source:The West Australian
Arafura Resources has a shovel-ready rare earths deposit in the Northern Territory it says could supply over 5 per cent of the world’s insatiable demand for the all-important heavy rare earth elements. The company’s Nolans rare earth project is fully approved and houses a massive 29.5 million tonnes reserve at 2.9 per cent total rare earth oxides with excellent infrastructure nearby and a supply agreement with Korea already locked away.
The Nolans project sits 130 kilometres north of Alice Springs in Australia’s Northern Territory and comprises a shovel-ready neodymium and praseodymium, or “NdPr” heavy rare earths project. The two heavy rare earths are essential components in the manufacture of permanent magnets within wind turbines and electric vehicles that are the key players in the de-carbonised economy of the future.
The company plans to kick off production at Nolans in 2022 and expects the commencement of mining to align well with the forecast supply shortages in the valuable heavy rare earth space over coming years.
Coinciding with production commencement, Arafura has been busily negotiating with offtake partners and has recently signed a joint statement of cooperation with the Korea Mine Rehabilitation and Mineral Resources Corporation, or “KOMIR”. The agreement will facilitate the supply of rare earths to the Korean market – one of the key global demand centres for rare earths.
The cooperation between Arafura and KOMIR aims to kickstart a range of initiatives that will support growing demand out of Korean for access to rare earth products from the Nolans project.
Intriguingly, a memorandum of understanding, or “MOU” between the Mineral’s Council of Australia and KOMIR was also signed in the same week as the Arafura supply agreement. The MOU looks to strengthen cooperation on the exploration and development of critical minerals between Australia and Korea making Arafura’s agreement all that more substantial.
Arafura does not have any intentions of being a small-time player in the rare earth production game with the company saying current internal forecasting expects the company to produce in the realm of 5-10 per cent of global demand for neodymium and praseodymium.
The massive potential has already spiked the interest of the Northern Australia Infrastructure Facility and Export Finance Australia, which have agreed to provide Arafura with a combined $300m in conditional letters of support.
Whilst Nolans’ massive ore reserve at impressive grades is a huge achievement in itself, the real prize sits with the high value NdPr content that makes up a whopping 26.4 per cent of the total rare earths content.
The company’s share price has seen some reasonable growth over the last 18 months, scaling from $0.06 to highs of $0.27 in November 2021 and has currently settled around the $0.20 mark.
Arafura is staking a claim as a trusted leader for sustainably mined and processed products aligning with the global push for reduced carbon emissions.
With all required regulatory approvals in place, including the recently received allocation of major project status from the Northern Territory Government, the company has ample opportunities to explore potential offtake partners ahead of starting production along with a myriad of other benefits.
The Nolans deposit is a giant beast with the life of mine currently estimated at 38 years that only incorporates the top 200 metres of vertical depth with major upside potential lurking below. Several deeper drillholes surpassing 400m depth have intercepted mineralisation providing further supporting evidence of a larger mineralised system at play.
The 38-year life of resource allows potential offtake partners to have security of supply over an extended period of time within the tier 1 mining jurisdiction of Australia.
A definitive feasibility study update completed in May 2021 boasted some impressive numbers. The post-tax net present value of the Nolans project came in at $1.4 billion with an internal rate of return sitting at 18.1 per cent. The average annual EBITDA printed at a juicy $354 million.
The updated DFS highlighted a very similar initial capital expenditure requirement to get the project off the ground as was previously defined - sitting just above $1 billion.
Recent updates to the DFS also confirmed the low operating costs over the life of the mine at around US$24.76 per kilogram of NdPr - underscoring the robust economics at current NdPr prices that are sitting well above US$100 per kilogram and climbing.
The skimpy operating cost places Arafura in the lowest quartile of comparable rare earth operators in the world including, incredibly, even the Chinese managed operations.
Arafura expects a global rare earths supply deficit to start becoming problematic in the second half of 2022 so its scheduled start to mining operations in 2024 may fit nicely into the supply-demand gap.
The company plans to incorporate an advanced manufacturing process into its Nolans operation. When it commences production as the only NdPr-focused project in Australia, the company plans to mine and process ore to oxide at a single site rather than the more complex process of shipping it overseas for processing.
The Nolans project seems ideally located to take advantage of existing infrastructure sitting a mere 10km off the Stuart Highway and adjacent to the Amadeus natural gas pipeline. The pipeline currently takes gas from its namesake gas basin to Darwin and has surplus capacity allowing Arafura to easily tap into it for its energy requirements.
Additionally, the company previously identified several locations prospective for water nearby that it intends to construct a bore field from to supply its operations.
Considering the project’s relatively remote location in the NT, the ready access to water, power and transport infrastructure places the project in a unique position allowing it to reduce operating costs on three separate fronts.
The company is also seeking to make a direct economic contribution to the Australian and Northern Territory workforce by employing a peak workforce of 623 full time equivalent employees and contractors during the Nolan’s project construction phase. Additionally, an average of 278 full time equivalent employees would be required during steady-state production with 75 employees expected to be sourced from the Northern Territory.
The next step on the pathway towards production for Arafura involves completing front-end engineering and design, or “FEED” work that is currently underway. The company plans to use the FEED work to allow it to cement in a fixed price before it puts the construction tender out in the second half of 2022.
The current demand and supply dynamics seem to point to a continued strengthening of NdPr prices well into the future due to the simply lack of new supply coming online. With offtake cooperation agreements already in place with major customer bases in Korea, Arafura has the reliable Korean market already waiting in line to get its hands on the company’s product.
Should Arafura manage to get its operation up and running later this year it will be the first Australian critical minerals project since Lynas went into production in 2009 to achieve the feat, however its plans to do its own processing are truly trailblazing. With offtake agreements already in place, the stars appear to be aligning for Arafura as it looks to turn the Northern Territory into a global breadbasket for heavy rare earths.