Special Report: A strategic alliance between Arafura and USA Rare Earth could help establish a reliable rare earth supply chain independent of China.

Arafura Resources (ASX:ARU) has reached a strategic alliance with USA Rare Earth that could see the heavy rare earth-rich SEG-HRE product from its Nolans neodymium-praseodymium (NdPr) project processed in the US company’s Colorado pilot plant.

USA Rare Earth’s proprietary continuous ion exchange and continuous ion chromatography processing technology is capable of separating and purifying up to 26 different recoverable elements including the middle and heavy rare earths.

Notably, the technology is capable of working with feedstock from projects other than the US company’s Round Top deposit.

The US company and its joint venture partner Texas Mineral Resources Corporation have just submitted a tender for the US Department of Defense’s Cornerstone Initiative for Heavy Rare Earth Element Separation (Cornerstone).

Cornerstone’s objective is to establish a commercially sustainable US domestic capability for the separation of heavy rare earths, a key element for ensuring supply of critical minerals given that most rare earths processing is carried out in China.

The two companies have agreed to execute a definitive agreement in the first quarter of 2020.

“Arafura and the Australian government, championed by the initiatives of Austrade, have combined to strengthen the working relationships with our US counterparts and we are excited to be playing our part in helping to establish a secure, long-term supply of rare earths critical to the world,” Arafura managing director Gavin Lockyer said.

“It’s an exciting opportunity for Arafura to expand its customer potential and work with USA Rare Earth and our NTIB (National Technology Industrial Base) allies.”

Arafura’s SEG-HRE separation circuit during pilot operation at ANSTO in December 2019

Separately, Arafura is progressing its own efforts for rare earths separation using rare earth chloride material generated by its pilot processing plants from Nolans ore.

Work at ANSTO Minerals in Sydney has successfully produced refined SEG-HRE liquor that contains the middle and heavy rare earths including samarium, terbium and dysprosium.

A second solvent extraction circuit is scheduled to run in January 2020 to separate the company’s key NdPr oxide product.

Samples of both the NdPr oxide and SEG-HRE carbonate products are required for the company’s advanced engagement with potential customers around the world.

Nolans currently boasts an economic reserve of 19.2 million tonnes at 3 per cent total rare earths (TREO) – with NdPr making up 26.5 per cent of the total rare earths content, enough to keep the mine ticking for an initial 23 years.

NdPr is used for the manufacture of rare earth permanent magnets, particularly neodymium iron boron magnets that are finding increased use in electric cars, wind turbines and other high-tech devices.

Under the definitive feasibility study released in February 2019, the project is expected to produce 4,357 tonnes of NdPr oxide and 603 tonnes of SEG-HRE carbonate per annum, and has robust economics with a net present value (NPV) of $729m and internal rate of return (IRR) of 17.43 per cent.

IRR and NPV are used to estimate the profitability of a potential operation. The higher the number, the more profitable it is.

The Nolans project is highly leveraged to the NdPr price, with every $US5 per kg increase in NdPr oxide price adding another $130m to the NPV.

Now read:
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The government pledges cheap funding for Australian rare earths projects
Tim Treadgold: Rare earths could be another ‘buy the sector’ situation, just like nickel
Tax refund highlights Australian support for Arafura’s Nolans rare earths project

This story was developed in collaboration with Arafura Resources, a Stockhead advertiser at the time of publishing.
This story does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

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