Highly competitive operating costs makes Nolans Project distinctive

Asian Metal: Thanks for accepting the interview of Asian Metal, Lloyd! Would you please introduce your company firstly?

Lloyd: Thank you for the opportunity, Vivian.
Arafura Resources is an Australian Securities Exchange-listed company (code ASX:ARU) headquartered in Perth, Australia, and with a smaller office in Darwin. The company’s market capitalization is about A$50 million. The company’s primary focus is on developing the Nolans Neodymium-Praseodymium (NdPr) project in Australia’s Northern Territory, but we also own 60% of an exploration project to develop tungsten and base metal opportunities. We have 18 technical, financial, commercial and marketing people on staff between the two offices.

Asian Metal: Would you like to give a brief introduction of your Nolans Neodymium‐Praseodymium Project?

Lloyd: The Nolans NdPr project is located about 135 kilometres NW of Alice Springs. We have defined a sizeable resource base at Nolans of 56 million tonnes @ 2.6% TREO and 11% P2O5, containing 384,000 tonnes of NdPr oxide. Our plan is to mine and recover four rare earth products (NdPr, La, SEG-HRE-Y, Ce), and a merchant-grade phosphoric acid (MGA) co-product, at the Nolans site. We anticipate delivering the results of a definitive feasibility study (DFS) for the project at the end of 2018, to coincide with completion of large-scale piloting of the process flow sheet which, to date, has met all our expectations with regards to equipment performance, materials handling and NdPr recovery. The basis of the DFS is for annual production of 14,000 tpa of TREO, including 3,600 tpa of NdPr oxide.

Asian Metal: May I know what's do you think as the advantage of Nolans Neodymium‐Praseodymium Project? What's the development prospect in the coming years? What's you do see as the major challenge?

Lloyd: The Nolans NdPr project has several advantages over all other NdPr development projects:
1. Its location with regards to existing infrastructure: sizeable population centre (135 km away), transnational highway (10 km), transnational rail (135 km), energy (operating natural gas pipeline runs through the project site), and water (large groundwater system within 30 km)
2. Long mine life (>30 years) at planned production rates
3. Outstanding representation of NdPr in the resource (26.4% of rare earths composition)
4. Highly competitive operating costs at US$24.40/kg of NdPr oxide (or US$6.20/kg of TREO)
5. Product diversification via MGA production
6. State/Federal environmental approvals secured, including the disposal and management of all radioactive tailings and process residues at the Nolans site
7. Strong State/Federal government support via Major Project facilitation services.

First production is planned for 2021, subject to procuring project finance. This positions the project to take full advantage of an anticipated supply shortfall of NdPr in the early-2020s as NdFeB magnet manufacturers respond to rapidly expanding global demand for widespread electrification of the transport and energy sectors.

The major challenge for the project is the large capital requirement of US$680 million.

Asian Metal: I noticed that Arafura Resources has started the major geotechnical program at Nolans Neodymium‐Praseodymium Project recently. May I know what information you got from the program?

Lloyd: The purpose of the recent geotechnical program at the Nolans site was to confirm suitable ground conditions for the construction of processing plant and related infrastructure, including tailings/residue dams. The program comprised drilling and excavation of shallow pits to acquire material for relevant geotechnical tests.

Asian Metal: The Chinese PrNd oxide prices climbed up in this Q1 but showed downward trend in general in Q2 and early Q3. The prices picked up slightly in early September. The current prices stand at RMB320,000-325,000/t (USD46,784-467,515/t) EXW D/P, down by 6% from late Q2 but still around 7% higher than early this year. Actually, the current prices stand at similar levels of those in Q3 of 2013. The market witnesses limited buying activities now due to the soft demand from NdFeB magnet industry. Would you like to share your opinion about the PrNd oxide demand and price trend in the remainder months of this year?

Lloyd: The price of PrNd is rangebound and driven by seasonal demand changes and market availability, and the remaining year should create buying opportunities at current prices. Recent quota increase allowed the magnet industry the comfort of sustainable supply and prices for the medium term, and with aggressive plans to expand in the next few years will place further pressure on PrNd prices.

Asian Metal: As we all know that the EV and HEV industries are the major and promising downstream industries of PrNd. How do you think about the development prospect of EV and HEV industries?

Lloyd: The future global growth trend for EV/HEV is exciting for the rare earth industry and its participants, and this end use application is likely to be the growth market for rare earth permanent magnets and consumption of PrNd going forward. All major automakers are announcing fleet expansions into EV/HEV for global passenger vehicles, representing a large growth opportunity for NdFeB permanent magnets and PrNd. Global policy to control carbon emissions in the next decade has created a revolution towards electrifying vehicles and most countries along with China have implemented plans and timetables to reduce carbon emissions and forgo dependence on fossil fuels.

Asian Metal: May I know your opinion about PrNd oxide demand in the coming years? Are you optimistic about the market in the coming years?

Lloyd: Global demand for PrNd is driven by demand for NdFeB permanent magnets, and the vast array of end use applications for magnets is growing with most analysts reporting CAGR of 8-10% per annum. The strong global demand for PrNd will place more pressure on global supply and also on China’s ability to supply the rest of the world, leading to opportunities for alternative supply outside of China to meet this growing demand.

Asian Metal: Thanks for your time and support for Asian Metal. Wish you every success in your business.

Lloyd: Thank you for the opportunity to speak with the Asian Metal audience, Vivian.