Special Report: Former resources analyst and new Arafura director Cathy Moises approves of the company’s development strategy for its flagship rare earths project.

Geologist and former resources analyst Cathy Moises believes Arafura Resources (ASX:ARU) has taken the best approach to its development strategy for the Nolans neodymium-praseodymium (NdPr) project in the Northern Territory.

The analyst of 30 years joined the rare earths company’s board last week and brings with her capital markets and institutional investor engagement skillsets.

Moises told Stockhead she would be getting to know the project from an insider’s perspective.

“From my analyst’s perspective, having covered Arafura, the company is progressing the project very well, and I look forward to increasing my understanding of the project through this directorship,” she said.

 

Geared project

Perth-based Arafura’s Nolans NdPr project was valued at $729m earlier this year in the company’s February 2019 definitive feasibility study (DFS).

The project is highly geared to increasing NdPr oxide prices, with Arafura estimating that each $US5-a-kilogram increase would add $130m to the project’s value.
Moises, who retired as Patersons Securities research head in October 2019, expects NdPr prices to appreciate in line with many observers’ forecasts for next year.
NdPr production costs for the project are estimated at a highly competitive $US25.94 a kilogram (current price US$41).
Referring to Nolans pre-production capital requirement of $US726m, Moises remarked, “Whilst the project is capital intensive, with considerable further work to finalise any funding package, the project very much justifies development in my view.”

 

Sound strategy

Moises expects to continue her assessment of the project in-house when she visits Perth next week.

She will attend a December 17 induction followed by her first board meeting the next day.

She expects to look over budget documents ahead of the board meeting, adding to her knowledge of the project gained via a tour of the Nolans site earlier this year.

“I think the whole project strategy is very sound,” she said, drawing on her analyst experience and more recent understandings.

“Having already undertaken a site visit to Nolans, I am highly impressed with the groundwork undertaken by the Arafura team.”

 

Refined product not concentrate

Moises is joining a board intent on ensuring it has the right mix of skills to switch from development to production mode.

She thinks the company’s focus on producing refined products at a single site in Australia is the way to go.

“I think it’s definitely the best strategy to produce an NdPr oxide end product rather than concentrate as this should optimise Arafura’s return on the project,” Moises said.

“And concentrate producers, I think, are exposed to an elevated supply risk should NdPr supply increase at some time in the future (perhaps when magnet recycling really starts to impact).

“If you’ve got your own standalone plant and your cost of production generally is relatively low … you’re in a very good position to maintain production through price cycles.”

Next steps

Arafura hopes to secure a Native Title agreement and firm up offtake agreements for the majority of its expected NdPr and phosphoric acid production.

The company hopes to finance Nolans next year, start project construction by the end of 2020 and commission the project by 2022.

Read more:
Australia and the US aren’t messing around, they’re getting even more serious about critical minerals
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 Limited, 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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