Rare Earth Metals

Neon Mining has recently applied for and  is currently in the process of acquiring the license for the KUTESSAY II RARE EARTH PROPERTY, located in the Aktyuz Ore Field, Kemin District, Chui Oblast, Kyrgyz Republic, 140 km east of Bishkek, the Kyrgyz capital, and 43 km from the nearest rail station in Kemin.

HISTORY OF THE KUTESSAY II PROPERTY

The Kutessay-II rare earth deposit was discovered in 1943. Initial exploration of the deposit started in 1956 and ended late in 1958. Initially, Kutessay II was considered a polymetallic, then a thorium deposit, and since 1956, a rare earth-polymetallic deposit. The first historic reserve estimate of the Kutessay-II rare earth deposit was approved by the USSR State Committee Reserves in 1959.

Development of the deposit began in 1958 by underground mining method for the first two years, and by the open pit in all following years. Until 1966 the mine operated primarily as a lead mine, with less attention paid to rare earth ores. From 1966 to closure in 1991 the mine operated primarily as a rare-earth-polymetallic mine with the production of rare earth concentrates (including yttrium), accompanied by the recovery of lead, molybdenum, silver, and bismuth.

Mining and rare-earth production was conducted under the management of Kyrgyz Mining and Metallurgical Combine from 1958 through 1991, and particular mining was conducted by its subsidiary Aktyuz Mine Group. Ore was milled and rare earth concentrates were sent for processing to the Chemical-Metallurgical Plant of the Kyrgyz Mining and Metallurgical Combine at Orlovka village, about 43 km west from Kutessay II. Concentrates of other metals were sent to other enterprises.

It is reported that during the Kutessay II combined underground and open pit mine life from 1958 to 1991 a total of 5.454 million t of ore were mined out to produce 22,109 t of TR₂O₃, at an average grade of 0.41%.

During the period 1962 to 1990 the plant processed 5.314 million t ore containing 19,980 t of rare earths at a weighted average grade of 0.376% of TR₂O₃, including 0.114% yttrium oxide. Kutessay II was also the source of 21,100 t lead, 167 t molybdenum, 17.3 t silver, and 25 t bismuth, with much of this metal production coming from the upper levels of the deposit.

For the last ten years of operation from 1980 to 1990, the recovery of total rare earths ranged from 62.04% to 64.0%, and averaged 63.4% from an annual feed ranging from 180,000 t to 300,000 t ore, with an average grade ranging from 0.29% to 0.34% _RE₂O₃.

Officially exploitation of the Kutessay II deposit was stopped at the beginning of 1995, and following the Governmental regulation dated 1 June 1995, all operations were temporarily suspended. Up to 1990, the deposit was the principal supplier of the yttrium and lanthanides requirements for the former USSR.

HISTORIC MINERAL RESERVE ESTIMATE

On January 1, 1992, the staff of the Aktyuz Mine Group (S. Isaev and T. Beregovaya, 1992) published a mineral reserve estimate of total rare earth oxides (ΣTR₂O₃) for the unmined portion of the Kutessay II deposit, between the horizons 2,353-2,153 m above sea level. The mineral reserve estimate was approved by the State Reserve Committee of the Kyrgyz Republic on October 1, 1995. The estimate was done using horizontal slices, polygonal estimation methodology based on the results of analyses from channel samples and core samples conducted from a system of underground workings on four horizons of the Kutessay II deposit.

The Historic 1992 Mineral Reserve estimate for Kutessay II was 16.9 million t of ore including 44,800 t _RE₂O₃ at a grade of 0.27% of the B + C₁ Category; and 1.8 million t including 3,900 tones _RE₂O₃ at a grade of 0.22% of the C₂ Category.

The 1992 estimate was classified as Mineral Reserves, designated as B, C_1, and C₂ reserve categories, using the Soviet resource and mineral reserve classification system prevailing at the time.

In 2011 Kutessay II Mineral Resource Estimate as of March 21, 2011, was prepared by Kutisay Mining LLC in accordance with JORC 2004 Code Standards.

Notes:

1. Mineral Resources were classified in accordance with JORC 2004 Code Standards.

2. Cut-off-Grade – 0.1% ΣTR₂O₃, minimum width of mineralization – 3 m, and a maximum thickness of below cut-off interbeds of 3 m.

3. A rock density ranging from 2.68 to 2.81 was normally used depending on the rock type hosting mineralization, equivalent, respectively to a tonnage factor of 0.373 m³/t and 0.356 m³/t.

4. High grades have not been cut for the Mineral Resource Estimate.

5. A long term price of US$100.00/kg total rare earth oxides is used for the Mineral Resource Estimate.

No Mineral Reserves have been estimated for the Kutessay II deposit.

DISTRIBUTION OF THE ELEMENTS

The distribution of the elements composition of the 15 individual REEs in the Kutessay II mineralization is given below. This historic 1959 estimate is from the Kutessay II open pit and the 1992 estimate is from the Kutessay II deposit. The distribution between the rare earths was made based on X-ray spectral analysis (Doroshenko, 1959 and Isaev and Beregovaya, 1992).

Doroshenko (1959) reported that a characteristic feature of the rare earth mineralization accessed by the open pit is the approximate equal distribution in the ores of the Cerium group, the Light REEs, and the Yttrium group, the Heavy REEs, with the Yttrium group varying between 40% and 47% of the total rare earth oxides and the Cerium group varying between 49% and 60% of the total rare earth oxides. For the Kutessay II underground deposit, Isaev and Beregovaya (1992) reported a ratio of the Yttrium HREEs to Cerium LREEs of 43.9% to 54.1%, respectively, as shown in Table above.

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