Arafura project costs hit $1.6bn

Arafura Rare Earths says its Nolans project has the capacity to deliver strong financial returns after releasing a study with higher costs but increased revenue.

The project update shows that the upfront capital cost of the rare earths development in the Northern Territory has increased to $1.59 billion.

That was up from $1.05 billion in the feasibility study released in May 2021.

The project update also disclosed a substantial lift in mining and processing costs.

These increases were offset by a large increase in assumed selling prices for the project’s core product, neodymium.

As a result, the project’s base case is for a 68 per cent increase in net present value to $2.4 billion and a 62 per cent increase in average EBITDA to $573 million.

The update was prepared by an Arafura project team that included engineering firm KBR and drew upon front-end engineering and design studies by Hatch and GR Engineering Services.

"This update re-confirms Nolans as an exceptionally valuable world-class NdPr rare earths project, with the capacity to deliver strong financial returns over an initial long mine life of 38 years.” managing director Gavin Lockyer said.

He anticipated that project financing would continue to gain momentum, with Arafura looking for both a strategic investor and debt providers.

"The Nolans NdPr project is one of the only construction-ready rare earth oxide projects of scale in the western world” he said.

“The significant size of the Nolans deposit provides customers with improved security of supply for critical raw materials.”

The update comes shortly after the West Perth-based company signed binding sales agreements with car manufacturers Hyundai and Kia.

Manufacturers of electric cars and wind turbines use neodymium magnets as a critical input in their products.

Arafura is targeting a final investment decision in March 2023.

If successful, it will join two other companies developing major rare earths projects.

Iluka Resources is about to commence construction of a $1.2 billion rare earths refinery near Eneabba, and Lynas Rare Earths is investing nearly $1.1 billion expanding its Mt Weld mine and building a processing plant at Kalgoorlie.

Another aspiring producer is Hastings Technology Metals, which this week appointed former BCI Minerals boss Alwyn Vorster as interim chief executive.

Arafura shares closed 7.5 per cent higher today at 35.5 cvents, valuing the company at $570 million.