PERTH (miningweekly.com) – The recent cost savings at rare earths hopeful Arafura Resources’ flagship Nolans project have kept the project economically viable, despite the significant decline in rare-earth prices.

Arafura reported on Thursday that the project had a net present value (NPV) of A$2.045-billion and an internal rate of return (IRR) of 21.4%. This was compared with the 2012 NPV estimate of A$4.3-billion and a 30% IRR.

In April last year, Arafura announced a A$1-billion cost saving target at the Nolans project, as capital markets tightened. In May this year, the miner announced that it had reduced the capital cost of Nolans from an initial A$1.9-billion, as estimated in 2012, to A$1.4-billion, following a cost review.

The company identified a number of revisions to the project, including a revised design at the rare earth intermediate plant seeing the replacement of hydrochloric acid with sulphuric acid in the pre-leach system.

In June last year, the miner reported a A$400-million saving in capital costs by abandoning plans for a rare-earth complex in South Australia, cancelling a land sale agreement with OneSteel.

The company also reduced operating cost projections for Nolans from the A$20.55/kg of rare-earth oxide (REO) predicted in 2012, to A$15.67/kg of REO, based on production of 20 000 t/y.

“Difficult external conditions are impacting companies all across the resources sector. The challenge for management is to take action to optimise project economics and maximise returns for shareholders,” said Arafura MD Gavin Lockyer.

“I am confident our actions to date have weathered the worst of the storm for the company and the project economics for Nolans will improve even further as we continue our focused efforts to drive costs down, and benefit from an expected uptrend in global pricing, particularly in those rare earths the world needs and Nolans has in abundance.”

Lockyer said that the company’s engagement with end-users, most recently in Japan and North America, continued to reinforce his confidence in the rare earths market, and in particular the necessity for products that would be delivered by Arafura from Nolans.

Further project cost savings were expected from an ongoing optimisation programme, which was due for completion in the near term.

Arafura plans to acquire an offshore site for the rare earths separation plant next year, and construction of Nolans was forecast to start mid-2016, subject to the company securing the necessary finance.