Australian rare earths company picks construction contractor

Potentially the first rare earths mine outside China to recover heavy rare earth elements passed another milestone this week.

Northern Minerals Limited (ASX:NTU) said on Wednesday that it has signed a memorandum of understanding with a Chinese company to build a pilot plant for its Browns Range mine located in northern Western Australia.

Sinosteel Equipment & Engineering Co., Ltd. (Sinosteel MECC) has been selected as the EPC (engineering, procurement and construction) contractor  for the 60,000 tonnes per annum Browns Range Pilot Plant. The company plans to construct the plant modules in China then ship them to the site for installation. The pilot plant was approved in September.

Sinosteel MECC agreed to defer AUD$12 million of the $60 million cost of the plant for two years, allowing Northern Minerals to pay the $12 million from cash flow after the mine is operating, rather than having to come up with the payment up front.

"We are excited to be partnering with a strong party such as Sinosteel MECC," said Northern Minerals’ managing director George Bauk. "The final pieces in the business plan are coming together as we move towards a final investment decision."

The pilot plant will produce a mix of rare earth oxides, including dysprosium, a heavy rare earth element used to make industrial magnets that are employed in wind turbines and electric vehicles, for example. Production from the pilot plant will represent about 10 percent of the mine's proposed output. Northern Minerals plans to operate the plant for three years, at which point a decision will be made whether to build a full-scale processing facility. Mining to feed the pilot plant is expected to start next year.

Browns Range would be Australia's first mine to process heavy rare earths, which generally command a higher price than light rare earth oxides. Lynas Corp's (ASX:LYC) Mount Weld rare earths mine in Australia hosts the Central Lanthanide Deposit (CLD) which, while considered high-grade, contains mostly light rare earth elements, according to a project page. The undeveloped Duncan deposit at Mount Weld hosts heavy rare earth mineralization, says Lynas.

While the pilot plant has yet to receive financing, Northern Minerals got a AUD$30-million boost from a Chinese investor. Huatai Mining, the Australian investment arm of Chinese coal producer Shandong Taizhong Energy, committed the funds in exchange for a 31 percent interest in Northern Minerals. The equity injection will be put towards mine construction.

Investors in Northern Minerals did not appear to react to the announcement. The stock has been mostly flat for the past three days, only rising to $0.130 a share on Thursday before settling at $0.125 at the close of trading on Friday. However NTU is up 56% year to date.

Image and caption courtesy of Northern Minerals.

Image and caption courtesy of Northern Minerals.