Arafura updates Nolans financials

THE BOURSE WHISPERER: Arafura Resources (ASX: ARU) has updated the financial projections for the company’s Nolans rare earths project in the Northern Territory.

The company said the projected economics for the project remain attractive despite a decline in rare earth prices.

The project economics include a net present value (NPV) of $2.045 billion and an internal rate of return (IRR) of 21.4 per cent.

The company has estimated Nolans to generate an after-tax payback of capital within five years of operations.

The commercial viability of the project has been boosted by a number of large-scale cost saving initiatives, which reduced the forecast capital cost of the project by over $500 million, or 26 per cent.

These initiatives are also expected to lower the operating costs by nearly $100 million per annum, or 24 per cent over the 20-year life of the project.


Source: Company presentation announcement


Specifically, these initiatives include the relocation of the RE Intermediate Plant to the mine site in the Northern Territory, selection of an offshore site in a mature chemical precinct for the RE Separation Plant, and simplification of the processing configuration and supply chain.

“Difficult external conditions are impacting companies all across the resources sector,” Arafura Resources managing director Gavin Lockyer said in the company’s announcement to the Australian Securities Exchange.

“The challenge for management is to take action to optimise project economics and maximise returns for shareholders.

“I am confident our actions to date have weathered the worst of the storm for the company and the project economics for Nolans will improve even further as we continue our focused efforts to drive costs down, and benefit from an expected uptrend in global pricing, particularly in those rare earths the world needs and Nolans has in abundance.

“Our engagement with end users, most recently in Japan and North America, continues to reinforce my confidence in the rare earths market, and in particular the necessity for products that will be delivered by Arafura from Nolans.”

Arafura said more project cost savings are expected from an ongoing optimisation program.

The company also indicated it plans to acquire an offshore site for the RE Separation Plant next year.

Construction of Nolans is forecast to commence mid-2016, subject to the company securing the necessary finance.