Arafura advances forward in the rare earths market
Around the time of the last financial crisis, concern was growing that China’s stranglehold on the rare earth elements (REE) market would bring about catastrophic shortfalls in supply that would impact everything from consumer electronics to military hardware. In response to the fearmongering, a number of explorers began to focus on REE extraction outside of China, but when the recession struck, buyers abandoned the initial public offering that would provide funding to Arafura Resources Ltd. (ASX: ARU) (“Arafura”) so that the company could advance their Nolans Project in Northern-Australia to production.
Thanks to the dependable effects of competition and innovation, the REE bomb never did go off, and after striking funding deals with Chinese investors the company has managed to make positive strides every year towards the construction of a functioning pilot plant. In fact, the company’s last share purchase plan closed early, raising A$3.1 million, raising their cash balance at the end of last quarter to A$12.5 million, which is more than enough to complete the Nolans pilot program. It has been a long and difficult road for rare earth explorers in particular, but the way is now clear for Arafura and a select few others to change the space dramatically in the very near future.
While opportunistic cowboy operations in China were mostly responsible for the disaster zone of a marketplace over the past decade, the country’s continued regulatory crackdown on illicit and harmful mining practices is exactly what has caused the sustained REE price increases we have seen in 2017. Arafura’s product offering is a rare earth oxide (REO) mix in which neodymium and praseodymium concentrations are particularly high, at 20.6% and 5.9% respectively. Both of these magnetic metals are leading the curve in terms of the recent value surge, and as they are fundamental in the manufacture of motors used to create efficient wind turbines and electric vehicles, the future of these metals is bright.
Wind power and electric vehicles are two markets that are already undergoing considerable growth and have been given almost unanimous positive forecasts over the coming decades. The UK government recently announced that it is considering a ban on cars powered by fossil fuels by 2040 to push the populace toward electric vehicle uptake. Of course, alongside this, renewable energy solutions must be the focus to avoid simply burning more oil downstream to keep the charge ports operational. It has been rather nice to watch the survivors of the REE space seeing a multitude of silver linings appearing simultaneously, and this year represents a key opportunity to join them in providing the materials essential to our cleantech driven future.
The pilot operations at Nolans are well-advanced, currently having completed phase 3 of 7 of the initial production run, and with the funds on-hand to complete this process, we should expect this to be somewhat of a formality. The Environmental Impact Assessment was submitted back in February and is expected to be finalized this month, with plans for phase 4 of the pilot scheme already underway and scheduled for this quarter, in which a full acid bake will be undertaken before the purification and precipitation phase begins.
It may have been a long time coming, but it seems the time has finally arrived for Arafura to launch into full swing. Keep a close watch on this guys over the next twelve months, as I anticipate that the bounce-back will be swift, sharp and easy to miss.