MOU Between TMRC, Pennsylvania Coal Company to Complement Round Top Heavy Rare Earth Project

Texas Mineral Resources Corp. (TMRC), an exploration company targeting the heavy rare earths and a variety of other high-value elements and industrial minerals, is pleased to announce that it has signed a memorandum of understanding (MOU) with a well-established privately-held Pennsylvania coal company. The MOU gives TMRC a six-month period of time to further evaluate the potential to finance, recover and produce scandium and other rare earth byproducts from their properties.

  • U.S. Department of Energy data suggests potentially significant amounts of scandium and rare earth byproducts are present
  • Both coal ash and in-situ coal overburden have been outlined as potential resources
  • Preliminary internal economic analysis of a coal ash project suggests modest CAPEX requirements along with profitability
  • TMRC to establish Scandium America Corp subsidiary upon signing definitive agreement

The National Energy Technology Laboratory of the Department of Energy has recently conducted studies at the properties that are the subject of this MOU, suggesting the existence of potentially valuable rare earth and scandium mineralization in coal ash being deposited at several locations on the property and in the in-situ coal bed overburden at different sites on company property.

Tonnages of the ash repositories are well documented. The area chosen for initial study, because of its favorable location, contains 3.7 million short tons of coal ash. A total of three ash repositories and an as yet undetermined number of in-situ overburden deposits lend themselves to simultaneous development. The property is fully permitted for mining and processing of coal. Only the additional permitting for scandium and rare earth processing would be needed.

With respect to the coal ash deposit, preliminary internal economic analysis, done by TMRC, of a modest startup operation processing 300 tons of coal ash per day suggests that it would require an estimated CAPEX of approximately $17 million, inclusive of a 25% contingency. Assuming a recoverable grade of 45 ppm (parts per million) scandium content, potential estimated production of scandium oxide would approximate 7,500 kilograms per year. Using a current scandium oxide market price of $2,000/kg could potentially result in pre-tax cash flow of approximately $10.3 million, after operating costs and royalty payments to the coal company. These assumptions assume that only the recovered scandium would be sold, attributing no value to the rare earth and other elements and minerals that could be recovered.

Additionally, the coal company has a large database of drill hole and outcrop sampling that indicates potential for extensive rare earth and scandium value in the rocks overlying the unmined coal. Research conducted on overburden from other properties in the region and published by a group from Pennsylvania State University*, suggests that the rock (overburden) can be successfully leached with several different organic solvents with encouraging recoveries. The drill and outcrop data suggest that the in-situ overburden rock contains higher scandium values than the coal ash, thus offsetting the potentially higher costs of mining, crushing and grinding it.

"While our Round Top deposit remains the flagship property of the company, we are very pleased to be able to start parallel examination of a series of deposits, potentially profitable at current scandium prices, that offer the possibility of being brought to production more rapidly and at a fraction of the cost of Round Top. A significant portion of the process development work we plan to undertake for the coal related deposits will be applicable to feasibility work required by Round Top," Dan Gorski, CEO, added.

Anthony Marchese, Chairman, further commented: "Worldwide scandium production is limited and industry demand is growing. Domestic manufacturers need a large and reliable source of scandium oxide. We believe joining forces with a well-established Pennsylvania coal company for the potential recovery of scandium and other valuable rare earth minerals is a perfect complement to our Round Top heavy rare earth project. The potential benefits of such a project will be felt in the surrounding coal community as well as by TMRC shareholders. In recognition of the potential significance of a long-term domestic source of scandium oxide we plan to establish a new subsidiary titled Scandium America Corp upon the signing of a definitive agreement with the domestic coal company, at which time further details of the Agreement will be released."

*Separation of Rare Earth Elements From Coal and Coal Products, Final Report, Prepared for Leonardo Technologies Inc., Pittsburgh, PA., by Nari Soundarrajan, Nuerxida Pulati, Mark Klima, Mku Ityokumbul, and Sarma V. Pisupati, EMS Energy Institute and John and Willie Leone Family Department of Energy and Mineral Engineering, The Pennsylvania State University, 5/7/2015.

Background on Scandium

Global scandium production is estimated to be between 8,000 to 15,000 kilograms annually. Most of today's production tends to come as a byproduct of the leaching activity associated with production of other metals, minerals or rare earths. The United States is 100% import-dependent for scandium. According to the USGS (U.S. Geological Survey), scandium-bearing minerals have not been mined nor recovered from mine tailings since 1990. Principal sources of scandium today include China, Kazakhstan, Russia and the Ukraine. Freedom House, a U.S. based non partisan organization that conducts research and advocacy on democracy, political freedom and human rights, currently ranks the first three sources as "Not Free" and the last as "Partially Free."

Principal uses of scandium today are for the production of solid oxide fuel cells, lasers, switches and mercury vapor high intensity lamps. Future significant growth is forecast in the metallurgical market as high-strength alloys of aluminum. When used in combination with other common aluminum alloys scandium can produce lighter, stronger, more corrosion resistant, heat tolerant and weldable aluminum products. It is believed that use of aluminum/scandium alloys can reduce aircraft weight by 15-20%. Likewise, automotive applications are large potential markets. One industry source estimates that if only a tiny fraction (0.1%) of the annual aluminum market absorbed scandium in alloy at a 0.5% level, it would represent a potential 317,000 kilograms of scandium demand.

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