ASM signs Joint Statement of Cooperation on Critical Metals with KOMIR (KORES)

Australian Strategic Materials Limited (ASX: ASM) is pleased to announce that it has signed a Joint Statement of Cooperation with the Korean Mine Rehabilitation and Resource Corporation (KOMIR), the renamed Korean Resources Corporation (KORES), to enable the supply of critical minerals and metals into Korea.

Under the Joint Statement of Cooperation, ASM and KOMIR have agreed to work together to expand the use of rare earths and critical metals in Korea and develop import opportunities that will secure the supply of these metals for Korean industry.

ASM Managing Director, Mr David Woodall, said:

“This builds on the cooperative and collaborative relationship between Korea and ASM, creating further opportunities to engage on the strategic issue of critical minerals and metal supply.”

“This Joint Statement of Cooperation is another firm sign of Korea’s commitment to securing its supply of critical metals and to working with ASM to deliver an outcome that is beneficial to the Korean supply chain.”

“ASM welcomes this opportunity to work with KOMIR to provide an alternative, secure and sustainable supply of critical metals. ASM will commence production of critical metals at ASM’s Korean Metals Plant in 2022.” 

CEO of KOMIR, Kyu-yearn Hwang, said:

“To improve the supply and demand of rare earths in South Korea, the South Korean government supports the operation of South Korean critical metals plants. Partnering with ASM will enable us to deliver on our strategy to ensure a stable, secure supply of critical minerals and metals for the South Korean industry.”

The key areas contemplated for cooperation under the Joint Statement of Cooperation include:

  • Importation of rare-earth products into Korea, including for strategic stockpiling.
  • Supplying ASM with rare-earth products to enable Korean domestic production of rare-earth magnet feed metal at ASM’s Korean Metals Plant.

The term of the Joint Statement of Cooperation is for five years, and the term will automatically extend for an additional one-year period unless the parties agree otherwise.

Under the Joint Statement of Cooperation, both ASM and KOMIR have a right to terminate the agreement on three months written notice to the other party.

KOMIR is the Korean Government Agency responsible for national resource security, including developing overseas mining and processing capacity to supply the Korean market. One of KOMIR’s strategic objectives is to upgrade the country’s access to critical minerals.

 

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Dubbo Project Optimisation Delivers Strong Financials

Key points

  • Optimisation Work for Dubbo Project confirms a strong expected rate of return with pre-tax NPV of AUD 2,361 million, pre-tax IRR of 23.5%, and annual free cash flow (full ramp-up) of AUD 425 million
  • Capital cost estimate of AUD 1,678 million consisting of direct capital of AUD 1,307 million, indirect capital of AUD 208 million, and a contingency of AUD 163 million
  • Forecast annual operating cost of AUD 287 million
  • Forecast based on 20-year life of mine at 1Mtpa plant feed rate based on existing ore reserves. Measured and Inferred mineral resources, which have the potential to extend the mine life, have been excluded for this study
  • Oxides of zirconium, hafnium, niobium, didymium (i.e. neodymium and praseodymium), dysprosium and terbium to be produced
  • Inclusion of major infrastructure to optimise environmental, social and governance (ESG) performance and deliver operating cost savings

Australian Strategic Materials Ltd (ASX: ASM or the Company) is pleased to confirm strong financial results as an outcome of the Optimisation Study and Enhanced Project Addendum (Optimisation Work) for the Dubbo Project (Dubbo Project). The Optimisation Study was based on Alkane Resources Ltd’s optimisation study released to the market in 2018 (ALK: ASX Release 4 June 18 Dubbo Project Engineering and Financials Update) (2018 ASX Release). A summary of the outcomes of the Optimisation Work is included at the end of the ASX announcement entitled Dubbo Project: Project Summary (Project Summary).

The revised financials are based only on the initial ore reserve of 18.9 Mt. Substantial additional measured and inferred mineral resources beneath the ore reserve are excluded from this study.

The Optimisation Work simplifies the Dubbo Project process flow sheet and incorporates new operating strategies that will reduce operating costs and improve the ESG performance of the Dubbo Project. These strategies now include increasing the brine concentrator capacity (halving water consumption), refurbishment of the railway line (which simplifies project logistics and will provide new categories of local entry-level jobs) and development of a chlor-alkali plant (which reduces the cost of reagents and their handling and transportation). These strategies facilitate ESG benefits by reducing water consumption, reducing the handling and quantum of process chemicals, and reducing the number of trucks on local roads, required for the Dubbo Project.

The updated Dubbo Project base case for the 20-year life of mine is expected to achieve a pre-tax NPV of AUD 2,361 million and a pre-tax project internal rate of return of 23.5%. This is a pre-tax IRR improvement of 6.0% compared to the 2018 ASX Release.

ASM Managing Director David Woodall said, “I am delighted with the outcomes of the Optimisation Work which demonstrates the financial strength of the Dubbo Project and ASM’s focus on a sustainable future delivering improved performance and ESG outcomes.”

Deputy Prime Minister of South Korea visits ASM Korean Metals Plant as hot commissioning begins

Australian Strategic Materials Limited (ASX:ASM) is pleased to announce that commissioning has begun at its Korean Metals Plant in Ochang Province, South Korea, marked by a visit to the plant by Deputy Prime Minister of South Korea, Mr Hong Nam-ki.

Australian Strategic Materials has commenced hot commissioning on its neodymium furnace. This included firing up the plant’s furnaces, processing feed material and casting the plant’s first ingots of neodymium metal.

This represents the first phase of commissioning activities, with additional modules of the Korean Metals Plant undergoing construction and installation. These first phase commissioning activities are planned to continue through the first half of 2022, with the full scale, 5200 tpa plant due for completion in the second half of calendar year 2022.

South Korean Deputy Prime Minister, Mr Hong Nam-ki meeting with representatives from the ASM Korean Metals Plant, South Korea.

Updated production guidance will be provided once the first phase of commissioning is complete.

Australian Strategic Materials Managing Director, David Woodall said the hot commissioning milestone was an important one for the company as it moves towards the completion of the Korean Metals Plant.

“The team in South Korea has worked tirelessly to put us in a position to start commissioning activities at the Korean Metals Plant, despite the logistical and supply constraints as a result of covid. Although, we have more work to do to complete the installation of the facility and commission the full plant, this is a great early sign that our plant is working as expected for this stage.”

“Australian Strategic Materials is moving closer to producing commercial quantities of titanium and permanent magnet alloy, as part of our strategy to provide an alternative, secure supply chain for critical metals.”

“We were also extremely honoured to have Deputy Prime Minister Mr Hong Nam-ki visit us at this significant stage for the business.”

Presentation of ASM metal samples to South Korean Deputy Prime Minister, Mr Hong Nam-ki.

Quarterly Activities Report to 30 September 2021

Highlights
  • Signing a $US250m framework agreement with South Korean consortium for 20% interest in Dubbo Project and offtake from Korean Metals Plant (ASX Release 21 July 2021: Framework Agreement for 20% stake in Dubbo Project and Offtake)
  • Construction of the Korean Metals Plant continuing, commissioning planned to commence before calendar year end
  • The Dubbo Project optimisation study is being finalised, with results to be released on completion of final reporting
  • Inclusion in the S&P ASX/300 Index effective 30 September 2021 (S&P DJI Index Announcement 3 September 2021: S&P DJI Announces September 2021 Quarterly Rebalance)
  • Appointing ANZ as financial advisor for the debt financing of the Dubbo Project (ASX Release 6 October 2021: Dubbo Project Finance Update)

ASM’s Managing Director, David Woodall, said:

“As the global energy transition continues, so does the global need for an alternative, reliable supply of critical metals and during the quarter we took a significant step towards meeting that demand by signing a Framework Agreement with a consortium of Korean businesses that creates a pathway towards financing the Dubbo Project.

Progress has been made to support the completion of the due diligence on the Dubbo Project under the Framework Agreement, and for preparations to commence commissioning the Korean Metals Plant before the end of the year. While the impact of the delta variant of COVID-19 has slowed completion of our planned activities, I am proud of our Korean and Dubbo Project teams on what they have achieved in trying times. 

We are close to finalising the outcomes of the Dubbo Project optimisation study and look forward to updating the market with these outcomes. We continue to progress opportunities with Australian and Korean engineering and construction companies, including to provide key infrastructure and equipment planned for the Dubbo Project.

I have just spent 4 months in Korea to continue the progression of our development of delivering our “mine to metal” business. Looking ahead, ASM will continue to work with our Korean partners to progress the equity investment into the Dubbo Project; commission the Korea Metals Plant; and continue our discussions with financiers and potential offtake partners for our high purity, low emissions metals products.”

Dubbo Project Finance Update

Technical due diligence of the Dubbo Project occurring under the Framework Agreement with the Investing Partnership of Korean private equity firms (ASX Announcement: 21 July 2021) has advanced with significant effort made by both parties. However, due to Covid19 travel restrictions between Australia and Korea and on travel within Australia, and the extensive scope of the technical due diligence, the due diligence has not been completed by Q3 2021 as initially anticipated and is continuing to be progressed.

Separately, to facilitate the financing of the Dubbo Project, ASM has appointed Australian and New Zealand Banking Group Limited (ANZ) as debt financial advisor. ASM made this appointment based on ANZ’s experience and strong relationships in both Australia and Korea, including with Australian and Korean export finance agencies. The ANZ appointment is both necessary and timely as ASM is engaging with those agencies as part of the financing of the Dubbo Project.

ASM Managing Director David Woodall said, “The Framework Agreement is one part of the financing of the Dubbo Project, ANZ’s appointment facilitates further engagement with debt providers that include Australian and Korean export finance agencies. We continue to progress the financing of the Dubbo Project, the development of which will provide an alternate, sustainable, secure, and stable supply of high purity and clean critical metals directly into the Korean manufacturing sector.”

“We look forward to updating the market as we continue to progress the transaction.”

ASM welcomes Australian Clean Energy Summit in 2022

Australian Strategic Materials Limited (ASX: ASM) welcomes Prime Minister Scott Morrison’s comments from Washington DC over the weekend following the Quadrilateral Security Dialogue.

Speaking from outside the White House at the end of the Quad meeting of leaders, Mr Morrison said Australia would host a clean energy summit next year under the Quad umbrella that would inform the development of a clean energy strategy, including Australia’s role in the supply of critical minerals in the Indo-Pacific region.

The Australian Prime Minister, said it would be an “applied summit” focusing on expert research and technology and would aim to deliver a roadmap to transfer scientific knowledge on clean energy to countries in the Indo-Pacific region. Importantly, Mr Morrison said the Quad country (USA, Australia, Japan and India) leaders recognised the role Australia can play in the supply of critical minerals to support energy and other technologies.

ASM Managing Director, David Woodall, currently in Europe meeting with manufacturers who require rare earth metals and alloys said, China currently supplies the majority of rare earth metals and alloys for the manufacture of electric vehicle components, electronics (semiconductors), communications, aerospace and defence.

“A critical materials strategy with clear objectives and actions will ensure an alternate, stable and secure supply of these critical materials and, importantly, will help to de-risk the global supply chain” said Mr Woodall.

Based on the initial comments by the Prime Minister, it would appear that the clean energy summit envisaged by the Quad is aligned with ASM’s strategy, which includes the construction of our first metal plant in South Korea, with commissioning to commence before the end of 2021.

Delivery of ASM’s Vision 2025 strategy will see the Dubbo Project in NSW producing four critical materials – zirconium, rare earths, niobium, and hafnium, and the target of establishing three additional critical metals production plants, located strategically in the manufacturing hubs of Australia, Europe and North America.”

“We look forward to learning more about the planned clean energy summit in 2022 and to working with the Federal Government on positioning Australia in the global supply of critical metals,” Mr Woodall concluded.

Change of Joint Company Secretary

ASM is pleased to announce that Julie Jones, ASM’s General Counsel, has been appointed Joint Company Secretary, effective immediately. Dennis Wilkins will remain as Joint Company Secretary with Ms Jones.

Ms Jones is an experienced General Counsel and Company Secretary with a strong background in mining and manufacturing, and has more than 18 years of legal, commercial, strategic, and corporate governance experience. Most recently, Ms Jones was General Counsel and Company Secretary for Matrix Composites and Engineering Ltd.  Ms Jones’s other past roles include General Counsel and Director of People at the Chamber of Commerce and Industry WA, and Corporate Counsel at Iluka Resources Ltd.

As part of the change, James Carter has resigned from his position as Joint Company Secretary.

ASM Managing Director David Woodall said that Mr Carter was instrumental in steering ASM through the de-merger from Alkane Resources and its listing on the ASX.

“On behalf of the Board I thank James for his important contribution and loyalty to ASM, and to Dennis for his ongoing work for the Company,” Mr Woodall said.

“I also congratulate Julie Jones on her appointment. Julie brings a wealth of experience across a range of industries that will be invaluable as we progress the Dubbo Project, and complete the conditions under the Framework Agreement with the South Korean Investing Partnership.”

Quarterly Activities Report to 30 June 2021

Highlights

ASM continued to execute its “mine to metal” strategy:

ASM’s Managing Director David Woodall said ASM was at a critical stage of its evolution as key projects matured and major milestones were reached.

The last quarter and the period since then have been transformational for ASM, with key financial support from the Australian Government, the backing from investors for our equity raising, and the Framework Agreement with the South Korean Investing Partnership that sets us on a path to realising our ‘mine to metal’ vision,” Mr Woodall said.

I’d like to thank shareholders for their support of our equity raising, which puts us in a very strong position to pursue the great opportunities we have to create an alternative supply chain for the critical metals that will power modern industries such as electric vehicles, renewable energy and aerospace.

“I’m also very pleased that we have recruited a high-calibre leadership team that is working with me and the Board to drive ASM’s future. Looking forward, we expect to start production from our relocated pilot metals plant in Korea next quarter, while building towards the completion of the Korean Metals Plant. We will also complete the optimisation study for the Dubbo Project.

Most importantly, we will be working with our new Korean partners to complete the conditions of our Framework Agreement, which will ultimately provide us with $250m of equity for the Dubbo Project, and a foundation customer for strip metal alloy from our Korean Metals Plant.

Post the close of the June Quarter, on 21 July 2021 ASM announced US$250m framework agreement with South Korean consortium for 20% in Dubbo Project and offtake from Korean Metals Plant (ASX Release 21 July 2021: ASM signs $US250m framework agreement with South Korean consortium for 20% in Dubbo Project and offtake from Korean Metals Plant).

Image of signing ceremony for the Framework Agreement. Attendees from L to R: Ms Catherine Raper, Australian Ambassador to the Republic of Korea; Mr David Ko, CEO of ACE Equity Partners LLC; Mr PS Ra, CEO of Cerritos Holdings Co., Ltd; Mr Jerry Kwak, CEO of Kamur Partners LLC; Mr Ian Gandel, Chair of ASM; The Honourable Mr Dan Tehan, Australian Minister for Trade, Tourism and Investment; and Mr David Woodall, Managing Director of ASM.

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ASM signs $US250m framework agreement with South Korean consortium for 20% in Dubbo Project and offtake from Korean Metals Plant

ASM (the Company) has entered into a conditional exclusive framework agreement (Agreement) with a consortium of South Korean Investors to subscribe for a 20% equity interest in Australian Strategic Materials (Holdings) Ltd (ASMH) for a subscription price of US$250m (equivalent to AU$340m based on current exchange rates) (Proposed Transaction). ASMH is a wholly owned subsidiary of ASM and is the holding company for ASM’s Dubbo Project.

Key points

  • ASM has signed a conditional framework agreement with a consortium of South Korean investors for the acquisition of a 20% equity interest in ASM’s Dubbo Project holding company.
  • Under the Agreement a consortium fund will invest $US250m for the 20% equity interest.
  • The Investing Partnership intends to establish a second fund to develop a domestic Korean permanent magnet manufacturing business that will enter into an offtake agreement for NdFeB (neodymium-iron-boron) alloy from ASM’s Korean Metals Plant.
  • The Agreement creates a pathway for ASM to develop the Dubbo Project and execute its ‘mine to metal’ strategy.

The Agreement includes provision for a ten-year offtake agreement for up to 2,800tpa of NdFeB (neodymium-iron-boron) alloy from ASM’s Korean Metals Plant (KMP), which is currently under construction in Ochang, South Korea (Proposed Offtake Agreement). The volumes outlined in the Proposed Offtake Agreement anticipate 100% of the neodymium oxide planned to be produced at the Dubbo Project being the primary source of feed to the KMP post the completion of construction.

The Investing Partnership comprises three respected South Korean private equity firms (none of which are related to the Company): Cerritos Holdings Co., Ltd, Kamur Partners LLC and ACE Equity Partners LLC (the Investing Partnership). The Investing Partnership intends to establish a South Korean consortium fund (Consortium Fund) for the purposes of the acquisition of the 20% equity in ASMH. Further, the Investing Partnership intends to form a separate consortium fund to establish and develop a permanent magnet manufacturing business in South Korea (MagnetCo Fund). MagnetCo Fund will be the counterparty to the Proposed Offtake Agreement.

The Investing Partnership will arrange investment into the Consortium Fund which is expected to include strategic investment from major Korean industrial companies. Under the Agreement, the subscription funds are payable to ASMH on satisfaction of the conditions. The funds are intended to be used by ASMH, in combination with other funding sources, to progress the development of the Dubbo Project.

The Agreement represents an important contribution of financial support for the Dubbo Project, a proposed long-term polymetallic resource development containing rare earths, zirconium, niobium, and hafnium, all critical metals essential for advanced and clean technologies. ASM recently announced conditional finance support from Export Finance Australia (EFA) (ASX Announcement 28 June 2021).

ASM Chair, Ian Gandel, said: “I am truly delighted that the vision shown by the whole ASM team to become a leading global supplier of critical metals is bearing fruit. I would like to thank the Non-Executive Directors comprising Ian Chalmers, Nic Earner and Gavin Smith for their significant and valued contribution to ASM. In particular, I would like to acknowledge the loyalty and commitment that Ian Chalmers has shown to the Dubbo Project over the past 25 years. I would also like to thank our Managing Director, David Woodall, for his dedication and persistence to deliver this incredible opportunity during the Covid19 pandemic.

“We welcome the encouragement received from the South Korean business community and Government, which are grounded in strong relationships. We would also like to thank the Australian Government for its interest and support for our projects. We look forward to finalising arrangements with the Investing Partnership and funding entities as soon as possible and delivering on ASM’s ‘mine to metal’ strategy.”

ASM Managing Director, David Woodall, said: “In opening a financing pathway for the Dubbo Project, this Agreement heralds an exciting new phase in ASM’s growth and puts us one step closer to executing our ‘mine to metal’ strategy.

 “We are delighted our new South Korean partners have recognised the mutual value of the strategic investment opportunity represented by our integrated manufacturing capability that offers a new, cleaner source of critical metals and alloys to a rapidly expanding market. Cementing our ties with South Korea’s advanced manufacturing sector represents an incredible opportunity to create value from our Dubbo Project.”

CEO of Kamur Partners LLC, Jerry Kwak, said: “We are very proud to be associated with this strategically important project that will give rise to significant upstream and downstream benefits for both Korea and Australia, ushering in new opportunities for downstream permanent magnet product manufacturing.”

ASM and the Investing Partnership will now work towards finalising the conditions before completing the Proposed Transaction and Proposed Offtake Agreement by the end of 2021.

Signing ceremony for the Framework Agreement. Attendees from L to R: Ms Catherine Raper, Australian Ambassador to the Republic of Korea; Mr David Ko, CEO of ACE Equity Partners LLC; Mr PS Ra, CEO of Cerritos Holdings Co., Ltd; Mr Jerry Kwak, CEO of Kamur Partners LLC; Mr Ian Gandel, Chair of ASM; The Honorable Mr Dan Tehan, Australian Minister for Trade, Tourism and Investment; and Mr David Woodall, Managing Director of ASM.

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