Arafura Resources Ltd (ASX:ARU) (OTCMKTS:ARAFF) (FRA:REB) has completed a feasibility study update for its 100%-owned Nolans Neodymium-Praseodymium (NdPr) Project in the Northern Territory, confirming ultra-low operating costs of US$24.76 per kilogram of NdPr oxide.
It outlines robust financial metrics with NPV of $1.4 billion, IRR of 18.1% and average EBITDA of A$354 million per annum based on a life of mine (LOM) of 38 years.
Recent strength in rare earths prices and increasing interest from financiers and potential offtake partners, along with project changes determined through optimisation work, provided strong rationale for Arafura to review the findings of the Nolans definitive feasibility study (DFS) delivered in February 2019.
Elements of the project that have been refined or optimised since then include:
- The process flowsheet (following completion of final stages of pilot program);
- Process plant design (deferral of cerium production and minor increase in concentrate processing capacity); and
- Mine scheduling (factoring in ore reserve update announced March 2020).
“Shovel ready ultra-low-cost project”
The stronger new metrics will now form the basis of discussions to finalise funding for Nolans, with Arafura targeting a Final Investment Decision in August 2022.
Arafura managing director Gavin Lockyer said: “The feasibility study update confirms Nolans as a shovel-ready world-class NdPr rare earths project with ultra-low operating costs and the capacity to deliver robust financial returns over an initial mine life nearing 40 years and it will provide an important tool with which to progress discussions on financing and offtake towards a successful close.
“Following the non-binding letter of support from Export Finance Australia for a A$200 million facility, we are working towards securing binding senior debt terms in line with the target for a Final Investment Decision in the second half of 2022.”
Shares have been almost 14% higher intra-day to A$0.205 while Arafura's market cap is approximately A$210.7 million.
Updated cost estimates and financial outcomes for the project.
FEED activities set to commence
Ahead of the FID, Front-End Engineering and Design (FEED) activities are expected to begin next quarter.
Lockyer said: “The size of the Nolans deposit will provide our customers security of supply for their critical raw materials and our ‘Ore to Oxide’ at a single site provides provenance that their product is being derived from processes aligned with their ESG priorities.
“With the forecast demand growth for NdFeB magnets to support the manufacture of electric vehicles amongst other applications, the rising imperative for nations to shore up sustainable supply chains and the lack of alternative NdPr sources outside of China, Arafura is moving ahead with greater confidence than ever before.”
The construction period for the project is 26 months from FID, giving first ore processing in October 2024 and first production towards the end of 2024.