“Taking the further step to rare earth metallisation would represent a crucial gateway step to the potential manufacture of rare earth magnets in future,” said Mr O’Leary in a speech to shareholders on May 10.
ASM has taken the unusual approach of entering the rare earths industry at the final stage of the value chain; it has built and commissioned a metallisation factory in the Korean district of Ochang which turns rare earth oxides into pure neodymium and praseodymium metal, or alloys of those metals, and then sells them to Korean magnet makers.
ASM’s Korean factory will get its feedstock from China and Vietnam for several years until the company starts mining at its rare earths and zirconia project near the NSW city of Dubbo.
Ms Smith said ASM wanted the Dubbo mine to have its own refinery making separated rare earth oxides, but the lack of a manufacturing ecosystem in Australia meant a domestic metallisation factory was harder to justify.
“We are very aligned with that desire to do more downstream processing in Australia, that is one of the reasons why in the Dubbo design we are taking it all the way through to oxide,” she said.
“I would be delighted to be building a metals plant in Australia… but it makes no sense to do it if there is not magnet production in Australia. It really only makes good sense if you have local downstream businesses.”
Ms Smith said customers buying alloys or pure neodymium from ASM’s Korean metallisation plant typically had very precise and unique requests, and commercial relationships at the latter stages of the value chain tended to be more intimate than partnerships in the upstream segment.
“I’ve had very strong indications from all three [prospective customers in Japan, Europe and the US] that they would like the metal to be a domestic facility, they want that metal production to be on ground [in their own nations],” she said.
“The relationship with the end user is key for these metals plants and so co-locating them in the area where the customers are facilitates that.”
The federal government agency Export Finance Australia gave conditional support for a $200 million loan to ASM to develop the Dubbo mine in 2021, and Ms Smith told The Australian Financial Review on May 2 that EFA was “very supportive of considering increasing that”.
Despite the fact ASM’s Korean factory currently gets some of its rare earths feedstock from China, the company’s strategy is to become a vertically integrated producer with no reliance on Chinese supply at any stage of the process.
Ms Smith said ASM would not consider offtake agreements with Chinese companies and believed it may be harder to secure government funding support if it was selling the product to Chinese customers.
“Our proposition is to provide an alternative supply chain,” she said. “In some jurisdictions, very explicitly, if you have got a China link then that is not going to meet the criteria for the funding support.”
Asked why ASM would seek to build a rare earths oxide separation plant near Dubbo rather than toll treat its Dubbo ore at Iluka’s federally funded Eneabba refinery, Ms Smith said the best results would come from having a processing plant that was tailored to Dubbo’s unique geology.
“Every rare earths deposit is different so the design of the flow sheet to separate is optimised for the ore body that is coming through,” she said. “The flow sheet they are designing for Eneabba is going to be terrific for Eneabba, it might be ok for other materials that are adjacent to Eneabba because they are similar in their geology, but it’s not going to be appropriate for Dubbo.”
Iluka has already struck an agreement with rare earths explorer Northern Minerals for its Browns Range project to be treated at the Eneabba refinery. Browns Range has a higher than average proportion of heavy rare earths like Terbium and Dysprosium – two metals that have supply chains dominated by China.
The agreement will see Iluka provide funding support to Northern Minerals through the issue of shares and a convertible note.
The reporter travelled to Korea on a Walkley Foundation Fellowship.