SPECIAL REPORT: A pilot plant for WA’s second rare earth metals mine is helping broaden the state’s resources horizons.
George Bauk drew threads from a range of sources as he stitched together the deal to fund the $56 million pilot plant at Browns Range, which is expected to become the state’s second rare earths mine.
Mr Bauk, the managing director of Northern Minerals, told Business News a variety of funding sources was needed in the current competitive financing market.
See more in the mining projects special report.
The Browns Range project comes amid growing demand for rare earths, with advances in engineering and technology adding urgency to mine development as some end-users seek to diversify supply sources.
Mr Bauk said securing finance for a rare earths project was more difficult than for traditional resources such as base metals or gold, with banks less inclined to support non-mainstream commodity projects.
“A lot of projects that are away from the mainstream, where banks can’t see a terminal market, where they can’t see clear transparent pricing and they can’t put facilities in place to hedge … they’re very difficult to bank finance,” Mr Bauk said.
“You really have to look at alternative funding strategies, so a lot of equity; we’ve seen the introduction of financing from our engineering, procurement and construction contractor.
“Sinosteel has put in up to $11 million of deferred payment, with the ability to convert into equity.
“We’ve also seen our offtake sales agreement partner doing the same thing, giving us a prepayment of $10 million and having the ability to have that paid over the back half of the project through sales or conversion to equity.”
The offtake partner was Chinese business Lianyungang Zeyu New Materials Sales Co, he said.
A final element of the financing equation was the federal government’s research and development tax credit scheme, which is paid quarterly, and for which Northern set up a factoring facility to smooth out cash flow.
Mr Bauk said it was vital that Northern demonstrated the potential of the ore body and that the pilot plant was a success, de-risking the operation and ensuring future financing was easier.
The project, located near Halls Creek, would be WA’s second, following a light rare earths mine opened in 2011 by Lynas Corporation at Mt Weld – an operation that has struggled with both a soft market and processing issues.
Mr Bauk said while there were lessons to be learned from the Lynas experience, the projects produced different metals.
There are approximately 20 rare earths elements, making it a fairly broad grouping, with the deposit at Browns Range containing heavier metals than those found at Mt Weld, including dysprosium and terbium.
A third rare earths hopeful located across the border in the Northern Territory has a different mix of metals again.
Arafura Resources general manager exploration and development, Richard Brescianini, told Business News that work on environmental approvals for the company’s Nolan’s project was in the latter stages, while a definitive feasibility study would be planned for next year.
Mr Brescianini said most of the value in the project, which is forecast to cost nearly $US700 million, would come from production of neodymium and praseodymium, with additional value from dysprosium, all of which are used in magnets.
And much like other tech metals used in batteries, he said greater worldwide adoption of electric vehicles would lift demand for neodymium and praseodymium, in particular.
“The market for magnets is already dominated by the automotive sector,” Mr Brescianini said.
“Of the 50,000 tonnes of magnets produced per annum, and these are 2014 figures, just over 30,000 tonnes go into the automotive sector.
“It already dominates that particular application, but it’s also growing somewhere in between 8 and 10 per cent per annum.”
The average car had about 700 grams of neodymium and praseodymium in magnets, he said, used to operate parts such as the windscreen wipers and for seat adjustment.
Electric cars will have magnets in the motor and drive train, Mr Brescianini said, which would increase use of the magnetic rare earths by around 1 kilogram per vehicle.
There are applications in other sectors, however, with about 150kg of the metals used for every megawatt of wind turbines installed.
All that has led the company to forecast a supply gap of nearly 10,000t by 2025.
Sills Strategic Materials executive director Robert Sills said that, while the take-up of electric vehicles was driving current demand, manufacturers, particularly in Japan, were keen to diversify supply sources.
Part of that was through engineering improvements, which Mr Sills forecast could eliminate the need for both dysprosium and terbium.
“The major manufacturers of these (neodymium and praseodymium) magnets … are actively pursuing risk mitigation strategies in reducing their reliance on the other rare earths such as dysprosium and terbium,” he said.
“These manufacturers, in turn, supply the rest of the world, namely the EU and the US.
“It is likely that engineering improvements will lead to an elimination for their requirement for dysprosium and terbium.
“The risk is that by the time local producers commence production, the requirement for dysprosium and terbium would have been engineered from the process.
“Manufacturers need rare earths supply now, not in two to three years.”
Northern's Mr Bauk said processes that were in development to reduce reliance on dysprosium and terbium had issues upscaling and were not attracting much interest at current prices.
He said he had had continued interest from Japanese players for involvement in the project, while some in China were looking to grow the number of applications for the metals.
A seperate portion of the market, lighter rare earths, would have an ongoing improvement in demand, according to Mr Sills.
He said a further potential rare earths mine in WA was Hastings Technology Metals’ Yangibana project near Gascoyne Junction, which has a high level of neodymium.
The company would be using a similar processing model to Lynas, Mr Sills said.
In early April, Sydney-based Hastings reported to the market that it had submitted an environmental impact assessment to the Environmental Protection Authority.
A definitive feasibility study is due for finalisation in the third quarter of this year.