Korea Resources Corporation confirms $23.8M investment for initial stake in Frontier's Zandkopsdrift rare earth project

Korea Resources Corporation to contribute to Zandkopsdrift operating budget from 3 July 2012

Closing scheduled for30 September 2012

TORONTO, July 11, 2012 /CNW/ - Frontier Rare Earths Limited (TSX: FRO) ("Frontier")  is pleased to announce an update on the status of its strategic partnership agreement with Korea Resources Corporation ("Kores"), the Korean Government-owned mining and natural resource investment company.

Background

On 5 December, 2011 Frontier announced that it had entered into a definitive agreement with Kores to form a strategic partnership to accelerate the development of Frontier's Zandkopsdrift rare earth element project ("Zandkopsdrift") in South Africa (the "Agreement"). Under the terms of the Agreement, Kores will acquire an initial 10% interest in Zandkopsdrift and off-take rights for 10% of the rare earth production from Zandkopsdrift.  The Agreement also provides that Kores may acquire a further 10% interest in Zandkopsdrift and/or up to a 10% share ownership of Frontier following completion of a Definitive Feasibility Study on Zandkopsdrift, which together, if acquired, would give Kores off-take rights for an additional 21% of rare earth production. (Full details of the Agreement are set out in the Press Release issued on 5 December, 2011. See Frontier news releases)

Agreement Update

Under the terms of the Agreement, Frontier was obliged as a condition precedent of the Agreement to file on SEDAR (www.sedar.com by 30 March, 2012 the results of a positive Preliminary Economic Assessment on Zandkopsdrift prepared in accordance with National Instrument 43-101(the "PEA"). Frontier satisfied this condition and the results of the PEA indicated that the proposed development of Zandkopsdrift is both technically feasible and economically robust with a low risk profile. Frontier has now also complied with its obligations in respect of all other conditions precedent of the Agreement and notification by Frontier of its compliance has been formally acknowledged by Kores.  Kores has also confirmed to Frontier that:

1. The purchase price for the initial 10% interest in Zandkopsdrift to be acquired by Kores is C$23.78M and will payable to Frontier in cash by 30 September, 2012
2. As from 3 July, 2012, Kores will be responsible for its share of all operating costs and expenses related to the Zandkopsdrift project pro rata to its initial 10% interest in Zandkopsdrift.

Korean Consortium Update

Under the terms of the Agreement Kores has the right to form a consortium of Korean companies (the "Korean Consortium") to jointly participate with it and Frontier in the development of Zandkopsdrift. Kores has advised Frontier that it has been engaged in detailed discussions with several leading Korean corporate groups and it has been agreed that Kores will have until 30 September, 2012 to finalise arrangements with the Korean Consortium.  Kores has confirmed to Frontier that in the event that Kores does not form the Korean Consortium for any reason within the prescribed period, Kores shall remain liable under the Agreement as principal.

James Kenny, President and CEO of Frontier Rare Earths commented: "Frontier is the only junior company in the rare earths sector to have signed a definitive agreement with a significant strategic partner such as Kores, which we believe is a reflection of the potential of Zandkopsdrift.  We have worked closely with our partners in Kores since the signing of our strategic partnership agreement in December 2011 and are very pleased to have in Kores a partner with a leading international reputation and significant technological and financial capabilities. The matters confirmed today provide an indication of the positive and collaborative working relationship already established between our companies and we look forward to Kores' continued involvement with Frontier and participation in the development of Zandkopsdrift."

About Frontier Rare Earths Limited (TSX: FRO) (TSX: FRO.WT): Frontier Rare Earths Limited (www.frontierrareearths.com) is a mineral exploration and development company principally focused on the development of rare earths projects in Africa.  Frontier's flagship asset is the Zandkopsdrift rare earth project, which is located in the Northern Cape Province of South Africa and is one of the largest, highest grade undeveloped rare earth deposits worldwide. Frontier has a direct 74% interest and a 95% economic interest in Zandkopsdrift prior to the acquisition by KORES of an initial 10% interest. In March 2012 Frontier filed a Preliminary Economic Assessment ("PEA") on the Zandkopsdrift project prepared in accordance with National Instrument 43-101. The results of the PEA indicate that the proposed development of the Zandkopsdrift Project is both technically feasible and economically robust with a low risk profile. In conjunction with the PEA a mineral resource estimate for Zandkopsdrift confirmed 42.5m tonnes at an average grade of 2.23% containing approximately 940,000 tonnes total rare earth oxides (applying a 1% cut-off) and with 78% of the mineral resource in the indicated category. Mineral resources that are not mineral reserves do not have demonstrated economic viability. Fiona Harper, Pr.Sci.Nat, was the independent qualified person from Venmyn Rand (Pty) Ltd responsible for the PEA.

Frontier is listed on the main board of the Toronto Stock Exchange and currently has 89,562,781 shares outstanding. Frontier is well funded, with approximately $33m cash and no debt, and this strong working capital position is expected to be sufficient to finance the proposed work programme of the Company and the completion of a Preliminary Feasibility Study (scheduled for Q4 2012) and a Definitive Feasibility Study for Zandkopsdrift (scheduled for Q3 2013). Frontier plans to commence production of separated rare earths from Zandkopsdrift in 2015 at a rate of 20,000 tonnes per annum.

About Kores (www.KORES.or.kr): Korea Resources Corporation ("Kores") is wholly-owned by the Korean government and has a stated objective of becoming a global top 20 mining company by 2020 principally through international investments and joint ventures.  Kores is charged with a policy mandate to further Korea's access to strategically important mineral resources.  Kores exclusively carries out the Korean government's mineral resources policy objectives by engaging directly or indirectly through joint ventures or in the form of investments, in overseas exploration, development and production of strategically important mineral resources, and managing Korea's stockpile of rare mineral resources. Kores works closely with all major Korean industry groups and plays an active role in assembling consortia of Korean companies to selectively participate with Kores in commercial ventures. The Korean government has designated rare earths as a strategic raw material for Korea's future economic growth and has undertaken considerable work to identify the most prospective sources of future rare earth supply worldwide.

Forward Looking Statements - Certain information set forth in this news release may contain forward-looking statements that involve substantial known and unknown risks and uncertainties. Readers can identify many of these statements by looking for words such as  "will", "intends", "projects", "anticipates", "estimates", "achieving", or similar words or the negative thereof. These forward-looking statements are subject to numerous risks and uncertainties, certain of which are beyond the control of the Company, including, but not limited to, the impact of general economic conditions, industry conditions, commodity prices, availability of financing for the Company and the Company's ability to raise additional capital, results of feasibility studies, dependence upon regulatory approvals, the estimation of mineral resources and the realization of mineral reserves based on mineral resource estimates and estimated future development, if any, and possible variations of ore grade or recovery rates; the Company development, if any, and possible expectations regarding competition from other producers globally, possible customer and supplier relationships, anticipated trends and challenges in the Company regarding competition; mineral resource estimates and supply outlook and growth opportunities, the future price of and future demand for rare earth elements, title disputes or claims including Black Economic Empowerment initiatives, and the timing and possible outcome of pending regulatory and permitting matters.

Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements. There can be no assurance that the plans, intentions or expectations upon which these forward-looking statements are based will occur.  The forward-looking statements contained herein are made as of the date of this news release and are expressly qualified in their entirety by this cautionary statement. Actual results may differ materially from those anticipated. Readers are cautioned not to put undue reliance on forward-looking statements due to the inherent uncertainty therein. Frontier disclaims any intent or obligation to update publicly any forward-looking statements, whether as a result of new information, future events or results or otherwise, except as required by applicable law.

SOURCE Frontier Rare Earths Ltd.