Jul. 5, 2011 (Canada NewsWire Group) --

TORONTO, July 5, 2011 /CNW/ - Pele Mountain Resources Inc. (TSXV: GEM) (OTCQX: GOLDF) ("Pele" or the "Company") today announced results of a NI 43-101 Preliminary Economic Assessment (the "PEA") on its Eco Ridge Mine Rare Earths and Uranium Project ("Eco Ridge" or the "Project"). The PEA was prepared by Roscoe Postle Associates ("RPA") and demonstrates that Eco Ridge has potential to become a profitable producer of rare earth oxides ("REO") and uranium oxide ("U3O8").

The Project is located in Elliot Lake, Ontario, the only Canadian mining camp to ever achieve commercial REO production and an historically important source of "Heavy" REO in North America. Recent extraordinary REO market developments, sparked by China's reduction of export quotas, have resulted in sharply higher prices, inciting a rush to find and bring to production new sources outside of China. With well-understood geology, excellent regional infrastructure, and strong local support, Eco Ridge is an ideal location for a safe, secure, and reliable long-term supply of REO and U3O8. Pele is focused on transitioning Eco Ridge into the feasibility and licensing stages as it advances the Project toward development and production.

Highlights of the PEA include (all financial terms in US$):

• 9,400-tonne per day operation with life-of-mine production of 10.7-million pounds of Total REO and 24.9-million pounds of U3O8 over a 14-year mine life.
• Cumulative operating cash flow of US$1.72-billion; Cumulative pre-tax cash flow of US$1.31-billion.
• Positive NPV of $662-million (at a 7.5% discount rate); IRR of 47-percent.
• Operating cash cost of $16 per pound U3O8, net of REO credits.
• Start-up capital cost of $212-million; Sustaining capital cost of $195-million.
• Life-of-mine production includes 430,000 pounds of dysprosium oxide (Dy2O3), 1.28-million pounds of neodymium oxide (Nd2O3), 2.08-million pounds of yttrium oxide (Y2O3), and 67,000 pounds of scandium oxide (Sc2O3).
• Two-thirds of REO revenue is from Heavy REO (including yttrium and scandium oxides) many of which are forecast to be in particularly short supply in the years ahead while demand continues to rise sharply.
• Opportunities for improvement of project economics include improved REO and U3O8 recoveries, and increased resources and production rate.

Pele President and CEO Al Shefsky, stated: "We are extremely pleased with this PEA of our Eco Ridge Mine Project. The PEA confirms our long-standing belief that Eco Ridge can be an important future source of rare earths and uranium, perhaps most critically as a secure and reliable long-term source of Heavy REO outside of China. Our project economics are robust and compelling and we are already planning next steps to rapidly advance towards development and production. The Eco Ridge PEA forecasts pre-tax cash-flow exceeding $7.00 per fully diluted Pele share. We do not believe that our stock price currently reflects the value of this important asset."

The 14-year production plan calls for a 9,400-tonne per day operation with average annual production of 708,000 pounds of Total REO and 2.07-million pounds of U3O8. Underground development has been designed to be developed within the mineralized beds. This development muck, plus approximately 40-percent of the material broken in stopes will be brought to surface and processed on the Heap Leach Facility ("HLF"). The remaining material will be bioleached underground with leach solutions circulated in closed systems within each stope. Leach solutions from both surface and underground will go through a solvent extraction plant designed to recover U3O8. The effluent from the U3O8 recovery plant will go through a secondary solvent extraction plant to recover the REO. The PEA is based on mining and processing plans designed by engineers who have direct experience with commercial production in the Elliot Lake camp. The mining and processing methods utilized in the PEA have been successfully used in past commercial production at other mines in the area.

Key operational and economic data are summarized in Tables 1 & 2 below.

Table 1: Key Operational Data

Notes:

1. The PEA is based on a Mineral Resource estimate that was publicly disclosed in Pele's press release dated February 24, 2011. See Table 4 below.
2. See Tables 3A & 3B for more details, including forecast production of each individual oxide.

Table 2: Base Case Economic Data (all financial terms in US$000)

Notes:

1. See Tables 3A & 3B for more details.
2. Deductions from Gross Revenue were applied to account for royalty payments as well as for an assessment of $30 per kg of oxide in concentrate to account for offsite separation and upgrading costs to produce high purity saleable REOs.
3. Operating costs include mining, processing and G&A costs.
4. Pre-production capital cost estimates includes a 25-percent contingency.
5. The PEA assumes a C$:US$ exchange rate of 1.00:1.00.

Note: The PEA is preliminary in nature. It includes inferred mineral resources which are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves and there is no certainty that the preliminary economic assessment will be realized.

Mr. Shefsky continued, "Light REO at Eco Ridge occur primarily in the mineral monazite and would likely require a different processing circuit to achieve significantly better recoveries than the range reported today. Economic trade off studies will be undertaken to determine if this approach is advisable. However, several of the Heavy REO at Eco Ridge occur within uranium minerals together with U3O8. Based on metallurgical and mineralogical studies to date, we believe there are excellent prospects for improving Heavy REO recoveries from the 34-percent average we are reporting today. Increased recoveries of Heavy REO (and U3O8) present an important opportunity to enhance the economics at Eco Ridge."

Estimated mineral recoveries used in the PEA are based on historic operations in Elliot Lake for underground recovery of U3O8 and on extrapolations of time recovery curves from preliminary metallurgical testing at SGS Canada Ltd. for REO. Assumed recoveries of individual oxides, along with forecast production and revenue contributions from each individual oxide are listed in Tables 3A & 3B below.

Table 3A: Uranium Recovery & Revenue

Table 3B: Rare Earths Recovery & Revenue

Notes:

1. Light REO includes La2O3, CeO2, Pr6O11, Nd2O3, and Sm2O3.
2. Heavy REO includes Eu2O3, Gd2O3, Tb4O7, Dy2O3, Ho2O3, Er2O3, Tm2O3, Yb2O3, and Lu2O3. Y2O3 and Sc2O3 are also included in Heavy REO.

The "Base Case" U3O8 price of $85 per pound is based on forecast price expectations by a group of independent analysts. This compares to a current long-term contract price of $68 per pound.

Base Case REO price calculations began with a 6-month trailing average of daily prices from January 1, 2011 to June 30, 2011 as published by Asian Metal, a market service whose price assessments serve as the benchmark for contracts signed by major industry participants worldwide. The trailing average was based on daily FOB China prices as available. Otherwise, domestic China prices were used with an escalation factor of 25-percent to account for duties and taxes (scandium is the only significant contributor to which this escalation applies).

The 6-month trailing average price of each individual REO (except thulium oxide) was then adjusted by RPA according to a factor (the "Adjustment Factor") provided in a June 7, 2011 report by Asian Metal (the "REO Price Forecast") prepared for Pele to be used in the PEA. The Adjustment Factor is based on the percentage change between the REO prices prevailing on June 7, 2011 and Asian Metal's forecasted REO prices for 2015 and was used by RPA to decrease or increase the 6-month trailing average prices to determine Base Case prices for REO in the PEA. RPA chose to reduce the 6-month trailing average price for thulium oxide from $22,000 per kilogram to $2,000 per kilogram, because it is traded in a very low volume market, before applying the Adjustment Factor to arrive at the Base Case price of $3,182 per kilogram.

If the Asian Metal REO Price Forecast figures are applied to the PEA model, it results in considerably stronger financial projections for the Project, including a NPV (at a 7.5-percent discount rate) of $1.48-billion and an IRR of 92-percent.

The Project has no known environmental liabilities and enjoys strong local support. The Province of Ontario has recently granted two renewable 21-year mining leases at Eco Ridge (the "Mining Leases"), giving Pele the exclusive right to mine in the leased areas. The Mining Leases also include surface rights except for an area covered by surface patents owned by the City of Elliot Lake (the "City"). The City has also granted Pele a renewable 21-year lease with a conditional option to purchase the City's surface patents (the "City Lease"). Both the Mining Leases and the City Lease allow for siting of project infrastructure like mine portals and processing facilities.

Pele places great value on community relations and has maintained friendly and productive dialogue with local First Nations and the City of Elliot Lake since the inception of the Eco Ridge Mine project. The Company's approach to sustainable development and operations at Eco Ridge is set out in a Project Description, which was filed with the Canadian Federal Government's Office of Major Projects Management and the Canadian Nuclear Safety Commission in September 2008. Pele is committed to sustainable development and seeks to provide long-term benefits to local communities.

Pele intends to pursue the following potential opportunities to improve project economics at Eco Ridge:

• Increased recovery of REO and U3O8 brought to surface. Process efficiencies may be improved by crushing ore delivered to the HLF.
• Increased recovery of REO and U3O8 from underground by optimizing leaching conditions and the time recovery curve. Metallurgical test work is underway at SGS Canada.
• Adding to the mine life and/or production rate by drilling off additional resources. A drill program is currently underway with objectives to improve the classification and expand the mineral resource as described below.
• Participation in higher margin downstream REO value chain through strategic alliances and/or vertical integration.

NI 43-101 Compliant Resource

Notes:

1. CIM definitions were followed for Mineral Resources.
2. The Qualified Person for this Mineral Resource estimate is Tudorel Ciuculescu, P.Geo.
3. Mineral Resources are estimated at a cut-off grade of 0.028% U3O8.
4. Mineral Resources are estimated using an average long-term uranium price of US$60 per lb, and a C$:US$ exchange rate of 0.95:1.00.
5. Total Rare Earth Oxides include La2O3, CeO2, Pr6O11, Nd2O3, Sm2O3, Eu2O3, Gd2O3, Tb4O7, Dy2O3, Ho2O3, Er2O3, Tm2O3, Yb2O3, and Lu2O3. Y2O3 and Sc2O3 are also included in TREO.
6. The resource wireframe at Eco Ridge contains both Indicated and Inferred U3O8 and TREO resources within the near surface portion of the Main Conglomerate Bed.
7. The U3O8 resource estimate is based on a total of 237 drill holes. These comprise 152 recent drill holes drilled by Pele Mountain between 2006 and 2009, and 85 historic drill holes drilled between 1954 and 1974.
8. The REO resource estimate is based on a total of 123 recent drill holes.
9. Mineral resources that are not mineral reserves do not have demonstrated economic viability.

Pele recently announced the commencement of a 7,000-metre drill program. As the mineralized reefs of the Elliot Lake mining camp are well known for their consistency and size, the mineral resources at Eco Ridge have excellent potential for improvement of classification and expansion. The program will include in-fill drilling within the existing Resource Wireframe with an objective of upgrading up to 5-million tonnes of Inferred Resources into the Indicated category. Indicated Resources may be converted to Mineral Reserves during the feasibility process, while Inferred Resources may not. The program will also include step-out drilling to the north of the Resource Wireframe with an objective of bringing up to 10-million additional tonnes of the mineralized reef into the Inferred Resource category.

The technical and economic information relating to the PEA in this press release has been reviewed and approved by Jason Cox, P.Eng., Director of Mine Engineering for RPA, an independent qualified person under NI 43-101. The PEA technical report will be filed on SEDAR in due course.

About Pele
Pele Mountain Resources is focused on the sustainable development of its 100-percent owned Eco Ridge Mine Rare Earths and Uranium Project. Eco Ridge is one of very few North American Rare Earths deposits that has completed a NI 43-101 Preliminary Economic Assessment with robust economics and is located in Elliot Lake, the only Canadian mining camp to have ever achieved commercial REO production. With well-understood geology, excellent regional infrastructure, and strong local support, Eco Ridge is an ideal location for a safe, secure, and reliable long-term supply of REO and U3O8. Pele also holds interests in a portfolio of Northern Ontario gold properties at Highland and Ardeen. Pele's shares are listed on the TSX Venture Exchange under the symbol "GEM" and on the OTCQX under the symbol "GOLDF".

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release. Some of the statements contained in this release are forward-looking statements, such as estimates and statements that describe Pele's future plans, objectives or goals, including words to the effect that Pele or management expects a stated condition or result to occur. Since forward-looking statements address future events and conditions, by their very nature, they involve inherent risks and uncertainties. Actual results in each case could differ materially from those currently anticipated in such statements. The economic viability of the 43-101 mineral resource at Pele's Elliot Lake Project has not yet been demonstrated by a preliminary feasibility study.

Al Shefsky, President, at (800) 315-7353, or visit the Pele website at www.pelemountain.com.