Arafura spells out the facts

Just before Easter, a reader posed a number of questions about Arafura Resources and its Nolans REE project in the Northern Territory of Australia. The were far more detailed than we could answer, so we sent them on to the company. Now the company’s exploration manager, Richard Brescianini, has taken the time to spell out the answers. They, preceded by the original questions, now follow.

1. Is Arafura Resources (ASX:ARU) two years from production of concentrates, or metals and oxides as well?

ARU is on track to produce separated rare earth oxide (REO) products from our rare earths complex in Whyalla, South Australia, from the latter part of 2013. The feed to this complex, in the form of mineral concentrate, will come from ARU’s Nolans Bore mine in the Northern Territory. There are no plans at this point for ARU to move further downstream into producing metals or metal alloys.

2. Have they produced sample oxides and metals from their mine at the lab or bench scale?

ARU successfully produced a mixed rare earth carbonate at pilot plant scale (see http://clients.weblink.com.au/clients/Arafura/article.asp?asx=ARU&view=6440643) in 2009 at the Australian Nuclear Science & Technology Organization’s (ANSTO) facility in Sydney, Australia. This material is feedstock to a current technology work stream, also being completed at ANSTO, to produce separated REO products at both lab (initially) and mini-plant scale for potential customer assessment (see the following for progress updates: http://clients.weblink.com.au/clients/Arafura/article.asp?asx=ARU&view=6505031, and http://clients.weblink.com.au/clients/Arafura/article.asp?asx=ARU&view=6523397).

3. Is the plan still to build an estimated billion dollar processing facility in Australia?

Yes. CAPEX estimated at around A$950 million will cover both the Nolans Bore mine and the Whyalla Rare Earths Complex (i.e. processing facility). Further details on CAPEX (and OPEX) are outlined on slide 26 “As it is today – October 2010” in: http://clients.weblink.com.au/clients/Arafura/article.asp?asx=ARU&view=6509007).

4. Of the planned production, how many metric tonnes of HREEs will they be producing?

Of planned production of 20,000 tonnes of REO per annum from the Nolans project, and considering the Nolans Bore rare earths composition, ARU will produce approximately 388 tonnes of HREE per annum (HREEs are Tb, Dy, Ho, Er, Tm, Yb, Lu and Y).

5. Are qualified people readily available in Australia to implement the mine and processing plant design? Many people are talking about qualified labour issues in the RE space.

As part of the Nolans Project bankable feasibility study, ARU has already engaged suitably qualified people from Lycopodium, Parsons Brinkerhoff, AMEC Minproc to advance engineering design for both the Nolans Bore mine and Whyalla Rare Earths Complex. See http://clients.weblink.com.au/clients/Arafura/article.asp?asx=ARU&view=6533664 for further details.

Also note that as ARU’s technology has been developed principally in Australia, we are not dependent on overseas know-how. We have expanded our leadership team with the appointment of very experienced operational and project senior management.

6. Lastly, what are the environmental constraints like in Australia? Radioactive mining just got shot in the foot with China, so what does ARU plan to do with the radioactivity?

Australia’s environment protection laws, both at a federal and state/territory level, are well understood by ARU, and we feel confident that all aspects our mining and processing operations, including transport and storage of radioactive materials, will comply fully with the relevant environmental regulations. Environmental impact statements are currently being prepared for our Nolans Bore mine and Whyalla Rare Earths Complex.

The jurisdictions within which ARU will operate the Nolans rare earths project – the Northern Territory and South Australia – currently hosts all of Australia’s uranium production, from mining through to export. In addition, Australia has decades-long experience in the safe management and regulation of thorium-bearing monazite tailings from its many mineral sands operations. In short, Australia’s record in regulating resource developments that contain radioactive minerals, from environmental, health and safety perspectives, can be considered world’s best practice.

All rare earth deposits contain some uranium and thorium. The amounts present vary depending upon the mineralogy of the deposit. ARU’s approach to management of these is to always be fully compliant with regulations and is firstly, where possible, to convert them into revenue streams and, where this is not possible, to handle them in a manner which is environmentally acceptable.

ARU’s Nolans Bore deposit contains about 0.27% thorium and 0.02% uranium. ARU’s business model is to produce 150 tonnes of uranium oxide per annum for sale which provides a revenue stream solution for uranium. For thorium we are proposing to use a “closed loop model”. We will remove the thorium, as an iron-thorium precipitate, as part of the chemical process used to recover REO at the Whyalla Rare Earths Complex. The current plan is to rail transport this precipitate from Whyalla back to the Nolans Bore mine (from where it originated) for long-term management and secure storage. We believe there may be a medium- to long-term market for thorium as an energy source.