At the start of 2018, Arafura Resources announced it had been granted environmental approval from the Northern Territory Environment Protection Authority (NT EPA) for its flagship Nolans project in central Australia – a project of globally significant scale in the rare earths space. News of this environmental approval represents a major milestone for the ASX-listed company after an exhaustive two-year assessment process. Now Arafura is in a position to move on to the next stage of the Nolans project – attracting cornerstone investors or strategic partners to assist with funding the development.
Many of these potential investors are likely to be major corporations with reputations to consider, therefore it was imperative for Arafura to secure environmental approval for the rare earths project which is set to play a key role in the pending clean energy revolution.
The Nolans project contains an abundance of two specific rare earths – neodymium and praseodymium (NdPr). Both have multiple uses across several disruptive markets including wind energy, robotics and electric vehicles.
The burgeoning EV industry is a major part of the aforementioned green energy transformation and is likely to be one of the biggest markets for Arafura’s key NdPr rare earth product, so the importance of being able to prove to potential clients that its raw materials have come from a non-polluting, environmentally-friendly environment cannot be understated.
“We advanced our environmental studies ahead of a lot of our engineering studies, knowing that environmental approval would enable us to have meaningful discussions with potential project financiers,” reveals managing director Gavin Lockyer. “It’s a really big milestone for our company.”
Passed with flying colours
Lockyer says that the project passed the environmental assessment with flying colours, after the NT EPA concluded that there were no significant risks identified in the assessments. The agency was also happy with Arafura’s risk management procedures, which are in line with all other mining practises in Australia.
Firstly, Arafura has committed to long-term management of radioactive material that occurs naturally in the resource. Essentially, they will extract the rare earths from the ore before storing the radioactive residues in engineered tailings and storage facilities.
“It’s a fairly standard process, many other mining operations like uranium, mineral sands or anyone mining a monazite material would have the same environmental processes and controls in place to manage it,” Lockyer says. “It’s not an onerous task and the Northern Territory has a long history of regulating it well.”
Secondly, groundwater usage came under scrutiny through the environmental assessments as the host region of central Australia is a very arid part of the world and it has been estimated that the project will use up to 2.7 gigalitres of groundwater a year. As such, economical use of this limited resource is a vital obligation for Arafura.
“Having said that, several years ago we spent over $3 million drilling in the desert where people told us there would be no water and we have found a significant new groundwater resource that’s not been tapped by any other user,” notes Lockyer. “So we are comfortable from all our studies to date that we’ll be able to access that water and manage the groundwater aquifers in a sustainable way.”
Aside from working closely with the EPA last year on attaining environmental approval, Arafura was also able to successfully raise capital and reached the halfway stage of its overall process flowsheet piloting programme.
Throughout 2017, the company raised a total of $9.8 million from new investors and from its shareholders, a significant result bearing in mind it was Arafura’s first market raise since 2012.
“That was a good sign for us that capital markets were slowly opening up. As prices turned around for NdPr, it showed a renewed interest and a renewed confidence in our sector so that was a highlight.”
The other highlight of 2017 from a technical aspect was the successful completion of three out of the seven phases of the flowsheet pilot programme for the Nolans project. The pilot regime is one of significant scale that will assess materials handling – that is, how concentrate and other process flows move through several different types of equipment.
Throughout the year, Arafura progressed through the beneficiation, phosphate extraction and bulk pre-leach phases of the pilot study and will look to complete the final phases over the first half of 2018, which should considerably minimise the commissioning risk attached to the project.
Arafura also strengthened its relationship with Korean chemical manufacturing giant OCI last year, with the signing of an extension to the existing MoU. “We have been in discussions with OCI regarding them providing us with our raw material requirements for our processing plant,” says Lockyer.
Both parties are also discussing the location of the processing plant, which is still planned to be built in South Korea, but Arafura is keeping its options open and is considering having sites in Australia and other parts of the world, with the view that OCI would toll process the final rare earth products at the refining, or separation plant.
“We have a really good relationship with OCI and we will continue to work with them throughout 2018, with the aim of reaching a more binding arrangement.” This partnership has certainly helped Arafura lay the foundations for striking further commercial deals, which has been highlighted as a key focus for the company this year.
Lockyer explains that the firm will require a ‘big brother’ to help with project finance over the crucial next stages and this will be underpinned predominantly by product offtake arrangements. “We’ll be ramping up those strategic partnerships and strategic offtake arrangements with target customers throughout 2018,” he declares.
An electric future
The gradual electrification of huge industries, including the global automotive and energy markets, is slowly pushing up demand for NdPr, owing to their properties as magnet material rare earths.
NdPr is a key component of high strength permanent magnets that are utilised in EVs and wind turbines, with around 1.7kg of the material required for every vehicle. Therefore, if you believe in the EV revolution and the widescale electrification of energy supply, you believe in NdPr.
However, Lockyer believes the future value of NdPr is not well reflected in their current prices and its true value will not manifest until China’s domestic rare earth market can no longer supply its magnet industry.
China has dominated global NdPr supply for many years but has recently been clamping down on illegal production and polluting mines and smelters. This campaign, along with sharply rising domestic magnet production, has led many analysts to predict that it will soon become a net importer of NdPr.
“I was reading a report just recently that China increased its magnet production by 11% in the last 12 months. If all the predictions are correct around the electrification of transport around the world, I think by the mid-2020s China will become a net importer of magnet materials, because it just won’t be able to supply its own industry.
“Then I think you’ll see prices for NdPr really start to take off. It’s extremely important for us as a developing company to make sure that we are ready to go when that market opportunity arises,” stresses Lockyer.
The NdPr supply opportunity
Achieving first production in 2020 would put Arafura in a great position to capitalise on the increased demand for magnet materials such as NdPr, with a multitude of projections suggesting that the start of the 2020s will yield some real dynamic changes in supply and demand.
For Arafura, the sheer scale of the Nolans project demands attention from a global audience.
“We have a world class asset in terms of size and longevity. Our target production is 14,000 tonnes of total rare earths, including 3,600 tonnes of NdPr, and that would represent about 5-10% of current global supply.
“Nolans is going to be a significant potential supplier into the market,” he proclaims. “What’s more is that this production figure equating to 5-10% of global supply is only represented in about 60% of our potential reserve.” Therefore, there is significant scope to increase the current capacity at Nolans, which could turn Arafura into an even larger global NdPr supplier.
Factor in an expected life-of-mine of 30 to 35 years and it becomes clear that with the Nolans project, Arafura has the required legs to sustain a leading position in NdPr supply while global industries undergo a major transformation towards electrification.
Roadmap to production
Arafura plans to award its feasibility engineering study contract in the coming weeks with completion of its definitive feasibility study (DFS) the first part of this. At this stage, delivery of the DFS and project financing are the only barriers left to overcome ahead of construction commencing.
“This year, we are really focused on completing our feasibility studies, advancing our offtake arrangements and engaging with strategic partners for capital equipment and project financing.”
“We will be one of the largest suppliers of NdPr magnet rare earths into the market, we are well advanced and this year we hope to build on all that good work we’ve done through the last couple of years,” says a bullish Lockyer.
When considering the scale and long-life of the Nolans project, along with the steady progress made on the project in the last year, it is difficult to quibble with Lockyer’s grand vision of Arafura as a globally significant supplier of NdPr, strategic material that is key to powering the electrification and automation of major global industries.