Korea Resources Corporation completes acquisition of a 10% interest in Frontier Rare Earths' Zandkopsdrift project for C$23.8 million

TORONTO, Dec. 14, 2012 /CNW/ - Frontier Rare Earths Limited (TSX: FRO) ("Frontier" or the "Company") is pleased to announce that Korea Resources Corporation ("Kores"), the Korean Government-owned mining and natural resource investment company, has completed the previously announced acquisition of a 10% interest in Frontier's Zandkopsdrift rare earth project in South Africa ("Zandkopsdrift"), along with an off-take right and obligation for 10% of Zandkopsdrift rare earth production, by payment of a cash consideration of C$23.8 million. This acquisition makes Frontier the only junior company in the rare earths sector to have signed and completed a definitive agreement with a significant strategic partner.

James Kenny, President and CEO of Frontier Rare Earths commented: "The acquisition by Kores of a 10% interest in Zandkopsdrift is a strong vote of confidence in both the potential of the Zandkopsdrift project and the management of Frontier.  With our partnership with Kores and a significantly strengthened balance sheet, we believe that Frontier is very well positioned to meet its objective of becoming the next major producer of separated rare earths outside of China."

Strategic Agreement
Under the terms of the revised strategic partnership agreement between Frontier and Kores (the "Strategic Agreement"), which was signed in October 2012, Kores has an option to increase its participation in Zandkopsdrift from its current 10% interest up to a 50% or equal interest with Frontier in Zandkopsdrift, together with a pro-rata off-take right and obligation for up to 50% of production from Zandkopsdrift.  The exercise of this option is conditional on Kores arranging project finance for the entire Zandkopsdrift development on terms acceptable to Frontier in its absolute discretion, and on Kores committing to provide its pro rata share of funding for the portion of Zandkopsdrift development costs not covered by the project finance.

Under the terms of the Strategic Agreement, Kores will also provide Frontier with technical and operating assistance for the design, construction and operation of the proposed Zandkopsdrift facilities.  Frontier and Kores will also cooperate in relation to downstream opportunities in the area of rare earth metals, alloys and magnets.  Further information and details on the Strategic Agreement are available in the Company's news release dated October 23, 2012 (http://www.frontierrareearths.com/media-cover/press-releases-2012)

Working Capital
Following receipt of the payment from Kores Frontier's cash balance is approximately C$52 million.  This is expected to be sufficient to fund the completion of a Preliminary Feasibility Study and a Definitive Feasibility Study at Zandkopsdrift, work on the Company's other proposed exploration and development programs and corporate overheads.  Kores is also required to pay Frontier 10% of all operating costs and expenses related to Zandkopsdrift from July 2012 onwards, amounting to approximately C$0.4 million as of the end  November 2012.  The Company has no debt.

Preliminary Feasibility Study
In March 2012, Frontier published a National Instrument 43-101 ("NI 43-101") compliant Preliminary Economic Assessment ("PEA") on Zandkopsdrift, the results of which confirmed the proposed development to be both technically feasible and economically robust with a low risk profile.  In April 2012 Frontier commenced work on a NI 43-101 compliant Preliminary Feasibility Study ("PFS") on Zandkopsdrift.  Good progress has been made on the PFS, with most of the requisite studies now either completed or at an advanced stage.  A detailed update on Frontier's PFS activities and progress is available in the news release dated November 7, 2012 (http://www.frontierrareearths.com/media-cover/press-releases-2012)

About Frontier Rare Earths Limited (TSX: FRO): 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 64% interest and a 85% economic interest in Zandkopsdrift following the acquisition by its strategic partner Korea Resources Corporation of an initial 10% interest in Zandkopsdrift. 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 C$52 million in cash (excluding amounts owing by Kores in respect of its obligation under the Strategic Agreement to pay 10% of all operating costs and expenses related to Zandkopsdrift from July 2012 onwards) and no debt, and this strong cash position is expected to be sufficient to fully fund the completion of a Preliminary Feasibility Study and a Definitive Feasibility Study on Zandkopsdrift and work on the Company's other proposed exploration and development programs.

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.