Kozak’s #2 pick for Top Five Rare Earths for 2021 is …
Australian Strategic Materials Ltd. (ASM:ASX) is an emerging “mine to manufacturer” of critical metals. The company’s cornerstone Dubbo Project (100% owned) is a proven long-term resource of rare earths, zirconium, niobium and hafnium located in central-western NSW, Australia. While this description might not excite you, it should. Read on….
The company is our # 2 pick for Top Five Rare Earths for 2021. Created by a corporate demerger completed in July 2020, ASM came out of Alkane Resources as the company’s directors sought to unlock shareholder value in the then-combined gold/rare earths company. The value creation has been very successful, with ASM’s share price up by 400+% at year-end 2020, although there has been a general retrenchment in most rare earths company share prices since that time.
If you are not familiar with ASM, here are the key points:
- 100% owned Dubbo Project – discovered more than two decades ago, this mining project is ready for construction, subject to financing. It has all major state and federal approvals in place and process systems design is complete
- Metals Business – the company has successfully deployed a “mine to manufacturer” business model, first working with and then acquiring the majority interest in a Korean metals joint venture partner.
The Dubbo Project
This is a polymetallic deposit that is rich in critical metals. Dubbo is currently undergoing an optimization feasibility study (to be completed end of Q1-2021) as well as mining costs updates and optimization/simplification of processing circuits for zirconia, hafnium as well as the rare earths. In 2021, the company is planning to continue with the FEED/Basic Engineering work. Later in 2021, it is expected that the Board will meet to review and (likely) approve the Dubbo Project with a Financial Investment Decision. From the approval, after tendering the project development will continue through to late 2023/early 2024 when the project is expected to ramp up. Funding is a significant issue, but in early 2020, Australian Government-owned Export Finance Australia has confirmed interest in financing the Dubbo rare earths project.
As exciting as a mining project can be, the company’s “mine to manufacturer” strategy is working well. ASM has a patented metallization which process produces high-purity metals from oxides using up to 70% less energy than conventional methods. Developed in Korea, ASM entered a joint venture with the South Korea’s Zirconium Technology Corporation (Ziron Tech) in 2019 and acquired a 95% interest in Zircon Tech in late 2020.
Through late 2020, the metals business had significant success including:
- production of high-purity dysprosium metal (99.5% purity), confirming the metallization of all key rare earth magnet metals produced by the Dubbo Project
- production of high-purity zirconium metal powder at 98% Zr and 1.5% Hf
- production of titanium copper alloy (99.5% purity)
- ferro-neodymium alloy (FeNd – Nd 80%, Fe 20%), a key constituent of strip cast permanent magnet alloys
- a neodymium iron boron (NdFeB) alloy which was produced at the Korean Institute of Rare Metals (KIRAM) facility;
- KIRAM certified the NdFeB alloy, derived from ASM’s FeNd alloy, is suitable for rare earth permanent magnet production
With these results, ASM is moving forward with plans for a 250 kg/d metallization plant (scoping study to be completed in Q1-2021). With the confirmation of the commercial scalability of ASM’s innovative metallization process, ASM will now progress detailed engineering of a 5,200t per year metals plant that will initially produce titanium metal, nickel-titanium alloy, copper titanium alloy, titanium powders, neodymium metal, dysprosium metal; and NdFeB strip metal alloy for permanent magnet production.
The Full Package – mine to manufacturer
The significant successes in the metals business as well as the status of the Dubbo Project are both milestones for this ~$600 million market capitalization company. At December 31, 2020, the company reported cash of AUS$12.4 million, down from AUS$16.5 million at the end of the previous quarter. No forecasts are available, but the company is funded (at the previous quarter’s spending rate) through most of 2021
A seemingly very good mining project and terrific success in a complimentary metals business make this company attractive for investors. Delivery on the business plan and no unanticipated process upsets are likely to be rewarded in the future. Watch this space!
Frederick Kozak is a Professional Engineer with extensive oil and gas, and international business experience and has more than 25 years involved in capital markets ... <Read more about Frederick Kozak>