Critical materials frontrunner ASM closes out 2021 with a pre-tax NPV of AUD$2.36 billion

Australian Strategic Materials Ltd. (ASX: ASM) management team closed out 2021 with a measurable project and corporate successes. Most significantly, in December 2021, the company updated the 2018 Dubbo Project Optimization Study. The updated study released in early December 2021, supports a 20-year mine life based on existing ore reserves, with Measured and Inferred mineral resources, (which have the potential to extend the mine life) being excluded for this study. The economics are robust – pre-tax NPV of AUD$2.36 billion and a pre-tax IRR of 23.5%. This is 6% higher than the previous study done in 2018 and is measurably significant.

The Dubbo Project is based on the Toongi deposit in southeastern Australia (New South Wales), which contains rare earths, zirconium, niobium and hafnium and reserves that support a project life of 20 years and resources that may support a much longer mine life. Importantly, on July 21, 2021, the company announced a new 20% partner for Dubbo development, the receipt of US$250 million from a consortium of South Korean investors, and a buyer for product from its Korean Metals plant in South Korea, which saw partial commissioning for the neodymium metal production furnace system last year with additional commissioning to follow this year and full scale production expected in the second half of 2022.

The Dubbo Project is ready for construction with all major state and federal approvals and licenses in place, along with a proven process flow sheet and solid project economics. Management has appointed Australian and New Zealand Banking Group Limited (ANZ) as debt financial advisor to assist in engaging with Australian and South Korean export finance agencies as part of the financing of the Dubbo Project.

The company has a “mines to metal” strategy and has executed on that in the past year. The company is nearing completion of the Korean Metals Plant (KMP) in South Korea and, as previously announced, as part of the framework agreement with the investors, a new and separate consortium will be established to develop a permanent magnet manufacturing business in South Korea (MagnetCo Fund).

Not to be outdone by the calendar, in mid-December the company announced the signing of a Joint Statement of Cooperation. ASM and KOMIR, the Korea Mine Rehabilitation and Mineral Resources Corp., 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. While this is a lot of press-release-speak, it means that ASM has a deal to supply an alternative, secure and sustainable supply of critical metals to South Korea. ASM will commence production of critical metals at ASM’s Korean Metals Plant in 2022.

In Summary:

  • Dubbo Mine – fully permitted, updated optimization study, now funded and partnered. Have a feedstock purchaser in KMP for rare earths.
  • Metallization plant – under construction in South Korea. Partially commissioned in 2021 and expected to be fully operational this year.
  • Magnet producer – to be constructed, partnership established.

Or as keen observers of the Australian Open tennis tournament would observe “Game, Set and Match”.

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One response

  1. Rare Earths Investor Avatar
    Rare Earths Investor

    I agree and ASM appears to be the next Lynas in the making, but obviously here with major S. Korea strategic backing. RE investors should, IMHO, be looking for entities that are going to be ‘prime movers’ in any national RE value chain creation.

    These companies are likely to enjoy a major share of the offtakes that come available within a region. I have long held Lynas. However, I made my biggest RE investment mistake this decade by selling my ASM at spinoff (got that thesis completely wrong). Live and learn.

    Presently, these two companies are the standouts in the ROW RE sector and have rewarded investors handsomely. IMO there are reasons to think that both will be at the forefront of US, Japanese and S Korean RE sector developments this decade.

    Thanks for writing.


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