Arafura

Aiming to become one of the few rare earths companies to enter the global supply chain this decade

About This Project

Arafura Resources is a rare earths development company with interests in the Northern Territory of Australia. Listed on the ASX in 2003, its flagship project is the world-class Nolans Rare Earths Project. The project boasts a large defined mineral resource of 56 million tonnes to a depth of 220 metres which has the potential to provide high-recovery, low-cost rare earths for an operational life exceeding 40 years. While Arafura has several exploration sites in the region, the primary focus is to become one of the few rare earths companies to enter the global supply chain this decade. Arafura will extract two key rare earths at Nolans, Neodymium and Praseodymium (NdPr), due to the project being highly enriched in these rare earths, and due to their significant upsides in terms of market supply and demand dynamics.

 

Nolans

 

The 100 per cent-owned Nolans Project is primed to become a long-life resource development with production targeted for 2019. It will comprise mining, ore concentrating and intermediate chemical processing operations on site and an offshore refining plant used for rare earths separation at a mature chemical precinct. Arafura is targeting production of 20,000 tonnes per year of high-value separated rare earths products, making up around 10 per cent of the world’s rare earth demand.

 

Managing director, Gavin Lockyer, is confident about the Nolans production target as the pieces of the jigsaw begin to fall into place. A comprehensive development report was released in September 2014 showing a 20 per cent increase in resource. The Environmental Impact Statement (EIS) is in the latter stages of completion – submission expected in Q1 this year – and the capital costs of the project are being constrained year on year. The plans for the offshore separation plant are in advanced talks with South Korean chemical manufacturer OCI and the project is reaching a position to compete with the Chinese rare earth supply firms.

 

The development report has increased the mineral resource at Nolans as Arafura identified material previously not included in the resource due to its environmental studies. Lockyer says the resource has grown and more importantly the mine has moved up categories in the JORC code to a more definitive measured and indicated resource.

 

“It’s an extremely positive outcome for us to get a 20 per cent uplift in resource, but more importantly it’s moving into a higher degree of confidence,” he said.

 

As a small market-capitalised company Lockyer realised the capital costs of the project had to be reduced. He has spent a lot of time, since becoming MD two years ago, reviewing the costs, reviewing equipment and identifying efficiencies in the flow sheet and processes. The capital spending has come down by 37 per cent since 2012.

 

“Many projects have large capital requirements and in a capital constrained world it’s not without its challenges,” said Lockyer. “Our operating costs have come down quite a lot and we believe we are now on par with some of the Chinese producers, which is critical if you want to have some longevity in this industry.”

 

Nolans’ large resource does not require any more definition drilling to be increased, there is in excess of 40 years life of mine, so Arafura is focused on optimising the flow sheet and trying to find the most efficient way to extract the NdPr. Lockyer believes they have identified a number of cheap rare earths agents that might be able to be substituted into the flowsheet, although some testing is required, but for now the majority of spending in the near-term will be around engineering optimisation.

 

The reduction in capital costs will remain a key focus throughout the life of the project as Lockyer says the other factors involved are very positive.

 

“If we can get our capital numbers down and rare earths prices turn around, I think it makes us extremely attractive because we have a long-life resource, we operate in a low sovereign risk environment, we have magnet-feed NdPr material which feeds high-growth and high-value markets and we have the support of our major shareholder (ECE Nolans Investment Co.) to push it through.”

 

The Chinese government have been attempting to stamp out the illegal production and exporting of rare earths for some time and the last year has seen this process ramped up, although the market is not seeing that reflected in prices yet. Due to NdPr’s unique qualities there are no known substitutes in high-performance, ultra-high strength magnets, and Lockyer forecasts NdPr prices will begin to creep up in line with supply and demand in due time.

 

Lockyer also predicts that NdPr’s primary growth industry will be in magnets used for green technologies and as a consequence of that equipment manufacturers will demand assurances, throughout the supply chain, that it has been produced in an environmentally friendly manner.

 

“I think the industry will see a move in the wider manufacturing industry for socially responsible production of material. So for entities outside of China, in particular in Australia where best practice and sustainable mining and mineral processing practices are in place, it’s all positive.”

 

Environmental impact study

 

Arafura’s key focus right now is getting approval for the EIS by the second half of 2016. Lockyer sees it as an important milestone in order for Arafura to attract a strategic investor or a customer in the future for offtake to be able to prove it has the environmental licences to operate.

 

Getting approval for the EIS, a land access agreement with Aboriginal traditional owners and a groundwater extraction permit are vital for authorities to grant the final mining licence. If the EIS is submitted by Q1 2016 Lockyer is aiming to fast track the other two areas.

 

Part of the EIS is a community consultation process which involves sitting down with local stakeholders and explaining what work is planned and how it will be carried out. This culture of social responsibility flows through the company, the shareholders and the community according to Lockyer.

 

“Ever since I have been at the company there has been a strong culture from the board down that we communicate with the communities in which we will be operating,” Lockyer said.

 

“We won’t be able to operate unless we are accepted by the community, so we have spent a lot of time and effort working with the community in central Australia and more broadly that we intend to respect the environment and be socially responsible.”

 

Joint venture

 

In January, Arafura announced an agreement to enter a Joint Venture with Korean chemical giant OCI for a rare earths separation plant potentially located near some of OCI’s chemical manufacturing operations in South Korea. The separation plant is where the real value will be added and it requires a substantial amount of hydrochloric acid. So it makes sense for Arafura to ship a small amount of intermediate rare earth product to an offshore location where there is ready access to the hydrochloric acid and cost-competitive electricity.

 

OCI will benefit in the sense that it sees South Korea becoming a big user of rare earths magnets – currently 10 per cent of China’s magnet production goes to South Korea – and it wants to start an industry that will benefit South Korea.

 

“With the longevity of our resource, OCI see a lot of benefits of teaming up with Arafura for a joint venture separation facility,” said Lockyer.

 

The Arafura boss hopes the partnership will go beyond the separation plant as he wants to utilise OCI’s expertise in chemical manufacturing and hopes to hire a number of OCI’s chemical rare earth agents to work in the plant in Australia.

 

“They have significant chemical engineering experience and we would hope that as our arrangements progress and as we know each other better, the sharing of knowledge and information will span many disciplines.”

 

The next step for Arafura is to raise the funds to install an integrated pilot plant to enable a move into the detailed engineering required for the definitive feasibility study. The company is in a strong position in regard to its financing, it has AUS$14 million in the bank – a significant amount for a resource company at this stage.

 

“We’re trying to utilise that money in a way that will progress the project without burning it and with the requirement for significant dilution for shareholders,” noted Lockyer.

 

“We’ll be working through the EIS, the land access agreement and the groundwater licence on one hand and interrogating our capital numbers further to see where we can find more efficiencies on the other.”

 

Arafura has benefitted from the support of its key contractors in getting up to this point and Lockyer alluded to the key contributors so far, “GHD are certainly key contractors at the moment, pushing on with the EIS, for our engineering studies we’ve used Lycopodium and also a local company Battery Limits have assisted us with our capital and operating reviews.”

 

Lockyer is assured about Arafura’s key targets in the coming year. He hopes to receive all project approvals by the end of 2016 and have refined the capital and operating costs to a point where the integrated pilot plant can be operated.

 

“If everything goes well and we get some offtake arrangements in place at some point this year then we could certainly be looking to secure project finance at either the end of 2016 or start of 2017.”

Company

Arafura

Category

Mining

Phone

+61 8 6210 7666

Category
Mining
Tags
Australia, mining, neodymium, praseodymium, rare earths