Special Report: Emerging junior rare earths producer Arafura Resources is just weeks away from locking down Australian government approval for its Nolans project in the Northern Territory.

The Northern Territory Environment Protection Authority has already recommended the project receive final approval from the Territory government.

Rare earths are a group of 17 elements with “unique catalytic, metallurgical, nuclear, electrical, magnetic and luminescent properties”, according to the federal government’s Australian Mines Atlas.

Neodymium-praseodymium (NdPr) is the main rare earth product Arafura (ASX:ARU) plans to produce from its Nolans project.

NdPr is used in the manufacture of high-strength permanent magnets that are used in the automotive industry for electric components such as seats, mirrors, wipers, steering and braking, as well as in the traction motors of hybrid and electric vehicles.

NdPr magnets, Arafura Resources
NdFeB permanent magnets which find application in the automotive, clean energy and personal electronics sectors, and in industrial automation

NdPr prices are rebounding, but it hasn’t been because of the electric vehicle uprising – at least not yet.

Since mid-last year prices have gained ground because of China’s push to consolidate its industry, including stamping out illegal polluting and unsustainable production.

The Asian powerhouse has generally controlled the production of NdPr but recently analysts predicted that it will become a net importer.

Rare earths another beneficiary of EV demand

Longer term, however, NdPr prices are expected to keep ticking up because of the strong demand in the electric vehicle and clean energy markets, and in industrial automation.

While traditional petrol or diesel combustion engine motor vehicles each use about 700 grams of NdPr, electric or hybrid vehicles require an extra kilo.

NdPr is also a key component of the magnets used in wind turbine generators.

Demand for NdPr is expected to grow at 8 per cent each year to 2025 from the current global consumption of 33,340 tonnes.

“The end-use markets for magnets really haven’t begun to impact pricing yet,” Managing Director Gavin Lockyer told Stockhead.

“There’s still a lot of upside coming from natural supply-demand forces in the market, which is underpinned by the electrification of the transport sector and clean energy applications.”

The Nolans project is capable of meeting 5 to 10 per cent of global demand.

Second revenue stream

As well as the primary NdPr and other rare earth products, Arafura will produce merchant-grade phosphoric acid, which will bolster its revenues.

Rare earth recovery circuit in phosphate extraction pilot plant, Arafura Resources
Rare earth recovery circuit in Arafura’s phosphate extraction pilot plant

Phosphoric acid is predominantly used in fertilizers, which consumes about 90 per cent of production.

2018 will be a busy year for Arafura. A priority for the company will be securing offtake agreements to underpin project funding.

“Offtake and the procurement of funding for the project are key work streams for us this year and will help our board come to a final investment decision,” Mr Lockyer said.

Arafura is looking to primarily supply end-users in Japan, Europe, the U.S. and China.

The company is also working to complete large-scale pilot work to incorporate in a definitive feasibility study due for completion by the end of the year.

Low on the cost curve

“In terms of our projected operating costs, we believe we’re going to be pretty low on the cost curve — competitive with Chinese rare earth operations,” Mr Lockyer said.

“That’s because we have developed a flow sheet that is very efficient with our particular ore and also we have another revenue stream.”

Nolans also has the benefit of being in a first world, low sovereign risk jurisdiction, close to key energy and transport infrastructure, and a supportive community in Central Australia.

 

This special report is brought to you by Arafura Resources.
This advice has been prepared without taking into account your objectives, financial situation or needs. You should, therefore, consider the appropriateness of the advice, in light of your own objectives, financial situation or needs, before acting on the advice. If this advice relates to the acquisition, or possible acquisition, of a particular financial product, the recipient should obtain a Product Disclosure Statement (PDS) relating to the product and consider the PDS before making any decision about whether to acquire the product.

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