Arafura Rare Earths Limited · ASX:ARU
Arafura Rare Earths — Arafura Resources — Rare Earths North America 2014 Conference
30 slides from Arafura Rare Earths's conference presentation, Jun 12, 2014
Slide 1: Arafura presents at New York Rare Earths Conference
ASX RELEASE 12 June 2014 ARAFURA PRESENTS AT NEW YORK RARE EARTHS CONFERENCE Australian Rare Earths company Arafura Resources Limited (ASX: ARU) (“Arafura” or For personal use only the “Company”) is pleased to advise that Managing Director, Gavin Lockyer, earlier this morning delivered a presentatio
Slide 2: Bridging the Rare Earths Gap
For personal use only BRIDGING THE RARE EARTHS GAP June 2014 Gavin Lockyer Managing Director Arafura Resources Limited (ASX: ARU)
Slide 3: Disclaimer
DISCLAIMER For personal use only Important Notice This presentation contains certain statements which may constitute “forward-looking statements.” Such statements are only expectations or beliefs and are subject to inherent risks and uncertainties which could cause actual values, results or performa
Slide 4: Company Snapshot
COMPANY SNAPSHOT For personal use only ASX listed company developing the ASX Code ARU Nolans Rare Earths Project in Australia Market Cap @ 10c A$44.1 million Focused strategy targeting full-scale 1-year range 6.0 – 14.0 cents production this decade Cash at 05/22/14 A$25.4 million Debt nil Strategic
Slide 5: Key Messages
KEY MESSAGES For personal use only Focused strategy for first production this decade Product mix geared for growth World scale project with robust economics on realistic assumptions Management delivering on large scale, value-add initiatives Chinese cornerstone provides gateway to technical expertis
Slide 6: Focused Strategy for First Production This Decade
FOCUSED STRATEGY FOR FIRST PRODUCTION THIS DECADE For personal use only 2014 2015 2016 2017 2018 2019 Extensive development Feasibility program has Offtake significantly Agreements de-risked project EIS & Permitting Moving forward with Financing confidence towards Detailed Design commercialisation C
Slide 7: Product Mix Geared for Growth
PRODUCT MIX GEARED FOR GROWTH For personal use only Market Market Share Demand Arafura’s Revenue Driver 1 2 Segment by Value Growth RE Products Contribution Majority of ARU HEVs, NdPr 77.0% revenue to be Magnets 63% 10% Wind Energy HRE 4.1% generated by RE products that feed Electronics, SEG 6.1% Ph
Slide 8: Tight Outlook for Supply
TIGHT OUTLOOK FOR SUPPLY For personal use only Short-term Criticality Matrix Medium-term Criticality Matrix (Present - 2015) (2015 - 2025) Source: US Department of Energy Critical Materials Strategy December 2010 Arafura Resources Limited (ASX: ARU) 7
Slide 9: Nolans Project Highlights
NOLANS PROJECT HIGHLIGHTS For personal use only Underpinned by a world-scale, low-risk resource in Australia’s Northern Territory Close to vital infrastructure – transport, water, gas, power, workforce, logistical and service support Potential to supply 10% of the world’s rare earths demand Project
Slide 10: A World Scale, Low Risk Resource
A WORLD SCALE, LOW RISK RESOURCE For personal use only Tonnes Rare Earths Tonnes Phosphate Uranium Resources (million) % REO REO % P2O5 % U3O8 Measured 4.3 3.3 144,000 13 0.03 Indicated 21 2.6 563,000 12 0.02 Inferred 22 2.4 511,000 10 0.02 TOTAL 47 2.6 1,217,000 11 0.02 1% REO cut-off grade Very hi
Slide 11: Where Are We? Mining & Extraction
WHERE ARE WE? MINING & EXTRACTION For personal use only MINE & CONCENTRATOR CAPEX A$217.1 million OPEX A$4.50/kg REO RE INTERMEDIATE PLANT CAPEX A$964.2 million OPEX A$7.84/kg REO Arafura Resources Limited (ASX: ARU) 10
Slide 12: Where Are We? Separation
WHERE ARE WE? SEPARATION For personal use only Global location study identifies three potential sites for RE Separation Arafura has fully costed a Gulf Coast USA location for a RE Separation Plant in a mature Chemical Precinct Cost-competitive access to key reagents and utilities a priority Discussi
Slide 13: A New Simplified Flowsheet
A NEW SIMPLIFIED FLOWSHEET For personal use only ROM Ore Nolans Site Reagent Flows 778,000 dtpa Chemical Sulphur 130,000 tpa Precinct Desalinated Water Beneficiation HCl (32%) 77,000 tpa from RE Int Plant Grind + Mag Sep + Reagents 0.7 GL/a Flotation Limestone 342,000 tpa Lime 16,000 tpa Concentrate
Slide 14: From Mine to Yours
FROM MINE TO YOURS For personal use only Mine Concentrator RE Intermediate RE Separation Plant Plant Ore Concentrate Mixed RE Intermediate Separated REO Products To International Customers Arafura Resources Limited (ASX: ARU)
Slide 15: Robust Project Economics on Realistic Assumptions
ROBUST PROJECT ECONOMICS ON REALISTIC ASSUMPTIONS For personal use only US$m pa A$m pa Sales Revenue The Nolans Project generates a REO equivalent 20,000 tonnes (less Royalty & Selling Expenses) 638 NPV of A$2,045 million and an IRR of 21.4% Total Revenue (A$1 = US$0.897) 638 712 OPEX The NPV has be
Slide 16: Management Delivering Large Scale Value-Add Initiatives
MANAGEMENT DELIVERING LARGE SCALE VALUE-ADD INITIATIVES For personal use only August 2012 (A$) June 2014 (A$) Savings (A$) CAPEX $1,912 million $1,408 million $504 million OPEX $20.55/kg REO $15.67/kg REO $4.88/kg REO Savings achieved through: Material improvements in and simplification of the proce
Slide 17: But Wait... There's More
BUT WAIT ….. THERE’S MORE For personal use only Further operational savings expected from ongoing technical review and optimisation program by Chinese rare earth experts Water resource confirmation drilling continuing near Nolans Site – definitive results expected shortly Partnership with Shanghai S
Slide 18: Chinese Cornerstone Provides Gateway to Technical Expertise & Funding
CHINESE CORNERSTONE PROVIDES GATEWAY TO TECHNICAL EXPERTISE & FUNDING For personal use only East China Mineral Exploration and Development Bureau (ECE) is a major state-owned enterprise and an important long-term strategic partner for Arafura No offtake or other obligations, currently have one non-e
Slide 19: Share Price Disconnect from Recent Performance
SHARE PRICE DISCONNECT FROM RECENT PERFORMANCE For personal use only ARU vs ASX Small Resources Index ARU Share Price - rebalanced to 100 Small Cap Resources Index - rebalanced to 100 120 Fifth REO product (La) separated to 99% purity New MD appointed Nolans CAPEX slashed by 100 A$408m and OPEX down
Slide 20: Re-rating Catalysts Imminent
RE-RATING CATALYSTS IMMINENT For personal use only INTERNAL EXTERNAL Results expected shortly for: China developments Optimisation program Uncertainty in response to WTO rulings Beneficiation Continued consolidation in rare earths RE Extraction sector Water resources drilling Non-Chinese supply issu
Slide 21: Key Messages – A Recap
KEY MESSAGES – A RECAP For personal use only Focused strategy for first production this decade Product mix geared for growth World scale project with robust economics on realistic assumptions Management delivering on large scale, value-add initiatives Chinese cornerstone provides gateway to technica
Slide 22: Thank You – Questions?
For personal use only THANK YOU Questions? Arafura Resources Limited (ASX: ARU)
Slide 23: Financial Evaluation Assumptions: Production and Operating Costs
APPENDIX FINANCIAL EVALUATION ASSUMPTIONS For personal use only CRITERIA EXPLANATION Target: 20,000 tpa of REO equivalent from Mining of Measured and Indicated Resources Production Ramp Up: Eight quarters Life: 20 years Reagent cost estimate: based on detailed mass balance modelling of the process f
Slide 24: Financial Evaluation Assumptions: Capital Costs (1)
APPENDIX FINANCIAL EVALUATION ASSUMPTIONS For personal use only CRITERIA EXPLANATION Mine & Concentrator: study compiled by Lycopodium • CAPEX of A$217.1 million includes a 12.0% contingency Nolans Site Infrastructure: Engineering Cost study (covering access roads, site buildings, camp, slurry pipel
Slide 25: Financial Evaluation Assumptions: Capital Costs (2)
APPENDIX FINANCIAL EVALUATION ASSUMPTIONS For personal use only CRITERIA EXPLANATION • Site visits and more detailed study identified the potential of some locations with: − Gulf Coast USA meeting the criteria and additionally the area is frequently used as a worldwide cost estimating reference base
Slide 26: Financial Evaluation Assumptions: Capital Costs (3)
APPENDIX FINANCIAL EVALUATION ASSUMPTIONS For personal use only CRITERIA EXPLANATION • Equipment costs based on budget quotes received from vendors for major plant items and a substantial proportion of the minor plant items, supplemented where necessary with recent historical engineering contractor
Slide 27: Financial Evaluation Assumptions: Market
APPENDIX FINANCIAL EVALUATION ASSUMPTIONS For personal use only CRITERIA EXPLANATION Arafura has developed a rare earth supply-demand model to interpret trends in market segments and derive the supply-demand balance and growth outlook for individual rare earths REO supply: Arafura has not taken into
Slide 28: Financial Evaluation Assumptions: Pricing
APPENDIX FINANCIAL EVALUATION ASSUMPTIONS For personal use only CRITERIA EXPLANATION An internal pricing model has been used as the primary price forecasting tool. Pricing projections adopt market supply and demand fundamentals with an understanding of key market drivers as the basis for pricing ass
Slide 29: Financial Evaluation Assumptions: Economic Factors
APPENDIX FINANCIAL EVALUATION ASSUMPTIONS For personal use only CRITERIA EXPLANATION Discount Rate: After-tax discount rate of 10% for DCF analysis determined by: • The required cost of equity return to an equity investor • The rates of return for comparable ASX-listed companies • The debt to equity
Slide 30: Sensitivity Analysis
SENSITIVITY ANALYSIS For personal use only Arafura Resources Limited (ASX: ARU) 29
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