
         
Cerium Hexahydrate
         
Europium Oxide
    233.80     Metal Pages
Lanthanum Metal
    5.81     Metal Pages
Neodymium/Praseodymium Metal
    19.06     Metal Pages
Nd-Iron-Boron Alloy
    19.51     Pricing provided by Molycorp
Samarium Cobalt Alloy
    24.15     Calculated based on ratio of TEM Sm price (9.00) to June 2010 (9.41)
TEM Scenario
The base case TEM remains the approved basis for the mineral reserve statement presented in the April 2010 engineering study. For illustration purposes, SRK replaced the pricing inputs (Table 1) to reflect current marking pricing (Table 2). Under this scenario, the TEM estimates an IRR of 43% (at a discount rate of 8%) and NPV of 2.02 billion USD. The target production level is equivalent to 42 million pounds per year of Rare Earth Oxide. This illustration is for informational purposes only and does not reflect a new base case for the reserve statement.

 


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SRK Consulting   Page 3 of 3
Closing
Please feel free to contact me if you have questions or require additional information.

Yours truly,
SRK Consulting (US) Inc.
-s- Terry Braun
Terry Braun
Principal

 


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Engineering Study for Re-Start of the
Mountain Pass Rare Earth Element Mine
and Processing Facility
Mountain Pass, California
Report Prepared for
Molycorp Minerals, LLC
(MOLYCORP LOGO)
Report Prepared by
(SRK CONSULTING LOGO)
April 28, 2010
     
Contributors   Authors
M&K Chemical Engineering Consultants, Inc.   Terry Braun, P.E.
Golder Associates, Inc.   Bret Swanson, M.AusIMM
R.G. Vanderweil Engineers, LLP   Jeffrey Volk, C.P.G., F.AusIMM
     
    Reviewed by
    Neal Rigby, Ph.D., CEng, MIMMM

 


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Engineering Study for Re-Start of the
Mountain Pass Rare Earth Element Mine
and Processing Facility
Mountain Pass, California
(MOLYCORP LOGO)
Molycorp Minerals, LLC
5619 Denver Tech Center Parkway
Suite 1000
Greenwood Village, Colorado 80111
SRK Consulting (U.S.), Inc.
Suite 3000, 7175 West Jefferson Avenue
Denver, Colorado, USA 80235
Tel: 303.985.1333
Fax: 303.985.9947
E-mail: denver@srk.com
Web site: www.srk.com
SRK Project Number 190600.050
April 28, 2010
     
Contributors   Authors
M&K Chemical Engineering Consultants, Inc.   Terry Braun, P.E.
Golder Associates, Inc.   Bret Swanson, M. AusIMM
R.G. Vanderweil Engineers, LLP   Jeffrey Volk, C.P.G., F. AusIMM
     
    Reviewed by
    Neal Rigby, Ph.D., CEng, MIMMM

 


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Molycorp Minerals, LLC    
Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page i
Executive Summary
Molycorp Minerals, LLC. (Molycorp) retained SRK Consulting (U.S.), Inc. (SRK) to prepare this engineering study for re-start of the Mountain Pass Rare Earth Element (REE) Mine and Processing Facilities Project in Mountain Pass, California (i.e., the Project). The re-start also includes integrated off-site facilities for production of metals and rare earth magnet alloys. The goal of this engineering study is to describe the technical aspects of the Project and to support a mineral reserve statement that meets the technical requirements of the U.S. Securities Exchange Commission (SEC) Guide 7.
SRK compiled a digital database based on information available from original laboratory analyses. In some cases, the original lab sheets were not located, and SRK relied on typed and hand written analyses as posted on drilling logs. There is some information available regarding drilling recoveries, recorded on the original drill logs. Anecdotal information indicates excellent core recovery, and no relationship was observed by site personnel between core recovery and REO grade. SRK is of the opinion that archiving of historical information related to drilling programs on site is sufficient.
SRK performed a detailed assessment of the 3-dimensional aspects (e.g., grade, lithology, continuity) of the deposit. This detailed assessment formed the basis of the reserve statement described in Section 6.0 of this report.
Planned mining operations at Mountain Pass will continue using open pit mining methods. Given the 42 Mlb annual production target for Rare Earth Oxide (REO), the mining rate will fluctuate between 1,100 and 1,500 t/day based on realized REO grade and estimated process recoveries. The primary bastnasite-bearing carbonatite formation dips to the west, resulting in an average stripping ratio of 7.65:1 (Overburden:Ore) through the 30 year mine life. This stripping ratio varies throughout the mine life. Overburden removal will start along the north pit wall and progress southward along the western boundary of the existing open pit.
The process flow sheet for on-site project activities includes milling, extraction and separation operations. The Mine and Mill will operate in a manner similar to historical operations with mill improvement measures included that have demonstrated increased REE recovery that allows for reduced mining rates and mill throughput. The slurry containing tailings solids produced during the milling process will be de-watered into paste tailings and deposited in an engineered containment facility.
The new extraction and separations facilities will be built to extract REEs from gangue materials as a RE chloride solution. As with historical operations, the solution will undergo an impurity removal step before transfer to the separations facility where solvent extraction circuits are used to separate individual REE. The individual rare earths will then be precipitated from solution, filtered, dried and if required, converted to oxide powders.
Molycorp will perform on-site processing of the cerium oxide to produce radiation-free glass polish, water filter media and cerium chloride hexahydrate. Molycorp will also package a portion of the lanthanum production as well as all europium oxide production for direct sale. Neodymium, praseodymium, lanthanum and samarium oxides will be transported to an off-site facility for conversion into metals and alloy products.
Molycorp operates the Mountain Pass project in accordance with applicable regulatory requirements. In 2004, Molycorp received approval for a re-start and expansion plan for the property at an average mining rate of 2,000 tons ore per day. As described below, Molycorp
     
SRK Consulting   April 28, 2010

 


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Molycorp Minerals, LLC    
Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page ii
maintains the necessary environmental permits for current operations and is actively engaged in obtaining the additional authorizations required for re-start of the Project.
The proposed SRK pit is based on a historical cut-off grade above 5% REO. Marginal grade between approximately 2.7% and 5% REO is stored for possible use and is not classified as a reserve. Table ES-1 presents the Proven and Probable Reserves (As of February 6, 2010) for Mountain Pass.
Table ES-1: Proven and Probable Reserves for Mountain Pass (As of February 6, 2010)
                         
                    REO  
Category   REO %     kilotons     (Mlbs)  
 
Proven
    9.38       480       88  
Probable
    8.20       13,108       2,122  
 
Proven and Probable
    8.24       13,588       2,210  
 
1.   Full mining recovery is assumed (100%).
 
2.   Mine reserves are fully diluted.
 
3.   A historical CoG of 5% REO was used within the pit design
 
4.   Average REO mill recovery estimated at 65%
 
5.   1997 surface topography used for volume control of reserves
 
6.   Values have been rounded to nearest significant number to reflect the accuracy of the estimate.
The base case economic analysis results, shown in Table ES-2, indicate an estimated post-tax NPV8% of approximately US$1.46 billion.
Table ES-2: Technical-Economic Model Results
                 
    Cost     Cost  
Description   ($000s)     $/lb-TREO  
 
Revenues
               
Lanthanum Oxide
  $ 668,879          
Ce – Glass Products
  $ 194,053          
Ce – Water Filters
  $ 1,460,616          
CeCl3 Hexahydrate
  $ 1,564,945          
Europium Oxide
  $ 294,808          
Lanthanum
  $ 1,080,240          
Didymium
  $ 0          
Praseodymium
  $ 143,604          
Neodymium
  $ 387,711          
Samarium
  $ 0          
NdFeB
  $ 9,404,687          
Sm2Co17
  $ 1,252,451          
 
Gross Revenue
  $ 16,451,993          
 
               
Transportation
               
Oxides to Port
  $ (16,098 )        
Metals to Port
  $ (6,324 )        
Port to Market
  $ 0          
 
Subtotal
  $ (22,422 )        
 
Net Revenue
  $ 16,429,571     $ 11.220  
     
SRK Consulting   April 28, 2010

 


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Molycorp Minerals, LLC    
Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page iii
 
Operating Costs    
                 
    Cost     Cost  
Description   ($000s)     $/lb-TREO  
 
Mining
    144,452     $ 0.099  
Milling
  $ 533,849     $ 0.365  
Chemical Plant
  $ 1,033,150     $ 0.706  
Metal/Alloy Plant
  $ 6,252,250     $ 4.270  
 
Operating Costs
  $ 7,963,700     $ 5.439  
 
               
 
Operating Margin
  $ 8,465,871     $ 5.782  
Project Capital
  $ (688,988 )        
Income Tax
  $ (2,190,083 )        
 
Cash Available for Debt Service
  $ 5,586,800          
IRR
    34 %        
NPV8%
  $ 1,460,042          
 
As of the date of this engineering study, development drilling continues at the project. As new geological information becomes available, Molycorp will re-assess the basis of the current mineral reserve statement. Geotechnical data from the in-fill drilling program will be used to re-evaluate the open pit design parameters. Molycorp continues to optimize and update to process and mining activities as part of the design effort. Estimated process recoveries in the re-furbished mill will likely increase beyond the historical performance of 65% as the mill returns to a steady-state operating condition and the Molycorp staff optimize the process improvements demonstrated in 2001 and 2002.
     
SRK Consulting   April 28, 2010

 


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Molycorp Minerals, LLC    
Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page iv
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Molycorp Minerals, LLC
Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility
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Molycorp Minerals, LLC
Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility
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Molycorp Minerals, LLC
Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility
  Page vii
List of Tables
         
Table 2.1: Typical Uses of Rare Earth Elements
    6  
Table 2.2: Patented Mine Claims
    10  
Table 3.1: Summary of Historical Drilling at Mountain Pass
    31  
Table 3.2: Oxides and REO Detection Limits
    36  
Table 3.3: Oxides Analyzed with Detection Limits
    39  
Table 3.4: 2009 Specific Gravity Results
    40  
Table 3.5: Standards with Expected Analytical Performance
    41  
Table 6.1: Past Mine Production (1968 to 2002)
    51  
Table 6.2: Physical Whittle Parameters
    53  
Table 6.3: Economic Whittle™ Parameters
    54  
Table 6.4: Whittle™ Pit — Summary of Results
    54  
Table 6.5: SRK Pit Design Results
    54  
Table 6.6: Product Code Cut-off Parameters (Proven and Probable Only)
    55  
Table 6.7: Mine Production Schedule
    56  
Table 6.8: Proven and Probable Reserves for the Mountain Pass Project (Effective February 6, 2010)
    57  
Table 7.1: Historical Mill Production, 1980 to 2002
    67  
Table 7.2: 2001 and 2002 Mill Production Summary
    68  
Table 8.1: Stage and Capacity Comparison for the PTSF
    89  
Table 8.2: Process Wastewater Handling
    89  
Table 10.1: Summary of Existing Environmental Permits
    99  
Table 10.2: Summary of Pending Environmental Permits
    101  
Table 10.3: Existing Reclamation Liability
    101  
Table 11.1: Mine Capital Cost
    102  
Table 11.2: Pre-Stripping Campaigns
    102  
Table 11.3: Mine Operating Cost
    103  
Table 11.4: Mine Operating Cost Assumptions
    103  
Table 11.5: Capital Cost for Mill Refurbishment
    104  
Table 11.6: Scoping Level Capital Cost Estimate for the Replacement Mill
    105  
Table 11.7: Mill Operating Costs
    106  
Table 11.8: Mill Cost Assumptions
    107  
Table 11.9: Capital Cost for Extraction Plant
    109  
Table 11.10: Capital Cost for Separations Plant
    110  
Table 11.11: Extraction/Separation Plant Operating Costs
    111  
Table 11.12: Extraction/Separation Plant Cost Assumptions
    111  
Table 11.13: Oxide to Metal/Alloy Plant Operating Costs
    112  
Table 11.14: Metal/Alloy Plant Operating Costs
    112  
Table 11.15: Capital Cost for Mine Waste Management
    113  
Table 11.16: Capital Cost Estimate, PTSF Construction
    113  
Table 11.17: Operating Cost Estimate for the Paste Tailings Plant
    114  
Table 11.18: Operating Cost Estimate, PTSF
    114  
Table 11.19: Opinion of Probable Cost for the CHP Facility
    115  
Table 12.1: Global Demand for Rare Earths by Market in 2008 (metric tonnes REO +/- 15%)
    117  
Table 12.2: Comparison of Rare Earth Oxide Prices from 2005 to 2009 (IMCOA 2009)
    118  
Table 12.3: Forecast Rare Earth Oxide Prices for 2010 to 2030 (IMCOA 2009)
    118  
Table 12.4: Historical Price Information for Metal Products (Lanthanum, Neodymium and Praseodymium)
    118  
Table 12.5: Summary of Letters of Intent
    119  
Table 13.1: General Modeling Assumptions
    122  
Table 13.2: Production Summary (30-Yr Analysis)
    123  
     
SRK Consulting   April 28, 2010

 


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Molycorp Minerals, LLC    
Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page viii
         
Table 13.3: Project Capital Summary (30-Yr Analysis, $000s)
    124  
Table 13.4: Owner Costs ($000s)
    125  
Table 13.5: Operating Cost Summary
    125  
Table 13.6: Technical-Economic Model Results
    126  
List of Figures
 
Figure 2.1: Site Location
Figure 2.2: Historic Exploration Activity
Figure 2.3: Property Ownership
Figure 2.4: Land Tenure
Figure 2.5: Existing Site Layout
Figure 2.6: Existing Office and Support Buildings
Figure 2.7: Existing Mill/Flotation Plant and Crusher Area
Figure 2.8: Existing Mineral Recovery Plant Area
Figure 3.1: Site-Wide Geologic Map
Figure 3.2: Drillhole Map
Figure 3.3: QA/QC Standards with Expected Analytical Performance
Figure 3.4: Pulp Duplicate Records
Figure 3.5: Scatter Plot of Historical Assays and 2009 Check Assays
Figure 6.1: REO to Metal Production per Ton of Ore Processed
Figure 6.2: Pit Layout, Production Year 0
Figure 6.3: Pit Layout, Production Year 1
Figure 6.4: Pit Layout, Production Year 2
Figure 6.5: Pit Layout, Production Year 10
Figure 6.6: Pit Layout, Production Year 14
Figure 6.7: Pit Layout, Production End of Mine Life
Figure 6.8: Mountain Pass Production Schedule
Figure 7.1: Basic Process Flow Diagram for the Molycorp Rare Earth Mine to Magnets
Figure 7.2: Overall Process Flow Diagram, Mill Facility
Figure 7.3: Process Flow Diagram for Crushing and Fine Ore Stockpile
Figure 7.4: Process Flow Diagram for Fine Ore Storage and Milling
Figure 7.5: Process Flow Diagram for Flotation
Figure 7.6: Process Flow Diagram for HCl Leach
Figure 7.7: Process Flow Diagram for Concentrate Storage
Figure 7.8: General Facilities Arrangement for the Extraction and Separations Facilities
Figure 7.9: Block Flow Diagram of the Molycorp Separation Process
Figure 7.10: Block Diagram of the Nd2O3 Production Process
Figure 7.11: Process Flow Diagram for NdFeB Alloy Production
Figure 8.1: Paste Plant Process Flowsheet, Sheet 1 of 2
Figure 8.2: Paste Plant Process Flowsheet, Sheet 2 of 2
Figure 9.1: CLOROMAT® Chloralkali Process Flow Diagram
Figure 12.1 China and Global Outlook: Supply and Consumption of Rare Earths, 2000 to 2015 (Mt)
Figure 14.1: Manufacturing Operations Organization Chart
Figure 14.2: Business Development and Technology Organization Chart
Figure 14.3: Project Development Schedule
 
Exhibit 13.1: Technical-Economic Model
 
Appendix A: Contributor Consent Forms
     
SRK Consulting   April 28, 2010

 


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Molycorp Minerals, LLC    
Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page 1
1 Introduction
Molycorp Minerals, LLC. (Molycorp) retained SRK Consulting (U.S.), Inc. (SRK) to prepare this engineering study for the re-start of the Mountain Pass Rare Earth Element (REE) Mine and Processing Facilities Project in Mountain Pass, California (i.e., the Project). The re-start also includes integrated off-site facilities for production of metals, alloys and permanent magnets. The goal of this engineering study is to describe the technical aspects of the Project and to support a mineral reserve statement that meets the requirements of the U.S. Securities Exchange Commission (SEC) Industry Guide 7.
SRK defined mineral “resources” according to the definitions set forth in National Instrument 43-101 guidelines. Under Industry Guide 7, mineralization may not be classified as a “reserve” unless the determination has been made that the mineralization could be economically and legally produced or extracted at the time the reserve determination is made.
Currently, Molycorp produces approximately 4 million pounds per year of Rare Earth Oxide (REO) through processing (i.e., extraction and separation of) feed material from existing on-site stockpiles. Full-scale production under this Project will include the re-start of open pit mining, refurbishment of the existing mill facility, construction of new extraction and separation facilities and construction of a new paste tailings facility. A new Combined Heat and Power (CHP) facility, powered by natural gas, will be installed to meet the energy and steam requirements of the Project. A portion of on-site REO production (e.g., cerium and lanthanum oxides) will be refined on-site for direct shipment to customers while the remainder of REO production is planned for conversion to metal, alloys and permanent magnets.
1.1 Project History
After approximately 50 years of mining, milling and processing activity, Molycorp suspended operation of the existing mill in 2002 due to a permitting-related delay in expansion of the primary tailings impoundment (P-16) and due to depressed market prices for the Rare Earth Oxide (REO) product associated with Mountain Pass. Prior to the 2002 suspension, Molycorp demonstrated greater than 50% improvement in mill recoveries using stockpiled ore that is representative of past and future operating conditions. Molycorp successfully retained key operating staff from this last period of mill operation.
In 2004, Molycorp received the necessary regulatory approvals to construct a new tailings storage facility. This authorization removes the constraint on tailing disposal from the existing mill facility. Molycorp is authorized to re-start open pit mining, expand existing overburden stockpiles and relocate the existing mill if required during the mine life.
Since 2002, Molycorp continued to operate the existing extraction and separation facilities. Feedstock for these operations were either imported or taken from existing material stockpiles at Mountain Pass. Since the fall of 2007, Molycorp operated the existing separations plant in conjunction with the extraction plant using available lanthanum concentrate as feed. Lanthanum concentrate is a stockpiled material produced over 30 years of operation containing significant quantities of neodymium and praseodymium. In 2008, the plant operated for approximately 300 days and produced 3.8 million pounds (Mlbs) of separated products. Estimated production in 2009 is approximately 4 Mlbs.
     
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Planned full-scale production of REO at Mountain Pass will be 42 Mlbs/yr. Molycorp will sell a portion of the REO production as oxide with the remainder planned for conversion from oxide to metal, metal to magnet alloys.
To achieve the planned production target, Molycorp will construct new extraction and separation facilities that are based on proven technologies demonstrated at the Mountain Pass property since 2002. The new facilities will be constructed on land owned by Molycorp and currently permitted for industrial use. The project development schedule targets full-scale re-start of mining, milling and processing activities by mid-2012.
1.2 Scope of Work and Terms of Reference
Molycorp retained SRK and other technical specialists to contribute to this engineering study for re-start of Mountain Pass. Accordingly, the scope of work included:
    Detailed geologic assessment of the mineral deposit;
 
    Development of a mine plan for exploitation of the mineral deposit in accordance with legal and economic requirements;
 
    Preparation of a Mineral Reserve Statement for the Project in accordance with the requirements of SEC Industry Guide 7;
 
    Documentation of the historical operating records for estimating recoveries and operating costs for process circuits included in the re-start;
 
    Description of the process engineering required to re-start the existing mill and to construct and operate the new extraction and separations facilities;
 
    Description of the conversion process for REO to metal and metal to magnet alloys;
 
    Description of the engineering design for the new paste tailings facility;
 
    Description of the mine and process-related infrastructure required for re-start of the Project;
 
    Discussion of the existing and pending environmental permit authorizations for re-start of the Project;
 
    Presentation of a market study applicable to the REE products associated with Mountain Pass; and
 
    Development of an economic model and implementation schedule for the Project.
1.3 Project Team
This engineering study represents the significant contribution of a team of experienced professionals in the following technical disciplines:
    Mining Reserve Statement, Open Pit Mine Planning, Mill Refurbishment and Economic Modeling – SRK Consulting (U.S.), Inc.;
 
    Process engineering for the extraction, separation and recycling circuits, including the general facilities arrangement and the paste plant facility – M&K Engineering, Inc.;
 
    Process engineering for the CHP facility – R.G. Vanderweil Engineers, LLP.; and
 
    Engineering design for the tailings storage facility – Golder Associates, Inc.
Molycorp staff provided monthly production reports to support the operating cost and performance information for the existing mill. M&K Engineering prepared the capital cost estimate for the extraction, separation and recycling circuits. The design of the extraction, separation and recycling circuits required specialized chemical engineering expertise. At the request of SRK, Molycorp retained a qualified third party with the necessary chemical engineering expertise to review the cost estimating methodology applied to the extraction, separation and recycling circuits. The results of this third party review confirm that the cost estimating methodology meets published and appropriate chemical engineering standards.
     
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Capital and operating costs for production of metals and magnet alloys are based on proprietary business information. Independent market price forecasts for REO, metals, and magnet alloys were prepared by the Industrial Minerals Company of Australia Pty Ltd. (IMCOA) and the Roskill Consulting Group.
Contributor Consent forms for M&K Engineering and R.G. Vanderweil Engineers, LLP (Vanderweil) are included in Attachment A.
The independent technical contributors are not insiders, associates, or affiliates of Molycorp. The results of this engineering study are not dependent upon any prior agreements concerning the conclusions to be reached, nor are there any undisclosed understandings concerning any future business dealings between Molycorp and the technical consultants. The technical consultants are being paid a fee for their work in accordance with normal professional consulting practice.
1.3.1 SRK Consulting
SRK is comprised of over 900 staff, offering expertise in a wide range of engineering disciplines. SRK’s independence is ensured by the fact that it holds no equity in any project and that its ownership rests solely with its staff. This permits SRK to provide its clients with conflict-free and objective recommendations on crucial judgment issues. SRK has a demonstrated record of accomplishment in undertaking independent assessments of mineral deposits and Mineral Reserves, project evaluations and audits, technical reports and independent feasibility evaluations to bankable standards on behalf of exploration and mining companies and financial institutions worldwide.
1.3.2 M&K Chemical Engineering Consultants, Inc.
M&K is a “Specialty Chemical Process Design Firm”, with world-wide process experience. This firm offers complete design services from process development assistance through design, construction management and start-up. Their management team has over 150 years of chemical plant experience. M&K personnel have helped bring over 30 new or improved processes from lab bench to full scale production. For approximately one year, M&K has been working with Molycorp to develop and design new milling, concentration, separation and extraction processes. These new systems and processes are designed to provide Molycorp with a competitive advantage over competitors by producing high purity rare earth oxides and metals in an environmentally responsible and cost effective manner.
1.3.3 R.G. Vanderweil Engineers, LLP.
Vanderweil Engineers is a 365 person mechanical, electrical, and power consulting engineering firm dedicated to providing value-added engineering services to clients. The company develops customized, innovative solutions to complex power needs including combined heat and power, district energy, and utility transmission and distribution. In addition to engineering and design services, Vanderweil provides professional services for project management, on site engineering, and commissioning. Vanderweil worked with Molycorp on the CHP configuration analysis, power island equipment selection, and preliminary engineering for this project.
1.3.4 Golder Associates, Inc.
Golder is an employee-owned professional consultancy with over 7,000 staff operating from 160 offices worldwide. Golder’s services span a range of technical disciplines around ground engineering and environmental services. Golder, in conjunction with Golder Paste Technology, Ltd. offers specialist consulting in design and construction of paste tailings processing and storage facilities.
     
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1.4 Sources of Information
The sources of information include data and reports supplied by Molycorp personnel, as well as documents listed in Section 17. The Consultants used their experience to determine if the information from previous reports was suitable for inclusion in this engineering study and adjusted information that required amending. Revisions to previous data were based on research, recalculations and information from each of the contributing parties. Where specialized expertise was required to prepare design or cost information, Molycorp retained qualified independent third-party staff to review and validate the work product.
1.5 Limitations
SRK relied upon the work of other technical consultants, financial advisors and client personnel for portions of this engineering study. In preparation and supervision of this engineering study, SRK has not relied on a report, opinion or statement of a legal or other expert, who is not qualified to provide information concerning legal, environmental, political or other issues and factors relevant to this report.
This engineering study includes technical information, which requires subsequent calculations to derive subtotals, totals and weighted averages. Such calculations inherently involve a degree of rounding and consequently can introduce a margin of error. Where these rounding errors occur, SRK does not consider them material.
     
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2 Project Overview
Recent independent market studies indicate that the global demand for REEs is increasing at a time when global supply is tightening (IMCOA 2009; Roskill 2009). The Mountain Pass REE property in California is a substantial REE deposit with a proven performance record as a global supplier of REE products since 1952. Given current REE market predictions, Molycorp initiated this engineering study for the Project.
The Project will involve the refurbishment and new construction of process facilities that rely on proven technologies that have been successfully demonstrated by Molycorp’s predecessor companies at Mountain Pass for over 50 years. Molycorp owns or controls the necessary mineral rights for full-scale re-start of the Project. The majority of existing infrastructure is adequate for the planned re-start and, where improvements are planned, the infrastructure upgrades are readily implementable.
2.1 Rare Earth Elements
The mineral deposit of Mountain Pass is comprised of the Lanthanide Group of rare earth elements. Bastnasite is the primary mineral in the Mountain Pass deposit. Bastnasite is a mixed Rare Earth fluoro-carbonate mineral comprised of the following:
    50% (by weight) Cerium;
 
    33% Lanthanum;
 
    12.4% Neodymium;
 
    4% Praseodymium; and
 
    Recoverable amounts of samarium, europium, gadolinium, dysprosium, terbium and other REEs.
The present and future market demand for these and other rare earth materials and permanent magnets is driven by existing commercial electronics and REE uses as well as emerging, clean energy technologies such as hybrid cars, energy efficient compact fluorescent lighting and next generation wind power turbines. The world’s two largest deposits of REE outside of China are in Mountain Pass, California and Mount Weld, Australia. Mountain Pass is currently producing small quantities of separated rare earths from rare earth concentrate stockpiles, while the Mount Weld property maintained ore stockpiles and re-started greenfield construction of process facilities in 2009 (Lynas Corporation, 2009 Annual Report).
The typical processing of REEs converts the REE mineralization to a REO (Rare Earth Oxide) product which can then be further processed into a metal, metal alloy or magnet. Table 2.1 provides an overview of typical uses for REEs.
Section 12 provides additional information related to global REE production and market trends.
     
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Table 2.1: Typical Uses of Rare Earth Elements
     
Name   Typical Uses
Lanthanum (La)
  FCC catalysts, NiMH batteries, and high refractive index glass
 
   
Cerium (Ce)
  Chemical oxidizing agent, polishing powder, yellow pigments in ceramics, catalyst for self-cleaning oven and automobiles
 
   
Praseodymium (Pr)
  Rare earth magnets, Laser, green colors in ceramics
 
   
Neodymium (Nd)
  Rare earth magnets, Laser, violet colors in ceramics
 
   
Samarium (Sm)
  Rare earth magnets, Laser
 
   
Europium (Eu)
  Red and blue phosphors, Laser
 
   
Gadolinium (Gd)
  Magnetic resonance imaging, green phosphors, compact discs
 
   
Dysprosium (Dy)
  Neodymium Iron Boron Magnets, dosimeters for measuring ionizing radiation
2.2 Project Description
The Project is located in San Bernardino County, California, north of and adjacent to Interstate 15 (I-15), approximately 15 mi southwest of the California-Nevada state line and 30 mi northeast of Baker, California (Figure 2.1). The mining history of this area began with the organization of the Clark Mining District in 1865. Mining at Mountain Pass began in 1924 as a series of small shafts and shallow trenches which were advanced by prospectors. In 1952, the Molybdenum Corporation of America began production of Rare Earth Oxides (REOs). Between 1995 and 1997, Molycorp’s predecessor company produced and sold in excess of 40 Mlbs of REO per year.
2.2.1 Physiography
The area is in the south-western part of the Great Basin section of the Basin and Range physiographic province, which is characterized by a series of generally north to south-trending mountain ranges separated by broad, low-relief alluvial basins, which often have internal drainage (Peterson, 1981).
The Project occupies the highest elevation along I-15 between Barstow, California, and Las Vegas, Nevada. Elevations range from 4,500 ft to 5,125 ft above mean sea level (amsl), with most of the site located between 4,600 to 4,900 ft amsl. Clark Mountain located northwest of the Project is the highest local peak at 7,903 ft amsl.
2.2.2 Climate
The following information is excerpted from the Environmental Impact Report for the Molycorp, Inc. Mountain Pass Mine 30-Year Plan (ENSR 2003):
According to data compiled at Molycorp’s on-site meteorological station, the warmest temperatures occur in late July or early August and coldest temperatures usually occur in January. From late fall to early spring, daily high temperatures are moderate, averaging 60°F to 85°Fahrenheit (F). Nights are cooler with low temperatures averaging 40°F to 60°F. Winter temperatures are occasionally below freezing, and can be below 10°F. During summer, temperatures are often 100°F to 110°F during the day and approximately 80°F at night.
Wind speeds average from 6 to 13 miles per hour. Summer and winter winds are similar generally blowing from the south and west. Data indicate that nearly 50% of the winds in the region come from the south through west-southwest sectors.
     
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Precipitation in the area of the mine averages 8.4 inches per year. The maximum precipitation from a single storm in the past 45 years was 5.9 in (Geomega 2000). Most storms yield a precipitation of 0.5 in or less. Precipitation most frequently occurs during winter months, November through February, accounting for over 40% of the annual total rainfall. A significant portion of the annual rainfall can occur as summer thunderstorms during July and August. These storms may result in heavy rainfall and flash floods.
2.2.3 Development and Exploration History
The discovery of rare-earth element mineralization at Mountain Pass was made in April of 1949 by prospectors searching for uranium. Having noted that samples from the Sulphide Queen gold mine were slightly radioactive, prospectors returned to the area and discovered a slightly radioactive vein containing a large proportion of a light brown mineral (bastnasite) that the prospectors were unable to identify. This original discovery is known as the Birthday Vein. The prospectors sent a sample of the unknown mineral to the United States Bureau of Mines for identification.
The U.S. Geological Survey (USGS) confirmed the bastnasite discovery and made a public announcement in November 1949 (Olson et al, 1953). This attracted the attention of several mining companies, including Molybdenum Corporation of America (MCA), which purchased the Birthday group of claims in February 1950. MCA sank a 100 ft deep shaft on the Birthday claims, but no mineable ore was delineated and development was stopped.
During this time, prospectors identified carbonatite dikes throughout a wider, adjacent area. The USGS proceeded to conduct detailed mapping of the entire Mountain Pass area. During the course of this work, the USGS staff identified a massive body of carbonatite to the south of the Birthday claims, largely made up of barite, calcite, dolomite, and bastnasite. Much of this carbonatite body was located on the original Sulphide Queen Claim Group. MCA bought the Sulphide Queen claim group and the surrounding properties in January 1951. The existing gold mine and its associated equipment and buildings were also purchased, and a new crushing plant was installed. MCA drilled several hundred shallow churn holes in the following months, and analyzed the cuttings for their rare earth element contents (Olson et al, 1954).
Production of REO at the Project began in 1952, using a gold plant, a new ball mill, and flotation cells from MCA’s Urad, Colorado molybdenum property. Mining started on a portion of the deposit where the ore averaged more than 15% REO. The mining rate varied from 80 to 120 tons of ore per day (t/day).
MCA signed a contract with the U.S. General Services Administration to produce rare earth element concentrates for the government stockpile. By 1954, MCA shipped 120 60-ton carloads of bastnasite concentrates to the government stockpile, thereby fulfilling the terms of the contract. Other markets for REOs had not yet developed, and the mine and mill operated part-time with a small crew.
Owing to the increasing demand for europium for use in color televisions, MCA constructed a europium oxide plant in 1965 and increased production six-fold from the previous year, to approximately 6.1 Mlb of REO concentrate. The following year, a new concentrator was completed with a capacity of 600 t/day. At the start of 1962, MCA produced 6,000 lb/yr of europium oxide. By year-end, production of europium oxide reached 20,000 lb/yr. By the end of 1966, total production at the Project had quadrupled to 24 million pounds per year on a REO basis.
     
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Due to the continued expansion of the rare earths market, a new Separation Plant was completed in 1982, which was capable of producing samarium and gadolinium oxides up to 99.999% in purity by solvent extraction (SX). Subsequently, the plant was modified to produce high-purity terbium oxide for fluorescent lighting.
In 1989, Molycorp began production of dysprosium oxide and increased its output of neodymium to satisfy the demand created by the growing neodymium-iron-boron permanent magnet industry. By 1990, Molycorp expanded the lanthanide processing facilities at Mountain Pass to produce various REO concentrates. Mining of overburden and mineralized rock took place through 2002. Mining operations ceased at Mountain Pass in 2002 due to permit constraints on expansion of the existing tailings disposal facility (i.e., P-16) and low market prices for REOs. The mill has been in care and maintenance since 2002.
Molycorp, Inc. (predecessor of Molycorp Minerals, LLC) undertook a major geologic evaluation program at Mountain Pass between 1976 and 1980. Molybdenum Corporation of America and Molycorp, Inc. drilled additional diamond drillholes between 1953 and 1992 for exploration, mine development, and condemnation (Section 3.3.2). More than 300 new mining claims were added over potentially rare earth-bearing ground. Regional aeromagnetic and radiometric surveys were conducted within and beyond the known rare earth mineralization, and Landsat imagery for the region was evaluated. The geological program included characterization of the alkaline rocks and rare earth mineralization of the district, and involved detailed geologic mapping and petrographic studies of the Sulphide Queen deposit and the surrounding rocks. Ground-based geophysical surveys were completed over the known bastnasite-bearing carbonatite and associated intrusives.
Figure 2.2 presents the extent and type of exploration drilling in the project area (excluding water production and compliance monitoring wells, and geotechnical drillholes). The majority of core was from surface drilling using diamond drilling techniques. A combination of rotary and diamond drill core was used on 12 holes where the rotary interval ranged from the top 80 ft to 1,153 ft. The initial core diameter was typically NX – size (2-1/8 inch diameter), with some holes completed by reducing to BX (5/8 inch), AX (1-3/16 inch), or EX (7/8 inch) at depth. Although most core holes were drilled vertically, the holes often tended to drift and be inclined into the mineralized material. Most holes drilled prior to 1982 were angled so as to intersect the ore body perpendicular to the dip. The average drillhole spacing in the currently defined deposit area ranges from 50 ft to 250 ft along strike and 150 ft to 350 ft down dip. The deposit is open to the north, south, and to the west (at depth).
Surveys and Investigations
Geologic logs that record the type of drilling (e.g., diamond drill, rotary), surveyed or approximate drill collar coordinates, rock type, mineralization, and alteration are available for nearly all drillholes. Detailed mineralogy logs including thin section point counts, ultraviolet fluorescence and magnetic susceptibility scans, and X-ray diffraction mineral identification results are available on a selection of diamond drill logs from the mid-1980s to early 1990s. Structural logs recording the fracturing, faulting, and jointing information were also prepared. REO assays were generated on-site by XRF; selected samples were sent to outside laboratories for various other analyses.
Procedures and Parameters
No changes to procedures for logging, sampling, exploration or blasthole drilling, bench mapping, or surveying have been implemented, however Molycorp implemented a number of changes in the analytical equipment and procedures used in the on-site laboratory relative to the previous operators as discussed in Section 10 of this report. In the 1990s, the routine assays
     
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consisted of %REO, %BaO, %CaO, %SrO, %Fe2O3, %P2O5, %SiO2, and %ThO2, a calculated LnP2O5 ratio, and possibly other parameters. With the addition of the inductively coupled plasma mass spectrometry (ICP-MS) to the on-site laboratory, the full range of REEs can be measured.
2.2.4 Current Status
On July 20, 2004, Molycorp obtained a Conditional Use Permit and Reclamation Plan from the Land Use Services Department of San Bernardino County which authorized a 30 year mine plan for the Project. In recent years, Molycorp postponed start-up of the open pit mine and mill facility and continued to operate the existing extraction and separation circuits to process historical stockpiles of milled or other process concentrates in an attempt to commercially test newly-developed process technologies. Currently, Molycorp plans to re-start the mine and beneficiation facilities by mid-2012. Specifically, Molycorp intends to:
    Re-start open pit mining with dewatering initiated in August 2009;
 
    Re-furbish the existing mill facility which is capable of up to a 2,000 ton/day throughput;
 
    Construct the new extraction and separations facility based on commercially-demonstrated process technologies;
 
    Construct a new paste tailings facility;
 
    Construct a combined heat and power (CHP) facility to produce steam and electric power from a new natural gas supply (provided by Kern River Gas); and
 
    Operate a metals to alloys conversion facility.
2.3 Property Ownership
MCA purchased the Birthday claims and the Sulphide Queen properties in 1950 and 1951, respectively. In 1974, MCA changed its name to Molycorp, Inc. In 1977, Union Oil of California (Unocal) purchased Molycorp, Inc. and operated the company as a wholly-owned subsidiary. In 2005, Chevron Corporation (Chevron) purchased Unocal. On September 30, 2008, Chevron sold Mountain Pass rare earth mine, claims, surrounding land, mill, refining assets, buildings, and intellectual property to a private investor group who formed Molycorp Minerals, LLC, which now owns the Project site.
Figure 2.3 presents current property ownership associated with the Project. Molycorp’s surface ownership includes approximately 2,222 acres, of which approximately 770 acres are currently in use (e.g., existing buildings, infrastructure or active disturbance). The County of San Bernardino General Plan designates the Official Land Use District for the majority of the site as Resource Conservation. This designation provides for open space and recreational activities, single-family homes on very large parcels, and similar and compatible uses. The site is located within Improvement Overlay District 5, which is applied to very rural areas with little or no development potential. The County Development Code permits mining in any land use district within the County subject to a conditional use permit.
The lands surrounding the Mountain Pass Mine site are mostly public lands managed by the Bureau of Land Management (BLM). The Mojave National Preserve, managed by the National Park Service, lies 2 to 3mi to the north, west, and south of the site. The Clark Mountain Wilderness Area is located 4mi northwest of the project site.
The land uses of immediately adjacent properties include:
    North – Open space, BLM managed public lands with mining prospects and claims.
 
    East – Open space, BLM managed public land with mining claims.
 
    South – Interstate 15 through the southern portion of the site. Ten-acre school site (closed in 2003, now used for a road construction crushing operation) located in former southern
     
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      portion of mine surrounded by mine property, Caltrans maintenance station, Caltrans and California Highway Patrol (CHP) housing, and numerous utility easements. South of Interstate 15, BLM-managed public lands with mining claims and isolated private properties with residences.
 
    West – Open space, BLM managed public lands. Several communications sites with access roads are situated to the northwest.
Figure 2.3 also details the mineral claim information associated with the Project.
2.3.1 Mineral Claims
Figure 2.4 illustrates the boundaries of the current mineral claims and surface rights provided by Molycorp. Mining claims and surface rights associated with the Project include:
    Patented claims owned by Molycorp;
 
    Unpatented lode and mineral claims controlled by Molycorp;
 
    Surface ownership by Molycorp and mineral rights controlled by the State of California;
 
    Surface ownership by Molycorp and mineral rights controlled by the U.S.; and
 
    Surface ownership by School District and mineral rights controlled by the U.S.
 
  Further discussion of each category follows.
Patented Claims
Table 2.2 identifies the 55 patented claims that are 100% owned by Molycorp. Figure 2.4 presents the claim locations.
Table 2.2: Patented Mine Claims
         
Claim Name   Claim Name   Claim Name
 
Ann
  Jack 13   Queen 1
Ann 2
  Jack 14   Queen 2
Betty Anne
  Jack 16   Queen 3
Candy and Cake
  Jack 17   Queen 5
East 1
  Jack 21   Queen 6
East 2
  Jack 19   Queen 7
Honey Pot
  Jack 21   Queen 8
Jack 1-A
  Jack 37   Queen 9
Jack 1-B
  Jack 38   Queen 10
Jack 2
  Jack 40   Queen 11
Jack 3
  Jack 41   Queen 12A
Jack 4
  Jack 42   Queen 12B
Jack 5
  Jack 43   Sleeper 1
Jack 6
  Jack 44   Sulfide King 1
Jack 7
  Jack 45   Sulphide Queen 1
Jack 8
  Lead Mt. 2   Sulphide Queen 3
Jack 9
  Lead Mt. 3   Wash Queen 2
Jack 10
  Lead Mt. 4    
Jack 11
  Lead Mt. East Ext.    
     
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Unpatented Claims
Molycorp maintains 489 unpatented claims and mill sites. All annual maintenance and tax payments are current (Molycorp, 2009).
Surface Ownership by Molycorp and Mineral Rights by the State of California
The California State Lands Commission (CSLC) retains a mineral right in T16N, R14E, Section 13 (Figure 2.4). In a June 19, 2003 letter from the CSLC letter to Molycorp, “...the CSLC has advised San Bernardino County that the State acquired and patented certain lands within the proposed project boundary, reserving a 100% mineral interest in approximately 400 acres in the S1/2, SE1/4 of NE1/4, and the SW1/4 of the NW1/4 of Section 13, T16N, R13E, SBM. This interest is under the jurisdiction of the CSLC.” (CSLC, 2003)
Surface Ownership by Molycorp and Minerals Rights by the U.S. Government
The U.S. government holds the mineral rights to an approximate 2.25 mi2 parcel of land located east of the planned area of operations.
Surface Ownership by School District and Mineral Rights by the State of California
The School District owns a 40 acre parcel of land adjacent to the Bailey Road highway exit. The State of California retains the mineral rights to this parcel.
2.3.2 Royalties, Agreements and Encumbrances
Molycorp advised SRK that there are no royalties, back-in rights, payments or other agreements and encumbrances to which the property is subject. A number of public service and utility easements and rights-of-way are located within the mine boundaries, including a Southern California Edison (SCE) electric utility easement and an AT&T right-of-way.
2.4 Existing Infrastructure
Molycorp maintains the existing infrastructure for the Project in support of current extraction and separations process activity.
Figure 2.5 presents the existing site layout.
2.4.1 Access Road and Transportation
The primary access road is the Bailey Road exit from Interstate 15 which parallels the southern property boundary of the Project. Bailey Road is asphalt-paved from the interstate exit, through the site security gate and to the existing warehouse transfer areas. The access road allows ingress and egress of tractor-trailer units for delivery of supplies, shipping of product and other off-site deliveries.
2.4.2 Site Security
Molycorp maintains a manned security gate for access to the Property on a 24 hour, 7 days/week basis. The gate is located on Bailey Road. Visitors are required to have a site-specific safety briefing prior to site entry. Molycorp personnel monitor entry and exit to the Project. The operating area is completely fenced.
2.4.3 Power Supply
The Mountain Pass facility is currently supplied by a 12 kV line from a Southern California Edison substation 2 miles away. The mine has historically met thermal demands of the process
     
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circuit through use of boilers running on fuel oil, diesel and propane. The proposed project includes construction of a Combined Heat and Power (CHP) facility to address the increased electrical demands, eliminate old fuel oil, diesel and propane equipment and improve overall reliability.
2.4.4 Water Supply
Molycorp maintains and operates two water supply wellfields for potable and process water. The Ivanpah well field, established in 1952, is located on private land eight miles east of the mine site and consists of six freshwater producing wells, three booster pumping stations, and associated pipelines. The Shadow Valley well field, established in 1980, is located 12 miles west of the mine site, consists of four wells of which three are on public land and one on private land, a single booster pumping station, and associated pipelines.
This water supply system is subject to the provisions of the Water Supply Permit issued to Molycorp by the Division of Environmental Health Services of San Bernardino County. The major water supply wells in the region are located in the carbonate and coarse alluvial sediments around the periphery of the Upper Kingston and Ivanpah Basins, respectively, both of which are located approximately 10 mi from the Mine Site. The designated uses for the aquifers in these basins, which are included within the Amargosa and Ivanpah Hydrologic Units, include municipal and domestic water supply.
2.4.5 Buildings and Ancillary Facilities
Figure 2.6 presents the existing administrative and support buildings that are immediately accessible from the primary access road (e.g., Bailey Road north of the security gate). The guard house is located at the southern entrance to the property. Two storage warehouses and the on-site laboratory are located on the west side of the access road. The site safety office and training facility are located immediately east of the access road. Warehouse A (A7) provides covered storage for bulk products. The administration and engineering buildings are located approximately 1,600 ft north of the security gate and immediately east of the access road.
2.4.6 Mill/Flotation Plant and Crusher Area
Figure 2.7 presents the crushing and flotation area. The primary crusher is located north of the fine ore stockpile. Molycorp uses a radial stacker system to manage the fine ore stockpile. A front end loader transfers the fine ore onto a conveyor system that feeds the fine ore storage bin, located north of the existing mill building. Product concentrate thickeners in the flotation process are located west and east of the existing mill building. Molycorp historically dried the bastnasite concentrate near the mill warehouse building prior to truck transfer to the extraction plant.
Molycorp maintains a HDPE-lined storm water pond to the south of the mill area. The 204 Building (B6) is inactive and will not be re-started as part of the Project.
2.4.7 Mineral Recovery Plant Area
Figure 2.8 presents the existing extraction and separation facilities in the mineral recovery plant area. The existing circuits are not discretely defined in plan view; however, the index on the figure gives a detailed description of individual structures. Section 7.2 provides an overview of the extraction and separation process. Currently, Molycorp operates the extraction and separation facilities with stockpiled feedstocks.
     
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2.4.8   Tailings Storage Facility Area
 
    Molycorp ceased operation of the P-16 Tailings Impoundment in 2002. P-16 is located immediately north of the Mineral Recovery Plant Area. This impoundment was permanently closed in 2006.
2.4.9   Overburden Stockpiles
 
    Molycorp constructed three significant overburden stockpiles during historical mining operations:
    North;
 
    South; and
 
    West
    The North Overburden Stockpile totals 18 acres and stands at 4,900 ft amsl, or approximately 100 ft above the surrounding ground surface. This existing stockpile is located northwest of the existing open pit. The South Stockpile covers approximately 21 acres and is located west-southwest of the existing mill facility. The West Overburden Stockpile is the largest stockpile with an approximate area of 70 acres and average height of 150 ft amsl. The West Overburden Stockpile is located west of the existing open pit.
 
    Molycorp has permit approval for expansion of the West Overburden Stockpile and construction of the North Overburden Stockpile.
2.4.10   Solid and Hazardous Waste Management
 
    Molycorp contracts with an off-site solid waste disposal facility for solid wastes generated on-site. Molycorp also contracts qualified, licensed contractors for transportation and off-site disposal of hazardous wastes.
2.4.11   Communications
 
    As a main transportation route along the Interstate 15 corridor, the Mountain Pass property has access to full telecommunication services, including wireless. Voice and data communications are from a hard line source, with a satellite based backup service.
2.4.12   Manpower
 
    Current manpower at the Mountain Pass project totals approximately 100 staff and hourly personnel. The majority of site personnel commute from the greater Las Vegas area.
2.4.13   Outside Services
 
    Outside services include industrial maintenance contractors, equipment suppliers and general service contractors. Access to qualified contractors and suppliers is excellent due to the proximity of population centers such as Las Vegas, Nevada as well as Elko, Nevada (an established large mining district) and Phoenix, Arizona (servicing the copper mining industry).
     
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3   Geology and Exploration
 
    Mountain Pass is a carbonatite-hosted REE deposit. Carbonatites are igneous rocks, composed of ³50% carbonate minerals. These igneous rocks are primarily intrusive bodies occurring as sills, dikes and plugs in continental rift environments and are predominantly Proterozoic to Phanerozoic in age. Although not unknown, carbonatite extrusive rocks (flows) are rarely preserved in the geologic record and are unstable at atmospheric conditions (Bell, 1989).
 
    Globally, carbonatites are subdivided into two main groups:
    Apatite-magnetite bearing, mined for iron and/or phosphorus ± various by-products; and
 
    REE-bearing carbonatites.
    Other commodities may be present in economically significant concentrations, such as uranium, thorium, titanium, copper, vermiculite, zirconium, niobium, and phosphorus (Modreski, et al., 1995).
 
    At Mountain Pass the carbonatite that hosts mineralization is known as the Sulfide Queen Carbonatite and is relatively unique among carbonatites worldwide. The Sulfide Queen Carbonatite is associated with ultrapotassic rocks and forms a crudely tabular, sill-like or lensoid-shaped body as contrasted with the majority of carbonatites, which are chemically more sodic and form concentric, circular to ovoid masses or plugs. Additionally, the majority of carbonatite complexes display a series of variable carbonatite magma compositions, the majority of which are not significantly enriched in REE. Mountain Pass is unique in that the carbonatite intrusion does not exhibit such variation. Mountain Pass is the only known example of a REE deposit where the primary economic mineral is bastnasite ((Ce, La)CO3F) (Bell, 1989; Modreski, et al., 1995; Haxel, 2004; Castor, 2008).
 
    All exploration prior to acquisition of the Property by Molycorp in September 2008, had been conducted by the previous owners MCA and Molycorp Inc. Exploration activities consisted of churn, reverse circulation (RC) and diamond drillholes, field mapping, regional aeromagnetic and radiometric surveys, and interpretation of Landsat imagery. The last recorded exploration conducted by Molycorp, Inc. was in 1992. Molycorp has relied on this previous exploration for characterization of mineralized materials and mine planning.
 
    In December 2009, Molycorp commenced new exploration activities on the Property. This work is primarily focused on an in-fill drilling program.
3.1   Regional Geology
 
    Mountain Pass is located in the southern part of the Clark Range in the northern Mojave Desert. The Mojave is situated in the southwestern part of the Great Basin a region extending from central Utah to eastern California that is characterized by intense Tertiary regional extensional deformation. This deformational event resulted in broadly north-south trending mountain ranges separated by gently sloping valleys, characteristic of Basin and Range tectonic activity. The Mountain Pass REE deposit is located within an uplifted block of Precambrian metamorphic and igneous rocks that are bounded to the south and east by basin-fill deposits in the Ivanpah Valley. This block is separated from Paleozoic and Mesozoic rocks on the west and southwest by the Clark Mountain fault, which strikes north-northwest and dips from 35 to 70 ° west but averages 55°. The North Fault forms the northern boundary of the block, striking west-northwest and dips from 65 to 70° south (Olson, et al., 1954; Castor, 2008). Geology of Mountain Pass is shown in Figure 3.1.
     
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    There are two main groups of rocks in the Mountain Pass area divided by age and rock type. These are Early Proterozoic high-grade metamorphic rocks, which are intruded by unmetamorphosed Middle Proterozoic ultrapotassic rocks and carbonatites. The Early Proterozoic high-grade metamorphic rocks represent a wide variety of compositions and textures, as follows:
    Garnetiferous micaceous gneisses and schists;
 
    Biotite-garnet-sillimanite gneiss;
 
    Hornblende gneiss, schist, and amphibolites;
 
    Biotite gneiss and schist;
 
    Granitic gneisses and migmatites; granitic pegmatites; and
 
    Minor occurrences of foliated mafic rocks.
    The Middle Proterozoic ultrapotassic rocks are intrusive bodies of granite, syenite, and composite shonkinite-syenite, which contain augite and orthoclase. These have been intruded by carbonatites, which formed swarms of thin dikes, stocks and the tabular Sulfide Queen Carbonatite at the Project (Olson et al, 1954; Castor 2008). The Middle Proterozoic ultrapotassic rocks have been age dated using U-Th-Pb and 40Ar-39Ar methods at 1,410 ± 5 Ma and 1403 ± 5 Ma for shonkinite and syenite respectively. The REE bearing carbonatites including the Sulfide Queen are younger with age dates, using Th-Pb ratios, of 1,375 ± 5 Ma for (DeWitt et al, 1987). Both the Early Proterozoic metamorphic rocks and the Middle Proterozoic intrusive rocks have been crosscut by volumetrically minor, Mesozoic to Tertiary age dikes of andesitic to rhyolitic composition. Large portions of the Mountain Pass district are covered by younger (Tertiary to Quaternary) basin-fill sedimentary deposits (Olson et al, 1954; Castor 2008) (Figure 3.1).
 
    Significant REE mineralization is only associated with the carbonatite intrusions. Strongly potassic igneous rocks of approximately the same age are known from other localities in and around the Mojave Desert, but no significant carbonatite bodies or REE mineralization have been identified (Haxel, 2004).
3.2   Local Geology
 
    At Mountain Pass, the ultrapotassic rocks occur in seven larger stocks and as hundreds of small dikes. The largest single body is a composite shonkinite-syenite stock approximately 6,300 ft in length and 1,800 ft wide (Olson et al, 1954). These rocks span a variety of compositions, from phlogopite shonkinite (melanosyenite) to amphibole-biotite (mesosyenite and leucosyenite) to alkali-rich granite (Haxel, 2004). These complex and varied lithologies are believed to be sourced from the same parent magma formed from partial melting of the upper mantle (asthenosphere) beneath the North American continent during the Middle Proterozoic. The different compositions reflect different phases of magma differentiation (Castor, 2008).
 
    The Sulfide Queen Carbonatite, which hosts the mineralization at the Project is referred to as a stock but is a roughly tabular, sill-like body that strikes approximately north and dips to the west at about 40° (Castor, 1988). The carbonatite magma is believed to have formed by liquid immiscibility, separating from a parent magma similar to that which formed the ultrapotassic rocks occurring nearby (Castor, 2008).
3.2.1   Local Lithology
 
    In the open pit and to the south, east and west, lithology is dominated by gneiss and the Sulfide Queen Carbonatite. Immediately north of the pit, carbonatite is found at surface and a small outcrop of syenite is found adjacent to and on the east flank of the Sulfide Queen. The Sulfide Queen extends to the contact with shokinite and ultrapotassic granite approximately 650 ft northwest of the open pit boundary.
     
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    Geologists at Mountain Pass divided the carbonatite rocks at the Project into six types:
    Bastnasite sövite (Bastnasite-barite soviet);
 
    Bastnasite beforsite (Bastnasite-barite) sövite;
 
    Bastnasite dolosövite Bastnasite-barite dolomitic sövite;
 
    White sövite (White bastnasite-barite sövite);
 
    Parisite sövite (Parisite sövite); and
 
    Monazitic sövite (Monazite-bearing carbonatites).
    These divisions are based on the carbonate mineral composition of the carbonatite, either calcite or dolomite, the dominant REE mineral, texture and other criteria detailed in the following sections (Castor 1988, 2008). The different carbonatite types and their specific mineralization are discussed in detail in Section 3.3.
 
    Breccia is found within and adjacent to the Sulfide Queen and includes altered clasts of country rock as well as carbonatite. It is most abundant in the northern part of the open pit and to the south under the mill. Breccia textures range from matrix to clast-supported breccia with rounded to angular clasts. In the hanging wall of the Sulfide Queen, breccia occurs as a stockwork while in other areas it appears to have formed by intrusive stoping. In the footwall of the carbonatite, the breccia is composed of rounded and crushed gneiss, syenite and shonkinite, which is interpreted by Castor (1988, 2008) as indicating a pre-carbonate intrusive formation. Breccia has previously been thought to be unmineralized, but contains monazite in places and is currently of interest as a possible source of heavy rare earth elements (HREE).
3.2.2   Alteration
 
    Alteration at the Property is primarily contact metamorphism associated with the emplacement of the Sulfide Queen Carbonatite. It is primarily fenitic alteration and found in the country rock adjacent to the carbonatite. Fenite alteration or fenitization is associated with carbonate-rich fluids and is characterized by secondary potassium feldspar, phlogopite and magnesio-riebeckite with chlorite and hematite in places. Owing to the resulting distinctive color and textures of these minerals, the fenitic alteration type is relatively easy to recognize in outcrop and drill core. Fenitization is typically less intense and widespread proximal to the ultrapotassic rocks relative to the intense alteration observed in the more reactive Middle Proterozoic rocks in the open pit area (Castor, 1988, 2008).
 
    Other alteration identified locally, includes hydrothermal alteration and silicification around the Celebration Fault. This is considered late stage and has little effect on mineralization (Castor, 1988; 2008).
 
    The presence of sillimanite in the biotite-garnet-sillimanite gneiss indicates that rocks of the Middle Proterozoic age reached high temperatures and pressures during metamorphism and were metamorphosed to the granulite facies. The carbonatites are not metamorphosed and the Late Proterozoic age ultrapotassic rocks show limited contact metamorphism where these rocks host carbonatites.
3.2.3   Structure
 
    Structural controls include local brecciation and faulting. Regional structural controls include the Clark Mountain and North faults, which bound the block separating the Proterozoic rocks at the Property from the surrounding Paleozoic and Mesozoic age rocks. The Clark Mountain Fault, strikes north-northwest and dips from 35 to 70°W but averages 55°W. The North Fault strikes west-northwest and dips from 65 to 70°S and has offset the Clark Mountain Fault by an estimated 1,200 ft near the Property. In general, all major faults in the Property area strike north-westerly
     
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    and dip to the southwest. This includes the Middle and South faults near the open pit (Olsen et al, 1954; Castor, 2008).
 
    Within the open pit area, the important faults are the Ore Body, Middle and the Celebration faults. The Ore Body Fault is a splay off of the North Fault and the carbonatite and ultrapotassic rocks are found primarily between the Middle and Ore Body faults. Both of these are normal faults that strike northwest and dip moderately to steeply southwest. Both faults display evidence of left-lateral and dip-slip displacements and were active until the Pliocene-Pleistocene. Both faults contain substantial gouge zones and are barriers to groundwater flow. Many smaller faults with similar orientations and movement histories have been mapped between these two faults.
 
    The Celebration Fault transects the open pit along the highwall and dips into the pit. It also functions as a groundwater conduit and is a target for two dewatering wells. This structure is sub-parallel to the Middle Fault and strikes at an average of N60°W with a dip of approximately 60°SW. Although appreciable dip-slip offset is not noted north of 800NWon the mine grid, shallowly plunging slickensides indicate a component of right lateral strike-slip motion. The Celebration Fault is marked by a 10 ft to 20 ft wide zone of shearing and brecciation with only local cementation. The Friendship Fault visible in the pit dips approximately 78°NE and is considered to be a splay off of the Celebration fault. Information from drilling indicates that the Sulfide Queen Carbonatite has offset downdip by a series of faults with limited displacement. These structures are sub-parallel to the Friendship Fault, do not offset the Celebration Fault and displacement of the Sulfide Queen Carbonatite is less that 100 ft in most places (Castor, 1988; Molycorp, 2003; Nason, 2009).
3.2.4   Mineralization
 
    Mineralization occurs entirely within the Sulfide Queen Carbonatite within the Project area. This has been defined through drilling and mapping. Grade distribution internal to this mineralized zone is variable. Higher grade zones (>10% REO) tend to occur in lenses parallel to the hanging wall/foot wall contacts, both down dip and along strike. Continuity of mineralization internal to the carbonatite zone is well defined both along strike and down dip.
 
    The currently defined zone of REE mineralization exhibits a strike length of approximately 2,750 ft in a north-northwest direction, and extends for approximately 7,000 ft down dip from surface. The true thickness of the >3.0% REO zone ranges between 15 ft to 250 ft.
 
    The principal economic mineral at the Project is bastnasite, a REE fluorocarbonate with the chemical formula LnCO3F where Ln represents yttrium or any REE ratio but usually lanthanum or cerium. The bastnasite composition at the Project is dominated by cerium, lanthanum, and neodymium, with smaller concentrations of praseodymium, europium, samarium, gadolinium, dysprosium, terbium and the heavier rare-earth elements.
 
    Bastnasite mineralization at the Project is restricted to carbonatite rocks which were subdivided by Castor (1988, 2008) as described below.
 
    Bastnasite Sövite
 
    Bastnasite-sövite is a calcite-rich mineralized rock type containing relatively coarse, early-formed bastnasite, along with recrystallized barite phenocrysts, in an anhedral matrix of fine calcite and barite. Dark brown or ochre limonite is locally pervasive in sovite, particularly in silicified ore giving these zones a brown color. Such rocks rarely have higher iron contents than unaltered sovite. Where unaltered, this material is a pink to mottled white and red-brown rock carrying about 65% calcite, 25% strontian barite, and 10% bastnasite. However, chemical and mineralogic changes subsequent to crystallization have produced more complex mineralogies. The sövite is
     
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    characterized by relatively high calcium, strontium and lead, moderate barium and low phosphorous.
 
    The bastnasite sovite forms the basal portions of the mineralized area, and all of the mineralized material at the north end of the pit. At the south end of the pit, sovite makes up less than half the mineralized zone thickness.
 
    Celestite occurs in the bastnasite sovite as bladed replacements and outgrowths from barite phenocrysts. Celestite is particularly abundant, along with variable amounts of very coarse bastnasite, in a basal sheet of otherwise unaltered sovite about 50 ft thick. This celestite sovite zone is separated from the main mineralized body by a zone of gneiss and/or breccia. Late celestite veins have been observed cutting talc-altered sovite.
 
    Dark brown or ochre limonite is locally pervasive in sovite, particularly in silicified ore. Such rocks rarely have higher iron contents than unaltered sovite. Coarse bastnasite typifies sovitic mineralized rock. On the 4640 level the average bastnasite grain diameter is about 300μm. For the most part, monazite [LnPO4)] occurs sparingly in the sovite, almost always as small primary euhedra and patches of radial secondary needles.
 
    Bastnasite Beforsite
 
    The bastnasite beforsite unit generally lies above the sovitic material and is separated from it by dolosovite. Bastnasite-beforsite is a carbonate-rich mineralized rock type, containing ferroan dolomite (ankerite) as the major carbonate phase, instead of calcite and largely unaltered. Locally this rock contains minor quartz. Beforsite is tan or grey to pinkish tan, and contains abundant grey or purple to pink and white single-crystal barite phenocrysts. The matrix consists mainly of fine dolomite rhombs set in very fine interstitial material consisting mainly of bastnasite with calcite and barite. The mineralogic composition of an average beforsite is about 55% dolomite, 25% barite, 15% bastnasite, and 5% calcite. Zones of barite-rich beforsite, associated with barite-poor zones have been logged in core holes and noted during pit mapping. Compared with the sovite, beforsite in pit samples has higher Ln and Ba, along with lower Sr and Pb. Phosphate content is variable, but can be high in areas of irregular late veinlets of felty monazite. This is known as “bone” monazite and can be as much as 5% of the rock.
 
    Dark brown limonitic alteration occurs in places in the beforsite, particularly along faults and in structural zones. In many instances, the limonite forms rhomb-shaped pseudomorphs indicating it formed by replacing the ferroan dolomite. In addition, Secondary lanthanide minerals occur in portions of the beforsite such as sahamalite [(Mg,Fe2+)Ln2(CO3)4], synchisite [synchysite, CaLn(CO3)2F] and ancylite [SrLn(CO3)2(OH)•H2O] which was also identified using XRD. Large amounts of these secondary Ln carbonates occurring within beforsite are associated with secondary calcite. Along the south wall of the pit, the beforsite contains crude, nearly vertical banding. On close examination, this is seen to consist of braided discontinuous veins of late bastnasite/calcite. This texture probably formed by upward streaming of lanthanum and calcium-rich residual fluids remaining in the beforsite after dolomite crystallization.
 
    Bastnasite Dolosovite
 
    Bastnasite dolosovite occurs in a 100 ft to 200 ft-wide zone between the bastnasite beforsite and sovite. It contains both dolomite and calcite, and is generally limonitic. Similar to the beforsite, dark brown limonite commonly forms pseudomorphs after dolomite rhombs. The dolosovite generally contains white to pink recrystallized barite phenocrysts. Some dolosovite samples contain coarse bastnasite as in the sovite, but often samples have fine, late beforsite-style bastnasite. A line drawn along the interface between the zone of coarse (greater than 150μm)
     
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    bastnasite average crystal sizes and the zone characterized by fine (less than 150μm) average crystal size roughly bisects the bastnasite dolosovite zone.
 
    Chemically, the dolosovite shows both sovititic and beforsitic attributes. It is highly variable in terms of gangue mineralogy, particularly with regard to the carbonate minerals which show much evidence of secondary redistribution. In some samples, dolomitization is obvious, along with later limonitic replacement of the dolomite. In other locations, late white to brown calcite veining is abundant.
 
    Some consider the dolosovite to be a hybrid rock and not a separate intrusive type. In this case, it is plausible it was formed by carbonate redistribution during and after intrusion of the beforsite. Based on bastnasite grain size, it is mainly dolomitized sovite; but contains some finely divided bastnasite and is in part calcitized beforsite. Strongly limonitized dolosovite, referred to as “black ore” by Molycorp personnel, creates extreme milling problems. “Black ore” is mainly restricted to the dolosovite but in places extends into the beforsite. This material is generally dark brown soft material with white calcite veining. It typically exhibits high lanthanum content, carrying large amounts of coarse or fine grained bastnasite. In part, the elevated lanthanide (Ln) values may be due to removal of carbonate, resulting in an abundance of void space allowing the formation of larger grain sizes. This material generally has relatively low densities and is poorly indurated. Laboratory analyses of this rock type shows that bastnasite dolosovite has above average iron, manganese, and phosphorous contents as compared with the bastnasite sovite.
 
    The bastnasite dolosovite has high strontianite contents where derived from sovitic ore. It is also locally high in fine, anhedral, late-stage silica. Although the dolosovite appears to be dominated by alteration mineralogies, it rarely contains talc.
 
    Ln-bearing minerals other than bastnasite commonly occur in the dolosovite, though mainly as minor phases. Bright yellow synchisite replacing bastnasite was observed in many thin sections. Secondary sahamalite and ancylite have also been identified in many dolosovite samples. Bastnasite in dolosovite is generally yellow-brown or dark-brown, rather than in normal light tan to grey colors. Bone monazite is more abundant than primary monazite.
 
    White Sovite
 
    White sovite occurs above the beforsite in the southwest corner of the pit. It carries very fine, late bastnasite as in the beforsite, but contains little or no dolomite. White sovite appears to be the product of late stage calcitization of beforsite by rising residual fluids responsible for late bastnasite/calcite deposition in the underlying beforsite.
 
    In addition to fine bastnasite, the white sovite contains abundant single-crystal barite phenocrysts as in the beforsite. Chemically, white sovite has high Ln and low Pb relative to beforsite. Its Sr content ranges from low to moderate. Phosphate contents are variable, with most present as veins of bone monazite.
 
    More white sovite was present in the mined-out portion of the 4700 level than in lower levels. This is due to the present pit plan which precludes mining in the southwestern-most portion of the mineralized zone. On the 4640 level, the white sovite is exposed as a thick dike within hanging wall stockwork breccia 10 ft to 20 ft above the beforsite. Drillhole 85-1 intercepted 80 ft of white sovite before encountering dolomitic carbonatite.
 
    Parisite Sovite
 
    Parisite sovite is found in the pit above the 4700 level in the footwall. A dike carrying about 20% of flow-oriented parisite [CaLn2(CO3)3F2] was mapped on the 4760 level at the south end of the
     
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  pit. This dike was intercepted in core hole 85-2. More information about this rock type is discussed by Sherer (1979).
 
    Monazitic Carbonatite
 
    Bodies of carbonatite which contain primary monazite in amounts that approach or exceed bastnasite contents occur within, and adjacent to, the mineralized zone. In addition, monazitic sovite comprises most of the small carbonatite dikes in the vicinity of the mineralized zone.
 
    The monazitic carbonatite has low total REO contents, generally in the 2 to 4% range. It is also characterized by high Ca and P, and low Ba. In hand specimen, the monazitic carbonatite is nearly equigranular because barite phenocrysts are sparse or lacking.
 
    Although sovititic and beforsitic carbonate rock types have both been documented, nearly all of the monazitic-bearing carbonatite rocks observed on the 4700 to 4640 levels are dolosovite. Monazite sovite is abundant in core holes drilled on the north part of the pit. Significant amounts of monazite dolosovite occur at the south end of the mineralized zone and extend beneath the mill.
 
    Monazitic carbonatite is generally associated with brecciated rocks. Small, phlogopitized clasts are commonly present in the monazite carbonatite as well as phlogopite xenocrysts. At the north and south ends of the pit monazitic carbonatite appears to form envelopes around breccia masses. A large monazite dolosovite mass along the hanging wall of the orebody contains areas rich in clasts.
 
    The monazite in the monazitic carbonatite occurs predominantly as primary euhedra or subhedra. Bone monazite replaces primary crystals in some samples. Where present, bastnasite occurs as sparse corroded grains, generally observed in coarser sizes similar to those documented in the basal sovite.
 
    The location of monazitic carbonatite masses, and the lack of barite phenocrysts suggest the monazitic magma was filter pressed out of the adjacent breccias. Formation of the monazitic carbonatites probably post-dated sovite emplacement and predated beforsite emplacement.
 
    Alteration in the monazitic carbonatite is similar to that observed in the dolosovite. However, “black ore” formed from monazitic carbonatite has not been recognized to date.
 
    Breccia
 
    Breccia with a carbonatite matrix comprises a significant proportion of the Mountain Pass carbonatite body. Like the related monazitic carbonatite, the breccia nearly always has low lanthanum oxide (REO) and high P, and has historically not been added to mill feed in significant quantities. Breccia has been observed in abundance at the north end of the current pit, and essentially limits ore mining in that direction due to metallurgical concerns. Breccia is also prominent at the south end of the pit, where considerable tonnages extend under the current mill location.
 
    As observed by Sherer (1979), breccia occurrences associated with the main carbonatite body at the Project are variable. The breccia bodies were previously noted to be semi-continuous envelopes on the hanging wall and footwall contact with the carbonatite intrusion and interlayered within the mineralized rock types. In the hanging wall, it ranges from stockworks of randomly oriented or sheeted carbonatite dikes cutting altered gneiss, clast-supported breccia with more than 70% altered angular clasts, to matrix-supported breccia with angular to rounded clasts which locally grades into monazitic carbonatite with sparse clasts.
     
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    In the footwall, abundant rounded clasts of gneiss, shonkinite, and syenite occur in a crushed rock matrix with little or no carbonatite. This breccia grades to matrix supported breccia with rounded clasts. Some footwall breccia has protomylonitic textures, along with occurrences of talc and crocidolite. Breccia at the north end of the pit is strongly altered to talc, which renders clast identification difficult. Brecciated zones have also been observed internal to the main carbonatite body.
 
    Crocidolite Occurrence
 
    Riebeckite is a sodium-rich amphibole [Na2(Fe,Mg)5Si8O22(OH)2] that locally occurs at Mountain Pass. When it occurs in an asbestiform or long-fiber variety, it is known as crocidolite or blue asbestos. Crocidolite is a concern owing to the processing problems that result if large amounts are introduced into the mill feed. Crocidolite is present in small quantities throughout the district as a replacement of mafic minerals (typically amphiboles) in the Precambrian gneiss. While it may occur alone in very limited quantities, it typically forms as part of the fenite alteration halo surrounding dikes of carbonatite and, to a lesser extent, the ultrapotassic intrusive rocks. Fenite is an alteration suite that consists of secondary red potassium-feldspar, hematite, and calcite + crocidolite. It locally occurs in carbonatite and the other intrusive rocks as a late magmatic alteration, which formed fracture coatings, irregular veins and clots, and pervasive, intense overprints in the host rocks.
 
    Of most concern at Mountain Pass are the areas where this extreme fenitization overprints mineralized carbonatite in the north end of the pit. This alteration has locally introduced significant amounts (up to several tens of percent) of crocidolite into mineralized carbonatite over an extensive, but poorly defined, area. Historical drilling results show that intervals with high concentrations of crocidolite are typically of low REO grade, but some carbonatite intervals contain both high REO and high crocidolite. This will have to be selectively mined and stockpiled for possible future processing. As more information becomes available, the mine plan will be adjusted to compensate for the deleterious effects of this material.
3.2.5   Relevant Geological Controls
 
    The primary geologic control on mineralization is lithology and only the carbonatitic rock types appear to be favorable for economically significant REE mineralization. Although a number of high-angle normal faults bisect the mineralized zone, offset appears to be post mineral in all cases and displacement appears to be less than 100ft.
3.3   Exploration
 
    The exploration history of Mountain Pass is described in Section 2.2.3. Currently, Molycorp relies on the interpretations made by predecessor companies, the USGS, and various consulting companies related to the regional and mine area geology and hydrogeology, regional and local structure, deposit geology, current pit slope stability conditions, and REE recoveries.
 
    Between December 2009 and February 2010, Molycorp conducted an in-fill drilling program to assess the following:
    Quantify the tonnage and grade of mineralized material underlying the existing mill facility; and
 
    Assess the potential northern extension of the mineralized zone.
    The 2009 — 2010 drilling program included approximately 9,750 feet of reverse circulation drillholes. Figure 3.2 presents the 2009-2010 in-fill drilling program. Since December 2009, six infill drillholes along the west side of the pit were completed, three drillholes were advanced to
     
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    target depths between the pit and the existing mill and two holes were drilled northeast of the pit on the north side of the Celebration fault. One drillhole was dropped from the program due to access constraints and two drillholes from the original program will be completed using a core rig. The program is being completed using core for better identification of crocidolite and to facilitate deeper drilling below the water table. As of the date of this study, analytical results are pending for this phase of the program.
3.3.1   Interpretation
 
    Based on a review of the information provided to SRK by Molycorp, and information available in the public domain from primarily USGS field observations, SRK is of the opinion that both the historical regional and property specific exploration of the Mountain Pass Property were conducted in a professional manner, and that interpretations derived from these studies are accurate.
3.3.2   Type and Extent of Drilling
 
    Numerous drilling campaigns have taken place at Mountain Pass, starting in 1951 with improvements in drilling methods and technology occurring through time. Throughout the years, a minority of holes have been drilled for which no known record exists. The documented exploration and development drilling data are summarized in Table 3.1.
 
    Drill coordinates, collar elevations, downhole surveys, rock type, and analytical results are still available on the geology logs stored on site. During the 1960s and 1970s, hundreds of shallow rotary holes were drilled and assayed. All material encountered by shallow rotary drilling has been mined out; therefore, these drill data were not used by SRK in this Report.
 
    Historical diamond drilling was conducted from the surface on the majority of drillholes. A combination of rotary and diamond drilling was used on 12 holes where the rotary interval ranged from the top 80 ft to 1,153 ft. Figure 3.2 presents the extent and type of drillholes in the project area (excluding water production and compliance monitoring wells, and geotechnical drillholes).
 
    Drill core is stored in waxed boxes at the Project site in locked containers. Drill logs are in a separate locked container in sequence in file cabinets. The hard-copy lithologic logs contain information on core recovery, lithology, structure, mineralization, assay values, alteration and orientation. Polished petrographic thin sections were made from selected intervals from each core hole. Mineralogical data from these thin sections are also available at the Project.
 
    Procedures
 
    Drilling was conducted by several different companies and separate files with the driller’s records are filed on site for most of the drilling campaigns. Industry-standard churn, rotary, and core drilling methods were used. Core recovery was typically good with typical recovery of 95% to 100%; rarely was recovery below 80%. Reduced recovery was encountered in fault zones and areas with large or abundant vugs.
 
    In some drilling programs (R-series, DH-series), rotary methods were used to drill through overburden and rock units such as the gneissic host rocks that were anticipated to be un-mineralized. The drilling method switched to diamond core when evidence of mineralization or promising alteration was observed in the rotary cuttings or there was evidence of a contact with top of bedrock or the top of the carbonatite.
 
    Core size was typically NX, with the exception of the Diamond Drillhole (DDH)-series (BX, AX, and EX) and the 91- and 92-series (HQ). It appears that a combination of wireline and non-
     
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Table 3.1: Summary of Historical Drilling at Mountain Pass
                                                                     
# of   Drill   Drill   Core Size or   Collar   Total   Recovery       Geology   DH   XRD   Structure   Alteration   UV   Magnetic    
Holes   Date   Type   Hole Diameter   Coordinates   Footage   Noted (%)   Assays   Log   Surveys   Mineralogy   Log   Log   Scan   Susceptibility   Comments
5
    1966     Churn   5”   Yes     1,072     No   %REO (XRF)   Brief typed   No   No   No   No   No   No   Only penetrated alluvium
1
    1980     Rotary   Unknown   Yes     200     No   %REO (XRF)   Brief   No   No   No   No   No   Yes    
27
    1951-1953,
1966-1968,
1981
    Diamond   Mostly BX, some AX & EX   Yes     8,693     Yes   %REO + 21 Elements (outside lab)   Brief Orig - Detailed 1978 Relog   No   Yes   Yes   Alt/Min info in relog   Yes   Yes    
7
    1976, 1979, 1982, 1983     Rotary/ Diamond   Unknown rotary, NX core   Yes     6,997     Yes   7 Majors (DH- 7 only)   Brief   DH-5 and DH-7 only   No   Yes   Brief   No   Yes    
1
    1979     Diamond   NQ   Yes     721     Yes   14 Elements (outside lab)   Good   No   No   Yes   Good   No   Yes    
5
    1977     Rotary   Unknown   Missing HDH-5     1,130     No   None   Brief   No   No   No   No   No   Yes   Claim assessment work
12
    1967, 1970     Rotary/ Diamond   4 1/2” to 5 1/8” rotary; NX/BX core   Yes     11,950     Yes   %REO & 21 Elements (outside lab)   Brief   Yes   Yes   Yes   No   Yes   Yes   Rotary through overburden and barren rock
4
    1983     Diamond   NX   Yes     3,939     Yes   7 Majors (83-3 and 83-4 only)   Brief   83-3 and 83-4 only   Partial   Brief   Brief   No   No    
6
    1984     Diamond   NX   Missing 84- 2     5,024     Yes   %REO, P2O5, PEO/P2O5, + 7 Majors   Castor - Good   84-3 and 84-4 only   Yes   Yes   Good   No   No    
21
    1985     Diamond   NX   Yes     11,704     Yes   7 Majors   Castor - Good   Most   Yes   Yes   Good   No   No    
6
    1986     Diamond   NX   Missing 86- 6     6,199     Yes   7 Majors   Brief to Good; Detail varies   Yes   Yes   Yes   Good   No   No    
3
    1987     Diamond   NX   Only 87-1     3,004     Yes   None   Good   Yes   Yes   Yes   Good   No   No    
3
    1988     Diamond   NX   Yes     2,036     Yes   7 Majors   Good   No   Yes   Yes   Good   No   No    
7
    1989     Diamond   NX   Yes     2,938     Yes   Most with no assays; Limited Au; 89- 1 has 7 Majors   Brief to Good; Detail varies   No   No   Yes   Some detail   No   No    
     
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# of   Drill   Drill   Core Size or   Collar   Total   Recovery       Geology   DH   XRD   Structure   Alteration   UV   Magnetic    
Holes   Date   Type   Hole Diameter   Coordinates   Footage   Noted (%)   Assays   Log   Surveys   Mineralogy   Log   Log   Scan   Susceptibility   Comments
20
    1990     Diamond   NX   Missing 90- 1, 90-3 to 90- 8     8,270     Yes   7 Majors, not all holes assayed, some Au   Good   No   No   Good   Good   No   No    
13
    1991     Diamond   HQ   Missing 91- 3, 91-4     6,662     Yes   8 Major, SiO2 added   Good   No   No   Good   Good   No   No    
11
    1992     Diamond   Unknown   Missing 92- 6, 92-7, 92-8     2,678     No   10 Major, ThO2, Ln/P2O5 ratio added   92-5 Brief, others unlogged   No   No   No   No   No   No    
Source: Drilling data for 152 holes totalling 83,216 ft were compiled by SRK Consulting , 2009
Notes: NX-diameter core = 2.12” or 54.7 mm diameter; HQ-diameter core = 2.5” or 63.5 mm
Assay parameters: “7 Majors” = Total REO (REO), BaO, CaO, SrO, Fe2O3, P2O5, pbO; “8 Majors = 7 Major plus SiO2; 10 Majors = 8 Majors plus ThO2 and calculated ratio Ln/P2O5
     
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    wireline equipment was used; however, core size and drill type were infrequently recorded on the geology log.
 
    Drillhole collars were surveyed by the mine department surveyor, using industry-standard surveying methods and equipment. Of the 152 drillholes documented in Table 3.1, survey coordinates are lacking for 18. Collar coordinates were estimated by the geologist for 11 of these holes, leaving seven drillholes with no coordinate information. Plotted maps or surveyor’s notes with the location of these holes may be available on site, but have not yet been identified in the historical files.
 
    Down-hole surveys were conducted using a single-shot gyroscopic surveying equipment. The survey increments vary but are predominantly in 100 ft to 200 ft increments.
 
    Drill core was split in 5 ft intervals and logged by the site geologists. Split core was delivered to the on-site laboratory for XRF analysis. Geology (lithology, structure, alteration) logs have been located for nearly all drillholes; UV fluorescence, XRD mineralogy, and magnetic susceptibility logs are present for some holes.
 
    Results
 
    The drilling programs enabled Molycorp’s predecessors to delineate the tabular, west-dipping geometry of the mineralized zone, and to conduct mine planning. SRK is of the opinion that the drilling and survey methods employed during the historical drill programs are well documented, and that the procedures used meet or exceed industry standards.
3.4   Sampling Method and Approach
 
    The sample methods discussed herein were applied during the core drilling programs at the Project (Nason and Landreth; personal communication; 2009). All sample processing was conducted at the Project and samples were analyzed at the onsite laboratory. Analytical procedures are discussed in Section 3.5.
3.4.1   Sample Methods
 
    After the core was logged, a geologist selected sample intervals for analysis. Sample intervals were based on lithology and were generally 5 ft in mineralized zones. It was the practice at the time of the historical drilling campaigns to only sample material that was visually mineralized. Sample intervals could be shorter or slightly longer at lithological contacts and through fault zones. Lithological contacts are generally sharp and recognizable.
 
    The core was split longitudinally using a hydraulic core splitter. Half of the core was placed in a bag for analysis and the remaining half retained for geological reference. Following sample collection, the samples were delivered to the sample processing facility located in the mill facility. The split core samples were crushed then pulverized. A split of the pulverized material was placed in sample envelopes and delivered to the Mountain Pass Laboratory. All pulp and coarse rejects were packaged and labelled. After analysis the pulp and coarse rejects were returned to the geology department for onsite storage.
 
    SRK was not able to independently verify or observe the sampling methods employed during the historical drilling campaigns, and has relied on verbal and written descriptions of the processes employed at the time by former employees of Molycorp and its predecessors. However, SRK reviewed drill logs, sample summary sheets, a limited number of coarse and pulp rejects and
     
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    remaining drill core. The remaining drill core is stored on-site and is organized by drillhole and interval. Historical coarse and pulp rejects are no longer available onsite.
 
    SRK conducted a random inspection of core in the storage areas from the various major drilling programs, and the historical sample preparation area, and is of the opinion that sample handling, sample preparation and storage of core and rejects exceeds current industry accepted practices.
 
    The 2009 infill drilling campaign includes photographs of core, a system of marking sample intervals on the core boxes, a sample numbering system and record-keeping for all sample intervals in the drill log.
3.4.2   Factors Impacting Accuracy of Results
 
    Bastnasite is generally described as disseminated throughout the carbonatite at the Project, but there are areas where the mineral is coarse grained ranging up to 1 in. Bastnasite is a REE, carbonate-fluoride mineral with either La or Ce and lesser, varying amounts of other REE. Yttrium (Y), a non-REE, may replace Ce and La in the mineral, but at Mountain Pass, the REE present is predominantly Ce. Other REE minerals can be present including the carbonate fluoride minerals parasite and synchysite, the REE carbonate mineral sahamalite, the REE hydroxide mineral ancylite and the REE phosphate monazite (Mariano, 1977).
 
    Bastnasite also forms a series of minerals where non-REE such as Ba, Na and Ca substitute for Ce or La in the crystal structure. In addition, there are visually similar non-REE minerals such as fluorite, barite, celestite, calcite, and dolomite. Crocidolite, an asbestos-form amphibole, is also present (Mariano, 1977). Crocidolite and usually fluorite are visually different than most of the minerals at Mountain Pass. However, visual identification of some of the other mineralogies can be difficult, complicating sample selection based on visual observations only, especially when the minerals are fine grained and disseminated. Coarse grained zones may cause a nugget effect and care must be taken to collect an adequate sample.
 
    Historically, Molycorp staff used x-ray diffraction (XRD), cathoduluminescence, carbonate staining and transmitted light petrography to identify minerals in the core and in hand specimen. Handheld scintilometers were also used to help identify monazite. These procedures assisted in mitigating limitations in mineral identification. SRK is of the opinion that this is not a significant problem for the historical database.
3.4.3   Sample Quality
 
    Given that most of the mineralization is disseminated, SRK is of the opinion that the sampling protocols employed during the historical drilling campaigns were to industry standard and appropriate for the deposit type.
3.4.4   Sample Parameters
 
    Since drilling was conducted prior to 1992, SRK was unable to confirm sample procedures and protocols. Samples were typically collected at 5 ft intervals, with assayed sample sizes in the database ranging from 0.7 ft to 10 ft, with an average sample length of 5.23 ft. SRK considers the sampling parameters as described appropriate, given the nature of mineralization and the mining method under consideration
3.5   Sample Preparation, Analyses and Security
 
    The sample and drilling procedures described by Nason and Landreth (2009) indicate that during drilling, the core or drill cuttings were in the custody of the drillers or geologists or secured in an
     
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    onsite storage location at all times. Field geologists delivered samples to the sample preparation area. The sample preparation and laboratory facilities were within the secured Mountain Pass property boundary. This was industry standard practice at the time for ongoing exploration at an operating mine.
 
    Molycorp’s predecessors used various analytical procedures for sample preparation and analytical methods. Quality Assurance/Quality Control (QA/QC) samples were not inserted into the sample stream as part of the drilling programs. Laboratory QA/QC was not documented for the drilling programs by the on-site assay laboratory.
 
    Sample preparation and analysis were dependent on the analytical technique used at the on-site laboratory. There were two types of analytical techniques used for REO at the Project:
    Gravimetric methods: and
 
    X-ray fluorescence (XRF).
    Results for REE were typically reported as total REO.
 
    The equipment used for the historical drilling programs was replaced with newer models and the on-site laboratory no longer uses the wet chemistry method that was standard during the early drilling programs. Currently, the on-site lab uses XRF and Inductively Coupled Plasma (ICP) techniques for determination of individual REE species and reports the analysis as individual REO and REO total. Laboratory equipment at the on-site laboratory includes:
    One Philips PW2404 x-ray spectrometer XRF with a sample changer capable of running up to 150 samples/day (the lab is currently capable of prepping 50 fusion disks/day);
 
    One X’Pert PRO X-ray Diffraction (XRD) PANalytical;
 
    One Perkin and Elmer Atomic Absorption Spectrometer (AAS);
 
    Two Ultima2 Inductively Coupled Plasma Atomic Emission Spectrometers (ICP-AES) each capable of 100 samples/day; and
 
    One Agilant Inductively Coupled Plasma-Mass Spectrometer (ICP-MS) with an Agilant 7500cc Octopole Reaction System capable of speciation that can analyze 600 samples/day.
    The laboratory equipment in the on-site laboratory is technology not often found on a typical mine site and more consistent with equipment found in a specialized commercial laboratory. Molycorp equipped the on-site lab with state-of-the-art technology for analysis of REE, which is difficult to analyze for at the levels found at the Project. The sample preparation methodology is standardized and meets applicable QA/QC standards. Sampling and analysis protocols are successfully reproduced by external assay laboratories.
 
    The REO analysis for the drilling data in the existing assay database was obtained primarily by XRF analysis. A limited number of analytical results in the database were determined through wet chemistry techniques.
3.5.1   Historical Sample Preparation
 
    Preparation of the drill core samples included processing in a jaw crusher, then overnight drying. The entire crushed and dried sample was then passed through a cone crusher, homogenized and split using a Jones splitter to a 100g sample. Reject material was placed in envelopes and labelled for storage. From the 100g sample, 10g was delivered to the on-site lab for XRF analysis. The sample grain size was further reduced using a shatterbox swingmill.
     
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3.5.2   Mountain Pass Historical Gravimetric Method
 
    Prior to 1970, Molycorp used a gravimetric method for samples from the drilling and sampling programs. The gravimetric method determined Re2O3 and was reported as REO. In this method, approximately 0.5 g to 1.0 g of sample was dissolved through heating in a mixture of perchloric acid (HClO4) and hydrogen peroxide (H2O2). REO was then isolated in two precipitation and dissolution steps using organic solvents and inorganic rinses. The first step involved using phenolphthalein and NH4OH and the second used oxalic acid. This procedure separated the REO and thorium from iron, aluminum, uranium, titanium, phosphate, manganese, alkaline and alkalai earth metals and other divalent cations. The final filtered precipitate of RE-oxalate was then ignited at 900 °C to 1000 °C and when cooled weighed as total Re2O3 (Jennings, 1966). SRK does not know the detection limit for this technique.
3.5.3   Mountain Pass X-Ray Fluorescence Method
 
    The XRF technique that was used for the historical drilling programs in the on-site laboratory is the same method used during the SRK check analysis program. A 0.5g sample is fused with 9.5g of a 90/10 mixture of lithium tetraborate and lithium metaborate flux to a homogenous glass. Occasionally in order to improve low level sensitivity, a combination of 1.0g of sample and 9.0g of flux or 2.0g of sample and 8.0g of flux is used. The REO content is then determined using an XRF. For the drilling programs, only REO and occasionally BaO, CaO, SrO, Fe2O3 and P2O5 were reported. Loss on Ignition (LOI) is typically determined at the on-site lab by weighing the sample, firing the sample in an oven at 1000°C for two hours, cooling the sample to room temperature in a moisture free environment and then re-weighing the sample to find the total weight loss. The formula for this calculation is:
 
    LOI = (post firing weight — tare weight) / (pre-firing weight — tare weight) * 100
 
    The on-site lab method specifies a 2g sample for this analysis. Table 3.2 lists the current analytical detection limits for analysis at the on-site laboratory.
 
    Table 3.2: Oxides and REO Detection Limits
                                                                 
Oxide   P2O5   ThO2   SiO2   Fe2O3   MgO   CaO   SrO   BaO
Limit (%)
    0.05       0.01       0.05       0.05       0.05       0.05       0.05       0.05  
                                                 
REO   ReO   CeO2   La2O3   Pr6O11   Nd2O3   Sm2O3
Limit (%)
    0.1       0.03       0.03       0.02       0.02       0.02  
3.5.4   Quality Controls and Quality Assurance
 
    During the drilling programs at the Project, which were conducted prior to 1992, there was no Quality Assurance/Quality Control (QA/QC) in place that included the regular insertion of standards, blanks and duplicates into the sample stream. SRK located a limited number of laboratory printouts but no analytical certificates. Within the printouts, SRK found a limited number of re-analyses, but these were not systematic and appeared to be confirmation of higher grades and did not represent the entire spectrum of analytical results. Current laboratory personnel report that instrument QA/QC was in place at the on-site laboratory during these drilling programs, but no records are available.
     
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3.5.5   Interpretation
 
    SRK could not verify analytical procedures conducted during the previous drilling programs since this work was completed prior to 1992. No QA/QC work was completed external to the on-site laboratory and SRK could not verify the laboratory’s QA/QC procedures.
3.6   Data Verification
 
    Based on the review of historical sample preparation and analytical procedures, SRK initiated a sample check assay program. The material remaining from previous drilling programs consisted of split core stored on site in locked SeaVans. Most of the coarse and pulp rejects had been discarded, therefore, a sample check program was conducted using split core.
 
    For this check assay program, samples were prepared at SGS Minerals preparation laboratory located in Elko, Nevada, USA. The primary analytical laboratory used for this program was SGS Minerals located in Lakefield, Ontario, Canada. Approximately 10% of the check samples were analyzed on site.
3.6.1   Quality Controls and Quality Assurance
 
    The sample check program included re-analysis of approximately 1% of the assay database results. In summary, the program included the following sample types and numbers:
    108 core samples with original assay results between 0.18% to 16.30% REO;
 
    10 site-specific standard samples based on two samples of known REO content;
 
    10 blind duplicates; and
 
    5 blank samples.
    SRK selected random duplicate samples from sample intervals within the database that covered a range of analytical results from 0.18% REO to 16.30% REO. Since these duplicate samples were from the second half of the split core, the samples from the split core are considered field duplicates, with a ±20% error considered within acceptable limits. Of the 108 core samples, 66 core samples had historical assay results between 3.00% and 11.00% REO. The remaining 42 core samples had historical assay results between 0.18% and 2.99% or 11.01% and 16.30% REO.
 
    Standards and blanks were site specific. The site specific standards are non-certified and were created by the on-site laboratory from a pit sample and a high-grade sample from the Birthday claim. The blank material was a non mineralized sample collected at the Mountain Pass site by SRK.
 
    SGS Minerals prepared ten blind duplicates from the pulverized splits as directed by SRK. The blind duplicates were prepared at SGS Minerals’ sample preparation lab in Elko, Nevada U.S.A. prior to shipping to the SGS Minerals Lakefield, Ontario Canada facility for analysis. Ten pulverized splits of the core samples were also sent back to the on-site laboratory for comparative analysis. The pulverized splits are considered pulp duplicates, which are allowed a ±10% error.
 
    In addition to the SRK QA/QC samples, SGS Minerals included one blank, one inline duplicate and three additional duplicates per batch at the analytical lab in Lakefield. The analysis was run in two batches, so this totalled two blanks, two in-line duplicates and six duplicates in addition to those inserted by SRK. Calibration standards were provided by the on-site laboratory to insure similar analytical sensitivity for both labs. Technicians at the on-site laboratory inserted two duplicates and one standard in the ten samples analyzed onsite.
     
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    Ten samples were selected from the core samples and sent to ALS Chemex in Reno, Nevada U.S.A for specific gravity measurements.
    Sampling procedures followed by SRK include:
    A written record of the sample collected;
 
    Marking the sample interval on the core box;
 
    Identifying the sample interval and box interval on the inside top of the box,
 
    Photographing the core and core box top as both dry and wet core;
 
    Placing the split core into a pre-labelled sample bag;
 
    Inserting core blocks at the beginning and end of the removed core; and
 
    Inserting a lath cut to the sample interval as a space keeper in the core box.
    Sample numbers were generated using a combination of the drillhole identification and “from-to” sample interval. Control samples were placed in the sample stream with similar numbers using a drillhole and interval so as to be unrecognizable to the laboratory. The sample interval used for control samples was beyond the total depth of the drillhole to eliminate confusion with an actual sample.
 
    SGS Check Assay Sample Preparation
 
    Sample preparation for the check analysis was completed at SGS Mineral’s sample preparation lab located in Elko, Nevada. The preparation technique used was SGS Minerals code PRP90, which uses the following procedures:
    The sample is dried at 100°C for 24 hours;
 
    Crushed to 90% passing a 2 mm (10 mesh) screen;
 
    Split using a riffle splitter to 250 g;
 
    The 250 g split is placed in vibratory mill and pulverized until 85% passes 75 µm (200 Mesh) screen; and
 
    The coarse reject is retained and returned to the client for future analysis.
    The sample was then shipped to the SGS Minerals Lakefield, Ontario Canada facility for XRF analysis (SGS Minerals, 2009).
 
    SGS Check Assay XRF Procedures
 
    SGS Minerals worked closely with the on-site laboratory to identify the appropriate method for XRF fusion disc preparation to ensure that both labs used similar procedures for REO XRF analysis. The method approved by the on-site lab and used by SGS was as follows. A 0.2g to 0.5g pulp sample is fused with 7g of a 50/50 mixture of lithium tetraborate and lithium metaborate into a homogenous glass disk. This is then analyzed using a wave dispersive XRF (WDXRF). Loss on ignition at 1,000°C is determined separately using gravimetric techniques and is part of the matrix correction calculation. These calculations are performed by WDXRF software (SGS, 2009). This method is accredited with the Standards Council of Canada and conforms with the requirements of ISO/IEC 17025 (SGS, 2009).
 
    The analyses performed for the sample check program were SGS control quality, which are used to monitor and control metallurgical or manufacturing processes. Sample results are analyzed individually for better quality output. The oxides analyzed and their detection limits are listed in Table 3.3. The analytical work included Loss On Ignition as a separate analysis.
     
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    Table 3.3: Oxides Analyzed with Detection Limits
                     
Oxide   Limit (%)   Oxide   Limit (%)   Oxide   Limit (%)
Whole Rock Analysis
                   
SiO2
  0.01   Na2O   0.01   CaO   0.01
Al2O3
  0.01   TiO2   0.01   MgO   0.01
Fe2O3
  0.01   Cr2O3   0.01   K2O   0.01
P2O5
  0.01   V2O5   0.01   MnO   0.01
Rare Earth Oxide Analysis
                   
La2O3
  0.01   Ce2O3   0.02   Nd2O3   0.02
Pr2O3
  0.02   Sm2O3   0.03   BaO   0.02
SrO
  0.02   ThO2   0.01        
    Check Assay XRF Procedures
 
    The on-site laboratory check assay XRF procedures are discussed in Section 3.5.3.
 
    Specific Gravity Assessment
 
    For all historical mineralized material estimates, a tonnage factor of 10 ft3/ton (specific gravity = 3.20) was applied to mineralized carbonatite, and a tonnage factor of 11.5 or 11 ft3/ton (SG = 2.79 to 2.91) was applied to the enclosing country rock (Cole, 1974; Couzens, 1997, Nason, 1991). Molycorp was unable to locate the original documentation related to specific gravity, although it was reported that IMC performed a truck weight study in the field on waste rock.
 
    In order to validate the historical specific gravity assumptions, SRK collected a total of ten samples for specific gravity determination. These determinations were completed by ALS Chemex Laboratories located in Reno, Nevada. The results of this testwork are provided in Table 3.4. Based on these results, SRK assigned a tonnage factor of 10.25 ft3/ton (specific gravity = 3.13) for mineralized carbonatite, and 11.57 ft3/ton (specific gravity = 2.77) for the enclosing gneissic rocks, which is in reasonable agreement with historical assumptions.
     
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Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility    
    Table 3.4: 2009 Specific Gravity Results
                                     
Sample
Sample ID   Hole   depth   g/cm3   ft3/ton   rock type   Notes
SGMP833531
  83-3     531       3.22       9.95     carbonatite   with red and brown flow foliation
SG854224
  85-4     224       3.14       10.20     carbonatite breccia   pink and white to pink and brown matrix with green amphibole clasts altered to chlorite and sericite
SG859233
  85-9     233       2.82       11.36     gneiss   fine grained biotite-qtz gneiss “sparse red feldspar and crocidolite mostly along veins”
SG8520427
  85-20     427       2.62       12.23     carbonatite   dark yellow brown strong limonite replacement of carbonatite bastnasite rare
SG8521437
  85-21     437       2.72       11.78     carbonatite breccia   with abundant syenite/shonkinite clasts
SG882399
  88-2     399       3.29       9.74     carbonatite breccia   blue to red brown matrix pink to brown barite, abundant crocidolite
SG9013464
  90-13     464       3.37       9.51     carbonatite   pink barite and white to gray calcite
SG9016244
  90-16     244       2.87       11.16     carbonatite   pink barite and white calcite, iron pseudomorphs black ore up to 60%, some violet barite
SG9111153
  91-11     153       2.91       11.01     carbonatite breccia   matrix supported breccia, matrix is light gray to maroon with salt and pepper texture, abundant FeOx
SG9111258
  91-11     258       3.65       8.78     carbonatite   pink to light gray mottled with clear to light pink barite phenocrysts
    Results
 
    The overall results of the sample check program indicate that historical data are acceptable for use in estimation of the mineralized material. Statistical comparison of the new analytical results for the 108 core samples with the historical assay database values indicate the datasets are comparable within tolerance limits. Results for the site-specific standards and duplicate samples were also within acceptable limits.
 
    There were no blank failures; however, two failures were observed in the low grade standard in the QA/QC analysis at the Project. Only one high grade standard was inserted in the sample stream due to delays in creating this sample. Both standards performed lower than the expected value and the nine low grade standard analyses suggest instrument drift, based on a consistent downward slope in the graph overtime. In addition, one of the standards that showed a variance outside the expected sample performance range was within a group of samples that showed good correlation with the original sample. The standard variance may be the result of insufficient analytical information required to determine a statistically representative expected value for the standard prior to insertion into the sample batch for QA/QC monitoring. Table 3.5 lists the standards with expected analytical values and Figure 3.3 shows the results of the standards.
     
     
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Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility    
 
 
 
 
 
    Table 3.5: Standards with Expected Analytical Performance     
                         
    Maximum REO (%)   Median REO (%)   Minimum REO (%)
Pit Standard
    6.50       5.91       5.32  
Birthday Standard
    24.86       22.60       20.34  
    The pulp duplicates showed good agreement with the original analyses. The pulp duplicates analysed at the SGS and on-site laboratories showed good correlation between the labs and were within ±10% with one failure. The duplicates analysed by SGS and the SRK blind duplicates analysed at SGS were all within ±10% of expected value. These results are shown in Figure 3.4.
 
    Overall the historical Project analyses in the assay database are lower than the corresponding SGS Minerals analyses and the Mt. Pass lab analyses above approximately 4.5% REO. Below 4.5% the historical analysis is generally a little higher, but within the ±20% range for acceptable analysis. The results of the SGS analysis plotted against the historical analysis shown in the scatter plot and the plot of relative percent difference are provided in Figure 3.5.
 
    SRK requested that SGS re-analyze 16 field duplicates between approximately 3.00 and 11.00% that exceeded ±20% and the two standards failures. The re-analysis of the standards included samples above and below the standard in the sample stream. Re-analysis of the standards resulted in values within the expected range. The re-analysis of the field duplicate failures at SGS were within ±10% of the first analysis at SGS.
3.6.2   Interpretation of SRK QA/QC
 
    SRK concludes that the differences identified between the original and check data are the result of different analytical techniques separated by almost 20 years and natural variability between the first analyzed half and the second analyzed half of the core. SGS and the Mountain Pass Lab produced similar results and demonstrated good repeatability. SRK is of the opinion that the historical analytical data in the database can be used to support a mineral reserve statement.
     
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Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility    
4   Mineralized Material Assessment
 
    SRK compiled a digital database based on information available from original laboratory analyses. In some cases, the original lab sheets were not located, and SRK relied on typed and hand written analyses as posted on drilling logs. There is some information available regarding drilling recoveries, recorded on the original drill logs. Anecdotal information indicates excellent core recovery, and no relationship was observed by site personnel between core recovery and REO grade. SRK is of the opinion that archiving of historical information related to drilling programs on site is sufficient.
 
    SRK performed a detailed assessment of the 3-dimensional aspects (e.g., grade, lithology, continuity) of the deposit. This detailed assessment formed the basis of the reserve statement described in Section 6.0 of this report.
     
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Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page 48
5   Geotechnical
    The primary geotechnical engineering aspects of the Project include the estimation of the maximum pit slope angle for the open pit and specification of the foundation designs for the new process facilities. The engineering designs for the overburden stockpile areas and the Tailings Storage Facility are addressed in Sections 8.1 and 8.3.
5.1   Pit Slope Design
    The 2004 application for the Conditional Use Permit, approved by the Land Use Services Department of San Bernardino County, included a post-closure stability analysis (Golder 2002b) for the ultimate open pit as well as other surface facilities. The geotechnical assessment of the ultimate pit included rock mass controlled stability analyses of the east, north, west and south pit walls. The assessment also included analysis of a non-daylighting planar mechanism on the east wall along the Celebration Fault. In this mechanism, slip may occur along the relatively weak fault surface and then break-through to the slope face through the rock mass. Post-closure groundwater conditions assume a 250 ft deep pit lake (due to groundwater inflow) or approximately 500 ft below the existing ground surface.
    The geotechnical assessment identified the non-daylighting planar mechanism on the east wall as the most critical failure mechanism. The calculated Factor of Safety (FOS) for this section is 2.3 for static conditions and 1.8 for pseudo-static conditions. Both FOS meet or exceed typical mine closure requirements of 1.5 (static) or 1.1 (pseudo-static) for post-closure stability (e.g., Arizona Department of Environmental Quality 1998).
    Per Golder (2002b), the maximum slope height will be 840 ft in the north wall and the overall design slope angles will be 42° in all pit sectors. Molycorp will re-assess this pit slope stability analysis if the mine plan changes materially from the assumptions described above.
5.2   Building Foundation Design
    Foundation designs for new buildings are subject to review and approval by building and land use authorities. In November 2009, Molycorp retained Converse Consultants (Converse) to perform a geotechnical study in the existing and proposed plant areas to assess the nature and engineering properties of the subsurface soils and to provide preliminary recommendations for support of the proposed building improvements. Converse advanced 10 exploratory test borings during an air rotary rig. Where material types allowed, Standard Penetration Tests (SPT) were performed using a SPT sampler.
    Conclusions relevant to new facility construction include:
    Three borings were advanced at widely separated locations to provide a preliminary indication of the near-surface conditions at those locations;
 
    The native soils encountered in the borings consisted of clayey, silty and poorly-graded (clean) gravelly sands, portions of which were cemented;
 
    Bedrock was encountered in one boring at a depth of about 3 feet but was not encountered in the other two borings within the 22.5 foot depth explored.
 
    Site materials are essential non-expansive;
 
    There are no known active faults projecting toward or crossing the site; however, ground shaking from earthquakes associated with nearby and distant faults may occur during the
     
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Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page 49
      lifetime of the project. Based on these initial findings related to seismic conditions, the appropriate site class for the area is “C”.
    Existing buildings and infrastructure at the Mountain Pass property indicate competent foundation conditions. During the course of detailed design for new buildings and infrastructure Molycorp will conduct additional geotechnical assessments to confirm appropriate foundation conditions and the corresponding structural design requirements.
     
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Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page 50
6   Mining
    Mining of rare earths at Mountain Pass commenced in 1952 with a small open pit mine. The mining initially focused on the high grade areas with a relatively low production rate of about 80 to 120 t/day. Table 6.1 presents a summary of historical mine production between 1968 and 2002. Historical open pit mining methods were based on a 30-foot bench height. Ore was mined with shovels with 85 ton haul truck transport to the primary crusher. Multiple operating benches and a large intermediate ore stockpile allowed Molycorp to achieve a target ore feed rate (approximately 2,000 tons per day) at an average REO grade of 8.5%.
    The existing open pit is about 1,800 ft long, 1,600 ft wide and 500 ft deep at its deepest point. The pit-bottom sump is about 250 ft deep. Existing benches are 30 ft high and the overall slope angle of the pit wall is about 45°.
    Planned mining operations at Mountain Pass will continue using open pit mining methods. Given the 42 Mlb production target for REO, the mining rate will fluctuate between 1,100 and 1,500 tpd based on realized REO grade. The primary bastnasite-bearing carbonatite formation dips to the west, resulting in an average stripping ratio of 11:1 (Overburden:Ore) over the 30 year mine life. The stripping ratio varies throughout the mine life. The pre-production stripping campaign will total approximately 10.4 Mt of overburden material. Overburden removal will start along the north pit wall and progress southward along the western boundary of the existing open pit.
    Molycorp will either self-perform or use mining contractors for stripping topsoil and overburden material. Molycorp intends to mine using Molycorp personnel and equipment. Molycorp staff will also be responsible for grade control, mine planning, environmental compliance and overall mine management.
    The proposed SRK pit is based on the mineralized material estimate (Section 4.0) using a historical cut-off grade above 5% REO. Marginal grade material between 2.7% and 5% REO is stored for possible use but is not classified as a reserve.
    The ultimate pit is approximately 3,200 ft long, 1,800 ft wide and 600 ft deep with a volume of 1.3 billion ft3. The pit design is based on 30 ft benches, taken in three 10 ft lifts with each ore lift taken in two 5 ft flitches. The ramps are 60 ft wide at a maximum gradient of 10%.
    SRK applied the open pit boundary approved in the 2004 Conditional Use Permit as an initial constraint on mine production. SRK developed a phased production schedule that restricted operations to the current pit permit boundary. Expansion to the ultimate open pit boundary will require amendment of the current CUP. Mining activities at Mountain Pass are a vested right of Molycorp and the act of open pit mining is not subject to future approval by regulatory authorities. Molycorp has a reasonable expectation that future amendments to the existing permit boundary will be approved.
    The life of mine plan was based on a culmination of pit optimization, pit design, associated mine economics and rare earth recoveries.
     
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Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page 51
    Table 6.1: Past Mine Production (1968 to 2002)
                         
Year   Mined, tons   Crushed, tons   Overburden, tons
2002
    201,520       217,204       255,520  
2001
    175,010       260,000       634,000  
2000
    78,000       0       239,000  
1999
    94,000       0       43,000  
1998
    234,000       269,000       688,000  
1997
    632,000       452,000       3,355,000  
1996
    604,000       551,000       2,312,000  
1995
    714,000       546,000       2,388,000  
1994
    567,000       494,000       1,217,000  
1993
    540,000       447,000       1,232,000  
1992
    275,000       247,000       1,771,000  
1991
    404,000       446,000       2,477,000  
1990
    706,000       508,000       1,749,000  
1989
    445,000       419,000       1,610,000  
1988
    143,000       214,000       1,049,000  
1987
    402,000       320,000       1,072,000  
1986
    343,000       214,000       1,225,000  
1985
    365,000       204,000       1,233,000  
1984
    621,714       439,000       728,000  
1983
    485,315       322,771       226,000  
1982
    400,428       400,427       221,625  
1981
    371,553       370,207       225,691  
1980
    386,927       360,068       219,345  
1979
    326,010       358,399       327,760  
1978
    292,760       266,757       132,200  
1977
    314,946       321,508       66,255  
1976
    355,253       308,938       73,980  
1975
    296,693       296,693       70,100  
1974
    479,000       499,597       9,100  
1973
    303,000       305,072         No data
1972
    163,000       228,488         No data
1971
    214,000       181,175         No data
1970
    226,000       204,398       14,000  
1969
    282,000       259,064       85,000  
1968
    196,000       193,100         No data
Mill quantities do not include tailings that were reprocessed.
Between 1975 and 1982, crushing tonnages were not recorded (assumed to be the same as milling tonnages)
Source: Mountain Pass monthly operational reports
6.1   Pre-Production Mine Development
    All overburden and waste movement will either be carried out by a mining contractor or performed by Molycorp. The existing open pit mine and associated infrastructure minimizes the requirement for extensive pre-production mine development prior to re-start of mining operations.
     
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Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page 52
6.1.1   Ground Preparation
    The mining advance will be preceded by ground preparation, which consists of topsoil removal and cleanup, and relocation of old waste dumps. The topsoil will be stockpiled and used later for environmental rehabilitation.
    The existing mill is located within the final pit limits. The current mine plan requires relocation of the mill facility approximately 10 years into the mine life.
    The site for the new Paste Tailings Storage Facility (PTSF) and paste plant will also be prepared for construction.
6.1.2   Road Construction
    The existing surface road infrastructure will be supplemented by a road to access the new PTSF. In Year 10, road construction will be required for access to the site of the new mill. It is expected that road construction will be characteristic of existing haul road and access roads, relying predominantly on grading the existing topsoil, with a minimum of fill.
6.1.3   Mining Preparations
    During the pre-production period, dewatering of the existing Mountain Pass pit and construction of the ore stockpile will commence. Stockpile Grade material (REO between 2.7 and 5%) will be placed in a designated area.
    Molycorp re-started pit dewatering in August 2009 with activation of two enhanced evaporation units on the west pit wall. Pit water is pumped from a floating sump in the existing pit. Molycorp will increase the evaporation capacity in 2010 and 2011 to allow resumption of pit development.
6.1.4   Stockpile Construction
    Molycorp has permit approvals for expansion of the West Overburden Stockpile (Section 8.1). Production activities will require clearing and ground preparation for the planned East Overburden Stockpile in Year 10.
6.1.5   Mine Block Model
    The block model was based on a mineralized envelope to estimate ore tonnage and extent of mineralization. Since the block model did not incorporate sub-blocking along this hard boundary, it was necessary to determine the quantity of REO, which may lie within any regular block touching the mineralized envelope. This essentially diluted regular block grade values to create a fuzzy boundary along the mineralized zone which equates to a diluted selective mining unit (SMU) of 10x25x25 foot mineable blocks. Regular block density, which touched topography, were also modified according to the percentage of the block in-situ verses that above topography thus maintaining the correct grade tonnage units within a block.
    Due to the multiple processing and product streams, the REO is subjected to a value model to determine the net value of blocks after recovery, processing cost and revenue. The actual block modification script used is described below and corresponds to the simplified schematic flow diagram shown in Figure 6.1.
    The resultant mine block model accounts for spatial dilution of grade and tonnage along the topography and orebody, provides a representation of a block dollar value and is suitable for pit optimisation and production schedule estimation.
     
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Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page 53
6.1.6   Cut-off Calculation
    The mining cut-off calculation is based on a historical grade of 5% REO. To calculate the marginal cut-off grade for Molycorp’s internal consideration, a zero revenue block equates to a 2.7% REO grade. SRK is of the opinion that using a 5% cut-off grade is prudent given historical mine performance and while crocidolite delineation is ongoing (Section 3.2.4).
6.2   Pit Optimization
    Pit optimization was carried out on the Mountain Pass deposit using Whittle™ v4.2 pit optimization software in conjunction with Maptek’s Vulcan 8™ general-purpose mine planning package. The optimization used the optimum pit size possible for the price assumptions and results formed the basis for a conceptual pit design. Whittle™ is a theoretical result which does not include mining access considerations and is used as a guide for detailed pit construction.
 
    Whittle Parameters
 
    Table 6.2 indicates the parameters used for pit optimization, which are based on the SRK geologic block model dated December 12, 2009. The block model was modified for proportional grade within the Mountain Pass mineralized envelope, inclusion of slope zones and modification of density due to topographical influence on regular block sizes.
 
    Table 6.3 illustrates the operational and mining limits applied to the optimization. The costs are based on estimates provided by SRK, Molycorp staff and from third party mining and process design contractors at the time of optimization.
 
    The Whittle™ parameters by necessity are estimated before the final economic model is constructed and may require further iterations in the future. An 8% discount rate for pit optimization and an estimated US$507 million initial capital cost were used to gage strategic mining cash flow risk involved in pit selection.
 
    Table 6.2: Physical Whittle Parameters
             
Whittle Parameter   Type   Value  
 
Base Units
  REO     %  
 
  Phosphorous     %  
 
  Calcium Carbonate     %  
 
  Value   $/ton  
 
Block Model Dimensions
  Geological        
 
  X     25  
 
  Y     25  
 
  Z     10  
 
  No. X     178  
 
  No. Y     204  
 
  No. Z     162  
 
Slope
        42º  
 
     
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Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page 54
    Table 6.3: Economic Whittle™ Parameters
             
Whittle™ Parameter   Type   Value  
 
Mining Cost
  Reference Mining Cost   $ 3  
 
  Mining Recovery Fraction     1  
 
  Mining Dilution Factor     1  
 
Processing Cost
  Process Name   MILL  
 
  Rocktype 1 - Category     1  
 
  Rocktype 2 - Category     2  
 
  Rocktype 3 - Category     3  
 
  Selection Method   Value Model  
Optimization
  Phase – Value Model     1  
 
Operational Scenario — Time Costs
  Initial Capital Cost (estimated)   $ 507,000,000  
 
  Discount Rate Per period     8 %
 
Operational Scenario — Limits
  Processing Method Limits   512,000 ore-t  
 
    Table 6.4: Whittle™ Pit — Summary of Results
         
Variable   Value  
 
Mill kilo tons
    14,871  
Waste kilo tons
    95,321  
Strip Ratio
    6.41  
REO (%)
    8.16  
6.3   Pit Design
    Pit designs for the Project were constructed using Vulcan 8™ general-purpose mine planning package. All designs used pit shell shapes exported from pit optimization results as a guide for toe and crest location. Ramps were added on an as needed basis to reduce haul distances and allow for effective mining widths.
 
    Ramp System
 
    The Mountain Pass ore body is controlled by a vein system of mineralization. As such there is a profound footwall and hanging wall. Ramps within the pit design have been placed exclusively on the footwall side of the pit where geometrical changes in the design are possible. This method removes the loss of ore on the footwall or additional stripping burden due to bench access.
 
    Table 6.5: SRK Pit Design Results
                 
Variable   Value     % Difference  
 
Mill kilotons
    13,588       -9.5  
Waste kilotons
    104,693       +9  
Strip Ratio
    7.7       +17  
REO (%)
    8.24       +1  
     
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Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page 55
    The percentage variation of pit design from whittle results illustrates the effect of mining width and ramp access from the theoretical results linked to the SMU block size. Due to the vein structure of the deposit this variance is within acceptable margins when ore tonnes are targeted.
6.4   Mine Production Schedule
    The production schedule was designed to mine 42 Mlbs of REO product. After a two year ramp up and pre-stripping from 2011, the resultant mill production schedule yielded a mine life of thirty-four years.
 
    The production rates estimated by SRK are based on the assumption that contractors will be used for pre-stripping activities in the pre-production period and early mine life to overcome the waste bound nature of the pit and when the mill is to be relocated. Using a base 5 year contract period, two stripping programs are required to move approximately 30,000 tpd and vary according to ore exposure. In between waste stripping regimes, a small owner fleet may be used.
 
    Three pit phases were constructed to represent segments of the final pit design. The number of possible phases is restricted by current mill location, depth of ore and required minimum mining width between phases which was maintained at 120 feet. For scheduling purposes, each phase comprised of a solid triangulation, which was converted into a 3-D solid shape representing 10 foot mining benches.
 
    For each bench triangulation within a phase, volumetric and grade fields were reported by product code (cut-off). While only Proven and Probable reserves for each rock type were used, multiple cut-offs and recoveries culminated in a product classification (Mill Grade and Stockpile Grade). The higher-grade product tonnage was used as the mill schedule target. The Stockpile Grade category was included in the actual production schedule, and did not contribute to Proven or Probable ore tonnages in the Reserve Statement. Table 6.6 illustrates the multiple CoGs used to assign product classifications, which were reported in the production schedule.
 
    Table 6.6: Product Code Cut-off Parameters (Proven and Probable Only)
             
Element   Mill Grade   Stockpile Grade   Waste
 
REO
  REO≥ 5%   2.7% < REO≥5%   2.7% < REO
    The pit progression for year pre-production periods, Year 1, Year 2, before mill relocation in Year 10, after the second stripping campaign in Year 14 and final layout are detailed in Figure 6.3 through Figure 6.7.
 
    Table 6.7 presents the annual mine production schedule. The Mine Production Schedule Results are shown in Figure 6.8.
     
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Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page 56
    Table 6.7: Mine Production Schedule
                                                         
                                      Mill Grade            
                      Mill             Ore     Stockpile      
                      Grade     Mill     Recovered     Grade     Stockpile
              Waste     Ore     Grade     Product     Ore     Grade
Year     Period     kt     kt     %     klbs     kt     %
 
2012
    Pre-prod and Year 1       13,779       358.96       6.32       28,580       469.93       3.90  
2013
    2       2,854       508.32       6.90       44,219       771.87       3.73  
2014
    3       17,785       477.55       8.22       49,452       420.03       3.80  
2015
    4       817       419.23       8.87       46,861       138.08       3.95  
2016
    5       396       372.02       9.18       43,035       94.01       3.93  
2017
    6       305       372.39       9.17       43,035       71.88       3.95  
2018
    7       248       368.83       9.26       43,031       57.18       3.97  
2019
    8       169       365.84       9.34       43,033       41.57       3.87  
2020
    9       129       364.67       9.37       43,044       38.94       3.89  
2021
    10       59       366.01       9.33       43,043       27.18       4.29  
2022
    11       41       369.82       9.24       43,061       25.78       4.19  
2023
    12       4,415       371.08       9.28       43,368       19.79       3.92  
2024
    13       17,558       513.65       6.85       44,351       364.43       3.92  
2025
    14       13,535       538.35       6.53       44,282       632.79       3.79  
2026
    15       7,828       466.06       7.51       44,076       364.04       3.85  
2027
    16       4,435       427.07       8.35       44,914       251.44       3.76  
2028
    17       2,972       424.63       8.28       44,301       166.65       3.84  
2029
    18       2,485       409.11       8.36       43,069       147.27       3.95  
2030
    19       2,061       406.11       8.41       43,046       148.16       3.89  
2031
    20       1,684       408.61       8.36       43,048       159.00       3.87  
2032
    21       1,311       419.34       8.15       43,046       194.71       3.92  
2033
    22       949       421.01       8.11       43,044       197.75       3.98  
2034
    23       646       419.55       8.14       43,037       180.63       3.99  
2035
    24       470       416.23       8.21       43,033       146.77       4.00  
2036
    25       362       412.24       8.29       43,060       126.42       4.04  
2037
    26       283       403.74       8.46       43,037       119.92       4.04  
2038
    27       203       404.97       8.44       43,061       110.22       4.06  
2039
    28       185       410.41       8.32       43,041       116.44       4.02  
2040
    29       144       413.00       8.27       43,044       120.42       3.99  
2041
    30       93       418.16       8.17       43,056       113.96       3.96  
2042
    31       93       424.88       8.04       43,067       130.51       4.01  
2043
    32       87       432.19       7.91       43,057       161.17       4.00  
2044
    33       122       387.77       7.73       37,790       166.58       4.07  
6.5   Reserve Statement
    Table 6.8 presents the reserve statement for the Project.
     
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Molycorp Minerals, LLC    
Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page 57
    Table 6.8: Proven and Probable Reserves for the Mountain Pass Project (Effective February 6, 2010)
                         
                REO  
Category   REO %     kt     (Mlbs)  
 
Proven
    9.38       480       88  
Probable
    8.20       13,108       2,122  
 
Proven and Probable
    8.24       13,588       2,210  
 
 
1.   Full mining recovery is assumed (100%).
 
2.   Mine reserves are fully diluted.
 
3.   A historical CoG of 5% REO was used within the pit design.
 
4.   Average REO mill recovery estimated at 65%.
 
5.   1997 surface topography used for volume control of reserves.
 
6.   Values have been rounded to nearest significant number, to reflect the accuracy of the estimate.
     
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Molycorp Minerals, LLC    
Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page 66
7   Process Metallurgy
    The process flow sheet for on-site project activities includes milling, extraction and separation operations. Figure 7.1 presents the basic process flow diagram for the project. The Mine and Mill will operate in a manner similar to historical operations with mill improvement measures included that have demonstrated increased REE recovery that allows for reduced mining rates and mill throughput (Section 7.1). The new extraction and separations facilities (Section 7.2) will be built to extract all REEs from gangue materials as a REE chloride solution. As with historical operations, the solution will undergo an impurity removal step before transfer to the separations facility where solvent extraction circuits are used to separate individual REE. The individual rare earths can then be precipitated from solution, filtered, dried and if required, converted to oxide powders.
 
    Molycorp will perform on-site processing of the cerium oxide to produce radiation-free glass polish, water filter media and cerium chloride hexahydrate. Molycorp will also package a portion of the lanthanum production as well as all europium oxide production for direct sale. Neodymium, praseodymium, lanthanum and samarium oxides will be transported to an off-site facility for conversion into metals and alloy products (Section 7.3).
 
    The slurry containing tailings solids produced during the milling process will be de-watered into paste tailings and deposited in an engineered containment facility (Section 8). Molycorp conducted site-specific test work to confirm the amenability of the Mountain Pass tailings to paste processing.
7.1   Mill/Flotation Circuit
    Figure 2.6 presents the general facilities arrangement for the existing mill facility. The mill is located to the south of the existing open pit. This section relies on process flow diagrams to describe the basic mill functions. Refurbishment activities will be based on the as-built drawings and field verification of dimensions for equipment replacement.
7.1.1   Historical Production
    Over the 50 year operating history of the existing mill facility, Molycorp’s predecessor companies successfully produced bastnasite concentrates on a continuous basis for sale and/or further on-site processing. Table 7.1 presents the historical mill production from 1980 to 2002, including total REO production. Prior to 2001, calculated mill recoveries varied from 52% to 75% , with an arithmetic average of 62.2% . During 6 months of mill operation in 2001 and 2002, the calculated mill recoveries varied from 57.3 to 71.6% , with an arithmetic average of 63.5% .
     
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Molycorp Minerals, LLC    
Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page 67
    Table 7.1: Historical Mill Production, 1980 to 2002
                                 
                            Unleached  
                            Concentrate  
            Average Mill Feed     Calculated     Production, lbs  
 Year   Milled, tons     % REO     Recovery (%)     REO  
 
20021
    183,487       7.91       67       2,616,000  
20012
    175,010               62.8       17,845,000  
2000
  No operation                          
1999
  No operation                          
1998
    321,000                          
1997
    424,000       8.43       57.51       41,117,711  
1996
    544,000                   42,513,000  
1995
    537,000       9.01       51.95       49,029,000  
1994
    508,000       8.68       56.40       49,726,403  
1993
    433,000       8.31       55.34       39,722,150  
1992
    409,000       8.80       60.4       42,800,327  
1991
    336,344       8.74       59.76       35,143,870  
1990
    480,161       8.81       60.19       50,943,008  
1989
    418,446       8.96       62.15       46,613,913  
1988
    221,764       9.74       60.48       26,135,080  
1987
    358,000       9.31       58.39       38,962,866  
1986
    225,000       9.47       57.32       24,414,453  
1985
    253,000       8.15       75.62       31,193,018  
1984
    543,354       7.82       68.49       58,176,586  
1983
    371,252       7.85       67.3       39,224,489  
1982
    391,417       7.30       69       38,581,897  
1981
    370,207       7.43       68.4       37,659,763  
1980
    360,068       7.18       68.2       35,243,503  
 
1   REO production total is for January 2002 only.
 
2   Mill operation for 5 months in 2001.
 
    Source: Mountain Pass monthly operational reports
    In 2000, Molycorp upgraded the mill facility to improve process efficiencies and mill recoveries. Specifically, Molycorp:
    Changed the configuration of the hydrocyclones, (a device used to size the particles being fed to the flotation process) in order to achieve a higher degree of separation between the bastnasite mineral and other minerals in the ore;
 
    Changed one of the flotation reagents from a liquid to a dry solid and implemented a feeding system that more closely controlled the reagent feed rate to the process;
 
    Replaced the drive mechanisms on a series of mixing tanks to achieve better mixing characteristics between the ground ore and the flotation reagents ahead of the flotation process;
 
    Optimized the throughput to the milling operation, resulting in a feed rate reduction of 31%; and
 
    Implemented X-Ray analysis of mill quality control samples in the flotation operation by mill personnel, in order to reduce analytical turn-around time and increase the frequency of analysis. This resulted in a substantial improvement in process control.
     
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Molycorp Minerals, LLC    
Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page 68
    Following implementation of these improvements, Molycorp operated the updated mill for a total of 6 months during two operating periods (Table 7.2). During this time, Molycorp produced approximately 20.5 Mlbs of bastnasite concentrate containing 13 Mlbs REO. Measured process recoveries, up to 71.6% in the updated mill, were observed.
 
    Table 7.2: 2001 and 2002 Mill Production Summary
                                                         
                            Unleached             Calc   Calc  
    Mill Feed     Mill Feed     Feed REO     Concentrate     Tailings     Recovery   Production  
    Tons     % REO     lbs     % REO     % REO     %   Mlbs REO  
 
May
    38,111       8.31       6,334,048       62.8       3.84       57.3 %     3,629  
June
    33,488       8.42       5,639,379       61.8       3.27       64.6 %     3,642  
Oct
    28,362       7.69       4,362,076       63.2       3.34       59.7 %     2,605  
Nov
    37,035       8       5,925,600       60.4       3.41       60.8 %     3,603  
Dec
    38,014       8.02       6,097,446       60       2.52       71.6 %     4,365  
Jan 2002
    24,692       7.91       3,906,274       58.9       2.87       67.0 %     2,616  
 
 
                                          Total:     20,461  
    The average ore grade (% REO) supplied to the mill during this operating period varied between 7.69% and 8.42% . Calculated mill recoveries varied from 57.3% (at an average ore grade of 8.31% ) to 71.6% (average ore grade of 8.02% ).
 
    Based on the 18 years of annual performance data and the 6 months of operation in 2001 and 2002, the average recovery rate in the existing mill is approximately 63% . During the 2001 and 2002 mill runs, Molycorp varied a number of operational parameters. Performance data from this period suggest that a mill recovery of 70% is possible when the mill is operated on a sustained basis and further improvements. For the purposes of this engineering study, SRK applied a recovery value of 65% .
7.1.2   Process Design Criteria
    The following general design criteria were applied for re-start of the existing mill:
    Mill feed of 1,100 to 1,500 t/day;
 
    Target average head grade delivered to the fine ore storage bin between 7.0 and 9.0% with an average of 8.5% as REO;
 
    Process recovery of 65% as REO (based on historical performance); and
 
    Leached REO concentrate at 68% bastnasite by weight.
7.1.3   Process Description
    Figure 7.2 presents the overall process flow diagram for the existing mill. As described in Section 6.0, Molycorp will haul REE material from the open pit mine to the primary crusher. The material will be crushed in three stages to reach the desired top size of -3/8” and stacked in a fine ore stockpile (Figure 7.3). Crushing utilizes a jaw crusher, a secondary cone crusher, and a tertiary impact crusher for each size reduction step. A pair of screen decks will be used to direct oversize materials to the proper size reduction unit. Once crushed below the maximum desired size, the ore is directed to the stacking belt system that is used to blend the crushed ore to produce a consistent, 8.5% REO average feed for the mill.
     
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Molycorp Minerals, LLC    
Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page 69
    The concentrator plant first reduces the size of the ore to a fine powder in a ball mill (Figure 7.4). The bastnasite mineral is then concentrated by selectively floating and separating bastnasite particles from the waste minerals. This is accomplished by conditioning the surfaces of the bastnasite ore with steam and reagents (Figure 7.5) to render the surfaces hydrophobic. The froth flotation circuit consists of rougher flotation cells followed by cleaner cells, final cleaner cells, and a cleaner column. The bastnasite concentrate is then thickened, and carbonates leached in mild hydrochloric acid to produce a bastnasite concentrate containing 68 wt % (Figure 7.6).
    Concentrate will be stored in large agitated tanks and pumped as slurry to the new separations plant (Figure 7.7). Tailing from the mill will be transported by slurry pipeline to the new paste plant, separating the solids as a paste for deposition in the paste tailings impoundment and reclaim water that is recycled back to the mill.
7.1.4   Mill Refurbishment Activities
    Re-start of the existing mill will require replacement or repair of various components of the mill circuit. Molycorp retained Wilmot Metallurgical Services to perform an inspection of the mechanical and electrical systems of the mill in order to assess the critical mill maintenance issues prior to a re-start. In summary, the primary maintenance items include:
    Replacement of various vibratory screens in the existing crushing circuit (all crusher chutes are in need of maintenance and some are missing liners);
 
    Refurbish crusher bag houses (dust collection);
 
    Replace plant weigh scales due to parts availability;
 
    Repair the existing ball mill and concrete pedestal foundations;
 
    Replace the concentrate — vacuum pumps;
 
    Clean out all reagent tanks and refurbish valving with selective tank replacement planned;
 
    Replace wooden thickeners with steel lined tanks;
 
    Inspect flotation cell mechanisms and motors; and
 
    Increase warehouse inventory for spare parts and other maintenance items.
    Replacement units and parts for the majority of equipment are still manufactured and are readily available. For equipment or instrumentation that is no longer supported by an existing manufacturer, Molycorp will purchase suitable replacement equipment.
7.2   Extraction and Separations Facilities
    Figure 7.8 presents the general facilities arrangement for the new extraction and separations facilities. The new facilities will be located to the north and west of the existing open pit.
7.2.1   Historical Production
    Although mining and milling operations ceased in 2002, Molycorp continued to operate the extraction and separation circuits as needed. Operations feed was supplied by REO concentrates recovered from historical on-site stockpiles. Metallurgical performance data from this period and additional pilot test work described below form the basis for predicted performance of the new extraction facility.
 
    The historical extraction process practiced at Mountain Pass consisted of a roasting step that heated the bastnasite to a temperature sufficient to oxidize the cerium fraction. Feeding the roasted bastnasite to a series of leach tanks under tightly controlled acid and temperature conditions promoted dissolution of non-cerium REO, leaving a cerium residue that was used for one primary product, glass polish. The polish was a low REO purity product containing thorium which had few applications outside of glass polish and therefore was no longer viable.
     
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Molycorp Minerals, LLC    
Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page 70
    Based on years of testing and experience, Molycorp determined that the upper recovery limit for a hydrochloric (HCl) leach is 70% , the point where carbonate is depleted and the remaining RE is combined as an acid insoluble fluoride. In 2009, Molycorp demonstrated, in laboratory and pilot operations, that REO recovery of up to 95% could be achieved. The leach modifications have been piloted in Molycorp’s Engineering Laboratory and have been scaled to production scale for use in full scale production beginning first quarter 2010. Engineering and commercial-scale testing will be conducted during the first quarter 2010.
 
    Process solution from the extraction circuit enters the separation circuit where solvent extraction (SX) is used to separate groups or individual REEs from one another. The separations circuits were preceded by an impurity removal section to remove non-RE contaminants, e.g. iron, lead and uranium.
 
    Since the fall of 2007, Molycorp operated the existing separations plant in conjunction with the extraction plant using available lanthanum concentrate as feed. Lanthanum concentrate was a stockpiled material produced over 30 years of operation containing significant quantities of neodymium and praseodymium. The lanthanum feed was dissolved in the existing leach and impurity removal circuits before being fed to separations. The separations circuits then produced a neodymium/praseodymium mixed product suitable for the Neodymium-Iron-Boron (NIB) magnet alloy sector and a lanthanum hydrate for the fluid catalytic cracking (FCC) sector. This plant has operated continuously since that date. In 2008, the plant operated about 300 days and produced 3.8 Mlbs of separated products. Estimated production in 2009 will be approximately 4 Mlbs.
 
    In 2009, Molycorp installed an on-site pilot plant in the engineering building to evaluate advanced separations data to support design work for the full scale plant. The primary goals were to confirm an advanced SX design that was developed and piloted in the mid 1990’s, and to optimize the number of extraction cells for each circuit. Specifically, the on-site pilot program confirmed a basic design model that was developed in the mid 1990’s for advanced SX separations. This design will lead to production of 95% Ce, 99% La, 99.9% Nd, 99.9% Pr, 99.9% Sm, 99.9% Eu, 99.9% Dy, 99.9% Gd and residual heavy rare earths.
 
    Lanthanum concentrate feed supplies are limited and operations will be switching to stockpiled bastnasite feed in the first quarter of 2010. The new bastnasite leach circuit described above will be employed to provide REEs to the Separations Plant until Q2 of 2012. The caustic crack for the fluoride residue will be brought online as engineering progresses.
7.2.2   Process Design Criteria
    General design criteria were applied for construction of the extraction and separation facilities:
    Operating Days/Availability;
 
    Target REO production: 42 Mlbs REO per year;
 
    Range of Bastnasite Concentrate Assay;
 
    Power demand;
 
    Reagent consumption; and
 
    Water recycle.
7.2.3   Process Description
    Molycorp will utilize a proprietary and confidential cracking process. M&K Engineering has access to the process details and has developed the engineering package under a confidentiality agreement with Molycorp.
     
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Molycorp Minerals, LLC    
Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page 71
    Bastnasite is fed into the process and a rare earth salt solution is the product. Solids from this step are transferred to the paste plant facility for disposal with the paste tailings. The resulting solution is treated to remove the iron, lead and uranium through a process that is a combination of pH adjustment for iron removal and the addition of sodium acid sulfide to precipitate lead as a sulfide.
 
    Figure 7.9 presents the proprietary Molycorp process flow for rare earth separation. Solution from the cracking process will flow through a counter current SX circuit to remove the heavy rare earth elements. The heavies barren solution will be treated in Molycorp’s proprietary cerium removal process.
 
    Praseodymium and Neodymium will be removed in a separate SX circuit. The final solution will be lanthanum salt containing small amounts of rare earth impurities. This solution will be polished in the final SX circuit and forwarded to the product circuits.
 
    Most rare earth products, such as lanthanum for petroleum based fluid bed cracking catalysts, are based on oxides. Therefore, after SX separation, a number of the rare earth streams will be precipitated with sodium hydroxide, sodium carbonate, or oxalic acid and fired (calcined) to oxide products.
 
    Because the REEs have essentially the same chemistry, the process for producing oxides is the same for each one. The separation process starts with the pure rare earth salts from the SX process.
 
    For the purposes of illustration, the block flow diagram for production of Nd2O3 is defined in Figure 7.10. Oxalic acid precipitation is commonly used in the rare earth industry to produce high purity rare earth oxides. In this process oxalic acid is added to a concentrated rare earth salt solution in a continuous stirred tank reactor with temperature control. This vessel functions as a reactor and crystallizer. The crystal slurry is then centrifuged. The process solution and wash water is transferred to water treatment and recycle. The dewatered salt is dried and calcined. The resulting product will be 99.99% or better Nd2O3.
 
    The residuals from the extraction circuit include filter cake from the cracking step and iron/lead removal. Dry solids from caustic cracking will be co-mingled with paste tailings and placed in the on-site tailings storage facility. Filter cake from the iron-lead removal step will be stabilized with fly ash and lime to form a solid waste. The stabilized iron-lead solid waste will be subject to licensed disposal requirements.
 
    Aqueous residuals and used reagents from the separations process will be recycled through a proprietary combination of established technologies (e.g., chloralkali plant). Bleed streams from the recycle circuits will be diverted to the existing evaporation ponds.
7.3   Oxides to Metals to Alloys
    Molycorp will transport lanthanum oxide, neodymium/praseodymium (e.g., didymium) and samarium oxide products to an existing off-site metals conversion facility. The off-site facility has produced custom rare earth alloys for over 40 years.
 
    The NdFeB magnet alloy is formed by melting appropriate ratios of Nd, Pr, Dy, Co, Fe, and FeB as well as other minor constituents and casting to produce ingots or powders. Figure 7.11 is a process flow diagram that highlights two process flows in an alloy plant. First, an alloy melt is formed in a vacuum melt furnace. In the first path the alloy melt is cast in book molds, crushed,
     
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Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page 72
    hydrogen decrepitated, jet milled and packaged. For customers that require strip cast powder, the melt is strip casted, jet milled and packaged.
 
    Molycorp will produce magnet alloys under the current re-start plan.
     
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Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page 83
    Figure 7.11: Process Flow Diagram for NdFeB Alloy Production
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Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page 84
8   Mine Waste Management
 
    Mining activities will generate low grade mineralized material that will not be processed in the existing mill facility. This material, or overburden, will be stockpiled adjacent to the open pit mine in designated stockpile areas (Section 8.1).
 
    During production of the bastnasite concentrate, the mill facility will also produce a low-grade tailing material. Approximately 92% of the material processed at the mill will convert into the tailing solids. Molycorp will slurry the tailing solids to a separate Paste Tailings Filter Plant for dewatering and conditioning (Section 8.2).
 
    Treated tailings from the paste plant will be conveyed to an engineered containment facility (i.e., Paste Tailings Storage Facility) for on-site disposal. The Paste Tailings Storage Facility (PTSF) is designed for permanent storage of the paste tailing material (Section 8.3).
 
    As described in Sections 7 and 8, re-start of the Mountain Pass Project will include upgrades to the process water management system that will reduce the amount of process waste water that will require special handling (Section 8.4).
8.1   Overburden Stockpiles
 
    Molycorp’s Conditional Use Permit authorizes the expansion of the existing West Overburden Stockpile. Molycorp has the option of expanding the existing North Overburden Stockpile (NOS); however, pending the outcome of future development drilling in this area, the NOS is not currently designated for expansion. The permitted additional storage capacity for the West Overburden Stockpile is 58,800 kt of overburden.
 
    As described in Section 6.4, the total estimated overburden storage requirement will be approximately 104,700,000 tons. This total includes the Stockpile Grade material that exhibits a REO content between 2.3 to 5% REO. This material will be placed in a designated area. In the event that the NOS is not selected as the second overburden stockpile, Molycorp will likely revisit the East Overburden Stockpile as a viable alternative.
8.1.1   Characterization
 
    The Lahontan Regional Water Quality Control Board classifies the mine overburden at Mountain Pass as Group C mining waste under Title 27, Chapter 7, Subchapter 1, Article 1 (22480)(b) “...because the material is non-acid-generating and little leaching over time is expected” (Board Order No. 6-91-836). The definition of Group C mining wastes is “...wastes from which any discharge would be in compliance with the applicable water quality control plan, including water quality objectives other than turbidity.”
 
    In 2000, Molycorp conducted laboratory test work to characterize the geochemical properties of the carbonatite ore body, alluvial materials (predominantly overburden material) and gneiss. The following discussion is summarized from the 2001 Pit Lake Water Quality Prediction (Geomega 2000):
    The approximate composition of the carbonatite is 60% carbonates, 20% barite, 10% lanthanide-bearing fluorocarbonates and 10% quartz and other silicates.
 
    Quaternary age debris flows and alluvium cover large areas of the Mountain Pass site and make up the bulk of natural overburden (Geomega 2000). The debris flows are firmly cemented with calcareous mud and exhibit a much lower permeability than shallow alluvium.
     
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Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page 85
    The Precambrian metamorphic complex is the typical bedrock found throughout the Mountain Pass area. A variety of igneous bodies intrude the metamorphic complex in the site area.
    Molycorp conducted leach testing of each principal rock type. The column tests indicated that there is negligible leaching of solutes from site alluvium and bedrock beyond dissolution of small particulates from freshly crushed and sieved samples. Leach solutions tended to exhibit a neutral pH with elevated alkalinity.
8.1.2   Construction
 
    Section 6 describes the phased construction of each overburden stockpile during development of the open pit. General design criteria (Lilburn 2005) applied to the ultimate configuration of each stockpile include:
    Each stockpile will be constructed in 50 ft vertical lifts; and
 
    Overburden will be dumped at its angle of repose (37° or 1.33 horizontal to vertical) with a slope length of 67 ft and a 48 ft wide bench.
    At closure, overburden outslopes will be reclaimed and further stabilized by dozing the crest of each bench to create an overall 2.3H:1V slope.
8.2   Paste Tailings Filter Plant
 
    Molycorp will construct a new Paste Tailings Filter Plant and Paste Tailings Storage Facility (PTSF) for the re-start of the Project. The 2002 Feasibility Level design (Golder, 2002) includes a thickener/pressure filtration system for processing of tailings from the mill facility and an 87 acre lined PTSF for permanent storage of the tailings material. The technical descriptions provided herein are excerpted from the original permit documents for the 30 year approved mine plan. Specifically, Section 4.0 of the approved Environmental Impact Report (ENSR, 2003) provides a detailed narrative of the new paste plant. In 2008, Golder provided an updated description of the paste plant facility which was largely unchanged from the 2002 design.
 
    Molycorp retained M&K to prepare a process flow diagram and capital cost estimate for the Paste Tailings Filter Plant. The process flow diagrams are consistent; however, the change in design criteria from 2,000 tons dry tailings/day to approximately 1,500 t/d resulted in a change in the capital cost estimate for the plant. M&K re-estimated the capital cost using the new design criteria.
8.2.1   Process Description
 
    Flow sheets for the paste plant are shown in Figure 8.1 through Figure 8.2 (Golder 2002a). As detailed by Golder:
 
    Tailings Receiving
 
    The tailings will be pumped as a dilute slurry from a pump box in the mill to the agitated tailings surge tank at the paste plant, which allows for some surge in the mill discharge rate and ensures a steady flow to the thickener for optimum flocculation. The tailings surge tank contents will be pumped by a service or standby pump to a high rate thickener.
 
    Tailings Dewatering
 
    Flocculent will be supplied by a self-contained flocculent system and will be added into the thickener feedwell and/or at the thickener feed box. The flocculent dosage rate will be controlled
     
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Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page 86
    based on the mass flow rate of tailings into the thickener so that a consistent dosage of flocculent/ton of tailings is achieved. The underflow pump will increase in speed if the density increases above the set point and decrease if the density falls below the set point.
 
    The underflow pumps will discharge to the agitated filter feed tank that allows for some surge from the continuous thickening process to the batch filtration process. The filter feed tank contents will be pumped as required by the filter press cycle, with the pumping rate speeding up or slowing down as required by the filter press cycle.
 
    Filtration will be performed by pressure filters, with each filter dewatering the thickened tailings to a ‘cake’ consistency in a batch cycle and the filter cake will be discharged onto a conveyor belt.
 
    Thickener Underflow Dewatering
 
    The dewatering screens will be fed from the thickener underflow pumps and the coarse overflow would discharge to a conveyor and hence to the live bottom feeder. The fines and supernatant will be pumped to a pressure filtration system that will dewater them further and convey the dewatered fines to be recombined with the coarse material.
 
    Surge and Mixing
 
    The filter cake will be transported by conveyor into a live bottom feeder that receives the pressure filter discharge in batches and meters it out at a constant rate to the mixer feed conveyor. The rate at which it discharges will be controlled to keep the flow rate as constant as possible based on the level in the hopper. The mixer feed conveyor transports a constant flow of tailings to the mixer, which combines the filter cake with slurry from the thickener underflow to produce a paste at the design slump. The amount of slurry added to the filter cake will be proportional to the amount of filter cake as measured by a belt scale on the mixer feed conveyor and the difference between the actual power draw observed at the mixer and the target power draw that will be determined during commissioning. The mixer will overflow continuously to either a service or standby paste pump. Two slide gates will allow the operator to select the overflow to feed either of the two paste pumps.
 
    Pumping
 
    The paste pumps will operate at a rate that will keep a constant level in the pump hopper. The pumps will stop before a low level in the hopper is reached so that no air is entrained in the line. The paste pumps are powered by a dedicated hydraulic power pack for each pump.
 
    Pressure in the discharge line will be measured by several pressure transducers located at various points in the distribution system, which will alarm the operator if the pressure in the pipeline is outside the normal range.
 
    The paste pumps will discharge to the tailings deposition area and it is expected that over time, the discharge pressure will rise in accordance with the deposition elevation at the given time.
 
    Clarification Pond
 
    The clarification pond will receive all plant effluent including thickener overflow, sumpage and water reclaimed from the PTSF collection pond. The pond will have adequate surface area so that solids will be settled and clarified water will be pumped back into the paste plant to be recycled. Excess water will be pumped back to the mill for re-use.
     
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Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page 87
    The clarification pond will be divided into two cells, which will allow one cell to be dewatered and the solids to be re-handled into the process while the other cell continues to receive feed. The clarification pond cells will be constructed so that solids can be re-handled using a loader, which will deliver the solids to the live bottom feeder in the paste plant.
8.2.2   Utilities
 
    As detailed by Golder (2002a):
 
    Fresh Water
 
    Fresh water is required for cooling water for power packs, filter belt wash water, hose stations, and sealing water. Fresh water is supplied from an existing freshwater tank located in the mill. Two new pumps (one service and one standby) will pump fresh water to a tank located in the paste plant. Fresh water will be supplied by a service or standby pump. Gland water is required for slurry pump glands and will be supplied by a service or standby pump. Gland water will be pumped from the fresh water tank.
 
    Process Water
 
    Process water is required for dilution of the incoming tailings stream and for dilution of flocculent. Process water will be recycled from the clarification pond and will be stored in a dedicated tank at the paste plant. A service and standby process water pump will be used to supply process water to the plant.
 
    Compressed Air
 
    Instrument air will be supplied by a dedicated oil free compressor and will be used to supply all automated valves. Instrument air will be dried and stored in a dedicated instrument air receiver.
 
    Drying air is required to operate the pressure filters and can also be used to clean the discharge pipeline if required. Plant air will be supplied by an oil-injected compressor and stored in a dedicated drying air receiver.
 
    Pressing air is required to inflate the diaphragms in the pressure filters. A two-stage compressor system is needed to produce the high pressure air required. Pressing air will be supplied by two oil-injected compressors in series and stored in a dedicated pressing air receiver.
 
    Sumpage
 
    The paste plant will have four sump pumps. The No. 1 sump pump services the thickener area while the Nos. 2 and 3 pumps service the filtration area. Sump Nos. 1 through 3 discharge back into the tailings surge tank. The No. 4 sump pump services the mixer and pump area, and could potentially contain binder. The discharge from this pump will be directed to the clarification pond.
8.3   Paste Tailings Storage Facility
 
    Molycorp will construct the PTSF immediately north of the West Overburden Stockpile. The paste tailings will be delivered to the PTSF via a pipeline from the paste plant. The average moisture content of the paste tailings will be less than 18% by weight.
     
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Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page 88
    The PTSF will abut the north outslope of the West Overburden Stockpile. The north face of the West Overburden Stockpile will be regraded to provide a series of 2H:1V slopes and 50 ft wide benches that will allow the face to be lined with the prescribed liner system and provide vehicle access during operation of the facility. The PTSF will be constructed with liner and drainage systems to contain the paste tailings, intercept downward seepage and direct runoff to a lined collection/reclaim pond at the southwest corner of the facility (Golder 2002a).
8.3.1   Characterization
 
    Molycorp retained Golder Associates to perform site-specific test work to assess the amenability of the Mountain Pass tailings for paste processing and storage. The test work program is detailed by Johnson (2004) and summarized below:
    Rheological index tests (e.g., slump cone and water retention) to evaluate the potential for surface placement of tailings as a paste;
 
    Dewatering studies to assess thickening, deep tank thickening, filtration and centrifuging technologies;
 
    Geotechnical testing of gradation, unconfined compression, Unconsolidated-Unconfined Triaxial Shear, and consolidation;
 
    Flow loop testing was performed onsite in a pilot plant to assess the pipeline pressure gradient for a range of material and operating conditions;
 
    Pilot plant testing to assess plate and frame and continuous belt pressure filtration equipment; and
 
    Test cells to estimate the rate of drying, densification, and strengthening of paste tailings with time when subjected to actual site climate conditions.
    The test work indicated that the Mountain Pass tailings were amenable to paste processing. On the basis of this test work, Molycorp proposed and gained County land use approval for a paste tailings plant and tailings storage facility.
8.3.2   Construction
 
    Molycorp anticipates five stages of development for the PTSF. The first stage involves construction of the double-liner and leak detection system for approximately 2/3’s of the ultimate footprint of the PTSF. Stage 1 also includes construction of the lined reclaim pond located on the southwest corner of the permitted PTSF footprint. Appendix F.3 presents the design drawings for the PTSF.
 
    Stage 2 involves expansion of the liner system over the ultimate footprint of the PTSF. The lined reclaim pond installed during Stage 1 remains in place. Stages 3, 4 and 5 consist of vertical expansions within the combined Stage 1 and Stage 2 footprint.
 
    At a mill throughput of 1,300 ton/day, the average daily production of tailings will be approximately 1,200 tons. Based on 290 days/year of operation, the average annual tailings production will be approximately 350,000 tons. Table 8.1 presents capacity of each PTSF stage in volumetric terms and operating duration.
     
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Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility
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    Table 8.1: Stage and Capacity Comparison for the PTSF
                         
           
Incremental
 
Cumulative Capacity
Stage   Capacity (tons)  
Capacity (Years)
 
(years)
 
1
    2,250,000       6 .4     6.4  
2
    2,100,000          6     12.4
3
    2,600,000       7 .4     19.8  
4
    6,200,000       17 .7     37.5  
5
    6,000,000       17 .1     54.6  
    The multi-stage construction sequence will be modified by Molycorp to include Stage 1 (at startup) and vertical expansion with Stage 3. Stage 2 will be constructed after Stage 4 or 5. This modification will allow Molycorp to expand vertically on an incremental basis into Stage 4. Final engineering is required to detail the proper sequencing of expansion.
8.4   Process Wastewater
 
    Table 8.2 presents a summary of principal process wastewaters associated with milling, extraction and separation activities. Molycorp operates four existing evaporation ponds in the northwest corner of the property to evaporate water that cannot be recycled. The proposed project is designed around the evaporative capacity of these ponds, so there will not be an industrial point source discharge associated with the operation. The ponds are permitted to receive various process wastewaters produced during milling, extraction and separation activities.
 
    Molycorp plans to install a chloralkali plant to allow recycling of acid and base reagents (Section 9.0). This process will promote significant water conservation and allow regeneration of reagents used in the extraction and separation process.
 
    Table 8.2: Process Wastewater Handling
             
        Treatment    
Source   Characteristic   Re-Use or Recycle   Disposal
 
           
Flotation underflow
  Tailing solids mixed with neutral process water   Treated at Paste Plant    
 
           
Mill Thickener Overflow from Concentrate Leach Step
  Spent HCl leach solution after concentrate rinse, low pH   Recycle    
 
           
Proprietary Cracking Process
  Wash water   Recycle    
 
           
Removal of Ore Gangue
  Wash water for cake from the thickener underflow       pH adjustment and discharge to evaporation ponds
 
           
Samarium and heavies precipitation
  Thickener overflow   Treated at Paste Plant    
 
           
Process water purification
  Filtrate       Carbon column treatment for removal of trace organics
 
           
Processing of salts produce acid base reagent
  Brine   Recycle    
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Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page 92
9   Infrastructure
 
    Existing infrastructure for the project is substantial (Section 2.4). New infrastructure elements or upgrades will include:
    Re-alignment of access roads within the property boundary;
 
    Construction of a Combined Heat and Power (CHP or cogen) facility; and
 
    Construction of a Chloralkali facility for salt recycle and production of HCl, NaOH and NaOCl.
    Under normal operating conditions, Molycorp will transport bulk REO products via tractor-trailer units from the project site to customers and for off-site conversion to metal and alloy products. At this production rate, logistical requirements for shipping and transport are addressed with these infrastructure upgrades.
 
    As described in Section 8.4, process wastewater handling associated with milling, extraction and separations activity will rely on use of the existing evaporation ponds, co-disposal with the paste tailings facility or minor upgrades to process equipment to increase recycling and reagent re-use.
9.1   Access Road and Transportation
    Molycorp will re-align the existing site road to allow efficient access to the relocated extraction and separations facilities (Figure 7.8). The primary design criteria for the new access road include:
    Allow ingress and egress of tractor-trailer units;
 
    Allow supervised access to secured reagent storage and delivery access;
 
    Prevent access to restricted safety zones associated with the extraction and separations process;
 
    Allow public access to Clark Mountain (prior to the gated entry to the secured zone) around the western boundary of the property; and
 
    Allow authorized access to the telecommunications relay station (prior to the gated entry to the secured zone).
    The access road will be asphalt paved with all-weather crossings of drainage channels.
9.2   Fresh Water Consumption
 
    The amount of freshwater consumed by the facility in 1996 was approximately 850 gallons per minute (gpm) or 1,388 acre-feet from both well fields describe above. The five-year annual average between 1993 and 1997 was 795 gpm or 1,281 acre-ft. As part of the comprehensive plan for continued operations, Molycorp placed emphasis on on-site management and treatment of process water and maximizing reuse. The increase in water reuse and the reduction in water usage required for mineral recovery operations will substantially reduce freshwater consumption onsite. Based on continued normal operations, Molycorp expects to reduce its freshwater consumption to the minimum needed to supply the workforce with potable water, estimated to be on the order of 30 to 50 gpm. The remainder of the site’s water needs will be supplied by water that flows into the mine pit from the surrounding aquifer, as well as from intensive internal recycling.
 
    As the supply systems have consistently produced much larger amounts of fresh water for the facility in the past, water supply is not anticipated to be problematic. Molycorp implemented this water conservation effort to minimize fresh water use at the facility. This >94% reduction in fresh water use is in accordance with Molycorps’ corporate goals concerning sustainability and
     
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    the fact that the operation is located in the high desert mountainous region where water conservation is critical.
9.3   Combined Heat and Power/CoGen Facility
 
    Molycorp retained R.G. Vanderweil Engineers LLP and J.A. Coleman, LLC to prepare the preliminary engineering design for the planned Combined Heat and Power (CHP) facility. The following process design criteria and description are excerpted from work completed in 2009 in support of a Department of Energy Grant Application for partial funding of CHP construction as well as updates to the same in 2010.
 
    The proposed CHP system is based upon 2 x 15 MW (ISO rating) combustion gas turbine generators, heat recovery steam generation (HRSG) with supplemental firing duct burners; and operating in an island power generation mode disconnected from the local utility. At site conditions and average annual temperature, the combustion turbines will have an average gross power generation capacity of about 12 MW each. The turbines will be installed with combustion air inlet air cooling to increase the power generation capacity during the warmer times of the year. The turbines will be natural gas fired with dry low emissions combustion technology. The exhaust heat from the turbines in combination with the additional heat from the duct burners will be captured in Heat Recovery Steam Generators (HRSGs), and will produce steam that will be used for the process. The exhaust gas will be treated using selective catalytic reduction and oxidation catalyst technologies in order to meet the stringent regulatory requirements of the Mojave Desert Air Quality Management District.
 
    Each HRSG will produce approximately 50,000 lbs per hour of 300 psig saturated steam in an unfired mode and 120,000 lbs per hour with supplemental firing. The HRSGs will include feed water economizers designed to maximize the heat extraction from the turbine exhaust and reduce the stack temperature to 325°F. In the unfired mode this will result in a gross system efficiency of 66.6% , on a higher heating value basis, with the potential for up to 73.8% for additional steam production with supplementary duct firing.
 
    The existing 12 kV Southern California Edison electrical supply line will be maintained for minimum service and backup power. The plant electrical system will be designed such that the new CHP system will operate separately, and will not be connected to the utility in parallel generation mode.
 
    The natural gas will be supplied at a pressure greater than 500 psig from the Kern River Gas Transmission Company high pressure pipeline located near the Mountain Pass facility. This high pressure supply will negate the requirement for a fuel gas compressor. The new Mountain Pass mining process facility will include water treatment systems; however the new power system will include feed water chemical treatment, de-aeration, and pumping for the HRSG systems.
 
    A 2.6 MW (average site rating) diesel fuel operated generator set will be provided as a stand-by unit and back -up power for the some of the critical loads.
 
    The new power island, electrical switchgear, and balance of plant equipment will be installed in a new metal clad building located near the new mine processing facilities. The building, equipment, and systems will be simple modular designs which will allow for future expansion and addition of turbine and reciprocating engines.
     
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Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page 94
9.4   Chloralkali Facility
 
    Molycorp will purchase a chloralkali modular system to re-process the concentrated brines produced in the separations process. The chloralkali system is a membrane electrolysis process that produces high purity membrane-grade sodium hypochlorite, hydrochloric acid and caustic soda from a feed of salt, water and electricity. The planned capacity of the modular system for the Project will be approximately 27.5 short tons per day of chlorine equivalents.
 
    The CLOROMAT® system is manufactured by General Electric Water and Process Technologies. Molycorp may substitute a comparable modular system during the detailed engineering phase of the project. Figure 9.1 presents the process flow diagram for the chloralkali process. As detailed in the manufacturer’s fact sheet:
 
    Purified salt (brine) solution and treated water are fed to a series of electrolytic cells where a DC current converts the brine and water into ions. An ion-selective membrane separates the anode and cathode with chlorine generated at the positive electrode while hydrogen and caustic soda are generated at the negative electrode. The chlorine and caustic soda are then immediately processed to produce sodium hypochlorite. An acid synthesis burner allows production of hydrochloric acid (32% w/w) and a caustic soda concentration (50% w/w) step allows production of caustic soda.
 
    Molycorp will not store chlorine produced by the chloralkali process. The chloralkali equipment is skid-mounted. Power and steam requirements for this facility will be met through operation of the CHP/cogen facility. Treated water will be supplied via the pit dewatering or fresh water supply systems.
     
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Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page 96
10   Environmental
 
    Molycorp operates the Mountain Pass project in accordance with applicable regulatory requirements. In 2004, Molycorp received approval for a similar re-start and expansion plan for the property. As described below, Molycorp maintains the necessary environmental permits for current operations and is actively engaged in obtaining the additional authorizations required for re-start of the Project. There are no environmental throughput limitations related to mining or processing rates.
10.1   Regulatory Context
 
    At least 18 different federal, state and/or county agencies assert some form of regulatory authority over the operations at the Mountain Pass facility. The primary operating level regulatory agencies are the San Bernardino County Land Use Services—Advance Planning Division (which oversees most of the mine surface facilities); and, the Lahontan Regional Water Quality Control Board (LRWQCB), which oversees all issues related to groundwater and surface water.
 
    The majority of facilities at the Mountain Pass site fall under the regulation of San Bernardino County, and their oversight associated with the Surface Mining and Reclamation Act (SMARA) and the California Environmental Quality Act (CEQA) Environmental Impact Report (EIR), including the EIR proposed mitigation measures. Ultimate use of the land is also controlled by the County through the Conditional Use Permit process.
 
    The LRWQCB essentially has jurisdiction over water storage facilities (e.g., process ponds, storm water ponds, tailings ponds, evaporation ponds, etc.) as they relate to potential impacts and possible contamination of water resources in the area.
 
    Due to the radiological characteristics of some of the process residuals associated with milling and processing, the California Department of Public Health, Radiological Health Branch administers a Radioactive Materials License for the property.
10.2   Existing Environmental Permits
    Molycorp maintains the necessary environmental permits for current site operations. Table 10.1 presents the existing environmental permits for Mountain Pass. In addition, Molycorp is authorized to re-start mining, milling and process operations in accordance with the operating plan approved in the July 12, 2004 Conditional Use Permit and/or authorized under existing permits. The existing operating plan includes:
    Resumption of mining activities within an ultimate open pit boundary;
 
    Continued operation of the existing extraction and separations facilities;
 
    Expansion of the West Overburden Stockpile;
 
    Construction of a North Overburden Stockpile;
 
    Operation of the existing 40 acre evaporation ponds located in the northwest corner of the property;
 
    Construction of the PTSF;
 
    Construction of a new paste tailings plant; and
 
    Relocation of the existing mill/flotation plant and crushing facilities to a new location northwest of the existing open pit based on Molycorp’s mine plan.
    The existing Conditional Use Permit was preceded by an Environmental Impact Report (EIR), conducted by the County of San Bernardino. The EIR followed the requirements of the California
     
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Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page 97
    Environmental Quality Act and involved extensive public consultation and participation by various state and federal authorities. The County of San Bernardino approved the final EIR in June 2004.
 
    Construction of the West Overburden Stockpile is subject to a series of compliance conditions specified in the CUP. In effect, the initial construction of the West Overburden Stockpile must be developed in a westerly direction and constructed in a sequential manner necessary to buttress the Paste Tailings Storage Facility. The CUP also requires a geologic study of the subsurface ore body to the north of the pit. Molycorp initiated a drilling program in support of this geologic study in December 2009. After completion of the drilling program and study, Molycorp will revise the development plan for the West Overburden Stockpile accordingly.
 
    The geologic study specified in the CUP will provide Molycorp with additional information regarding the feasibility of the North Overburden Stockpile. If the existing ore body extends under the proposed North Overburden Stockpile and if Molycorp elects modify the mine plan, Molycorp will propose an East Overburden Stockpile.
 
    Pending the findings of the in-fill drilling program, the current mine plan includes future construction of an East Overburden Stockpile, starting in Year 10 of development. The proposed location for this future stockpile includes the existing disturbed area of the plant area, closed P-16 and disturbed areas downgradient of the P-16 embankment. The EIR contemplated a conventional tailings impoundment, named the East Tailings Impoundment, in an adjacent wash to the east of the proposed East Overburden Stockpile.
10.3   Pending Environmental Permits
 
    Molycorp plans to amend the existing, approved operating plan as follows:
    Relocation of the extraction and separation facilities to the proposed Northwest Evaporation Pond area;
 
    Construction of a combined heat and power (CHP) or cogen facility; and
 
    Construction of a chloralkali facility to produce HCl, NaOH and NaOCl from wastewater brines.
    Relocation of the extraction and separation facilities will require a change in land use approval from San Bernardino County. This process will include amendment of the approved reclamation plan for the project. This proposed action will also trigger other permit amendments or filings prior to the start of operations.
 
    Construction of the cogen facility will require new air quality permits for construction and operation. Molycorp will supply the cogen facility with natural gas delivered via a newly constructed gas pipeline. Permitting and construction of the new gas pipeline will be performed by Kern River Gas Transmission Company, an established gas pipeline company based in Salt Lake City, UT.
 
    Table 10.2 presents a summary of pending environmental permits for the Project. The summary identifies the planned filing date for the permit application. Based on current dialog with regulatory authorities, Molycorp has a reasonable expectation that permit approvals will be obtained in a timely manner.
     
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Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page 98
10.4   Health and Safety
 
    Molycorp maintains a world-class safety program at the Mountain Pass facility. The program includes training programs that cover all of the potential hazards that may be present at the facility. All employees and contractors are required to successfully complete a prescriptive 24-hour initial training session, as well as annual refresher sessions that are 8 hours in duration. During the training, Molycorp’s commitment to a safe work environment is reinforced through the Stop Work Authority program, which allows any employee or contractor at the facility to stop work that they deem to be unsafe. The success of Molycorp’s safety program is reflected in the facility’s safety record, which is reflected in the 1,667 days worked without a lost time accident.
 
    Within the last 6 years, independent recognition of Molycorp’s safety program includes:
    Mine Safety and Health Administration (MSHA) Sentinels of Safety award in 2008, 2006 and 2004;
 
    MSHA - Certificate of Honor Joseph A. Holmes Association for outstanding safety program in 2000;
 
    National Safety Council Awards — Perfect Record (2008 not posted, 2007 not posted, 2006 and 2004); and
 
    National Safety Council Awards — Occupational Excellence achievement award (2009, 2007 and 2004).
10.5   Reclamation and Closure
 
    Existing reclamation liabilities at the property include closure of the surface overburden stockpiles, four active surface water evaporation ponds and decommissioning and demolition of surface facilities. In 2006, Molycorp completed surface reclamation of the two former tailing storage facilities at the properties.
 
    Molycorp maintains financial assurance in the form of letters of credit for reclamation activities with designated regulatory authorities in the state of California. Molycorp reviews and updates, as appropriate, the financial assurance cost estimate on an annual basis. Table 10.3 presents the estimated reclamation liability for the existing property, as of year-end 2008. There were no material changes in reclamation liability during 2009.
 
    In addition to surface reclamation activities, the Project is required to develop a groundwater remediation program to address historical groundwater contamination at the property. The Clean up and Abatement Order requires the mine to abate the discharge, implement a monitoring program, conduct an investigation into the impacted groundwater to determine its characteristics and extent, provide a report detailing the investigation, and implement a Ground Water Corrective Action Program. Molycorp’s predecessor companies commissioned the initial abatement program in 2000 and performed upgrades to the program based on monitoring results.
     
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Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page 99
    Table 10.1: Summary of Existing Environmental Permits
                 
Permit   Agency   Application Date   Approval Date   Expiration Date
Right of Way for the Shadow Valley Fresh Water Pipeline CA12455
  Bureau of Land Management   3/22/82   8/23/82   8/23/12
 
               
Right of Way for the Ivanpah Valley Fresh Water
  Bureau of Land Management   No data   4/26/55   No expiration
Pipeline CA 0131543
               
 
               
San Bernardino County Domestic Water Supply
  San Bernardino County Department of Public   No data   12/8/04   No expiration
Permit #36000172
  Health            
 
               
Radiation Machine Tube Registration FAC66764
  California Department of Public Health   10/21/08   12/15/08   5/30/10
 
               
EPA Identification Number CAD009539321
  United States Environmental Protection Agency   10/20/08   10/30/08   No expiry
 
               
Hazardous Materials Certificate of Registration
  United States Department of Transportation   No data   8/27/09   6/30/10
 
               
NRC Export License XSOU8707 A5
  United States Nuclear Regulatory Commission   9/30/08   11/10/08   12/31/21
 
               
NRC Export License XSOU8708 A3
  United States Nuclear Regulatory Commission   9/30/08   11/10/08   12/31/11
 
               
Radio Station Authorizations WNYG247
  Federal Communications Commission — Wireless Telecommunications Bureau   9/12/08   10/15/08   1/21/12
 
               
Radio Station Authorizations KD49101
  Federal Communications Commission — Wireless Telecommunications Bureau   9/12/08   10/15/08   10/6/14
 
               
Radio Station Authorizations WPFG761
  Federal Communications Commission — Wireless Telecommunications Bureau   9/12/08   10/15/08   7/11/14
 
               
Portable Fire Extinguisher Servicing Concern License E-1711
  California State Fire Marshal   No data   12/2/08   12/31/10
 
               
Conditional Use Permit 07533SM2/DN953-681N
  San Bernardino County Land Use Services Department   7/10/04   7/20/04   7/20/34
 
               
Annual Building, Electrical and Plumbing Permit
  San Bernardino County   6/30/09   7/23/09   7/23/10
 
               
Weighmaster License 03773
  San Bernardino County   7/24/09   7/24/09   7/1/10
 
               
CUPA Annual Permit FA0004811
  San Bernardino County Fire Protection District   5/18/09   8/1/09   7/31/10
 
               
LRWQCB Order 6-01-18 — Domestic Wastewater System
  Lahontan Regional Water Quality Control Board   11/9/00   4/11/01   No Expiry
 
               
LRWQCB Order 6-91-836 — Mine and Mill Site
  Lahontan Regional Water Quality Control Board   4/15/86   6/13/91   No Expiry
 
               
LRWQCB Order R6V-2005-0011 — On Site Evaporation Ponds
  Lahontan Regional Water Quality Control Board   2/3/05   4/14/05   No Expiry
 
               
Mojave Desert Air Quality Management
District — Permits to Operate
  Mojave Desert AQMD   2/1/09   2/18/09   2/18/10
(PENDING)
     
SRK Consulting   April 28, 2010

 


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Molycorp Minerals, LLC    
Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page 100
                 
Permit   Agency   Application Date   Approval Date   Expiration Date
Industrial Stormwater Pollution Prevention Plan
6B361021848
  California State Water Resources Control Board   10/1/08   10/2/08   No expiry
 
               
Construction Stormwater Pollution Prevention Plan 6B36C353601
  California State Water Resources Control Board   10/1/08   10/3/08   No expiry
 
               
Right-Of-Way Lease 6375.2
  California State Lands Commission   No data   1/20/83   1/19/32
 
               
Radioactive Materials License #3229-36 Amendment 22
  California Department of Public Health — Radiologic Health Branch   5/12/84   1/16/09   8/5/98
 
               
Streambed Alteration Agreement R6-N-011-2000
(On-site Evaporation Ponds)
  California Department of Fish and Game   7/10/00   8/25/00   10/31/02 for construction; ongoing monitoring
 
               
County Drinking Water System Permit PT0006375
  County of San Bernardino — DEHS   9/30/09   10/31/09   10/31/10
 
               
County Landfill Permit PT0079569
  County of San Bernardino — DEHS   9/30/09   10/31/09   10/31/10
 
               
County Landfill Permit PT0019570
  County of San Bernardino — DEHS   9/30/09   10/31/09   10/31/10
     
SRK Consulting   April 28, 2010

 


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Molycorp Minerals, LLC    
Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page 101
    Table 10.2: Summary of Pending Environmental Permits
         
Permit   Agency   Proposed Filing Date
 
Conditional Use Permit /Reclamation
Plan Approval
  San Bernardino County   1/21/2010
 
       
Air Permits
  Mojave Desert AQMD (MDAQMD)   6/22/2010
 
       
Waste Discharge Requirements
  Lahontan Regional Water Quality Control Board (LRWQCB)   1/31/10
 
       
Natural Gas Pipeline Right of Way
  Federal Energy Regulatory Commission / Bureau of Land Management   6/1/10
 
       
Section 2080.1 Consistency Determination
  California Department of Fish and Game   6/22/10
 
       
Section 1603 Streambed Alteration Agreement
  California Department of Fish and Game   6/22/10
 
       
Building Permits
  County of San Bernardino   6/22/10
 
       
Radioactive Materials License Amendment
  California Department of Public Health — Radiologic Health Branch   1/31/10
 
       
Construction Stormwater Notice of Intent and Stormwater Pollution Prevention Plan
  California State Water Resources Control Board   4/1/11
 
       
Hazardous Materials Business Plan
  San Bernardino County   6/14/11
 
       
404/401 Permits
  US ACOE and the Lahontan RWQCB   6/22/10
    Table 10.3: Existing Reclamation Liability
           
Agency   Regulatory Obligation   Amount
 
Lahontan Regional Water Quality Control Board
  Closure   $ 12,920,238
 
  Post Closure   $ 1,810,800
 
  AK&RFR1   $ 7,015,700
 
       
County Of San Bernardino
  Mine Reclamation   $ 3,287,992
 
  Evaporation Pond Closure   $ 723,100
 
       
California Integrated Waste Management Board
  Post Closure   $ 500,915
 
       
California Department of Public Health — Radiologic Health Branch
  Decommissioning   $ 1,125,000
 
  TOTAL:   $ 27,383,745
 
1 All Known and Reasonably Foreseeable Releases
     
SRK Consulting   April 28, 2010

 


Table of Contents

Molycorp Minerals, LLC    
Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page 102
11   Capital and Operating Costs
 
    Cost information is based on a combination of vendor quotations, historical operating costs and specialized estimating software.
11.1   Mine Operations
 
    Mine operations consist of the equipment, infrastructure and manpower required to strip overburden material, haul ore to the crushing circuit and stockpile crushed ore adjacent to the mill facility. Molycorp can either self-perform or contract overburden removal. For the purposes of this engineering study, contract mining is assumed.
11.1.1   Capital Cost Estimate
 
    The existing truck shop and maintenance facilities will be adequate for owner or contractor operated mining equipment. Earthmoving equipment purchase or lease costs are included in the operated unit rates. Table 11.1 presents the estimated start-up capital costs for mine operations.
 
    Table 11.1: Mine Capital Cost
                                 
Description           Qty.   Cost   $000s
Equipment
                               
Dozers
            1     $ 641       641  
Graders
            1     $ 630       630  
Backhoe
            1     $ 145       145  
Lightplants
            6     $ 22       131  
Pickups
            4     $ 28       113  
Pumps
            6     $ 26       155  
 
Subtotal Capital Cost
                            1,815  
Contingency
    20.0 %                     363  
 
Total Mine Capital
                            2,178  
 
    The current mine plan includes two phased pre-stripping campaigns. Phase I includes activities in Years 2011 through 2014 while Phase II includes Years 2023 through 2026. Table 11.2 presents the estimated quantities and unit cost for each pre-stripping campaign.
 
    Table 11.2: Pre-Stripping Campaigns
                         
   
Quantity
 
Unit Cost
 
Cost
Description  
(kt)
 
($/t)
 
($000s)
 
Phase I (Yrs. 2011-14)
    32,904     $ 2.00       65,808  
Phase II (Yrs. 2023-26)
    39,003     $ 2.00       78,006  
 
Total
    71,907     $ 2.00       143,814  
 
11.1.2   Operating Cost Estimate
 
    Mine operating costs shown in Table 11.3 assume contract mining as well as a provision for owner oversight of contractor operations. The mine will also have personnel available for minor support functions.
     
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Molycorp Minerals, LLC    
Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page 103
    Cost estimating assumptions are shown in Table 11.4. Under the option of contract mining, unit costs are based upon contractor quotes received by Molycorp. The mine labor crew and equipment costs were estimated by SRK. Labor rates are consistent with other labor at the mine site. Provisons for G&A are included in the Mill and Separation Plant cost estimates.
 
    Table 11.3: Mine Operating Cost
                 
    Cost   Unit Cost
Description   ($000s)   ($/lb-TREO)
 
Contractor — Waste
  $ 65,783     $ 0.045  
Contractor — Ore
  $ 41,076     $ 0.028  
Owner
  $ 37,593     $ 0.026  
 
Mining
  $ 144,452     $ 0.099  
 
    Table 11.4: Mine Operating Cost Assumptions
                 
Contract Miner   Cost        
 
Ore Mining
  $ 3.00     $/ton
Waste Mining
  $ 2.00     $/ton
                                                 
    Base                              
  Rate1   Base     Burden     Overtime   Salary   Hourly
Mine Labor   ($/hr)   ($/yr)     (%)     (%)   ($/yr)   ($/yr)
 
Mine Manager
        $ 150,000       30.0 %         $ 195,000        
Mine Engineer
        $ 120,000       30.0 %         $ 156,000        
Foreman
  $ 30.19     $ 62,795       30.0 %     0.0 %         $ 81,634  
Equipment Operators
  $ 27.34     $ 56,867       40.0 %     0.0 %         $ 79,614  
                 
Mine Labor     Hrs/Yr   $/hr
 
Dozers
    1,500     $ 78.56  
Graders
    1,500     $ 69.36  
Backhoe
    1,500     $ 19.04  
Lightplants
    500     $ 2.81  
Pickups
    2,000     $ 8.50  
Pumps
    250     $ 12.25  
 
1 2,080 hours per year.
11.2   Existing Mill Refurbishment and Operation
 
    Capital costs for refurbishment of the existing mill are based on a detailed reconnaissance of the primary unit operations of the mill process. Specialists in mill re-starts tested mechanical and electrical systems as part of the assessment.
 
    Operating costs for the existing mill are based on monthly production reports, current reagent prices, updated energy costs and new manpower estimates.
11.2.1   Capital Cost Estimate
 
    Table 11.5 presents the capital expenditure summary for the mill refurbishment. The total capital expenditure for the mill refurbishment is approximately US$17.7 million. Contingency is elevated for this capital cost item due to the potential for planned repairs to become new replacements.
     
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Molycorp Minerals, LLC    
Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page 104
    The primary basis for the mill refurbishment cost estimate is the cost for equipment replacement and repair (US$4.4 million). Major equipment replacement costs are based on vendor quotations. Repair costs are based on the field inspection and professional experience.
 
    Table 11.5: Capital Cost for Mill Refurbishment
                 
Description           Cost ($000s)  
 
Equipment
               
Crushing
            1,678  
Fine Ore Storage and Milling
            1,268  
Conditioning
            226  
Gland Seal Water
            0  
Rougher Flotation
            442  
Cleaner Flotation
            773  
HCL Leach, Thickening Filtration
            20  
Concentrate Storage
            0  
 
Subtotal Equipment:
            4,408  
Civil / Structural
               
Site Work
    6.0 %     264  
Foundations
    20.0 %     882  
Structural Steel
    20.0 %     882  
Building
    19.0 %     837  
Piping
    33.0 %     1,455  
Electrical
    39.0 %     1,719  
Instrument
    20.0 %     882  
Insulation & Paint
    4.0 %     176  
 
Subtotal Civil / Structural:
            7,096  
 
Subtotal Direct Costs:
            11,504  
Indirect Costs
               
Freight
    8.0 %     920  
EPCM
    18.0 %     2,071  
Construction
    0.0 %     0  
Vendor Equipment Reps
    2.3 %     265  
 
Subtotal Indirect:
            3,256  
 
Capital Cost:
            14,759  
Contingency
    20.0 %     2,952  
 
Total Mill Refurbishment:
            17,711  
 
    The longest lead-time item for procurement of new equipment for the refurbishment is approximately 18 months. The duration of construction and repair activity is expected to be 9 months. These activities will be conducted concurrently.
 
    Table 11.6 presents a scoping level capital cost estimate for construction of a replacement mill. Based on the mine plan presented in Section 6.0, the new mill will be constructed after Production Year 10 (2022).
     
SRK Consulting   April 28, 2010

 


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Molycorp Minerals, LLC    
Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page 105
    Table 11.6: Scoping Level Capital Cost Estimate for the Replacement Mill
                 
            Cost
Description           ($000s)
 
Equipment
               
Crushing
          $ 3,033  
Fine Ore Storage and Milling
          $ 1,892  
Conditioning
          $ 314  
Gland Seal Water
          $ 18  
Rougher Flotation
          $ 1,107  
Cleaner Flotation
          $ 649  
HCL Leach, Thickening
               
Filtration
          $ 190  
Concentrate Storage
          $ 528  
 
Subtotal Equipment
          $ 7,731  
Civil Structural
               
Site Work
    5.5 %   $ 425  
Foundations
    19.0 %   $ 1,469  
Structural Steel
    19.4 %   $ 1,500  
Building
    17.8 %   $ 1,376  
Piping
    32.7 %   $ 2,528  
Electrical
    39.3 %   $ 3,038  
Instrument
    19.6 %   $ 1,515  
Insulation & Paint
    3.1 %   $ 240  
 
Subtotal Civil / Structural
          $ 12,091  
 
Subtotal Direct Costs
          $ 19,822  
Indirect Costs
               
Freight
    8.0 %   $ 1,586  
EPCM
    18.0 %   $ 3,568  
Construction
    0.0 %   $ 0  
Vendor Equipment Reps
    2.3 %   $ 456  
 
Subtotal Indirect
          $ 5,610  
 
Capital Cost
          $ 25,432  
Contingency
    30.0 %   $ 7,630  
 
Total Mill Capital
          $ 33,062  
 
11.2.2   Operating Cost Estimate
 
    Operating costs for the refurbished mill are based on historical operating costs and supplemented by changes in power costs and the use of paste tailings technology. Detailed operating costs for mill production in 1995, 1996 and 1997, when Molycorp produced in excess of 45 Mlbs of REO per year, are comparable to the current production scenario.
 
    Mill operating costs are shown in Table 11.7. Mill operating costs are based upon historical productivities and consumption rates at Mountain Pass. Reagents, supplies, utilities and labor rates are based on purchase prices documented by Molycorp. Cost estimating assumptions for mill operating costs are shown in Table 11.8.
     
SRK Consulting   April 28, 2010

 


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Molycorp Minerals, LLC    
Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page 106
    Table 11.7: Mill Operating Costs
                 
     Cost     Unit Cost
Description   ($000s)   ($/lb-TREO)
 
Labor
  $ 152,656     $ 0.104  
Reagents
  $ 70,770     $ 0.048  
Supplies
  $ 87,087     $ 0.059  
Utilities
  $ 24,277     $ 0.017  
G&A — Mountain Pass
  $ 115,273     $ 0.079  
Paste Tailings Storage
  $ 83,776     $ 0.057  
 
Milling
  $ 533,839     $ 0.365  
 
     
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Molycorp Minerals, LLC    
Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page 107
    Table 11.8: Mill Cost Assumptions
                                                 
    Base                    
    Rate1   Base   Burden   Overtime   Salary   Hourly
Mill Labor   ($/hr)   ($/yr)   (%)   (%)   ($/yr)   ($/yr)
 
Superintendent
        $ 120,000       30.0 %         $ 156,000        
Foreman
  $ 30.19     $ 62,795       30.0 %     4.0 %         $ 86,532  
Maintenance Foreman
  $ 30.19     $ 62,795       35.0 %     4.0 %         $ 89,860  
Maintenance Mechanics
  $ 30.98     $ 64,438       35.0 %     4.0 %         $ 92,211  
Boiler Tenders
  $ 28.69     $ 59,675       40.0 %     4.0 %         $ 88,558  
Operators (4 per shift)
  $ 27.34     $ 56,867       40.0 %     4.0 %         $ 84,391  
Loader Operator at Ore Stockpile
  $ 27.34     $ 56,867       40.0 %     4.0 %         $ 84,391  
Equipment Operator at Crusher
  $ 27.34     $ 56,867       40.0 %     4.0 %         $ 84,391  
 
                 
    Reagent    
    Cost   Consumption
Mill Reagents   ($/lb)   (lb/lb REO)
 
Weslig
  $ 0.219       0.089  
Pamak
  $ 0.635       0.003  
Soda Ash
  $ 0.156       0.099  
Sodium Silicofluoride
  $ 0.544       0.007  
HCl (35% solution)
  $ 0.088       0.089  
 
         
    Annual Cost
Mill Supplies   ($000s)
 
Miscellaneous Chemicals
  $ 236  
Other
  $ 516  
Wear Metal
  $ 187  
Operating
  $ 535  
Maintenance
  $ 1,165  
 
                                 
    Unit            
Mill Utilities   Cost           Consumption
 
Steam (incl. in opex)
                               
Power
  $ 0.029     $/kWh     16,800     MWh/yr
Water
  $ 5.00     $/kgal     1.15     gal/lb REO
             
Mill G&A   Cost    
 
Assay Lab
  $ 0.011     $/lb REO
Safety
  $ 56     $000s/yr
Indirect Costs
  $ 1,000     $000s/yr
 
1   2,080 hours per year.
    Source: Monthly and annual production reports for 1995 to 1997 from Molycorp.
11.3   Extraction and Chemical Process Operations
 
    Capital and operating costs for the extraction and separation facilities are based on specialized estimating software used in the chemical engineering industry.
     
SRK Consulting   April 28, 2010

 


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Molycorp Minerals, LLC    
Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page 108
11.3.1   Capital Cost Estimate
    M&K estimated capital cost for the extraction and separations facilities based on process flow sheets. In accordance with standard cost estimating methodology for the chemical industry, the initial factored estimate was validated by M&K by completing the Piping and Instrumentation Diagram’s (P&IDs) for the leach, lead and iron removal, didymium extraction circuit and the cerium precipitation portion of the chemical process. AspenTech®’s Icarus cost estimation program was then used to produce an initial factored capital cost estimate. The initial estimate for the bastnasite leach section was $13,935,000 based on the factored method (not including contingency).
 
    M&K then solicited budgetary vendor quotes for a detailed capital cost estimate for the bastnasite leach section. The detailed capital cost estimate of $14,807,000 USD (excluding contingency) was 7% more than the initial factored estimate. This comparison suggests the accuracy of the factored estimate produced by the Icarus cost estimation program is acceptable.
 
    Flow sheets were developed for the process steps and the equipment was sized for certain process steps based on a general overall mass balance. The capital cost for one stage of REO separation was developed and the costs factored (i.e., scaled-up) based on the size of the separation equipment to develop the costs for other REO separation stages.
 
    Equipment costs were then factored to arrive at the estimated installed direct cost. The factors used were based on an industry-standard guide for the chemical plant industry titled “Planning, Estimating, and Control of Chemical Construction Projects” (Pablo F. Navarrete and William C. Cole). The factors for a solids/liquid plant were adjusted for each of the individual process steps and the results compiled. Further detailed estimates were completed for portions of this process by completing the P&IDs and developing quantities for the piping, electrical and various other quantities.
 
    The capital cost estimate for the bastnasite leach through redox and extraction circuits has potential for significant improvement. Methods to recycle caustic soda and hydrochloric acid have been piloted at Mountain Pass. Scale-up of these improvements to a level at 15% of full scale is currently under design and construction.
 
    M&K concludes that the greatest risk in the equipment estimate is the cost of the extraction cells. As of the date of this study, preliminary vendor quotes have been obtained on the extraction cells, dryers and calciners. Table 11.9 and Table 11.10 present the capital cost estimates for the new extraction and separation facilities, respectively.
     
SRK Consulting   April 28, 2010

 


Table of Contents

     
Molycorp Minerals, LLC    
Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page 109
    Table 11.9: Capital Cost for Extraction Plant
                 
            Cost
Description           ($000s)
 
Equipment
               
Bastnasite Leach
          $ 2,931  
Fluoride Crack
          $ 2,397  
Iron and Lead Removal
          $ 1,260  
Heavies Removal Circuit
          $ 2,125  
 
Subtotal Equipment
          $ 8,714  
 
               
Materials & Labor
               
 
Materials
          $ 9,713  
Labor
          $ 14,443  
 
Subtotal Materials & Labor
          $ 24,155  
 
Subtotal Direct Costs
          $ 32,869  
 
Indirect Costs
               
 
Freight
          $ 0  
EPCM
          $ 6,574  
Construction
          $ 2,166  
Vendor Equipment Reps
          $ 0  
 
Subtotal Indirect
          $ 8,740  
 
Capital Cost
          $ 41,609  
Contingency
    20.0 %   $ 8,322  
 
Total Extraction Plant Capital
          $ 49,931  
 
     
SRK Consulting   April 28, 2010

 


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Molycorp Minerals, LLC    
Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page 110
    Table 11.10: Capital Cost for Separations Plant
                 
Description           $000s
 
Equipment
               
Cerium Redox
          $ 2,059  
Didymium Circuit
          $ 3,100  
Lanthanum 5205 Circuit
          $ 2,023  
Nd 5410 5410 Purification
          $ 2,820  
La 5200 Precipitation
          $ 676  
La 5200 Dry and Package
          $ 1,833  
Ce 5350 Precipitation
          $ 872  
Ce 5350 Dry and Package
          $ 2,359  
Pr 5500 Precipitation
          $ 646  
Pr 5500 Dry and Package
          $ 964  
Nd 5410 Precipitation
          $ 646  
Nd 5410 Dry and Package
          $ 964  
Europium Oxide Precipitation
          $ 646  
Europium Oxide Dry and Package
          $ 964  
Subtotal Equipment
            41,758  
 
Materials & Labor
               
Materials
            37,591  
Labor
            61,246  
 
Subtotal Materials & Labor
            98,838  
 
Subtotal Direct Costs
            140,595  
Indirect Costs
               
EPCM
            28,119  
Construction
            9,187  
 
Subtotal Indirect
            37,306  
 
Capital Cost
            177,902  
Contingency
    20.0 %     35,580  
 
Total Separations Plant Capital
            213,482  
 
    Due to the specialized chemical engineering aspects of the extraction and separations circuits and at the request of SRK, Molycorp retained an independent third party specialist to review this cost estimating methodology based on industry standards for chemical engineering. The results of this third party review indicate that the estimate is consistent with a Class 4 classification, as defined by the Association for the Advancement of Cost Engineering (AACE). Specifically, the AACE published Recommended Practice No. 18R-97 to define guidelines for applying the principles of estimate classification specifically to project estimates for engineering, procurement, and construction work for the process industries. As defined by the AACE, a Class 4 estimate is characterized by:
    1 to 15% Level of Project Definition;
 
    Suitable for Feasibility Study evaluation; and
 
    Expected accuracy of +/- 25%.
     
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Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page 111
11.3.2   Operating Cost Estimate
    Extraction and Separation Plant operating costs are shown in Table 11.11. Cost estimating assumptions are shown in Table 11.12.
 
    Table 11.11: Extraction/Separation Plant Operating Costs
                 
    Cost   Unit Cost
Description   ($000s)   ($/lb-TREO)
 
Lanthanum Oxide
  $ 372,226     $ 0.254  
Cerium Hexahydrate
  $ 174,712     $ 0.119  
Cerium Oxide
  $ 217,560     $ 0.149  
Didymium Oxide1
               
Praseodymium Oxide
  $ 66,193     $ 0.045  
Neodymium Oxide
  $ 178,179     $ 0.122  
Samarium Oxide
  $ 19,556     $ 0.013  
Europium Oxide
  $ 4,724     $ 0.003  
 
Extraction/Separation Plant
    1,033,150     $ 0.706  
 
1   Cost of production is included in the Pr and Nd unit costs.
    Table 11.12: Extraction/Separation Plant Cost Assumptions
                                         
                                    Annual
    Base Rate   Base   Burden   Overtime   Cost
Plant Labor   ($/hr)   ($/yr)   (%)   (%)   (US$000s)
 
Chemical Operators
  $ 27.340     $ 56,867       40.0 %     10.0 %   $ 88,144  
Maintenance Workers
  $ 28.690     $ 59,675       35.0 %     15.0 %   $ 93,988  
Foremen
  $ 30.190     $ 62,795       30.0 %     10.0 %   $ 91,053  
Engineers
  $ 57.692     $ 120,000       30.0 %     0.0 %   $ 156,000  
Salaried Personnel
  $ 40.000     $ 83,200       30.0 %     0.0 %   $ 108,160  
 
                             
                        Annual
                        Cost
Process Chemicals & Energy   Cost   Unit   Usage   (US$000s)
 
Natural Gas
  $ 5.000     mmbtu                
Natural Gas — Bldg Heating
  $ 5.000     mmbtu     103,680     $ 518,400  
Natural Gas — Dry & Calcine
  $ 5.000     mmbtu     240,000     $ 1,200,000  
Electricity
  $ 0.029     kWh     48,000,000     $ 1,373,524  
Process Steam (non CA)
  $ 3.993     mmbtu     689,068     $ 2,751,530  
Sodium Chloride
  $ 0.055     lb     29,910,933     $ 1,645,101  
Water (RO)
  $ 5.000     1000 gal     82,675     $ 413,374  
Oxalic Acid
  $ 0.500     /lb     5,612,251     $ 2,806,125  
Sodium Carbonate
  $ 0.075     /lb     27,546,763     $ 2,066,007  
Sodium Bisulfide
  $ 1.040     /lb     139,364     $ 144,939  
Miscellaneous Other Chemicals
                $ 1,000,000  
 
11.4   Metal Alloy Plant Operations
 
    Molycorp intends to enter into a long-term business relationship with the metals conversion company. As of the time of this engineering study, the specific business terms of this relationship
     
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Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page 112
    remain confidential. The approximate level of investment by Molycorp in this business relationship totals approximately US$32 million.
 
    Operating costs for conversion of REOs to metals and then to alloys are based on confidential pricing information. Table 11.13 presents summary operating cost information. Costs for these functions were supplied by Molycorp as discussed in Section 7. Cost estimating assumptions, as provided by Molycorp are shown in Table 11.14.
 
    Table 11.13: Oxide to Metal/Alloy Plant Operating Costs
                 
    Cost   Unit Cost
Description   ($000s)   ($/lb-TREO)
 
Metals
  $ 1,096,935     $ 0.749  
Alloys
  $ 5,155,413     $ 3.521  
 
Metal Alloy Plant
  $ 6,252,347     $ 4.270  
 
    Table 11.14: Metal/Alloy Plant Operating Costs
                 
Description   Cost   Unit
 
NdFeB Magnet Alloy
               
Didymium Metal1
          $/lb
Dysprosium Metal
  $ 42.650     $/lb
Iron
  $ 0.673     $/lb
Cobalt
  $ 23.300     $/lb
Copper
  $ 2.500     $/lb
Boron
  $ 8.182     $/lb
 
               
Sm2Co17 Magnet Alloy
               
Sm Metal1
          $/lb
Iron
  $ 0.673     $/lb
Cobalt
  $ 23.300     $/lb
Copper
  $ 2.500     $/lb
Zr
  $ 15.230     $/lb
 
               
Oxide-Metals G&A
               
Transportation from Mt. Pass
  $ 0.023     $/lb
Administration
  $ 500     $/yr
 
Note 1: Metal supplied by Molycorp Minerals
11.5   Mine Waste Management
    Haulage costs for excavation and transport of overburden and stockpile grade material are included in the mining operating costs. Table 11.15 presents the capital cost estimate for the Paste Tailings Filter Plant, PTSF and process wastewater system. The capital cost estimate for the Paste Tailings Filter Plant is based on Aspen Tech®’s Icarus cost estimation software. Capital costs for the PTSF are provided by Golder. Operating costs for the Paste Tailings Filter Plant and PTSF are described below.
     
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Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page 113
    Table 11.15: Capital Cost for Mine Waste Management
                 
            Cost
Description           ($000s)
 
Equipment
               
Waste Treatment
          $ 2,460  
Tank Farm
          $ 2,034  
Utilities
          $ 1,913  
Paste Plant
          $ 4,697  
Paste Tailings Storage Facility
          $ 10,249  
 
Subtotal Equipment
          $ 21,352  
Materials & Labor
               
Materials
          $ 20,303  
Labor
          $ 33,462  
 
Subtotal Materials & Labor
          $ 53,765  
 
Subtotal Direct Costs
          $ 75,117  
Indirect Costs
               
Freight
          $ 0  
EPCM
          $ 12,765  
Construction
          $ 8,569  
 
Subtotal Indirect
          $ 21,334  
 
Capital Cost
          $ 96,452  
Contingency
    20.0 %   $ 19,290  
 
Total Separation Plant Capital
          $ 115,742  
 
    Capital costs and operating costs for the PTSF were developed by Golder. Table 11.16 presents the detailed capital cost estimate for construction of Stage 1, 3, 4 and 5. This capital cost is also included in Table 11.15.
 
    Table 11.16: Capital Cost Estimate, PTSF Construction
         
Item   Total (US$000s)
 
Site Preparation
    565  
Tailings Disposal Facility Earthworks
    2,596  
Geosynthetics
    3,947  
Reclaim Pond and Channel
    806  
Lysimeter Trench
    48  
Stormwater Diversion Channels and Berms
    291  
Construction, QC/QA, Permitting and Monitoring1
    1,329  
Water Pipeline Relocation
    667  
Subtotal:
    10,249  
 
1   Additional Engineering, Procurement and Construction costs are included in the indirect costs shown in Table 11.15.
    Operating Cost Estimate
 
    Table 11.17 presents the itemized operating cost estimate for the Paste Tailings Filter Plant. Operating costs for the plant were provided by Golder PasteTec.
     
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Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page 114
    Table 11.17: Operating Cost Estimate for the Paste Tailings Plant
                             
                    Annual
Description   Quantity   Unit   Unit Cost   ($000s)
 
Power1
    7,470,528     kWh   $ 0.029     $ 214  
Plant Maintenance
                           
Parts and Supplies
    1     lot   $ 200,000     $ 200  
Maintenance Labor
    7,488     hr/yr   $ 43.202     $ 323  
Consumables
                           
Flocculant
    28,105     kg floc   $ 4.000     $ 112  
Lubricants
    1     lot   $ 200,000     $ 200  
System Manpower
                           
Paste Plant Operators
    25,560     hrs   $ 40.573     $ 1,037  
Supervisor
    2,600     hrs   $ 39.247     $ 102  
 
Annual Cost
                      $ 2,189  
Unit Cost
    401,500     tpy basis           $ 5.451  
 
1   Golder 2009 data used to establish quantities and unit rates. The unit cost for power is based on operation of the new CHP facility.
    Operating costs for the PTSF include extension of the pipeline distribution system and operation of a part-time bulldozer (3,000 hours/year) for placement of paste tailing material. Table 11.18 presents the operating cost estimate for the PTSF.
 
    Table 11.18: Operating Cost Estimate, PTSF
                             
                Unit   Annual
Description   Quantity   Unit   Cost   ($000s)
 
Pipeline Extension
    800     Ft   $ 28.00     $ 22  
Bulldozer
    3,000     hours   $ 125.00     $ 375  
 
Annual Cost
                      $ 397  
Unit Cost
    401,500     t/y basis           $ 0.990  
 
Golder 2009
                           
11.6   Process Wastewater
    Capital costs for process water handling are included in Table 11.15. Operating costs are included in the extraction and separation operating cost estimates.
11.7   Infrastructure
    Major infrastructure elements include the new Combined Heat and Power facility and the chloralkali plant.
11.7.1   Combined Heat and Power Facility
    Vanderweil prepared the capital cost estimate for the 2 x 12 MW CHP installation and start-up (Table 11.19). Operating costs are reflected in 0.029 $/kWhr power cost within individual operating cost allocations.
     
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Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page 115
    Table 11.19: Opinion of Probable Cost for the CHP Facility
                 
            Cost
Description           ($000s)
 
Equipment
               
Electrical Generation Equipment
            15,174  
Heat Recovery System (CT)
            6,383  
Electrical
            1,776  
Mechanical Balance of Plant
            102  
Power Delivery
            188  
 
Subtotal Equipment
            23,623  
Construction
               
Buildings & Foundations
            2,160  
Equipment Foundations
            347  
MEP Construction Services
            14,201  
 
Subtotal Civil / Structural
            16,708  
 
Subtotal Direct Costs
            40,330  
Indirect Costs
               
Freight
            210  
EPCM
            0  
Construction
            0  
Vendor Equipment Reps
            0  
 
Subtotal Indirect
            210  
 
Capital Cost
            40,540  
Power Island Contingency
    0.0 %     0  
BOP Contingency
    15.0 %     3,805  
 
Total Heat & Power Plant
               
Capital
            44,345  
 
11.7.2   Chloralkali Facility
    The capital cost estimate for the equipment component of chloralkali facility is based on a confidential and proprietary vendor quotation from the manufacturer.
     
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Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page 116
12   Marketing
    Molycorp retained Roskill Consulting Group Ltd (Roskill) and Industrial Mineral Company of Australia (IMCOA) to perform studies for the current and future rare earth global market. In addition, Molycorp obtained Letters of Intent for off take from international consumers and customers for rare earth oxides, metals and alloys. This section is based on the Roskill and IMCOA studies as well as market information provided by Molycorp.
12.1   Market Demand and Supply
    Historically, over the decade to 2008, market growth for REE products was approximately 6% annually. In 2009, the U.S. continued to be a major consumer, exporter, and importer of rare earth products with $84 million in imports in 2009, a decrease from $186 million imported in 2008. Import sources of rare earth metals and compounds are China, 91%; France, 3%; Japan, 3%; Russia, 1%; and other, 2% (USGS 2010). Overall demand growth from 2010 to 2014 will be 7.7% to 9% (Roskill 2009).
 
    In addition to controlling production of greater than 97% of all REE on a worldwide basis (including those relied upon by all NdFeB magnet producers outside China), China is also the world’s leading consumer of rare earth materials, currently consuming approximately 60% of production and rising rapidly. China recently adopted policies that encourage rare earth producers to move downstream and add value by creating finished goods such as permanent magnets and various metals and alloys domestically. The Chinese government recognizes the strategic nature of its REE deposits and is actively taking steps to insure the longevity and security of its REE material for its own domestic consumption as evidenced by the following support mechanisms:
    Export quotas and licenses;
 
    Export taxes;
 
    Production quotas;
 
    Foreign investment in rare earth mines is prohibited; and
 
    Foreign investment in downstream processing, and the concomitant technology transfer is encouraged.
    These measures were implemented by China to help generate manufacturing jobs (IMCOA 2009). These policies also increase the costs for buyers to export REE out of China, which amounted to 56,130 mt in 2008. The quota for the first half of 2009 (Chinese companies only) was 15,043 mt in comparison with 22,780 mt in the equivalent period in 2008.
 
    Domestic consumption of rare earths in China increased from approximately 20% of total production in 2002 to approximately 60% in 2008. Companies from Japan, North America, and Europe invested in downstream processing in China and are transitioning from production of separated oxides to metals and alloys, to valued-added magnets, phosphors and batteries. Chinese companies, at the same time, are also investing in downstream operations to satisfy domestic consumption and support aggressive renewable energy goals. Demand will increase at a faster rate in China than the rest of the world so that China’s share of global consumption will increase from 60% in 2008 to 65% in 2014, and 69% in 2020. As a result, Chinese consumption of REE will move closer to balance (Figure 12.1).
 
    The more important points illustrated in Figure 12.1 are:
     
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Engineering Study for Re-Start of the Mountain Pass Mine and Processing Facility   Page 117
    China’s growth rate of domestic production is expected to fall significantly below its growth rate of domestic demand with production and demand essentially equal by