Special Report: In the wake of the Malaysian government’s crackdown on Lynas Corporation, emerging rare earths producer Arafura Resources is more convinced than ever that its plan to locate its entire mining and processing operation in Australia is the right move.

Since 2012, Lynas has been mining rare earths at its Mount Weld operation in Western Australia and shipping concentrated ore to its refinery in Malaysia for further processing into saleable rare earths products.

On Wednesday, shares in the Sydney-based company crashed as much as 25% after the Malaysian government ordered that the company must find a permanent storage location for waste residue containing low levels of radioactive material from the refinery or remove it from the country if it is to secure a future licence to operate.

Arafura is completing a Definitive Feasibility Study (DFS) on its Nolans rare earths deposit in the Northern Territory, which has similarities to Mount Weld in that it contains a high proportion of neodymium and praseodymium (NdPr), high value rare earths that are used in drivetrain magnets for electric vehicles and other industrial applications.

As part of the DFS, Arafura had been contemplating conducting the final phase of processing – separation – at an overseas location, but in early November the company announced that all processing facilities would be established at the Nolans site, a 90-minute drive north of Alice Springs on a remote cattle station.

At the time, Arafura noted that the decision would mitigate the sovereign risk associated with locating parts of its operation overseas.

According to Managing Director Gavin Lockyer, that advantage had only been made clearer with the latest developments around Lynas.

“Absolutely there is a higher cost associated with establishing 100% of our business in Australia,” Lockyer told Stockhead. “For one, Australian waste management standards are as stringent as anywhere in the world and complying with those carries an added cost.”

“But the trade-off is regulatory and business certainty by avoiding things like mandated production quotas and short-term operating licences.”

Arafura anticipates securing a mining lease for the Nolans Project in the first half of 2019. This will be valid for 25 years, providing a firm foundation for long-term planning by the Company.

The socially responsible mindset that is driving the uptake of electric vehicles is also driving increased emphasis on ensuring raw materials used in the manufacturing process are ethically sourced.

If it hasn’t already, Lockyer believes this will extend to consumers wanting to know that waste generated in the production of those raw materials is being managed responsibly as well.

“Our view is that having a social licence to operate doesn’t just mean product stewardship, it includes being accountable and responsible for the totality of our project, including waste management and site rehabilitation.”

Arafura’s waste management plans, which will be centred around the Nolans site, were signed off by federal and Northern Territory authorities with the grant of environmental approvals at the respective levels earlier this year.

This followed a lengthy and comprehensive public review of the Company’s operational plans in its Environmental Impact Statement (EIS).

A risk assessment completed by Arafura found that the decision to build the separation plant to Nolans would have no additional environmental impact outside what was outlined in the EIS.

 

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