An Insight into the Rare Earth Industry Gavin Lockyer is Managing Director of Arafura Resources. He talks to APAC Insider about the company as well as the industry as a whole. Arafura Resources is a mineral exploration and development company that is listed on the Australian Securities Exchange (ASX: ARU). Gavin Lockyer explains more about the company, its services and its clientele. “Our focus is on developing mining and mineral processing opportunities in the Northern Territory of Australia,” he begins. “Our headquarters are in Perth with an operations office in Darwin. Our Company directly employs fifteen people, including managerial, technical (geology, metallurgy, engineering), commercial (finance, marketing, accounting), legal and administrative staff. “The company’s clients include its shareholders, potential investors, and local community and government stakeholders in the Northern Territory. Arafura’s shareholders are spread across the globe, with sizeable representation from Asia, Europe and Australia. “The main “service” offered by Arafura is the prospect of attractive financial returns from the development of the Nolans Rare Earths Project in the Northern Territory. Arafura’s overall mission is to become a key global producer of rare earths – and in particular the rare earths Neodymium (Nd) and Praseodymium (Pr) – and
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merchant-grade phosphoric acid from the Nolans Project. NdPr is the foundation of the fastest growing and most valuable application for rare earths – ultra-strong permanent magnets used in the automotive, clean energy, healthcare and consumer electronics sectors. Gavin tells us more about the steps that are being taken to achieve this objective. “During the last ten years we have been progressively reducing the technical, environmental, marketing, financial and regulatory risks associated with developing the project. The project is now in the final phases of technical and economic feasibility, obtaining the regulatory approvals necessary to construct the project, and negotiating product offtake arrangements to underpin project financing.” Gavin provides us with a brief overview of the industry in the APAC region. “The rare earths industry is characterised by a highlyfragmented supply chain with most of the world’s mining, processing and refining capacity in China. Rare earth projects are capital intensive and the development lead time is necessarily lengthy considering their complexity and the fact that each operation has its unique characteristics. “Rare earth prices are at their lowest levels in almost seven
years, and this alone presents challenges in maintaining investor interest in the sector, or in attracting new sources of investment capital. However, the demand for NdPr is set to escalate due to the mass electrification of the auto sector and the growth in clean energy across the world (requiring permanent magnet synchronous motors or generators). At the same time an NdPr supply shortage is highly likely due to underinvestment in new or existing mining and processing capacity. Consequently, NdPr prices are forecast to climb over the next several years, coinciding with our timetable to bring Nolans into production.” Staying ahead of the curve is key in such a fast-paced industry. Gavin elaborates: “We place enormous value on intelligence acquired from information services, market experts, technology providers and active participants in most parts of the rare earths supply chain. To that end, Arafura subscribes to several independent information services (where crossreferencing can help support the Company’s marketing and financing strategy), and maintains active and regular dialogue with a number of industry operatives in Japan, China, the EU, and the USA. “The company also participates, where sensible, in collaborative technical research and development initiatives where it
considers outcomes could deliver a competitive advantage in areas such as processing and refining technology.” Arafura’s culture is one that is founded in achieving a common purpose. “In our case that’s delivering on our objective to become a key global producer of NdPr rare earths,” states Gavin. “Every decision that is made by our people affords consideration of its impact on the commercial prospects of the company and its stakeholders, and the timing of the impact. Innovation is certainly encouraged in our business, but again, is tempered by commercial considerations, timeliness, and the effect on the communities in which we seek to operate. “Resource development, and rare earths development in particular, is a long game, so it’s important that prospective employees demonstrate resilience, commitment and hunger for a challenge, whether that be technical or commercial, in their employment history.” With regards to the future, Gavin foresees 2017 being a defining year for the company. “This is because all elements of our Nolans Project – technical and economic feasibility, government approvals, and securing product sales agreements – are coming together to support our efforts to procure US$680 million in construction funding.