Australian Strategic Metals (TSX-V:SMD) Ltd has capped off another crucial quarter, one that saw the emerging 'mine to metal' producer ink a key framework and nab an offtake proposal.
The critical materials stock, a successful spin-off from public gold miner Alkane Resources Limited (ASX:ALK), spent the September quarter advancing its cornerstone Dubbo Project in New South Wales and constructing its Korean metals plant.
A key part of the Dubbo Project’s development is tied to the US$250 million framework agreement, which tees up a consortium of South Korean investors to acquire a 20% equity interest in the project’s holding company.
Under the deal, there’s also scope for a 10-year offtake contract, which allows for up to 2,800 tonnes of neodymium-iron-boron to be picked up every year from ASM’s Korean metals plant.
A top 300 stock
As an ASX-lister, ASM also reached new heights: it became one of the local share market’s top 300 stocks in late September and currently boasts a A$1.4 billion market cap.
The company ended the period with A$76.1 million in cash to fund activities in the current quarter, including the start of commissioning activities at the Korean metals plant as ASM accelerates towards producer status.
Meeting demand for critical metals
Commenting on the progress made in the September quarter, ASM managing director David Woodall said: “As the global energy transition continues, so does the global need for an alternative, reliable supply of critical metals.
“During the quarter, we took a significant step towards meeting that demand by signing a framework agreement with a consortium of Korean businesses that creates a pathway towards financing the Dubbo Project.
“Progress has been made to support the completion of the due diligence on the Dubbo Project under the framework agreement, and for preparations to commence commissioning the Korean Metals Plant before the end of the year.
“While the impact of the delta variant of COVID-19 has slowed completion of our planned activities, I am proud of our Korean and Dubbo Project teams on what they have achieved in trying times.
“We are close to finalising the outcomes of the Dubbo Project optimisation study and look forward to updating the market with these outcomes."
Proving up rare earths supply
ASM is advancing its flagship project towards production as the world seeks out new critical metal sources.
As megatrends like clean energy and transport and the Internet of Things come to the fore, critical metals are becoming, well, critical to support burgeoning industries.
It’s a broad umbrella, but critical metals includes everything from rare earth elements to energy minerals like lithium to platinum group metals.
But although they’re in high demand, these materials are in short supply.
Roughly three-quarters of the world’s zirconium and 85% of the high-value rare earths that make up magnets are produced by China, while around 85% of our niobium comes from Brazil.
With supply so centralised — and demand for magnet rare earths alone piqued to grow at 9% or more — diversification is becoming key.
And that’s where Dubbo comes in.
Dubbo Project
The Dubbo Project represents a large in-ground polymetallic resource, made up of rare earths, zirconium, niobium, hafnium, tantalum and yttrium.
It’s wholly owned by ASM and lies just 25 kilometres to the south of the eponymous town of Dubbo.
At full capacity, the Dubbo Project’s mineral processing plant will be capable of processing 1 million tonnes per annum of crushed ore via sulphuric acid leach and solvent extraction recovery.
Mining will take place in a single open pit, after which ore will be transported to the processing facility.
What’s more, Dubbo is all fired up and ready to go: all of the key approvals, frameworks and licences are already in place to get the project under construction.
Thanks to the key framework agreement, ASM is a step closer to bringing Dubbo online.
Key activities
In mid-July, ASM signed on with a South Korean financing consortium under a conditional contract.
In exchange for 20% of ASM, the consortium plans to hand over US$250 million in funding to give Dubbo the cash injection it needs.
Under that same agreement, the South Korean investors intend to establish a second fund, which will help develop a domestic Korean permanent magnet manufacturing business.
This is proposed to enter a 10-year offtake agreement to secure critical metal supply from ASM’s Korean metals plant.
That plant is currently under construction, with commissioning work to take off before year’s end.
Post-quarter, the company appointed big four bank ANZ as its financial advisor, meaning the firm will oversee debt financing developments for the Dubbo Project.
The road ahead
Speaking on what’s to come, Woodall continued: “We continue to progress opportunities with Australian and Korean engineering and construction companies, including to provide key infrastructure and equipment planned for the Dubbo Project.
“I have just spent four months in Korea to continue the progression of our development of delivering our 'mine to metal' business.
“Looking ahead, ASM will continue to work with our Korean partners to progress the equity investment into the Dubbo Project; commission the Korea Metals Plant; and continue our discussions with financiers and potential offtake partners for our high purity, low emissions metals products.”