A Visit To Arafura Resources’ Nolans Rare-Earth Project

by Gareth Hatch on July 20, 2011 · 12 comments

in Rare Earths, Site Visits

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Last month during our visit to Australia, Jack and I had the opportunity to visit Nolans Bore, the rare-earths deposit owned by Arafura Resources Limited (ASX:ARU, PK:ARAFF).

The Nolans Bore deposit is located about 80 miles north of Alice Springs, in the Northern Territory. A two-hour drive from the airport in Alice Springs, Nolans Bore is very much in the central part of Australia. It is roughly halfway between Darwin (850 miles to the north), also in the Northern Territory, and Whyalla (890 miles to the south) in South Australia. Access is via the Stuart Highway, which runs about 7 miles from the entrance to the project.

According to Richard Brescianini, Arafura’s General Manager for Exploration & Development, the rare-earth deposit at Nolans Bore was discovered by PNC Exploration in 1995, and was effectively “re-discovered” in 1999, by Arafura. The deposit contains an estimated 30.3 Mt of rare-earth mineral resources, at an average grade of 2.81%, resulting in an estimated 850 kt of rare-earth oxides present. In addition to the production of rare earths, the project is of interest for co-products of uranium oxide and phosphate, and a gypsum by-product. As we’ll see later in this article, determining the right “mix” of priorities for the production of these various materials, has been a key aspect of recent business development for Arafura.

You can see photographs taken during our visit, in the four galleries below (click on each image to enlarge it).

The plan for the Nolans Project is to mine and to then process the ore into a mineral concentrate at Nolans Bore, which would be transported to Whyalla via a rail line located approximately 40 miles from Nolans Bore, and which goes all the way to Whyalla and beyond. Arafura is planning to build a processing and separation complex in Whyalla, to produce 20 ktpa of separated rare-earth oxides. Arafura originally planned to transport 700 ktpa of mineral concentrate to Whyalla, but that plan may change, depending on the outcome of additional technical studies that Arafura is presently undertaking.

On a side note, one interesting aspect of the development work at Nolans Bore, is that the site is situated just a few miles from the Aileron Roadhouse. This is a longstanding pit stop for tourists and travelers along the Stuart Highway. Arafura has an unusual arrangement with the Roadhouse in that all of their site workers are housed here when working. They also have a portable office on-site and it’s clear that this symbiosis between Arafura and Aileron works well. It was interesting to hear the owners of the Roadhouse asking the managers after the day’s work, how things were going, gently ribbing them about the share price, and so on.

At the time we visited, Arafura was in the middle of a 52,000 m in-fill drilling program. In 2011, Arafura plans to complete more drilling in one year, than has been completed in all previous years combined, as part of the process of increasing the Indicated and Inferred portions of their mineral-resource estimate. You can see the details of the mineral-resource estimate on the TMR Advanced Rare-Earth Projects Index page. The planned drilling includes approximately 30,000 m of reverse-circulation (RC) drilling, and 22,000 m of diamond drilling.

Drilling is typically initiated in 80 m x 80 m grid patterns, with these spacings allowing for the results to be compiled into an Inferred resource estimate. Mr. Brescianini indicated that 40 x 40 m spacings lead to Indicated resource estimates, with 20 m x 20 m spaces leading to Measured estimates.

Mr. Brescianini estimated the drilling costs to be approximately AU$80 / m for RC drilling and AU$260 / m for diamond drilling. I asked Kelvin Hussey, Arafura’s Principal Geologist, why they would use one type of drilling over another, costs aside. He explained that RC drilling, though cheaper, is limited in the depths to which it can be used. This is because the process uses compressed air to help extract rock chips during the drilling process, and after 150 m of drill depth, the required pressure can no longer be maintained.

The current drilling program calls for holes down to 250 m, with a handful of holes drilled to 450-500 m, to determine mineralization at depth. In addition to holes that have been drilled in their entirety with the diamond drills, some of the cores are collected via diamond drilling that uses a pre-existing RC drill hole to start off well below the surface – these are known as “diamond tails”. Up to the day we visited, the diamond drilling had been conducted by two rigs; as we were leaving the site, a large truck carrying the third diamond-drilling rig arrived on site, to shorten the time required to complete the program.

The on-site work at the Nolans Project is set up to run 24 hours a day, done by 30-40 people over two shifts, with a “two weeks on – one week off” shift rotation pattern. Our visit to the Nolans Project site started off early in the morning, after arriving in the night before following our drive from Alice Springs. At 6AM we joined the workers coming onto the day shift as they gathered outside the offices on the Aileron site. The night-shift workers handed off to the new shift during the pre-start “toolbox” meeting, noting any issues and summarizing progress made. Everyone on the new shift was required to take a breathalyzer test before commencing for the day. This is apparently common in these types of operations. Even Jack and I were required to puff into a tube before coming onto site; I’m glad to report that we both passed the test…

We then underwent a thorough environmental, health & safety induction session, before we headed out to the Nolans Bore deposit itself.

Mr. Hussey explained that much of the early work at Nolans Bore was done in the form of costeaning. This is a method of cutting deep trenches into the surface of the ground, and then taking channel samples from the walls of the trenches at regular intervals. The rare earths at Nolans Bore are contained in several minerals, primarily apatite and monazite (both phosphate minerals) and allanite (a rare-earth silicate).

The known mineralization at Nolans Bore is distributed over 370 acres (150 hectares) of the property, with significant portions of it exposed at surface. Almost all of the holes have been drilled at a 60-degree angle to the south-east, reflecting the predominant dip and trend of the mineralization.

Mr. Brescianini said that while there was some variation on the distribution of rare earths at the small scale, the variations were not as marked at the larger scale. Thorium and uranium levels have consistent values. Over the years, many tens of thousands of samples have been taken from the Nolans Bore deposit for assaying. More recently, Arafura contracted with Intertek Minerals Services to provide on-site sample preparation facilities. Literally a “lab-in-a-container”, replete with dust extraction, air conditioning and on-site lab technicians, this capability has allowed Arafura to significantly reduce the mass of material required to be shipped to the Intertek lab in Darwin for geochemical assaying. 50 g samples are prepared from 30-60 kg drill cores, equivalent to approximately 1-2 m of depth downhole.

While at the core shack, Jack and I noticed that we couldn’t see any handheld Niton XRF analyzers to hand. Mr. Hussey commented that while such equipment may be of use with drill cores at other deposits, with different mineralization, they were not used at Nolans Bore because they felt that there were issues relating to XRF calibration and the reliability of the subsequent readings. He said that they focused more on using geological logging and radiometrics to do gross core sample selection for analysis.

Additional bulk samples have been taken for processing and beneficiation trials at AMMTEC in Perth and the ANSTO Minerals facility in Lucas Heights, New South Wales, not far from Sydney. Mr. Brescianini said that during August-October 2010, the company undertook a wide-diameter (780 mm / 31 in) drilling program to acquire representative bulk-tonnage samples of the current Measured and Indicated resource. A total of 48 holes were drilled to depths of 7.2 m to 64.5 m. Approximately 1,400 t of mineralization was collected in 1,368 bulk samples. These samples form the basis of the feedstock for the beneficiation and (subsequently) pre-leach and sulphation demonstration trials, which form part of the Nolans Bankable Feasibility Study (BFS).

Mr. Brescianini indicated that the minerals could be cracked using sulphuric acid at relatively low temperatures. Arafura will be working with ANSTO to scale up the separation processes, and to help prepare products to demonstrate the quality and consistency of processing. The company has also worked with Lycopodium and AMEC Minproc as they work towards completing the BFS.

An interesting aspect of the combination of working in both the Northern Territory (Nolans Bore) and South Australia (Whyalla) is that neither jurisdiction has the same prohibitions on uranium production that Western Australia, New South Wales or Queensland have in place. In theory this should make it easier to handle the disposition of thorium as a byproduct of rare-earths processing; it also means that the uranium present could be processed and made available for sale. Mr. Brescianini indicated that Arafura had not yet decided if they would export uranium oxides; one option would be to sell such materials to current domestic producers, with existing permits to export these materials.

I asked Mr. Brescianini about the royalties on mineral projects, and how the so-called Minerals Resource Rent Tax (MRRT) would affect things if ever it came to fruition and was applied to rare-earth projects (it currently only applies to iron-ore and coal projects). He said that in Australia, it is the states and territories that own the mineral rights. In the Northern Territory, the base royalty is 18% on the net value of mineral production, though the effective rate is in the single digits because of a variety of deductions that can be made. Mr. Hussey added that the MRRT is so controversial because it would be imposed by the national government, not the states and territories. He said that Arafura’s rare-earths development will not be captured  under the current design of the MRRT.

On the day that Jack and I arrived at the Aileron Roadhouse, prior to visiting Nolans Bore the next day, Arafura made an announcement that it was going to expand the scope of its BFS. Not unexpectedly, the market did not like this news and the share price for Arafura has been down ever since. We had the opportunity to discuss the announcement with Mr. Brescianini, and asked why Arafura was taking this step, and what it might mean for the project.

Mr. Brescianini said that in a nutshell, the decision to make this change was rooted in the desire to reduce the complexity of the flow sheet required to process materials from Nolans Bore, so that more emphasis could be placed on the production of rare earths, and much less on that of phosphate and other products of lesser value. He said that in doing so, the capital costs required to get the Whyalla Complex up and running, and ongoing operating costs, would be reduced. The recent escalation in rare-earth prices was obviously also a factor in this decision, as was the company’s view that demand for rare earths would continue to outstrip supply for many years to come.

Arafura’s announcement included mention of an estimated 9-12 month delay in the completion of the BFS, which naturally puts back the estimated start date of production to perhaps 2014. Mr. Brescianini acknowledged that the change could result in the delay of revenues from the Nolans Project. Beyond the dynamics of Arafura Resources and this project, how this delay will affect the rare-earths sector in strategic terms remains to be seen. While it is likely that Arafura will still be one of the first few producers to come on-stream in the short-to-medium term future, what the industry needs are some success stories in the next few years, to get investors past the jitters caused by playing in the junior mining and development sector.

In the longer term, if things go according to the revised plan, then it would appear that Arafura has a significant opportunity to generate higher revenues with lower costs, thus achieving higher margins and ultimately making their shareholders happy. The company took a calculated risk in changing their game plan. Let’s just hope that it pays off, not only for Arafura and its shareholders, but for the industry as a whole, and those end users who need a steady source of supply, in particular.

Overall, both Jack and I were impressed with the ongoing work at Nolans Bore, and the way that the project is being managed. The project definitely has an operational, not just exploratory, feel to it. Jack recently said elsewhere, that “Arafura Resources has a first class operational management” as well as “a skilled and dedicated workforce, and a first class operation” at Nolans Bore. I am inclined to agree with him.

Our thanks go to Arafura Resources Limited for facilitating the visit to the Nolans Bore site of its Nolans Rare-Earth Project.

Disclosure: at the time of writing, neither Gareth Hatch nor Jack Lifton is either a shareholder of, nor a consultant to, Arafura Resources Limited (Arafura) or any of its subsidiaries. They did not receive compensation from Arafura or from anyone else, in return for the writing of this article.

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1 Jack Lifton July 20, 2011 at 1:55 pm

To Gareth’s review here, I just want to add that I thoroughly enjoyed our (TMR’s) visit to Nolans Bore, and I will never forget the depth of the nighttime silence at the Aileron Roadhouse, or my first sighting ever of the Southern Cross, literally sparkling just above the horizon at 05:00 local time. What impressed me the most, however, during the visit, was the professionalism of Mr Brescianini and his technical and operating staffs. I want to emphasize this point, because so many of the junior mining ventures begun in the last few years (perhaps most!) are simply stock promotions peopled by IR and PR drones, who know nothing whatsoever about the refining or marketing of rare earths.

Everything else being equal, the winner of the race to produce rare earths (or anything else) at sustainable volumes, of consistent high quality, and at low costs, has little to do with the size of the deposit, or even its location, as it has to do with the quality, experience, and professionalism of the financial and engineering management of the venture.

Arafura Resources (and Alkane Resources, for that matter) are down in my book as being operated by open and skilled professionals. In every case, that covers about two-thirds of the issues faced by any business whatsoever….

2 Kris July 20, 2011 at 2:16 pm

Many thanks again! These reports and your other contributions have much more value than most other REE-articles in the blogosphere IMHO. And while in the past the focus was a bit too much on the North-American developments regarding deposits, I’m happy to see there’s much more balance now in your coverage of REE deposits with recent visits to South Africa and Australia.

So when are you going to Russia? ;)

Keep up the good work!
Kris

3 Tuck-Nasty July 20, 2011 at 3:11 pm

Awesome pics of the site.

4 Cláudio Holanda July 20, 2011 at 3:16 pm

Congratulations and thanks a lot for a very nice report and precious information about the search of REE in Australia. For sure all information will be quite important for all involved with REE prospection.

Regards,
Cláudio Holanda

5 Evan July 20, 2011 at 3:52 pm

My question to your two is this…. if a company like this trades at around .71 cents a share and will not be seeing the downstream revenues for almost 3 to 4 years, how is a company like GWMGF trading at .88 cents???

6 Mike S July 20, 2011 at 5:51 pm

Thank you – an excellent report. I had been wondering about diamond versus RC drilling and now I know.

7 Gareth Hatch July 20, 2011 at 10:04 pm

@Kris: thanks for the feedback. I’m pretty much open to visiting any of the advanced rare-earth projects that will have us :-)

@Tuck-Nasty & @Cláudio Holanda: thanks!

@Evan: If you really need to compare companies you’re probably better off comparing market caps, not share prices, no? Beyond that, I’m not sure what you’re specifically getting at; there’s more to both of these projects than just their projected start dates…

@Mike S: Thanks – yes, I had wondered about the difference too, other than the price. Never hurts to ask, eh?!

8 Positroll July 22, 2011 at 8:14 am

Thanks for the detailed report.

” Arafura will be working with ANSTO to scale up the separation processes, and to help prepare products to demonstrate the quality and consistency of processing. ”
Hm, isn’t this what Alkane has done with its pilot plant years ago?
If so: Why then does Arafura think it will be ready for production as soon Alkane (late 2013/ early 2014)? Is their resources mix easier to handle? Is it about size?

@Jack Lifton
I take it you didn’t visit Alkane when Gareth did ( http://www.barnswood.com/tmr/wp/2011/06/a-visit-to-the-dubbo-zirconia-project-demonstration-plant/ ). So where does you positive comment on Alkane come from? Did you recently meet the CEO at a conference? Did you visit their site on another day? If so, anything to add to Gareths report on them?

Disclosure: long Alk.ax

9 Gareth Hatch July 22, 2011 at 8:31 am

@Positroll: the flow sheet for Lynas Corp’s Mount Weld project was also developed at ANSTO Minerals (I got a fleeting look at it as we walked through the buildings there).

The resource at Arafura Resources’ Nolans Bore deposit, is distinctly different from that at Alkane Resources’ Dubbo Zirconia Project. The mineralogy and distribution of rare earths, and other materials of interest, are usually unique to a specific deposit. So, timelines will vary for the development of flow sheets, and their optimization.

For the record, Jack and I attended a two-day conference while in Australia, and among a number of attendees, Alkane Resources’ CEO was there. We’ve also met him before at other conferences too.

10 Positroll July 22, 2011 at 9:56 am

“So, timelines will vary for the development of flow sheets, and their optimization.” Um, yeah, sure, but Alkane is basically done with that, except for a little tinkering here and there.
So why is Arafura optimistic that counting from today they can not only do the optimisation faster than Alkane did in the past, when they are still at the beginning of the process (from what I read about Alkane’s journey of getting ready for production, a lot of luck was involved in finally finding the right approach – maybe Arafuras lab tests lend themselves to easier upsizing … ?) but also get the permits, financing and build the infrastructure in the same timeframe as Alkane will do ?!?

To me it looks as if either Alkane is overly pessimistic (I’d love that…), or Arafura overly optimistic (unless I misunderstood you and “perhaps 2014” for Arafura does not mean “Q4 2013 or Q1 2014” but rather “maybe 2015” …? ). Oh well, I guess we just have to wait and see …

11 prescient11 July 22, 2011 at 1:00 pm

Gareth,

I read with intensity Jack’s latest article on critical metals. His conclusion seems to put dysprosium as the absolute most critical REE in the future. However, he failed to list Quest as a potential critical piece of that supply going forward. I know he made a reference to TMR’s 20 listed advanced projects, but there is far and away no other mine that can match QRM’s anticipated production of Dy. It more than doubles AVL’s estimated annual production.

And I know our commentary with regard to other deposits having more in situ amounts of dysprosium, but when it comes to actual annual production, none of the non-Chinese projects get close to Quest. Just curious about that omission.

Many thanks.

12 BRUCE July 25, 2011 at 11:43 pm

MANY THX FOR THOSE INFORMATIVE ARTICLE TO JACK AND Gareth,
I BELIEVE WE ARE ON THE RIGHT TRACK FOR THE RARE EARTH INDUSTRY, AND LEARN TO CHOOSE THE BEST PROJECT FROM YOUR ARTICLE.
BY THE WAY, WOULD YOU MIND TELLING ME MORE ABOUT GRAPHITE, HOW WILL IT WORK IN THE FUTURE, AND WILL IT BE ANOTHER NANO TUBE?

BEST REGARDS,
BRUCE

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