ASM signs Exclusive Heads of Agreement with Hyundai Engineering Corporation

Australian Strategic Materials (ASM) has announced that following ongoing discussions with HEC in relation to the development of the Dubbo Project, it has signed a Heads of Agreement with Hyundai Engineering Corporation Co., Ltd., to exclusively negotiate with HEC the delivery of the FEED, which could progress to the EPC.

The agreement for the exclusive negotiation follows the request for proposal process run by ASM for FEED for the Dubbo Project, where HEC have been identified by ASM as the preferred candidate based on HEC’s experience and capability.

Under the HoA, ASM and HEC have entered into an exclusivity period for the award of FEED by 31 March 2022 and subject to the successful delivery of FEED for the award of EPC until 25 February 2023. The Company’s current target is for the FEED contract to be awarded in Q1 2022, and for the delivery of the FEED in Q4 2022. The terms of the FEED and any EPC (including the price, scope, and schedule) are yet to be agreed by the parties.

ASM Managing Director David Woodall said exclusively engaging with HEC was another key milestone in moving the Dubbo Project towards a Final Investment Decision and demonstrates the support the Dubbo Project has from key stakeholders in Korea.

The team at HEC are impressive being at the forefront of providing innovative and sustainable engineering solutions that will enable the successful delivery of our Dubbo Project, a key to our “mine to metal” strategy.

Meeting HEC CEO Mr Kim Chang-Hag and his team shows the quality project partner HEC brings.  The desire of both HEC and ASM to work in partnership to deliver the Dubbo Project with significant benefits to both Korea and Australia puts us in a great position as we continue discussions with Korean financial institutions to fund the development of Dubbo.

Mr David Woodall

HEC Chief Executive Officer Kim Chang-Hag said:

HEC has delivered large projects successfully globally, and we are delighted to be working with ASM on FEED progressing to EPC to develop the Dubbo Project. We believe we can deliver an innovative and optimised solution to support the development of the Dubbo Project and ASM’s critical metals business in a partnership that helps Korea secure the critical metals it needs for its manufacturing industries.

Download the ASX Announcement

Korean Consortium successfully completes due diligence on the Dubbo Project

Australian Strategic Materials Limited (ASM) is pleased to advise that the consortium of South Korean Investors, comprising Cerritos Holdings Co., Ltd, Kamur Partners LLC and ACE Equity Partners LLC, (the Investing Partnership) has successfully completed due diligence on the Company’s flagship Dubbo Project. This represents a key milestone in progressing the consortium fund’s proposed conditional investment under the Framework Agreement. (see ASX Announcement: 21 July 2021)

After a delay due to COVID-19 travel restrictions, ASM recently hosted an extensive Australian due diligence visit by the Investing Partnership. This included visiting the Company’s Dubbo Project and discussing ASM’s research partnerships and business activities in Australia.

ASM’s Managing Director, David Woodall, said the completion of due diligence to the satisfaction of the Investing Partnership had taken place in parallel with continued progress on the remaining formal binding terms of the consortium’s investment.

“We are very pleased to have successfully concluded the due diligence process. Together we are now focused on securing a significant South Korean strategic investor to partner with ASM on its Dubbo Project, and to completing the terms for a formal binding agreement.”

“Our relationship with our Korean partners continues to go from strength to strength,” Mr Woodall said.

Spokesperson for the Investing Partnership, CEO and Founder of Cerritos Holdings Co., Ltd, Pumsoo Ra said the Investing Partnership was committed to working with ASM to finalise an investment in relation to the Company.

“It is clear that ASM has the resources and technical capacity to partner with us to support the supply chain of critical metals needed for the production of clean energy technologies such as electric vehicles and renewable energy generation capacity, as well as advanced electronics,” Mr Ra said.

“We need that supply chain to be secure and reliable, and we look forward to continuing our discussions with ASM and our partners in Korea.”

ASM will continue to update the market as further milestones are reached.

Download the ASX Announcement

 

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.”

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.

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.

Download the Full ASX Announcement

 

Export Finance Australia issues letter of support for the Dubbo Project

ASM is pleased to announce conditional finance support from Export Finance Australia (EFA) to secure A$ 200 million of debt funding for its Dubbo Rare Earths Project in Central NSW.

EFA has advised that it will commence detailed due diligence of the Dubbo Project, in line with the agency’s mandate to support eligible Australian projects with targeted debt solutions to supplement private market finance.

ASM Managing Director David Woodall said the Dubbo Project’s alignment with the objectives of the Australian Government’s Critical Minerals Strategy – to diversify global critical mineral supply and capture more value from the critical minerals value chain – would be a key factor in a successful application to secure Australian government financing.

“The critical metals we will produce from the Dubbo Project – including zirconium, niobium and hafnium, and the rare earth elements neodymium, praseodymium, terbium and dysprosium – are all in high demand for a suite of modern industrial applications, including energy-efficient technologies, electric vehicles, aerospace, defence and telecommunications,” Mr Woodall said.

“We are developing an integrated “mine to metals” business, which will be unique in that we will take all project products from the mine and manufacture them at our Korean and global metals plants into critical metals, alloys and powders that can be used directly by hi-tech industries.”

As outlined in EFA’s non-binding letter of support, a successful outcome from the EFA assessment and due diligence process is contingent on a number of conditions, summarised below:

  • securing offtake commitments for metal products, which diversify critical metal supply chains;
  • execution of a lump sum turnkey fixed date contract with an acceptable engineering contractor for the engineering, construction and commissioning of the Project;
  • finalising the Project’s funding plan including the raising of equity and securing funding from other lenders;
  • meeting eligibility criteria, credit and risk requirements, including, but not limited to, EFA’s “know your customer” and anti-bribery requirements and checks; and
  • the Project receiving the required regulatory and environmental approvals.

“The Dubbo Project is ready for construction, with all major State and Federal approvals and licences in place,” Mr Woodall said.

“Our discussions with potential offtake, equity and financing partners in the Dubbo Project have been very positive and are continuing. We look forward to updating the market as this progress.”

 

Download the ASX Announcement

 

Export Finance Australia Confirms Interest in Dubbo Project Financing

Australian Government-owned’ Export Finance Australia (EFA) has confirmed interest in financing Alkane Resources’ (ASX: ALK) Dubbo rare earths Project, stating it closely aligns with the recently announced initiative by the Australian Government to develop its “Critical Minerals” sector.

Alkane through its wholly-owned subsidiary Australian Strategic Materials (“ASM”) has been engaged with the Australian Government for many years, but particularly in recent months as it works to assist private business in developing Australia’s “Critical Minerals” sector.

Alkane’s Managing Director, Nic Earner, said “After extensive engagement with the Australian Government, particularly recently as part of its Critical Minerals initiative, it is pleasing to see that stated support is translating into preparedness for government agencies to act, in this case with EFA providing confirmation of its interest in being part of the financing consortium for the Dubbo Project.”

ASM’s Managing Director, David Woodall, said “It is very pleasing to see positive action by EFA. I look forward to continuing ASM’s discussions with strategic partners and offtake parties, particularly with the ongoing trade support and now potential financial support from the Australian Government. It is very clear in today’s world that security of supply chains in all manner of materials is a pressing issue, and security of Critical Minerals is one supply chain that the Australian Government is clearly identifying as a priority for government backing.”

The Dubbo Project is an advanced polymetallic project with large in-ground resource of zirconium, hafnium, niobium, yttrium and rare earth elements with a potential mine life of 75+ years. This polymetallic project is a potential strategic and independent supply of critical minerals for a range of sustainable technologies and future industries.

The Dubbo Project is development-ready, subject to financing, with the mineral deposit and surrounding land acquired, all major State and Federal approvals in place and extensive piloting and engineering completed.

The ASX announcement can be found here.

Climate change action depends on supply of critical elements

To prevent catastrophic climate change, we must rapidly reduce emissions of carbon dioxide and other greenhouse gases, replace fossil fuels with clean, renewable energy sources and make much more efficient use of resources.

A critical point is that these urgent tasks cannot be achieved unless we have a secure supply of elements essential to advanced technologies for clean energy, transport and manufacturing: rare earths, hafnium, zirconium and niobium.

To mitigate climate change, we need rare earths (RE) for:

  • permanent magnets in wind turbines, eliminating the need for gear boxes, thereby improving reliability, which is particularly important for off-shore wind power generators. RE magnets also facilitate larger wind power generator designs.
  • permanent magnets in electric motors
  • electric motors and electronic control systems for solar power generation
  • nickel-metal (RE alloy) hydride batteries for electric and hybrid vehicles and rechargeable electronic devices
  • energy efficient lighting (fluorescents and LEDs)
  • energy efficient communication through fibre optic signal amplification
  • hydrogen storage alloys for clean transport and energy
  • ceramics for hydrogen fuel cell vehicles and power generation, and
  • catalytic converters to reduce harmful emissions in exhaust gases.

Applications of hafnium and/or zirconium that help to mitigate climate change include:

  • efficient microelectronics, capacitors and computer chips and memory devices
  • solid oxide membranes for clean metal production
  • nuclear power fuel assemblies and construction materials, and
  • gas sensors of all types.

Niobium enables the construction of robust, safe structures using less steel. In the transport sector, this produces better fuel efficiencies and lower carbon dioxide emissions.

To act on climate change, we must secure a supply of these essential elements that is:

  • sustainable and traceable
  • not monopolised by any single nation or bloc
  • designed for complementary sourcing of other essential materials and
  • has the potential for ‘urban mining’ (i.e. recycling materials from technology at the end of its useful life).

The world-class Dubbo Project in NSW, Australia, meets these criteria and can supply these essential elements for decades. To progress the Dubbo Project to construction, Alkane Resources seeks a blend of financing from export credit agencies, strategic partners and equity and debt markets. Information for investors is available here

Further reading:

https://setis.ec.europa.eu/sites/default/files/reports/JRC-report-Critical-Metals-Energy-Sector.pdf

Advanced defence technology depends on Dubbo

To monitor threats and defeat hostile actions, we expect advanced defence forces to deploy – increasingly by remote control – high-performance machines and systems that can withstand extreme environments, including space. Producing these advanced technologies requires a sustainable supply of critical materials: rare earths, zirconium, hafnium, and niobium.

The United States, Japan, Korea, and European nations already rely heavily on these essential materials for military and civilian technologies, and demand is growing as applications expand. Of concern for those nations, one country – China – dominates rare earths supply and the Zirconium market.

Luckily, Australia’s mineral resources include a wealth of these critical elements. This presents a strategic opportunity to expand Australia’s role in global security, while sustaining economic wellbeing by adding value to our raw resources.

The elements of defence

Rare earths are a group of 17 elements, known as the ‘vitamins of industry’ because many applications require only minute – but essential – amounts. Permanent magnets are an exception, being composed of ~31% rare earths. Permanent magnets have multiple applications in advanced technology, including electric motors and guidance systems for vehicles, submarines, drones, missiles and robots. China controls 85% of the rare earth permanent magnet supply chain.

Rare earths, zirconium, hafnium and niobium are essential to the production of electronic sensors, and microprocessors in smart devices and computers. These elements are used for heat resistant alloys and coatings for aircraft, spacecraft, missile and rocket engines, as well as in armour for personnel and vehicles.

Alkane’s Dubbo Project is a large in-ground resource of rare earths, zirconium, hafnium and niobium, and the most advanced project of its kind outside China, with a potential mine life of 75+ years. Given the numerous high-tech applications of these elements in defence and beyond, the strategic importance of developing this project is clearly high. Delaying development risks further disruption of supply from China and a missed opportunity for Australia.

Adding value multiplies benefits

We can take lessons from China in extracting maximum economic and social benefit by adding value to our raw resources. My colleague Alister MacDonald has previously explained how the ‘dig it and ship it’ (and buy it back in processed form at retail prices) mentality of the old Australian economy must change to ‘dig it, process it, use it and ship it’. The Dubbo Project goes far beyond mining, by processing materials to standard and customised specifications, delivering advanced products for global markets.

Downstream processing of critical elements – transforming oxides to metals, advanced alloys, and other materials for defence or other applications – requires a skilled workforce of scientists, engineers, and technicians. In tandem with resource development, Australia must plug the ‘brain drain’, invest in education and training, and build our IP portfolio.

By adding value along the supply chain, Australia will create new, sustainable enterprises that will generate employment, reduce our dependence on imported products, and build national security. Technologies developed for defence will transfer to new and improved products and services for civilians. GPS navigation and drones are examples of military technologies applied to everyday life.

The first step is to invest in the source of this future wellbeing. To progress the Dubbo Project to construction, Alkane Resources seeks a blend of financing from export credit agencies, strategic partners and equity and debt markets. Information for investors is available here

ASM