Arafura Resources Ltd (ASX:ARU) (OTCMKTS:ARAFF) (FRA:REB) continues to work on optimising the Nolans Neodymium-Praseodymium (NdPr) Project in the Northern Territory of Australia in parallel with offtake and project funding activities.
As offtake and project funding discussions continue to progress constructively, the Nolans Project Team has been working to optimise the project execution strategy and in recent weeks, has settled on several changes.
A review of the Nolans Project has also led to deferral of cerium production to allow focus on ramp-up of production of on-specification high-value NdPr and to offset the risk of downward pressure on cerium prices.
Further project updates incorporating revised capital and operating cost estimates are expected this quarter.
Managing director Gavin Lockyer said: “The Nolans Project is shovel-ready and we are continuing to look at ways to optimise its delivery whilst the required funding is put in place.
“Arafura’s ore to oxide model is a differentiator from other companies that are only proposing to produce concentrates or intermediate products for processing elsewhere, and the feedback we’ve received from customers and financiers indicates strong support for that approach and for the shift to the more traditional FEED model for the project.”
Incorporating feedback from potential contracting, offtake and financing partners, the integrated project management team (IPMT), which includes KBR and Wave International personnel, recently conducted a review of the Hydrometallurgical Plant execution strategy.
Combined with the increasingly positive outlook for NdPr pricing and the traction being gained in offtake discussions, the review has given Arafura the confidence to modify the execution strategy to a traditional detailed front-end engineering and design (FEED) model.
The main aspects of the FEED model are:
- Contracts for the engineering and procurement (engineering contractor) and the construction will be split;
- Detailed FEED will be completed by the engineering contractor to approximately 60-70% of design completion prior to tendering of construction;
- Significant procurement of equipment will be completed ready to place orders at the end of FEED;
- Engineering contract will be carried on rates to a target cost and will include performance and design warranties for the plant; and
- Tendering of other contracts (beneficiation plant, acid plant and non-process infrastructure) will be undertaken in parallel with FEED.
Changes in execution strategy
The change in execution strategy is expected to increase the project delivery schedule by around eight months to allow for the 12-month FEED/tendering program along with some project expenditure incurred prior to FID.
This also enables Arafura to advance offtake and financing discussions by reducing execution risk and allowing for construction tenders to be received prior to FID.
The contracting strategy for the other aspects of the project, which include the beneficiation plant, sulphuric acid plant and non-process infrastructure, remains unchanged.
Arafura is investigating options for Federal Government grants to assist with funding of this FEED program and recently applied for a grant though the Modern Manufacturing Initiative (MMI).
Deferral of cerium production
Arafura has made the decision to defer cerium production from the product mix at Nolans until after commissioning of the processing plant is complete and production has ramped up to full capacity.
The deferral of cerium production is not material to project returns.
As part of ongoing optimisation work, it was identified that the production of cerium delivered limited value to the project.
Coupled with low current spot prices, there is uncertainty over a potential future oversupply of cerium as additional rare earths projects come online to meet increasing NdPr demand, placing further downward pressure on cerium prices.
Deferring the production of cerium will allow Arafura to focus on the production of on-specification neodymium-praseodymium oxide, which is a higher value product and represents 95% of project rare earth revenue.
It will also allow for additional marketing efforts to identify potential customers that may be willing to pay a premium for Nolans’ sustainably produced cerium oxide and for further metallurgical test work.
The Nolans Project team continues to work on a further project update that will provide revised capital expenditure and operating expenditure estimates for the project based on the changes detailed above as well as the updated ore reserve and mining inventory.
The update, which is expected to be finalised in May, will also incorporate revised product pricing based on the latest market research and input from early engineering works completed by several tier-one engineers and constructors.
Story by ProactiveInvestors
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