Dubbo Project Optimisation Delivers Strong Financials

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Dubbo Project Optimisation Delivers Strong Financials

Posted on by Tim Highley

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.”

View ASX Announcement and Project Summary

Quarterly Activities Report to 30 September 2021

Posted on by Tim Highley
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.”

View Full Quarterly Report

ASM welcomes Australian Clean Energy Summit in 2022

Posted on by Tim Highley

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

Posted on by Tim Highley

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.”

View ASX Announcement

Quarterly Activities Report to 30 June 2021

Posted on by Tim Highley

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.

Download the Full Quarterly Report

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

Posted on by Tim Highley

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.

Download the Full ASX Announcement

 

ASM boosts leadership team ahead of key decisions

Posted on by Tim Highley

ASM is pleased to announce key leadership appointments to drive the Company’s progress towards the implementation of its “mine to manufacturer” strategy in the production of critical metals, including rare earths for advanced manufacturing.

Chief Operating Officer – Rowena Smith

Rowena Smith joins ASM from her former role with South32 as the Chief Sustainability Officer accountable for the sustainability strategy and business processes, including HSE standards, enterprise risk management systems, and climate change.

Rowena brings over 28 years of global mining experience and has held various senior roles in strategy, commercial, and operations, including Vice President Supply at South32 and General Manager Kwinana Nickel Refinery, BHP. Rowena’s early years were spent in operational leadership roles within Rio Tinto’s aluminium smelting business. Rowena holds a Bachelor of Commerce degree from the University of Western Australia and is currently the Chair of the Board for the Women and Infants Research Foundation.

Chief Financial Officer – Jason Clifton

Jason Clifton joins ASM from Woodside Energy Limited, where his most recent position was Senior Vice President Financial Services, responsible for Treasury, Tax, and Finance. Before Woodside, Jason worked in the banking industry, including roles as Chief Financial Officer of Bankwest and Chief Financial Officer of Westpac New Zealand.

Jason is a Board member at Volunteering WA, holds a Bachelor of Commerce from UWA, is a Fellow of the Institute of Chartered Accountants, a Fellow of the Financial Services Institute of Australia, and a Member of the Australian Institute of Company Directors.

General Counsel – Julie Jones

Julie Jones is an experienced General Counsel and Company Secretary with a strong background in mining and manufacturing. Julie has more than 18 years of legal, commercial, strategic, and corporate governance experience. Julie has significant experience in the areas of contract, employment, intellectual property, and mining law. Julie has comprehensive knowledge of all aspects of company secretarial matters, including the Corporations Act and ASX.

Most recently, Julie was General Counsel and Company Secretary for Matrix Composites and Engineering Ltd. Before this, Julie has held legal roles in the not-for-profit and mining industry.

President Asia – Frank Moon

Frank Moon has more than 25 years of experience in the metal and material industries, working in various global environments. He has been involved in international business development and global marketing and operation, where he held executive roles in South Korea, UK, Europe, USA, Japan, and China.

Mr. Moon is a Chemical Engineer from Sydney, Australia, and before joining ASM, he was operating as an expatriate in various regions. He has extensive experience working in and with South Korean Corporations and has provided consulting services to ASM for the last 18 months to assist with the development of the Ziron Tech metallisation process.

Chief Culture Officer – Tess Lackovic

Tess Lackovic is a senior people and culture executive with over 15 years’ experience within globally and locally listed mining, oil and gas, and manufacturing businesses. Holding a Bachelor of Science in Psychology and a Masters in Commerce, Tess has worked extensively in growth markets for organisations that have rapidly scaled their global operations, including Kentz, SNC Lavalin, BHP, BlueScope Steel, and several privately-held businesses.

Tess has built and led extensive teams to execute two of the biggest oil and gas construction projects in recent Australian history – Gorgon and Ichthys – and has executed multiple Greenfield expansions, complex Joint Venture partnerships, system transformations, and mergers & acquisitions in her career.

Chief Information Officer – Peter Simko

Peter Simko has over 30 years of experience in the resources, defence, and engineering industries working with companies including Clean TeQ, St Barbara, Tenix, Wiluna Mines, and WMC Resources.

He has expertise in technology, business systems, and business transformation, with a focus on business improvement, digital innovation, and project leadership.

Peter is also the founder and chair of a volunteer fundraising organisation called Rock Off MND, an annual live music event that raises funds and awareness for Motor Neurone Disease research. Peter’s qualifications include a Master of Business Administration from Deakin University, and he is a Member of the Australian Institute of Company Directors (AICD).

 

 

ASM’s Managing Director David Woodall said, “the Company is building its capability as it moves towards key decisions on the Dubbo Project in NSW, and the proposed Korean Metals Plant.”

“It’s a great reflection on the direction ASM is heading that we have been able to attract such a high calibre team to drive the business,” Mr. Woodall said.

“ASM is at the beginning of an exciting new phase as it moves towards critical decisions on financing, offtake, and equity for its projects. Our new leadership team will execute our vision to become a global, independent, and integrated critical metals producer by 2025.”

 

Download the ASX Announcement

 

Quarterly Activities Report to 31 March 2021

Posted on by Tim Highley

Highlights

ASM Metals Business

  • Successful production of pre-sintered permanent magnets, with properties and quality confirmed by the Korean Institute of Rare Metals (KIRAM).
  • A 75kg/day run of titanium (Ti) metal powder was successfully produced by Ziron Tech at a pilot scale (metal purity 99.918%, O2 < 300ppm).
  • Quality and significant environmental benefits of high purity titanium powders confirmed by independent 3D-printed metal part producer HANA AMT. Completion of the 5,200tpa Korean Metals Plant (KMP)1 study confirming strong economics
    • Estimated capital: approximately US$35-45 million
    • Estimated annual revenue: approximately US$180-190 million
    • Estimated annual EBITDA: approximately US$45-$50 million
  • Signing of a Memorandum of Understanding (MoU) with the Chungcheongbuk-do (Chungbuk) Provincial Government and Cheongju-si (Cheongju), City Government to locate ASM’s first metals plant (KMP) within the Ochang Foreign Investment Zone in South Korea.

MoU Signing Ceremony with Chungcheongbuk-do Provincial Government and ASM’s David Woodall

Dubbo Project Optimisation

  • South Korean companies identified to progress a build, own, operate (BOO) development for the provision of renewable power, chlor-alkali plant, directly for the Dubbo Project.
  • Progressing opportunities to leverage the full breadth and depth of South Korean manufacturing capabilities to provide valuable support in the development of the Dubbo Project.

Corporate

  • Announced an equity raising to primarily fund the final engineering and construction of the proposed 100% owned KMP, and accelerate the Dubbo Project’s detailed construction design.
  • Executed non-disclosure agreements and advanced discussions with several large South Korean corporations as prospective partners.
  • Continued discussions with potential strategic, and engineering and construction, partners in South Korea to present the potential economic benefits of ASM’s “mine to manufacturing” strategy.
  • Progressing discussions with South Korean Government and financial groups regarding the financing of the Dubbo Project.
  • Advanced discussions and negotiations with South Korean metals manufacturers about titanium, NdFeB, dysprosium and zirconium offtake arrangements.
  • Strategic engagement with key South Korean Government departments (Korean Institute of Technology, KORES and Ministry of Trade and Industry) on the development of the Dubbo Project.

 

Download the Full Quarterly Report

 

1 Refer to ASX announcement 2 March 2021. The material assumptions underpinning the scoping study continue to apply and have not materially changed

Completion of non-renounceable entitlement offer and shortfall notice

Posted on by Tim Highley

ASM announces the Company’s pro-rata non-renounceable entitlement offer (Entitlement Offer) of new ordinary shares in the Company (New Shares), closed on 16 April 2021 and proceeds of $26,919,096 have been raised pursuant to the Entitlement Offer.

The Company received applications from eligible shareholders for 5,608,145 New Shares at the issue price of $4.80 per New Share, representing an approximate 65.23% take-up. Together with the placement to institutional and sophisticated investors of $65,000,000 (refer ASX release 26 March 2021), the gross proceeds under the capital raising are $91,919,096 (Capital Raising). The placement to institutional and sophisticated investors completed on 6 April 2021.

 

The proceeds of the Capital Raising will be used to provide funding for ASM to focus on advancing key workstreams including engineering and development of the Korean Metals Plant (KMP) and the FEED Study for the Dubbo Project, while also providing additional working capital and funding of corporate costs.

Managing Director, David Woodall stated “This Capital Raising builds on the momentum that ASM has generated through the technical milestones achieved since listing in July last year. The funds raised will cover important work on both the KMP and the Dubbo Project as ASM advances its critical metals strategy.”

The Directors wish to thank shareholders for their continued support of the Company, and again welcome new shareholders who participated in the Capital Raising.

New Shares are expected to be issued on Friday, 23 April 2021, with normal trading of the new shares expected to begin on Monday, 26 April 2021.

ASM maintains the flexibility to place shortfall under the entitlement offer but has made no decision to do so at this stage.

For further information regarding the Offer please contact Company Secretary, Dennis Wilkins, on +61 8 9227 5677 or via email at dennis@dwcorporate.com.

 

Download the ASX Announcement

 

ASM