Arafura Rare Earths Limited · ASX:ARU
Arafura Rare Earths — Arafura Resources — Symposium Investor Roadshow (July 2014)
29 slides from Arafura Rare Earths's conference presentation, Jul 22, 2014
Slide 1: Bridging the Rare Earths Gap
For personal use only BRIDGING THE RARE EARTHS GAP July 2014 Richard Brescianini General Manager Exploration & Development Arafura Resources Limited (ASX: ARU)
Slide 2: 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 3: Company Snapshot
COMPANY SNAPSHOT For personal use only ASX listed company developing the ASX Code ARU Nolans Rare Earths Project in Australia Market Cap @ 8c A$35.3 million Focused strategy targeting full-scale 1-year range 5.5 – 13.5 cents production this decade Cash at 22/05/14 A$25.4 million Debt nil Strategic p
Slide 4: Key Messages
KEY MESSAGES For personal use only Focused strategy for first production this decade World-leading magnets leverage to drive high-value growth World scale project with robust economics on realistic assumptions Management delivering on large scale, value add initiatives Strategic Chinese alliances pr
Slide 5: 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 6: Tight Outlook for Supply
TIGHT OUTLOOK FOR SUPPLY For personal use only EU: Economic Importance & Supply Risk USDOE: Medium-Term (2015-2025) Criticality Matrix European Commission, July 2010: Critical Raw Materials for the EU US Department of Energy, December 2011: Critical Materials Strategy Fluorescent lamps Headphones Ar
Slide 7: World-Leading Magnet Leverage
WORLD-LEADING MAGNET LEVERAGE For personal use only RARE EARTHS MARKET 2013 global RE demand ~115,000 tonnes Global demand forecast to grow at 6-7% p.a. between 2014 and 2020 Demand driven by technology innovation, and industrial and clean energy sectors Global market valued at US$3-5 billion MAGNET
Slide 8: 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 Automotive, NdPr 77.0% revenue to be Magnets 63% 10% Wind Energy HRE 4.1% generated by RE products that feed Electronics, SEG 6
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 RE demand Project status –
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 Premium
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$7.84/kg REO Arafura Resources Limited (ASX: ARU) 11
Slide 12: Where Are We? Separation
WHERE ARE WE? SEPARATION For personal use only Global location study identifies three potential sites for RE Separation Arafura has fully costed a Gulf Coast USA location for a RE Separation Plant in a mature Chemical Precinct Cost-competitive access to key reagents and utilities a priority Discussi
Slide 13: A New Simplified Flowsheet
A NEW SIMPLIFIED FLOWSHEET For personal use only Arafura Resources Limited (ASX: ARU) 13
Slide 14: From Mine to Market
FROM MINE TO MARKET For personal use only Mine Concentrator RE Intermediate RE Separation Plant Plant Ore Concentrate Mixed RE Intermediate Separated REO Products To International Customers Arafura Resources Limited (ASX: ARU)
Slide 15: Robust Project Economics on Realistic Assumptions
ROBUST PROJECT ECONOMICS ON REALISTIC ASSUMPTIONS For personal use only US$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$0.897) 638 712 OPEX The NPV has be
Slide 16: Management Delivering Value-Add Initiatives
MANAGEMENT DELIVERING VALUE-ADD INITIATIVES For personal use only August 2012 (A$) June 2014 (A$) Savings (A$) NOLANS $1,912 million $1,408 million $504 million CAPEX NOLANS $20.55/kg REO $15.67/kg REO $4.88/kg REO OPEX CORPORATE 1 $423k/month $283k/month $140k/month OVERHEADS 1 Average monthly corp
Slide 17: Chinese Alignment a Key Differentiator
CHINESE ALIGNMENT A KEY DIFFERENTIATOR For personal use only East China Mineral Exploration and Development Bureau (ECE) is a major state- owned enterprise and important long-term strategic partner Strategic alliance with existing RE producer Shenghe Resources SKN appointment as key China consultant
Slide 18: 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 Nolans CAPEX slashed by Improved Nolans 100 A$408m and OPEX down
Slide 19: 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 RE sector RE extraction Non-Chinese supply issues Water resources drilling Accele
Slide 20: Key Messages – A Recap
KEY MESSAGES – A RECAP For personal use only Focused strategy for first production this decade World-leading magnets leverage to drive high-value growth World scale project with robust economics on realistic assumptions Management delivering on large scale, value add initiatives Strategic Chinese al
Slide 21: Thank You
For personal use only THANK YOU Questions? Arafura Resources Limited (ASX: ARU)
Slide 22: Financial Evaluation Assumptions
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 23: 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 24: 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 25: 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 26: 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 27: 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 28: 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 29: Sensitivity Analysis
SENSITIVITY ANALYSIS For personal use only Arafura Resources Limited (ASX: ARU) 29
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