Developing Zandkopsdrift a world-class rare earth project Frontier - - PowerPoint PPT Presentation

DRAFT

Developing Zandkopsdrift

a world-class rare earth project

February 2012

Frontier Rare Earths Limited TSX:FRO

Safe Harbour Statement

Certain statements contained in or incorporated by reference into this presentation constitute “forward-looking statements”. Officers and representatives of Frontier Rare Earths Limited (the “Company”) may, in their remarks or in response to questions regarding this presentation, make certain statements which are “forward-looking statements” and are prospective. Forward-looking statements are neither promises nor guarantees, but are subject to risks, uncertainties and assumptions that may cause the actual results, performance or achievements of the Company, or developments in the Company’s business or its industry, to differ materially from the anticipated results, performance, achievements or developments expressed or implied by such forward-looking statements. Forward-looking statements are based on management’s beliefs and opinions at the time the statements are made or presented, and undue reliance should not be placed on any of these forward-looking statements. There should be no expectation that these forward-looking statements will be updated or supplemented as a result of changing circumstances or otherwise, and the Company does not intend, and does not assume any obligation, to update these forward-looking statements.

February 2012

2 │

Forward-looking information

Topics

 The Rare Earths Market  Frontier Rare Earths and Background to the Zandkopsdrift Project  Preliminary Economic Assessment and Project Development Plans  Korea Resources Corporation Joint Venture  Outlook

3 │

Rare Earths – Overview

 Series of 15 chemically similar elements that occur and are recovered together

 Distribution of elements varies from deposit to deposit  Two distinct categories based on atomic weight: Light Rare Earths and Heavy Rare Earths

 Each element has a range of distinctive physical properties which allow them to be used in a variety of technological applications

 Magnetic, optical, electrical, catalytic and metallurgical

 Underpin the “green” technology economy

 Hybrid motor and battery technology  Energy efficiency  Wind power  Consumer electronics  Defense  Transport

 Most have no substitutes and are indispensable in many applications

4 │

37% 31% 14% 5% 4% 4% 3% 2% 0% 5% 10% 15% 20% 25% 30% 35% 40% Magnets Phosphors Metal Alloys Catalysts Ceramics Polishing Other Glass

Value of RE usage by application

Rare Earths – Uses

 Biggest, fastest-growing use is for magnet applications which, together with phosphors and metal alloys, accounts for >80% of demand by value

Source: Roskill 5 │

Rare Earth Market Developments

China

 Continued restructuring of export quota system, forced industry consolidation and clampdown on illegal mining & processing likely to have significant price implications  China has confirmed only 15-20 years reserves of heavy and medium REOs and are expected to be a net importer of these elements by 2015  Chinese export quotas have been reduced significantly since 2005  2012 quotas appear to have stabilised at c.30kt per annum, however:  2012 quota applies to a wider range of products  First -time introduction of quotas for heavy (13%) and light REOs (87%) which is likely to increase the shortage of these critical rare earths outside China

Rest of World

 Plans by several countries including China, Japan, South Korea and US announced to stockpile rare earths  Major industrial users seeking to lock in long-term supply/partnership from credible potential producers i.e. Frontier/KORES, Lynas/Siemens  Although FoB China prices have declined in recent months, there has been a significant increase in REO prices over the last 12 months 6 │

10,000 20,000 30,000 40,000 50,000 60,000 70,000 2005 2006 2007 2008 2009 2010 2011 2012E

Tonnes REO

Chinese Export Quota

Global Supply and Demand (tonnes REO)

Rare Earths – Supply/Demand Forecasts

 Demand CAGR projected at 7-10% through 2015 and beyond  China’s domestic demand increasing faster than domestic supply  Supply deficit widely forecast

 Circa 70t of REO required from non-China sources by 2015 and 115kt by 2020  Significant opportunity for new producers of separated rare earth oxides outside of China

Source: Roskill,Freedonia Group

7 │

25,000 50,000 75,000 100,000 125,000 150,000 175,000 200,000 225,000 250,000 275,000 2004 2005 2006 2007 2008 2009 2010 2011 2015f 2020f

China supply ROW supply China demand ROW demand Total demand

Frontier Overview

 Frontier's flagship asset is the Zandkopsdrift Rare Earth project

World-class deposit in terms of size, rare earth grade, distribution and value

 Preliminary Economic Assessment confirms Zandkopsdrift’s significant potential

 PEA is the only integrated NI 43-101 compliant study covering mining through separation of REOs  NPV11% of $3.7bn generating a post-tax IRR of 53% and 2 year payback from production start  Supports Frontier’s objective to become a major low cost producer of separated REOs by 2015

 Definitive joint venture signed with Korea Resources Corporation (KORES) in Dec ’11

Frontier is the only rare earth junior advancing a major rare earth resource outside China with a definitive strategic partnership agreement in place KORES forming a consortium expected to include Samsung Group, GS Caltex, Daewoo Shipbuilding & Marine Engineering Group and AJU Group to participate in the Frontier Joint Venture

 Pre feasibility Study scheduled Q3 2012 and Definitive Feasibility Study Q3 2013  Strong financial position: c.$38m cash and fully funded through Pre & Definitive Feasibility Studies  Experienced Board, management and technical teams  Well developed corporate and product strategy

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Zandkopsdrift Project Location

 Project well-situated in the Northern Cape Province, South Africa’s oldest mining region  Excellent mining and related infrastructure available  Close to N7 highway from Cape Town (c.450 km)

 35km to nearest railhead (Bitterfontein)  300km north of deep water port of Saldanha Bay

 Strong support in in local communities for the development of the Zandkopsdrift  Frontier controls c.60,000 ha prospecting right area and owns c.4,500 ha of land on which the Zandkopsdrift rare earth deposit and carbonatite complex is situated

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Zandkopsdrift Project Area

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Zandkopsdrift carbonatite complex Gravel road to N7 N7 tarred road to Cape Town Bitterfontein rail head (~44 km by road) Exxaro Resources Namakwa Sands Mine (~45 km)

Zandkopsdrift Deposit

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Zandkopsdrift Project Overview

 A world-class rare earth deposit

 Carbonatite complex and one of the largest known rare earth deposits globally with approx. 950k TREO

 Significant higher grade “Central Zone” identified within the deposit (average in situ grade 3.1% TREO ) extending from surface and amenable to preferential mining  Zandkopsdrift principally contains “conventional” RE minerals (97% monazite) for which commercial extraction processes exist

 Metallurgy now well understood, and utilises established extractive processes  Rare earth minerals in many new projects have never had commercial processes developed, which is key to development time, costs and process risk

 Potential for rapid development and production start-up

 Good regional infrastructure will also facilitate development  Targeting annual production of circa 20,000 tonnes of separated rare earths commencing in H2 2015

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PEA Financial Highlights

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PEA Financial Highlights

Post-Tax NPV &IRR Post-Tax Net Present Value @ 11% discount rate $3.65bn NPV attributable to Frontier Rare Earths $3.60bn Post -Tax Internal Rate of Return 52.5% Pre -Tax NPV & IRR Pre-Tax Net Present Value @ 11% discount rate $4.3bn Pre-Tax Internal Rate of Return 57.6% Revenue and Cashflow Average annual revenue $1.1bn After-tax free cashflow in full production $711m Capital Expenditure Total construction capex excluding contingencies $910m Start-up costs excluding contingency $27m Project payback from commencement of full production 2 years Revenue and cost/kg Separated REO “Basket price” per kg of separated REO from Zandkopsdrift $58.23 Total cash operating cost/kg separated REO $13.08

Zandkopsdrift Project Rare Earth Operations and Infrastructure

14│

Koeburg Nuclear Power Station Koeburg Nuclear Power Station

Saldanha Bay Rare Earth Separation Plant Saldanha Bay Rare Earth Separation Plant Rare earth carbonate transported 300kms by road (N7) to Saldanha Bay Rare earth carbonate transported 300kms by road (N7) to Saldanha Bay Mining, flotation and cracking plants to produce mixed rare earth carbonate Mining, flotation and cracking plants to produce mixed rare earth carbonate

Zandkopsdrift Updated Resource Estimate

 Large, high confidence resource (c.950k tonnes TREO) with 78% of the contained TREO at the Indicated Resource level  Higher grade Central Zone (c.624k tonnes TREO at 2% cut-off and average in situ grade of 3.04%) identified within the deposit which will be the focus for the PEA mine plan  Additional 14,200 meters drilling at Zandkopsdrift completed in Q4 2011 which is expected to advance the current resource into measured and indicated categories

Relative distribution of REOs in Zandkopsdrift is shown on page 47.Resource is NI 43-101 compliant and presented in accordance with CIM definitions The mineral resource estimates reflect 100% of the estimated resources at Zandkopsdrift. Frontier’s 74% owned subsidiary, Sedex, has complied with the BEE equity ownership requirements as laid down by the Mining Charter and MPRDA, through shareholder agreements with historically disadvantaged South African individuals and entities that together hold the remaining 26% of the issued share capital

• f Sedex. In addition to Frontier’s direct interest in the Zandkopsdrift Project through its 74% shareholding in Sedex, Frontier shall also be entitled to, in consideration for Frontier’s funding of

the BEE Shareholders’ share of Sedex’s expenditure on the Zandkopsdrift Project up to bankable feasibility stage, a payment from certain of the BEE Shareholders following the completion

• f the bankable feasibility study equal to 21% of the then valuation of the Zandkopsdrift Project. This gives Frontier an effective 95% interest in the Zandkopsdrift Project until such payment

has been received.

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2011 Resource Estimate Cut-off Grade

(TREO)

Tonnes (Millions) Average Grade

(TREO)

Contained TREO

(tonnes)

Indicated Resource 1% 32.4 2.3% 739k 2% 16.0 3.1% 495k Inferred Resource 1% 10.1 2.1% 210k 2% 4.5 2.9% 129k

Zandkopsdrift Resource Block Model

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Zandkopsdrift ‘Central Zone’ Block Model – 3.04% TREO

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PEA Operating Assumptions and Parameters

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PEA Operating Assumptions and Parameters Mining Target annual mining rate 1 m tonnes Average stripping ratio* 3:1 Life of mine 20 years Average production grade 3.1% TREO Mining dilution 7.50% Processing Target annual production rate 20,000t separated TREO Metallurgical recovery 67% Production start-up 2015 Time to full production 1 year

* including all stockpiled <2% grade material and waste

Zandkopsdrift Mine Pit Design (looking southwest)

19 │

• 19.5 mt to be mined over 20 years
• Average 3:1 stripping ratio
• Significant LoM extension possible, as only

60% of current resource is exploited Pit Dimensions (approx) East -West extent 830m North-South extent 900m Maximum no. benches planned 12

Zandkopsdrift Mine Detailed Layout

20 │

Zandkopsdrift Mine Process Plant Layout

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• “Conventional” metallurgical

process

• Crush, grind, float and sulphuric

acid crack

• 99% pure mixed rare earth

carbonate produced

Zandkopsdrift Mine Concentrator Plant - Metallurgical flow sheet

22 │

Zandkopsdrift Mine Acid Cracking Plant – Metallurgical flow sheet

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Saldanha Bay

24 │

Sichen to Saldanha iron ore export rail line Exxaro ilmenite smelter-Saldanha Bay Arcelor Mittal Saldanha Steel Works Saldanha Port

Saldanha Bay Industrial Development Zone

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Rare Earth Separation Plant Location and Layout

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Saldanha Rare Earth Separation Plant- Metallurgical flow sheet

27 │

Environmental

 Preliminary environmental assessments completed  Botany  Archaeology  Air and water quality  Human health risk and radiology impact  Uranium and Thorium at low levels  Grades are low, at 60-70ppm uranium and 215-235ppm thorium  Uranium and thorium removed by precipitation and disposed to lined tailings disposal facility  Environmental studies concluded that environmental impact of the radionuclides will be negligible

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Zandkopsdrift Project Capital Expenditure

 Total construction Capex estimate of $910m* (including c.$100m for sulphuric acid and desalination plants)  Split 67% for the Saldanha Bay rare earth separation plant & infrastructure and 33% for Zandkopsdrift mining, concentration plant, sulphuric acid plant and infrastructure  Additional $27m required in start-up and indirect Capex on commissioning

*excludes contingency but included in the PEA financial model and valuation 29 │ Sulphuric acid plant, $87.7m (9.6%) Mining and infrastructure at Zandkopsdrift, $79.4m (8.7%) Concentrator Plant, $132.1m (14.5%) Infrastructure at Saldanha, $112.6m (12.4%) Separation plant, $498.4m (54.8%)

Zandkopsdrift Project Capex versus Peers

30 │

(1) Capex based on refurbishment of existing mine and infrastructure (2) US$/A$ exchange rate of 1.07

Actual & Forecast Capex of Projects to produce separated REOs

 Total Capex for the Zandkopsdrift Project is comparable with similar scale projects worldwide  2/3rds of Capex relates to the Saldanha Separation Plant and published data from peers indicates comparable capital split requirements i.e. Lynas and proposed Arafura separation plants

Separation Plant Mine & Concentrator Start-up Capex

Zandkopsdrift Project Operating Cost Breakdown

31 │

$0.86 $5.06 $0.06 $0.07 $7.03 $0.00 $5.00 $10.00 $15.00

Mining Concentrator & H2SO4 Plant Other costs Transport Separation Plant

 The total operating cost per kg/separated REO from Zandkopsdrift is estimated at $13.08  The main opex components are c.54% for the separation plant and c.39% for the concentration plant, the bulk of which comprises reagent costs and the operation of the sulphuric acid plant  Mining and shipping costs are low due to the ease of mining, the high grade and the availability of infrastructure  Excludes 15% contingency but which has been included in the Zandkopsdrift financial model and valuation

PEA Rare Earth Pricing Methodology

32 │

 Applying trailing 3 year FoB China prices, the Zandkopsdrift “basket price” per kg of separated REO price is $64.36/kg  Applying the mid-point of Roskill’s 2015 price forecast ranges for the principal REOs, the Zandkopsdrift basket price is $52.10/kg  PEA utilised the average of the 3 year China FoB price and the mid-point of Roskill’s 2015 forecast. This methodology reduces the impact of recent high rare earth oxide prices and results in a Zandkopsdrift PEA basket price of $58.23/kg  At 31 December 2011, the PEA basket price represented a 58% discount to the China FOB price, a 20% discount to the China domestic price and a 9% discount to the 3 year average FoB China price

Rare Earth Oxide FoB China Price (1 Dec 2011) China Domestic Price (1 Dec 2011) 3 Year Avg. FoB China Price (Dec 2008-2011) Roskill 2015 price forecast PEA Basket Price Contribution to PEA Basket Lanthanum

64 17 42 20-35 35 15%

Cerium

54 19 41 10-15 27 20%

Praseodymium

20 100 81 80-120 91 7%

Neodymium

235 190 93 80-120 97 26%

Samarium

89 14 39 * 39 2%

Europium

3790 2048 1207 1,000-1,200 1154 12%

Gadolinium

133 36 56 * 56 1%

Terbium

2810 1517 1016 1,000-1,200 1058 3%

Dysprosium

1960 956 554 800-1000 727 10%

Yttrium

113 42 57 40-60 53 4% Zandkopsdrift Basket Price/kg $137.93 $72.13 $64.36 $52.10* $58.23 100%

Korea Resources Corporation

 Korea Resources Corporation (“KORES”) is wholly-owned by the Korean government  Objective of becoming a global top 20 mining company by 2020, principally through international investments and joint ventures  Policy mandate to further Korea's access to strategically important mineral resources  Works with major Korean industry groups and assembles consortia of Korean companies to participate with KORES in commercial ventures  Korean government has designated rare earths as a strategic raw material for Korea’s future economic growth and selected Zandkopsdrift source of their future rare earth supply

33 │

Frontier/KORES Joint Venture December 2011

34 │

Shin-Jong Kim, President and CEO of KORES (seated lhs) said:

“In order to support Korea’s high technology, automotive and other industries, the development of Zandkopsdrift will be a strategic priority project for the KORES Consortium and a critical element of KORES’ efforts to secure a long term, stable source of rare earth supply for Korean industry.”

KORES Joint Venture Highlights

 KORES to acquire initial 10% interest in Zandkopsdrift  Consideration to be based on the Enterprise Value of Frontier using 15-day average share price post PEA publication, subject to a minimum share price of C$2.39  KORES options:  acquire further 10% interest in Zandkopsdrift at DFS project valuation  acquire 10% shareholding in Frontier at market price post DFS  If all options are exercised, KORES will have the off take right and obligation for 31% of Zandkopsdrift production  KORES to arrange  debt finance to cover development costs, and contribute their share of costs pro rata to equity interest  technical and operational assistance in relation to the development of Zandkopsdrift  Frontier and the KORES Consortium will investigate and pursue downstream business

• pportunities in the areas of rare earth alloys, rare earth metals and rare earth magnets

 Zandkopsdrift is KORES’ only investment in a rare earth mine development worldwide to date

35 │

Frontier Peer Comparison

36 │

Company Lynas Molycorp Avalon Rare Element Quest Arafura Tasman Frontier Deposit Mt Weld Mtn Pass Nechalacho Bear Lodge Strange Lake Nolan's Bore Norra Karr Central Zone Deposit Location Australia California NW Territories Wyoming Quebec Australia Sweden South Africa TREO Grade 8.08% 7.04% 1.70% 3.45% 1.20% 2.80% 0.54% 3.12% 2.28% Tonnes per annum 11kt / 22kt 19kt / 40kt 10kt 10kt 12kt 20kt 6kt 20kt Rare Earth Product Separated REO Separated REO Concentrate Concentrate Concentrate Separated REO N/A Separated REO Project stage Commissioning Commissioning PFS PEA PEA PFS Resource PEA Primary RE Mineral Monazite Bastnaesite Syenite Ancylite & bastnaesite Granite Fluorapatite & Cheralite Eudialyte Monazite Deposit type Pipe Pipe Tabular Dykes/veins Veins Veins Tabular Pipe Mining Method Open Pit Open Pit Underground Open Pit Open Pit Open Pit Open Pit Open Pit Climate Arid Arid Arctic Cold Cold Arid Moderate Good Infrastructure Poor Good Poor Good Poor Poor Good Good Industry Partner Yes Yes No No No No No Yes Market Cap $2.33bn $2.18bn $307m $277m $184m $139m $127m $103m Enterprise Value ($m) $2.09bn $1.62bn $247m $231m $139m $110m $112m $65m

Zandkopsdrift Project Timeline

37 │

PEA Resource 2011 2012 2013 2014 2015 PFS/DFS Resource PEA

Pre Feasibility Study Definitive Feasibility Study

Financing Construction Production Start-up

Corporate Information

 TSX:FRO  Shares Outstanding: 89,562,781  Fully Diluted Shares: 90,072,765 (Feb 2012)  Market Cap c.$103m  Share Price $1.15 (52 week hi/low $3.75 - $0.87)  Working Capital c.$38m (no debt)  Research Coverage:

 CIBC initiated coverage March 6 2011 - 12/18 month target price $7.30  Byron Capital initiated coverage March 17 2011 - 12/18 month price target $4.80  Jacob Securities initiated coverage June 8 2011 - 12 month price target $9.83  Cormark Securities initiated coverage Sept 13 2011 - 12 month price target $4.30

38 │ 20 40 60 80 100 120 Frontier Peer Average (RER, Quest, Arafura & Avalon)

Frontier Relative Share Price (rebased)

Senior Management Team

Management team with extensive experience of exploration and development of mineral projects in Southern Africa, financing and corporate development

Philip Kenny B Eng, MBA

Chairman 25 years experience in natural resource sector. Founder and former Executive Chairman and CEO of Firestone Diamonds plc, an AIM-listed diamond mining company focused which built and operated diamond mines in South Africa, Botswana and Lesotho.

Derick de Wit B Tech, Chem. Eng.

Vice President, Project Development 15+ years experience in minerals industry. Has managed

• r prepared more than 30 independent review, scoping,

pre-feasibility and feasibility studies in Africa and Canada.

James Kenny B Comm, MBS

Chief Executive Officer 20+ years experience in natural resources sector as an executive, adviser and broker. Centrally involved in Frontier's corporate strategy and development activities since incorporation.

Paul McGuinness B Comm, ACA

Chief Financial Officer 15+ years experience in investment banking and financial control with Arthur Anderson, Salomon Brothers, Schroders, Collins Stewart and MG Capital.

• Dr. Stuart Smith B Sc, PhD

Vice President, Exploration 30+ years experience in mineral exploration with particular experience in rare earths, uranium, base metals and diamonds.

39 │

Summary

 World-class rare earth deposit  Experienced management and technical teams  PEA confirms significant economic potential and low risk profile  Only rare earth junior with a strategic industry partner  Downstream opportunity in rare earth metals, alloys and magnets to be pursued with Korean consortium partners and others  Strong financial position (cash c.$38m) and fully funded through PFS and DFS  Share price trading at significant discount to peers and re-rating warranted post-PEA  Very well positioned to become the next major, low cost producer of separated rare xearth oxides commencing in 2015

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DRAFT

Appendices

PEA Consultants

42 │

Consultant Responsibility

Africa Geo-Environmental Services Preliminary environmental assessment including archaeological, botanical, air quality, human health risk and radiological impact assessments Mine closure plan and estimate of financial provision Water fatal flaw analysis and water baseline study Africa Remediation Technologies Sea water desalination plant scoping study Benchmark Risk Advisory Independent risk assessment Cameron Cross Incorporated Environmental permitting legal opinion Corli Havenga Transportation Engineers Access routes and logistics surveys EHL Consulting Engineers Eskom bulk power supply application Epoch Resources Tailings disposal facility design KPMG Tax and corporate structure Metallurgical Development Services Independent process consultant MSA Group Geological model and mineral resource estimation SGS Minerals Services Beneficiation and hydrometallurgical studies SNC Lavalin Group Design of the concentrator, acid cracking, sulphuric acid and separation plants, including associated infrastructure and services, and capital and operating cost estimates Sound Mining Solution Geotechnical assessment and mine design Venmyn Rand Technical and economic review of the project, preparation of financial model and project valuation, preparation of independent technical report on the results of the PEA

Zandkopsdrift PEA Valuation – DCF Sensitivity Analysis

 The DCF valuation of the project is based on certain key assumptions variations of which can have a material impact on the PEA valuation  The two of the most critical sensitivities are the discount rate applied and the rare earth ‘basket price’ used for the calculation of project revenue  Set out below is a sensitivity table highlighting the impact of changes to these key assumptions

43 │

Sensitivity of Post-Tax NPV to REO Basket Price/kg and the Discount Rate

$/Kg separated REO

70 65 60 58.23 55 50 45 8.0 6,530 5,854 5,178 4,939 4,502 3,826 3,152 9.0 5,909 5,291 4,673 4,454 4,054 3,436 2,819 10.0 5,361 4,793 4,226 4,025 3,659 3,092 2,525 11.0 4,874 4,352 3,830 3,646 3,308 2,786 2,265 12.0 4,441 3,960 3,478 3,308 2,997 2,515 2,035 13.0 4,055 3,610 3,165 3,007 2,719 2,274 1,829

Discount Rate %

Capex versus peers producing mixed RE concentrate

44 │

 Several of Frontier’s Peers plan to produce a mixed rare earth concentrate rather than separated rare earth oxides  The production of rare earth concentrate may be a more challenging business model as, at present, there are no available western separation plants that can toll separate rare earth concentrate. In addition sales of RE concentrate to China may be impacted by the export quota system (and therefore the price achievable for the RE concentrate could be based on a discount to the China domestic REO price rather than the China FOB price as many projects have assumed)  The cost advantage of the Zandkopsdrift Project can also be seen in the Capex cost of the Zandkopsdrift mine and concentrator plants to produce a mixed rare earth concentrate .

‐ 100 200 300 400 500 600 700 800 900 1,000 Total Cost US$m Mine & Concentrator ‐ Total Costs

• 10

20 30 40 50 60 70 80 90 100 Total Cost Per Kt REO - US$m Mine & Concentrator Costs per kt of RE product

Zandkopsdrift Opex versus peers

45 │

(1) Molycorp Q3 2011 .Molycorp forecasts a 90% reduction in opex but does breakdown costs between separation and other operating costs (2) Based on a US$/A$ exchange rate of 1.07 and a USD/ZAR rate of 7.8

Opex of Projects producing Separated REOs  Zandkopsdrift’s concentrator and separation plant opex compares well with

• ther rare earth projects globally

 Opex primarily driven by reagent and energy costs  Molycorp plans to generate its own power and also regenerate reagents which it proposes will reduce its opex by c.90%  The Zandkopsdrift PEA assumes that HCL for the Saldanha separation plant will be purchased at market rates and that a sulphuric acid plant will be built at the mine site which will also provide power to operate the mine and concentrator  Frontier will continue to further optimise the Zandkopsdrift Project opex

5 10 15 20 25 30 Molycorp (1) Lynas (2) Frontier (2) Arufura (2) Molycorp Q3 2011 (1) US$ per Kg of Separated REO Separation cost per kg Mining, conc. & transport cost per kg

Illustrative Production and Revenue Contribution by REO

46│

5,083 8,833 910 3,154 462 118 288 34 154 814 150 4,370

• 2,000

4,000 6,000 8,000 10,000

Tonnes per Annum

*Big 5 – Neodymium,Praseodymium,Europium,Terbium and Dysprosium **Revenue contributions are calculated using FOB China prices from Metal Pages Feb 2012 No value is attributed by Frontier to the five heavy rare earths from Holmium to Lutetium

 Assumes production of 20k tonnes separated REOs p.a. and elemental recovery in line with in situ Zandkopsdrift distribution  Zandkopsdrift has an attractive distribution of both the high value light and heavy rare earth elements  These “Big 5” elements represent 22% of illustrative production volumes but contribute c.67% of project revenue**  Cerium and lanthanum would represent c.70% of the illustrative production volume but contribute only c.28% of potential project revenue**

10.5% 16.2% 7.1% 25.2% 1.5% 20.5% 1.4% 4.4% 10.0% 3.4% 0.0% 67.2% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0%

Contribution to value

Rare Earth Oxide

REO price ($/kg)2 Lynas Molycorp Frontier R.E.R. Arafura Avalon Quest Mt Weld Mtn Pass Zandkopsdrift Bear Lodge Nolans Bore Nechalacho Strange Lake

LREO

Lanthanum $45 25.2% 34.0% 25.4% 27.1% 19.8% 17.1% 14.4% Cerium $40 45.2% 48.8% 44.2% 43.7% 47.6% 39.5% 30.0% Praseodymium $170 4.9% 4.2% 4.5% 5.1% 5.8% 4.9% 3.3% Neodymium $175 17.1% 11.7% 15.8% 18.0% 21.2% 19.2% 12.2% Samarium $70 2.4% 0.8% 2.3% 2.7% 2.4% 3.8% 2.2%

HREO

Europium $3800 0.6% 0.1% 0.6% 0.7% 0.4% 0.5% 0.0% Gadolinium $103 1.5% 0.2% 1.4% 1.4% 1.0% 3.1% 2.2% Terbium $2820 0.2% 0.0% 0.2% 0.0% 0.1% 0.4% 1.1% Dysprosium $1420 0.5% 0.1% 0.8% 0.3% 0.3% 1.8% 3.3% Holmium1 $0 0.1% 0.0% 0.1% 0.0% 0.0% 0.3% 1.1% Erbium1 $0 0.2% 0.0% 0.3% 0.0% 0.0% 0.8% 2.2% Thulium1 $0 0.0% 0.0% 0.0% 0.0% 0.0% 0.1% 0.0% Ytterbium1 $0 0.1% 0.0% 0.2% 0.0% 0.0% 0.6% 2.2% Lutetium1 $0 0.0% 0.0% 0.0% 0.0% 0.0% 0.1% 0.0% Yttrium $91 2.0% 0.0% 4.1% 1.0% 1.3% 7.8% 25.6% Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Total – HREO 5.1% 0.5% 7.8% 3.4% 3.1% 15.5% 37.8% Total – ‘Big 5’ 23.3% 16.1% 21.8% 24.1% 27.9% 26.8% 20.0%

Relative REO Distribution of Major Deposits

47 │

1. No value attributed by Frontier to Holmium, Erbium, Thulium, Ytterbium and Lutetium as these elements have small markets, are typically produced to special order and do not have regularly published prices. 2. REO prices from Metal Pages 13 February 2012 3. Peer group includes selected advanced rare earth projects with >200k TREO calculated on a code-compliant basis

Zandkopsdrift Sample Geological Section

48 │

7.98% TREO over 16 meters with 17.98% TREO over 1 meter

Transition from Weathered to Fresh Carbonatite Visible in Core

49 │

Weathered Carbonatite Lower Grade Fresh Carbonatite High Grade Weathered Carbonatite

Zandkopsdrift Geological Map and 2011 drill programme

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14,200 meters of additional drilling completed and will be incorporated into a revised resource estimate for PFS and expected to move resource to Measured and Indicated categories

Metallurgical Sample Recovery Sites (Q1 2011)

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Metallurgical sample recovery sites

KORES Consortium

 KORES forming a consortium to participate in the Frontier Joint Venture that includes some of Korea’s largest and most respected companies and industrial groups

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Samsung Group is a multinational conglomerate whose subsidiaries include Samsung Electronics (the world’s largest information technology company by revenue and the world’s largest manufacturer of smartphones ahead of Apple), Samsung Heavy Industries (one of the world’s largest shipbuilders) and Samsung Life Insurance (the world’s 14th largest insurance company). The Samsung Group’s interests span electronics to financial services, from chemicals and heavy industries to trade and services. In 2010 the company had turnover of over $134 billion and profit before tax of $17 billion. Daewoo Shipbuilding & Marine Engineering operates as a shipbuilder and offshore contractor that builds vessels (i.e. tankers, passenger ferries, ro-ro carriers) offshore platforms, floating oil production units, submarines, and destroyers and is ranked as the second largest shipbuilder in the world. In 2010 the Company had turnover of over $11 billion and net income

• f $666 million. DSME is also very active in the wind turbine sector.

GS Group is a Korean holding company focusing on oil refining and retail. Its main asset is a 50% interest in GS Caltex, Korea’s second largest refiner, and which is a joint venture with Chevron Corporation. GS Group’s business activities consist of petroleum refining and marketing, the production of petro-chemicals and the blending of lubricant oils. In 2010 the CS Group reported revenues of over US$36 billion and an operating profit of approximately $1 billion. AJU Group is a privately owned group with operations spanning energy, resources, construction materials, finance, tourism and leisure and real estate development. In 2010 the company reported assets of $4.1 billion, sales of approximately $800 million and operating profits of $33 million.

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Independent Non-executive Directors

Eamonn Grennan B.Sc, M.Sc

(Ireland) Independent consulting geologist with over 40 years experience as an exploration manager, geologist, consultant and senior lecturer. Former President of the Irish Association for Economic Geology and member of the Consultative Committee of the Irish Geological Survey.

Anu Dhir B.A., J.D.

(Canada) Former VP Corporate Development and Company Secretary of Katanga Mining Limited. Managing Director

• f Miniqs Limited, Non-executive Director of Anooraq

Resources Corporation and Non-executive Director of Compass Asset Management.

Crispin Sonn B.A., B.Comm

(South Africa) Executive Director of Old Mutual South Africa, the largest integrated financial services company in South Africa. Chairman of the Old Mutual Foundation, founding Chairman of Foodbank South Africa and Non-executive Director of Capespan (Pty) Ltd.

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