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Arafura Resources progresses pre-FEED and offtake activities for Nolans Project

Arafura is balancing company activities, project progress and cash conservation around COVID-19 restrictions.

Arafura Resources Ltd - Arafura Resources progresses with Pre-FEED and offtake activities for Nolans Project
The pandemic has highlighted how vulnerable Chinese rare earths supply is to disruption

Arafura Resources Limited (ASX:ARU) is progressing towards commercialising its 100 per cent-owned Nolans Neodymium-Praseodymium (NdPr) Project in the Northern Territory.

While there has been limited impact on company activities from COVID-19 restrictions to date, Arafura’s in-principle agreement with the three indigenous groups who hold native title rights over the Nolans Project area has been postponed.

The agreement was planned to be endorsed and then executed by the full council of the Central Land Council (CLC) during April.

COVID-19 precautionary measures

Unfortunately, with the onset of the COVID-19 pandemic and the precautionary measures introduced by the Northern Territory Government, the meeting has been postponed until travel restrictions designed to protect the well-being of the residents of remote indigenous communities in the Northern Territory are relaxed or withdrawn.

The Indigenous Land Use Agreement (ILUA), also contains a section 31 agreement under the Native Title Act, and is an enabling agreement to allow the grant of the project’s mineral leases by the Northern Territory Government prior to formal registration of the ILUA by the Native Title Registrar.

Because of this, the project’s mining tenure cannot be granted until an executed section 31 agreement is received.

However, the company continues to advance pre-FEED and marketing activities with samples from the recently completed rare earth separation pilot plant.

Pre-FEED activities

Progress has continued with Hatch on the pre-front end engineering and design (pre-FEED) activities aimed at finalising the basis of design, design specifications along with finalising Arafura’s overall project requirements in preparation for the early contractor involvement (ECI) phase of project delivery.

Work on pre-FEED activities is well advanced and is anticipated to be completed in the current quarter.

ECI phase

Preparation for the ECI phase is continuing to plan for the tendering of key contracts, including for the beneficiation plant, hydrometallurgical plant and sulphuric acid plant.

The hydrometallurgical plant tender stage one has also closed with several tenders received from joint ventures between Tier 1 engineering and construction contractors.

Marketing activities

Planned marketing visits to Japan, South Korea and China in January and February were cancelled in response to COVID-19 related international travel restrictions.

However, Arafura was able to conduct a marketing visit to Europe in early March and continues advancing offtake discussions with several end-users and supply chain partners in Japan, Europe and China via telephone and video conferencing.

The company has commenced communication with its existing Chinese magnet manufacturing partners JingCi Material Science and Baotou Tianhe Magnetics, as well as a Japanese magnet manufacturer, to deliver samples of high purity NdPr oxide product from Arafura’s recently completed rare earth separation pilot plant for pre-qualification and verification.

The timing of delivery is being compromised by a temporary disruption to the company’s rare earth precipitation program due to the COVID-19-related suspension of some activities.

Offtake arrangements progress

In March, Arafura entered a non-binding memorandum of understanding with a Chinese downstream rare earth metal processor in relation to the conversion of NdPr oxide from Nolans to NdPr metal at its metal conversion operations in Thailand and Vietnam.

The company is working towards negotiating and executing a formal toll conversion agreement with this supply chain partner in direct response to requests by European end-users for the delivery of NdPr metal via a non-Chinese supply chain.

Arafura also has non-binding rare earth product offtake arrangements in place with several parties in Japan, Europe, South Korea, the USA and China, and for phosphoric acid product with parties in India.

China rare earths industry restart

Following a nationwide shutdown that began in late-January due to the onset of COVID-19, Chinese industry restarted in March with many manufacturing facilities now operating at 50-80% capacity.

Many rare earth industry and downstream neodymium (NdFeB) magnet producers are now operating, filling a backlog of offshore and domestic orders and the demand is stretching operational and logistics capability.

Automakers have also restarted with production of vehicles and components resuming at 22 of 24 Volkswagen locations in China during the past month.

Supply chain fragility  

China sources NdPr and other rare earths from offshore jurisdictions like Malaysia, Africa, Myanmar, Australia and the USA to help meet domestic and global demand.

Some of this supply has temporarily shut with some rare earth companies suspending operations due to COVID-19, however, any extended operational shutdowns will tighten supply further and some supply chains like Japan could be affected.

Supply chains in Europe and the USA are also reshaping to mitigate future events.

Arafura believes that the COVID-19 pandemic is a stark reminder of the fragility of supply chains, including those relating to critical minerals like rare earths and is a prime motivator for direct investment being considered by governments and downstream customers in the sector.

Quick facts: Arafura Resources Ltd

Price: 0.079 AUD

Market: ASX
Market Cap: $92.26 m

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