Arafura Resources (ASX: ARU) is one of Australia’s fastest-growing rare earths developers and recent achievements have put the company on a path to capitalize on long term growth opportunities through its various exploration successes and strategic partnerships. Currently, Arafura is placing its focus on the Nolans Rare Earths project which operates in the Nolans Bore Mine in the Northern Territory of Australia and in the Whyalla Rare Earths Complex in the southern part of the country. The phosphate-uranium project is built around 47 million tons in mineral resources, with content in Rare Earth Oxides (REO) estimated to be above 1.2 million tons (equal to 2.6% of the project’s total resources).
The Nolans Bore probable ore reserves total 24 million tons grading 2.8% REO (672,000 tons of contained REO), along with 2.97 million tons of phosphorus oxide and 4,900 tons of uranium oxide. According to Arafura, these reserves can be mined using open-pit methods that help improve on overall costs and have an estimated lifespan of 22 years, using a maximum beneficiation throughput of 1.1 million tons per annum. Additional positives can be found in the fact that 21 million tons of the Nolans Bore inferred resources can be converted to ore reserves. Further drilling will be required for confirmation but Arafura’s 95% resource-to-reserve conversion rate marks a significant achievement, with Nolans Bore as one of the world’s only rare earths projects that has established an ore reserve. All of these factors help validate the advanced stage of the Nolans Project and bring it one step closer toward commercialization.
Arafura Adds Fifth Rare Earth Oxide Product
As the Nolans project moves forward, recent successes are showing that Arafura is positioned to become one of the world’s leading rare earths producers before the end of the decade. Last month, Arafura announced that is has started producing Lanthanum Oxide, which is the fifth rare earths product in the company’s portfolio. It has long been Arafura’s goal to produce five individual separated oxide products, and this latest milestone helps propel the Nolans project in reaching its initial stages of commercialization.
The separation of Lanthanum follows the successful production of four other REO products at pilot scale and this validates the intrinsic opportunities and advanced level of development in the Nolans Project. Arafura’s downstream technology program continues to produce superior results, and the final separated REO product samples from the Nolans Bore resource highlights Arafura’s efficient approach, provides valuable engineering data, and furthers the opportunity to attract potential customers for high volume products. With these developments, Arafura has clearly demonstrated its superior ability in producing separated oxide products, and this helps separate the company from its rare earth project competition both inside Australia and on a global scale. Arafura’s Lanthanum product will help the company meet increasing demand in the nickel metal hydride batteries market, with products to be used in hybrid vehicles and fluid cracking catalysts that are used to process crude oil.
Settlement Reached for the $10 Million East China Mineral Investment
These productivity announcements follow a long run of positive stories for Arafura. Last October, the company received a AUS$22.5 million tax refund for research and development spending, and, more recently, final approval from the Foreign Direct Investment Bureau for its large East China Mineral Exploration shareholder investment purchase (valued at AUS$9.9 million). For the transaction, Arafura issued 45,266,500 ordinary shares, at price of $0.22 per share. This valuation represented a 29% premium relative to the stock’s previous closing prices and a 10% premium over the 15-day VWAP of $0.20 that was seen when the transaction was initially outlined. This positive market reaction is reflective of the high level of investor confidence that has been generated by the relationship established by these two companies.
The East China Mineral Exploration strategic equity holding of 24.86% in Arafura is representative of an ongoing commitment through financial and strategic support, and this helps to confirm that investor confidence in the Nolans Project is growing. At this stage, it is clear that both parties are committed to developing and funding Arafura’s flagship project in ways that limit shareholder dilution and deliver stable returns over the long term.
Care to comment on Arafura’s financial position and prospects with regard to funding its rare earth buildout?