Australian Strategic Materials Ltd (ASX:ASM) has presented a “strong go forward case” in an optimisation study for the Dubbo Project in Central West New South Wales with pre-tax NPV of A$2.361 billion and pre-tax IRR of 23.5%.
This represents a pre-tax IRR improvement of 6.0% compared to the 2018 study.
The strong financial results in the study based on an initial ore reserve of just 18.9 million tonnes with considerable upside potential also include an annual free cash flow of A$425 million.
Forecasts are based on a 20-year life of mine at annual plant feed rate of 1 million tonnes. Substantial additional measured and inferred mineral resources beneath the ore reserve are excluded from the study.
“Demonstrates financial strength”
ASM managing director David Woodall said: “I am delighted with the outcomes of the optimisation work which demonstrates the financial strength of the Dubbo Project and ASM’s focus on a sustainable future delivering improved performance and ESG outcomes.
"The optimisation work supports a strong go forward case and is an exciting development for ASM, our partners and shareholders.”
Forecast financial outcomes in Australian dollars.
Critical metals source
Dubbo Project, southeast of the city of Dubbo, has been optimised to produce neodymium, praseodymium, zirconium, hafnium, dysprosium, terbium and niobium oxides that can all be refined into high-purity alloys, metals and powders at ASM’s metals plants.
It represents an alternative, sustainable and secure source of these metals, which are critical for a diverse range of advanced and clean technologies.
New operating strategies
The optimisation study, which is based on Alkane Resources Ltd’s optimisation study released to the market in 2018, simplifies the Dubbo Project process flow sheet and incorporates new operating strategies that will reduce operating costs and improve the ESG performance.
These include increasing the brine concentrator capacity (halving water consumption), refurbishing the railway line (simplifies logistics and provides new categories of local entry level jobs) and developing a chlor-alkali plant (reducing the cost of reagents and their handling and transportation).
ESG benefits
By implementing these strategies, ASM will also facilitate ESG benefits by reducing water consumption, reducing the handling and quantum of process chemicals, and reducing the number of trucks on local roads.
Woodall said: "The optimisation work confirms we have a project that can integrate into our metals business to create an alternate, sustainable, secure and stable long-term supply of critical metals and oxides.
"This places ASM in an exceptional position in the critical metals value chain, as the vertically integrated owner of a globally significant polymetallic resource in Dubbo, and the capability to produce critical metals from this resource to the highest environmental standards.”
Capital and operating cost estimates.
Cost estimates
The capital cost estimate from the optimisation work is A$1,678 million compared to A$1,297 in the 2018 work.
Key drivers of the increased capital costs include refinements in the design and updating of the pricing of the dehafniated zirconia solvent extraction plant (A$87 million), the inclusion of chlor-alkali plant (A$65 million), Brine Concentrator capacity upgrade (A$30 million) and owners contingency (A$163 million).
On the other hand, these inclusions have the effect of reducing forecast annual operating expenditure from A$317 million to A$287 million and have improved the ESG performance of the Dubbo Project.
An independent review completed by consultants, Mining One Pty Ltd, has confirmed proven ore reserves of 18.9 million tonnes. The mineral resource estimate is unchanged at 75.2 million tonnes with 42.8 million tonnes in the measured category and 32.4 million in the inferred category.
Making “good progress”
Woodall added: "These exciting outcomes allow the ASM team to focus on progressing the financing, engineering and construction strategy, and to secure offtake agreements for the integrated metals business.
"ASM is making good progress on these matters. In particular, with the financing of the Dubbo Project through the conditional framework agreement with the consortium of Korean private equity firms and the letter of support from Export Finance Australia.”