Battery minerals, Commodities, Features

Rare earths: Australia’s next big players

Rare earths

ARI chats to Arafura Resources and Australian Strategic Materials, two companies critical to the country’s future rare earths aspirations.

As fossil fuel demand regresses, certain commodities will inevitably have to pick up the slack.

Coal remains an important resource for now, but the energy transition is rapidly advancing the need for green alternatives, such as lithium, nickel, copper and cobalt.

Also critical to net-zero, demand for rare earth elements (REE) doubled in the 15 years to 2021, reaching 125,000 tonnes per year. And future growth is tipped to be exponential.

According to 2022 data from the United States Geological Survey (USGS), it was estimated China produced approximately 168,000 tonnes of rare earth oxides (REO) in 2021, making up 60 per cent of the world’s production.

Despite China’s current market dominance, Australia’s rare earths industry is on the rise, with several emerging companies looking to accompany Lynas Rare Earths in the production ranks.

One of those is Arafura Resources, which is developing its Nolans rare earths project in the Northern Territory.

Aiming for a final investment decision (FID) in the second half of 2022, Arafura first listed on the ASX in 2003 and has had a front seat for rare earths’ rapid rise.

Arafura managing director and chief executive officer Gavin Lockyer said the evolution of the automotive industry was an early stimulant for this growth.

“The real game changer has come through modernisation of so many industries and miniaturisation of things,” he told Australian Resources & Investment.

“Fuel efficiency became a really big driver for rare earth magnets.

“People wanting their cars to go further on less fuel meant they had to try and find alternate ways to make the car lighter. They started replacing hydraulics with little micro motors. So now we have electric seats, electric windows, electric steering, electric brakes, and so forth.

“All of them combined would probably have about one kilogram of rare earth magnets in them, and then come forward about 10 years and you’re finding transportation fleets are becoming electrified.”

Arafura’s Nolans rare earths project.

Rare earths are proving equally, if not more, important to global electrification than other battery materials, with the commodity serving a unique purpose to the movement.

“If you want batteries to drive an efficient motor, and therefore extend the range of the car, you need to use rare earth magnets in the motor, where there’s another kilogram of rare earth magnets located,” Lockyer said. “If you don’t use those magnets, the motor runs at about a third of the efficiency.”

Rare earths comprise 15 elements of the lanthanide series. Some REEs are more useful than others, and Nolans is focused on neodymium-praseodymium (NdPr).

Lockyer said the automotive industry would be a key market for Arafura once Nolans gets into production; however, demand can certainly come from elsewhere.

“I’ve only spoken about cars but you can apply this to offshore wind turbines, which is another growing market,” he said.

“Rare earths have military and medical applications. Your dishwasher will have a couple of little electric motors in it which have rare earth magnets in them. So they’re in everyday use.

“But the real consumer and where all the focus has been recently is around electric cars and wind turbines.”

While the rare earths appetite continues to grow, the commodity is more geologically complex than people may realise, a situation Lockyer said had led to misconceptions in the market.

“Every rare earth deposit is slightly different geologically,” Lockyer said. “China’s dominated the market as a dominant supplier and you can’t just go to an engineering company and say, ‘Build me a rare earth extraction plant like what you built for Lynas’.

“Because Lynas’ geology is different to our geology and so it’s a different chemical process.

This has been really hard for the markets to understand, that you’re not a gold mine (and) you can’t just go to somebody and say, ‘Build me a gold mine like you built over there’, because each rare earths mine is different.”

Arafura has put in years of work to get to where it is today, and the company wouldn’t be the advanced business it is if it didn’t believe in its product.

“To get to where we are now, we’ve had to do a lot of trial and error. A lot of testwork, a lot of lab-scale work,” Lockyer said.

“Then when we got comfortable with the flow sheet itself, in around 2015, we determined we would build a pilot plant … such that we can prove the process at a much larger scale and hopefully de-risk some of the commissioning risks that we might experience going forward.”

Fast-forward to today and Arafura is among a handful of companies looking to be Australia’s next rare earths producer.

When asked about what makes Nolans distinctive, one thing stood out to Lockyer.

“Nolans is unique in the fact that it’s a large deposit and it’s typically contained in one big area,” he said. “A number of other projects are having to mine in lenses, which obviously increases your mining costs.

“It’s enriched in NdPr – 26 per cent of our rare earths is contained in NdPr. That translates to 85 per cent of our revenue. .

“We have a JORC (Joint Ore Reserves Committee)-compliant resource with a life of mine of about 38 years, and that’s only in the top 200m of vertical depth.

“We’ve drilled 440m deep and still been in mineralisation. So this thing’s massive.”

Nolans is focused on the rare earths, neodymium-praseodymium (NdPr).

The project is also unique in its location, and given its proximity to Alice Springs Nolans has the potential to be an economic driver for the region and Australia.

“We’re only 130km north of Alice Springs,” Lockyer said. “It’s remote. It’s just enough out of town to not bother the locals, but at the same time it’’ accessible.

“In this part of Australia, a lot of the gross domestic product (GDP) depends on government services. So we have an opportunity here, given it’s such a long-life mine, to make some intergenerational change for that region and for wider Australia.

“There’s a lot of people dependent on welfare (in this region) and so we have an opportunity here as a company to actually make change and try and break some of those cycles of welfare.

“We see this as a really high priority for the company, because we want to be a good neighbour to the people, and personally, we just want to see this new industry flourish.”

Arafura signed a joint statement of cooperation agreement with the Korea Mine Rehabilitation and Mineral Resources Corporation (KOMIR) in late February to assist the supply of rare earths to the Korean market.

The agreement will see the two focus on expanding cooperation in several areas, including information-sharing on Nolans’ development, to enable participation of South Korean investors, the import of rare earths into Korea, and the use of strategic stockpiling.

With similar agreements signed with other emerging critical minerals producers, Korea is positioning itself as a committed partner to Australia.

“What is significant is Korea has identified they want to diversify the entire supply chain down to magnets,” Lockyer said. “Japan already have magnet-making capacity and they’re already tied up with offtake with Lynas and they funded Lynas. So Japan’s set.

“The EU currently buys all its magnets either from Japan or from China. There is small magnet-making capacity in Europe but they really haven’t focused on expanding that capacity, they’ve been more focused on securing battery material for the electric cars, not the magnets.

So the Koreans have stepped forward and said, ‘We don’t want to be dependent on China and we don’t want to be dependent on Japan. We want to develop our own diversified supply chain’, and they’ve been very proactive about it.”

Leading into the FID later this year, Arafura is working on several different work streams to further solidify Nolans. This includes the front-end engineering design (FEED) process.

“Last year, we undertook an exercise with the Australian Government lending bodies in Export Finance Australia (EFA) and the Northern Australian Infrastructure Fund (NAIF),” Lockyer said.

“Feedback from them and also from other commercial banks was that they would like to see a more detailed engineering design phase committed to before they would look at drawing down debt funding.”

“So we went out and raised about $40 million last year, and then committed to the FEED process. The target there is by the end of that FEED process, which is prior to FID, we should have about 65 per cent of all our capital costs locked in as a lump sum.

“This gives the market confidence that we’re not going to expect any nasty surprises in cost overruns and so forth. So that’s one thing we’re doing, and that’s a pretty big exercise.”

Lockyer said Arafura had “20-odd” well advanced term sheets. Having offtake agreements in place will assist Arafura to establish more debt funding, which puts the company in a better position come the FID.

Debt financiers are typically more likely to come on board if a company can demonstrate how they will be repaid. Having credit-worthy offtake partners is an important piece to this puzzle.

As rare earths demand continues to balloon, Nolans will hit the ground running if it can achieve first production in 2024. Whether it be the automotive industry, wind turbines or dishwashers, a slate of customers will no doubt be eagerly awaiting Nolans NdPr product.

Located in New South Wales, Australian Strategic Materials’ (ASM) Dubbo project is another rare earths project looking to come on stream in the next few years. Dubbo is different from Nolans in that it comprises rare earths as well as zirconium, niobium, hafnium, tantalum and yttrium.

ASM also has a joint statement of cooperation agreement with KOMIR in place, and in late February the company signed an exclusive heads of agreement with Hyundai Engineering Corporation.

This enables ASM to exclusively negotiate with Hyundai regarding the FEED and engineering procurement and construction (EPC) of Dubbo.

ASM managing director David Woodall said Hyundai had world-class credentials.

“The idea is, one, we do a positive FEED study, but secondly, once it’s done and delivered, the logical part would be someone like Hyundai to build Dubbo,” he told Australian Research & Investment.

“Hyundai are building three multi-billion-dollar projects globally, in various jurisdictions, so they’re a very strong potential partner.”

Australian Strategic Materials’ Dubbo project in NSW.

ASM will aim for an FID in 2023, then, following a two-and-a-half-year construction timeframe, Dubbo would commence production in 2025.

With a “mine to metal” strategy, ASM has a metallisation plant in Korea with which it aims to commence critical metals production in 2022. The plant will also be used to convert the oxide produced from Dubbo into metal.

Woodall said the middle business offers ASM a point of difference.

“We’re not reliant on selling our product at a lower value form,” he said.

“We can deliver it to the end customer as an independent alternate supply chain – as part of our ‘mine to metal’ business – and that has significant advantages.”

Aiming to commence production about a year apart, one could consider Arafura and ASM to be competitors in Australia’s emerging rare earths industry. But with the commodity’s expected demand growth in the future, the world is going to need all the REEs it can get.

“To people who say various rare earth producers are your competitors, my comment is, if you look at the growth and demand of rare earths, you literally need every single deposit to move forward,” Woodall said.

Sounds like the sky’s the limit for Australia’s rare earths industry.

This feature appeared in the April issue of Australian Resources & Investment.

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