Australian Strategic Materials well set to continue ‘mine to manufacturer’ transition in 2021

Australian Strategic Materials Ltd (ASX:ASM) ticked off several milestones in the December quarter which progress its ‘mine to manufacturer’ metal company transformation and pave the way for an exciting year ahead. During the quarter, the company completed the acquisition of a 95 per cent interest in joint venture partner Ziron Technology Corporation along with the update of patents related to continual improvement of the metallisation process and successfully produced various amounts of dysprosium, zirconium, zirconium, titanium and neodymium. Building on tasks completed in the last quarter, ASM aims to complete a scoping study of a Korean plant in the current quarter and is also striving to deliver an optimised feasibility study (OFS) for its flagship Dubbo Project by the end of the quarter. The company's progress since listing in late July 2020 has been recognised by investors with the share price increasing from A$0.84 in early August to a record high of $6.84 in late December while the market cap today is approximately $621.4 million. Progress at Dubbo Project The company continued implementation activities at the Dubbo Project during the December quarter. Development of the project execution philosophy and contracting strategy is underway, including drafts of the project charter, governance and execution guidelines. Project budget and schedule confirmation continues in parallel with the OFS program and will be finalised as part of the OFS deliverables this quarter. During the quarter, ASM and Hatch Engineering progressed the Dubbo Project OFS, which remains on target and budget for delivery by the end of quarter one. An independent review of the rare earth circuit was carried out and did not identify any issues with the flowsheet, while also identifing opportunities for optimisation. Completion of these reviews has resulted in an optimised flowsheet, informing the scope for the OFS to be finalised, with Hatch now proceeding on this basis. ASM metal business ASM’s development of a ‘mine to manufacturer’ metals business continued during the quarter. The company completed the acquisition of a 95% interest in JV partner ZironTech and now ASM owns the patented low-energy, high-purity metal-refining process and the pilot plant in Korea, with the ZironTech team integrated into ASM. ASM also completed the updating of patents related to the continual improvement of the metallisation process. The final production of permanent magnets during the December quarter was impacted by the recent spike in COVID-19 cases in the greater Seoul area and this work is now expected to be completed this month. Advancement in metals produced during the December quarter includes: 7.5 kilograms of high-purity dysprosium metal (99.5% purity), confirming the metallisation of all key rare earth magnet metals produced by the Dubbo Project; 8.6 kilograms of high-purity zirconium metal powder at 98% zirconium and 1.5% hafnium; 120 kilograms of titanium copper alloy (99.5% purity) to confirm the commercial scalability of ASM’s proprietary metallisation process; 200 kilograms of ferro-neodymium (FeNd - Nd 80%, Fe 20%), a key constituent of strip cast permanent magnet alloys; and 6 kilograms of a neodymium iron boron (NdFeB) alloy was produced at the Korean Institute of Rare Metals (KIRAM) facility. During the quarter ASM also signed an agreement with Dongkuk Refractories & Steel to design, develop, assemble, install and verify a 250 kilogram/day commercial metallisation plant. Concept design of Korean Metal Plant. Scalability of innovative metallisation process Based on the work completed by the team at ZironTech, ASM will have a scoping study of a Korean Plant completed in the current quarter. With the confirmation of the commercial scalability of ASM’s innovative metallisation process, along with its environmental benefits, ASM will now progress detailed engineering of a 5,200 tonnes per year metals plant that will initially produce titanium, nickel-titanium, titanium powders, neodymium metal, dysprosium metal and NdFeB strip metal. With the successful construction and commissioning of the metal plant, ASM will then look to expand the facility increasing the capacity of the plant, that would produce zirconium metal and other metal products. ASM is in discussion with several provincial cities in South Korea which have expressed interest in having the first metalisation plant within their well-serviced industrial districts. Surge in prices of key magnets Prices for key magnet rare earths surged during the December 2020 quarter as magnet producers restocked in response to stronger demand which had depleted their stocks. Further demand is coming from China’s State Reserve Bureau, which is also understood to be stockpiling material. Increased rare earths prices are expected to flow through to magnet prices as producers pass on cost increases. China’s export prices for neodymium-praseodymium (NdPr) metal increased by 28% during the quarter and have now increased by almost 60% since their mid-year low of around US$50/kg. Neodymium metal is selling at a 20% premium over NdPr metal, reflecting strong demand for high-performance magnets for electric vehicle (EV) traction motors. The company expects prices of rare earths to remain at elated levels on increase in demand from battery manufacturers as well as renewable energy companies.