I looked at the next part of the presentation particularly the funding of Dubbo. Done more for my own use but happy to share.
(20:44) Soas we look then at how we meet our commitment for community, that is one areawhere we have a very deep connection with the Dubbo community for many years,and that is something that we really value and will continue. But we have alsoin recent times being investing in a similar deep connection with our Koreancommunities, the health and safety for our employee’s is another area where wehave a very strong focus is particularly relevant in our Korean operations thatwe are now managing operational risks in a day to day basis now that we are inproduction. We have got a commitment to make sure that we do not have any environmentalharm either in the work we are doing across the Dubbo project as well as ourToongi Pastoral activities and well as the work we are doing in our Koreanmanufacturing facility, and that constant focus on how we are going to deliverthis at a net zero carbon and really looking at working you know, additionally tothe technology development that we are doing in Korea, we are really workingwith the NSW government in what we do to access renewable energies as well aswhat can we do about improving the design for Dubbo to take advantage of theemerging technologies that will allow us to have that stronger environmentalperformance.
So thatwill continue to be an area of focus for us going forward.
I did thenwant to spend a little bit of time sharing what we are doing in Korea. Therehas been a lot of questions coming to me about what we are doing there and Ihave shared a number of times that whenever I have an opportunity to take avisitor to Korea, they are just blown away by what we have done there in Ochang and I just wish I could take you all there but this is a photo of the plant that we have built in Korea.
The pretty building with the orange spots on it on the right is the admin building and that is a three story admin building where we house both the operational management and the production support teams but that is also where we house the research and development team that we have, you might recall that we purchased Zircon a couple of years ago and bought that research capacity as a fully owned subsidiary in house and when we made that acquisition we acquired an incredibly we credentialed research and development team who are the team that is developing that LK process I spoke about before. So, they are co-located there.
But that large building that is the L shaped building is the production facility. That building did exist before we started it was an old DVD company but we completely gutted it and refitted it. But the rest of the properties on that 2 hectare plot were not there when we broke ground in July last year. So since July last year we have done that whole construction and commissioned it and delivered our first saleable product to our first customer, a Korean magnet firm, all within 15 months which the team there are very very proud of.
The L shaped production facility, the area under the black roof is the area that is dedicated to the neodymium production and there we have installed two furnaces and stripcaster and that is what we are currently what we are currently doing all thecommissioning and production on. The intention as we then increase the capacityof that neodymium production is to add an additional number of furnaces, another13 furnaces within that facility and also an additional strip caster. So thatwill take what is nominally a 600 tpa capacity we have there at the moment throughto the 3,600 t that we are planning to have installed by the end of next year.
The areathat is the blue roof, the other part of the L, is the area where we haveinstalled the Titanium furnaces, we have two furnaces installed there. Theyhave an installed capacity of 1,600 tpa. And that is as much capacity as we areplanning to put there at the moment, although there is space to do another twofurnaces so we can double that capacity within that facility should we chose to.
The twotall buildings that make up the square, that fill out the L to a square, arethe two buildings, one of the building where we do the material prep, and theother is where people make the Titanium powder, so that is what those are.
The smallerbuildings on the left are the laboratory, we have a nationally accredited laboratorythere to be able to do all of our assays work and to be able to do all of ourquality assurance for products for customers as well as the canteen for thestaff.
So I speakabout that, I am sure you can hear that I speak about it with pride because whileI appreciate that the project did delays predominantly due to COVID, we haddisruptions to equipment delivery, we had disruptions to contractors beingavailable, we had difficulties getting visas for people to come overseas toassist with commissioning and we had had at times where we had to close theplant because of COVID infections. So, we have had disruptions there so thetimeline has been adjusted accordingly, but none the less I am very proud ofthe work that that team has done there this year.
Just a coupleof photos that you can see there, the one on the left is actually one of thecopper titanium cores did, the development of the copper titanium is a littlebit slower than the neodymium process, it is a very innovative process, understandablywe have got more work to do doing that process commissioning, but that is thereason for, we have been running trials there in the facility, and the trialsthat we ran through last quarter we sent some of the samples to HITECH which isone of the premier government owned research facilities in Korea, we sent thesamples to get independent analysis and have got a report now that confirms thatthat product is being made to saleable spec. Which is very exciting, and we arein the process now of broadening out the product range that we have made andalso… {inaudible}… we are just in the final stages of commissioning that …{inaudible}…virtual but …{inaudible}…we have some examples of some of the products that we are making …{inaudible}…we are on track with what we originally estimated …{inaudible}…the customer contracts of the Korean mills plant is that the actual customers have not increased there production requirements at the rate that was initially anticipated, so it is planned that the ramp up will go a little slower that the original estimates, but we are working closely with a number of customers, we have broaden the range of customers now to include customers in the United States and Japan as well as the customers we have spoken to in Korea, so that we can build up the production profile for our Korean metals plant.
Now I wouldlike to have a chat about Dubbo, because Dubbo, because much as a lot of thetime and attention goes to the Korean metals plant, Dubbo is our prioritybecause that is the resource that is ultimately where the feed for metal plantwill come from. An we are really excited that we have got what we really believeis the right project at the right time. I am sure that most of you are deeplyfamiliar with Dubbo, it is a long life resource, we have 20 years of reserve,we got some additional 50 resource identified. We have been working on this formany years. We have, well over 15 years been working with ANSTO and have a veryadvanced flow sheet, we have got all our major approvals in place we have donesignificant design work, because as I said earlier we have released the updatedoptimization study in December, where we have done further improvement to thatflowsheet, in part reflecting some of the recent results from …{inaudible}…ANSTOwork where we have seen opportunities for improving recoveries but also, so wecould improve the environmental performance of the facility taking advantage ofthe up to date technologies, we reduced the water usage by over 50% in recenttimes we reduced the amount of road haulage that we will use, we have been ableto reduce the amount of reagents that is coming, also we have transferred anumber of the haulage to rail. So, there are some of the things that we havebeen working on.
We issuedthe ECP definition contract to Hyundai Engineering in June of this year and weare just working at the moment on securing funding to be able to provide noticeto proceed to Hyundai with a desire for that work to proceed next year, as wethen secure funding talking to our strategic investors and offtake partners.
The financialsthat came through that optimization study are very strong we have a pre-taxinternal rate of return of 23.5% and a free cash flow of over 400 milliondollars Australian every year once we have the project in operation.
But we dohave the challenge of funding it, the funding of it is 1.67 billion, so that isobviously a challenge for us, and one that we have been, since I started in therole I have been going to talk to all the various parties that we have beenspeaking to for some period of time, to check in with what is the status, whatis their level of enthusiasm, what is there level of commitment. I am veryhappy to say that the amount of support for this project, at the Australian governmentlevel, at the NSW government level, at the Korean government level federally, theand Chungcheongbuk Province which is the state level in Korea just continues to be so strong.
The target lastyear was for us to have secured our investors and we were working with a KoreanConsortium to progress that, and as we now get …{inaudible}… at the end of theyear we recognized that that was not going as quickly as we wanted to anddecided to step into a broader search so not have the Korean Consortium exclusivelydoing that work on our behalf but take that work more in-house again and thatis in part because we have been talking to some of the large Korean end users.What became clear is they have a lot of enthusiasm for being Dubbo offtakepartners but they really wanted to work with us more directly than that modelwe had was enabling. So, we have now taken that to, working on that in-house andthat is really when we put the company presentation out last month, with theupdated timelines, they are the timelines that we are working to progress thoseconversations over the next six to nine months. One of the things that I thinkthat graph shows is that I think is worth reflecting on for just a moment, whenyou have a look at the gap between what the Opex is versus what the revenue is,we used relatively conservative price assumptions for the revenue, what you cansee there is once we have the offtake for the hafnia and the zirconia, then allof the revenue we get for the rare earths is free carry. So, this project continuesto have a lot of exposure to the upside as we see the rare earths valueincreasing.
And lastlyjust to give you a sense of what we are doing around marketing, we haveactually got in the room for those who Mr Peter Finnemore who is the head ofour marketing, who joined us not long after I started in the role. Peter hasbeen assisting us with really broadening that search for offtake partners, youcan see there the sorts of companies that are potential end users for theproducts we make at Dubbo, whilst we still have a very strong focus on Korea,you can see there that there are a number of companies that are Japanese, thatare American, European and that the search we have for off-take partners isalso no longer focused on light rare earths but we are looking at all the rareearths, sorry all of the products simultaneously as we are taking that work forward.
So thoseare the really the things I really wanted to share with you today as an update.This is really an exciting time for ASM and I really just want to re-emphasisethat we have a high tech metals plant that is in production, we have got acritical metals project ready for development and we have a very very good teamwho are dedicated to getting this unique set of opportunities into production forASM.The past few months have been incredibly busy and I am really grateful toIan and other directors for the support they have given to me and the team aswe have transitioned in recent months. But I would also like to give my thanksto ASM staff who have worked so hard in the last 12 months to deliver theprogress that we have made towards our goals.
(20min delay)
