Company aiming to become the first global company to go from rare earths mine all the way through to metals.

Rare earths are considered critical minerals and demand is set to surge, making ASX-listed Australian Strategic Materials (ASM) well-placed to capitalise.

ASM holds one of the country's most advanced rare earth element deposits, the Dubbo Project, in New South Wales.

What differentiates ASM from other rare earths developers is the fact that it already produces metals via a plant in South Korea.

Dubbo

The Dubbo Project is shovel-ready with all permits in place.

The project's Toongi deposit has a resource of 75.18 million tonnes at 1.89% zirconium dioxide, 0.04% hafnium oxide, 0.44% niobium pentoxide, 0.03% tantalum pentoxide and 0.14% yttrium oxide, or 0.74% total rare earth oxide (TREO).

Reserves stand at 18.9Mt at 0.735% TREO, for a mine life of at least 20 years.

Based on an optimisation study completed in late 2021, the project has capital costs of A$1.678 billion, a pre-tax net present value of A$2.361 billion and an internal rate of return of 23.5%.

Annual revenue is forecast at A$840 million, while the project is expected to generate annual free cashflow of A$425 million.

A Front-End Engineering Design (FEED) services contract was awarded to US-owned Bechtel Mining and Metals in March, while some early construction work on roads is progressing.

"The FEED services will progress our engineering work and provide critical inputs to enable us to take final investment decision and commence the execution and construction phase of the Dubbo Project," ASM managing director Rowena Smith said.

ASM is also talking to potential customers, export credit agencies (ECAs), strategic investors and governments about funding, which is another key piece required to be in place ahead of FID.

ASM made significant headway in this area when it recently received non-binding letters of interest from the Export-Import Bank of the United States (US EXIM) for up to US$600 million, and up to A$400 million from Export Development Canada (EDC) in debt financing for the Dubbo Project, in addition to conditional finance support of A$200 million previously received from Export Finance Australia. 

Interest from US and Canadian agencies stems from enhanced policy alignment between Australia and North American jurisdictions on the importance of establishing an alternative critical minerals supply chain. 

The company plans to complete construction and commence production ramp-up at the Dubbo Project in 2028. 

Korean Metals Plant

Smith said ASM was creating its own supply chain via its "mine to metals" strategy.

"We will take it from mine through to oxide in Dubbo and put all of that midstream processing here in Australia," she said. 

"But then what we have done is develop our own technology for taking it through to metal and alloy.

"And we've taken the unusual step of starting our mine to metal strategy with the metals piece first." 

In 2022, ASM opened its Korean Metals Plant, which produces neodymium praseodymium metal and neodymium iron boron alloy.

Smith explained there were a number of reasons for focusing on the metal first.

"Firstly, Korea was an early jurisdiction that understood the strategic importance of incentivising an alternative supply chain, so there was R&D funding and support for these early startups in Korea earlier than there was in other jurisdictions," she said.

South Korea is also home to a large manufacturing industry and many of the big end users.

Smith said it was also important to demonstrate the capability of metallisation technology and it happened to be lower cost than other parts of the supply chain.

"It was the easiest entry point, but it gave us an opportunity to establish technical and operational capability in the metallisation and start working directly with the next step in the supply chain," she said. 

The next step in the supply chain is the magnet producers, which were looking to establish themselves in South Korea  and the US. 

"But they needed a non-China source of material, so for us, being an early leader in it means we're now in this process where we're validating our product with all of them to qualify to be a supplier," Smith said.

"We're getting all of that close interaction with the emerging magnet producers, which is giving us a much stronger sense of intel around what's happening in the market."

Smith said the South Korea plant also gave investors confidence around the final destination for material from Dubbo.

The company currently has metal and alloy customers in Korea and the US and is advancing technical validation processes with potential customers in Korea, the European Union and the US. 

Supply chain

China well and truly dominates the rare earths supply chain, accounting for about 98% of global processing.

According to Smith, many rare earth developers can see a path to producing carbonate but they don't know how to navigate the rest of the supply chain.

"And that next step, the actual separation through to oxide is the most capital-intensive piece and nobody wants to invest in that if they don't have line of sight of where the rest of their supply chain is actually established," she said.

Smith said collaboration would be key to developing the rare earth supply chain.

"You want to minimise the number of different parties you've got across that supply chain, because we've got to have a sensible conversation about how margin is going to be shared across all those process steps," she said.

"In China, they have full vertical integration of the process, it's all owned essentially by one party so they've got much more flexibility to move the margin across that supply chain. 

"But if each process step is a different party, and they're all being very transactional, then that's going to really slow the development of that supply chain down, so you need to work in partnership and try to minimise the number of parties.

"We also need to think about it in terms of jurisdiction, because my opinion is that each country can't build the whole of that supply chain in itself."

Smith acknowledged that it would be difficult for Australia to compete in manufacturing with the likes of South Korea and Germany but rather to leverage its expertise in mining and processing.

"And what's important is that we make sure that we don't just mine it and make it as a carbonate and send it off to be processed somewhere else," she said.

"Which means that we put our effort – both technical expertise and funding – towards making sure that we've got the mining and processing through to oxide happening here."

Blazing the trail

If successful, ASM will be the first company to go "mine to metals".

Smith joined the company in 2021, initially as chief operating officer, before being promoted to CEO in 2022.

"But what I hadn't really realised until I was in it is that we're actually starting an industry," she said.

"We take that very seriously at ASM and yes, we've got to deliver for our shareholders but we've also got a higher purpose of actually helping an industry to establish itself which ultimately will be to ASM's benefit. 

"Which needs us to actually think about ‘how do we work in partnership rather than in aggressive competition with each other?' Because we will all be stronger for this industry having more than just the one player."