Resources and mining companies dominating the headlines this past week include Fortescue chairman Andrew Forrest convincing the High Court to hear his appeal, Paladin Energy raising $68 million, BHP predicting the resources industry in Australia will need 170,000 extra workers over the next five years and Sandfire Resources securing a $390 million debt facility to complete its Degrussa copper and gold development.
This week we take a closer look at rare earths. Finance News Network speaks with leading American investment analyst James Dines, asking why he's bullish on rare earths. We also speak exclusively with Arafura Resources chief Steve Ward about his strategy to harness the world's increasing appetite for rare earths.
Fortescue's Forrest wins right to appealFortescue Metals Group Limited
(ASX:FMG) chairman Andrew Forrest has convinced the High Court to hear his appeal against a deceptive and misleading conduct finding. Earlier this year the full bench of the Federal Court found that Mr Forrest misled investors by giving the impression that broad agreements with Chinese construction companies were binding contracts. If the High Court had refused to hear the appeal, Mr Forrest would have likely been banned from board-level positions in Australian companies for up to seven years.
CommoditiesFinance News Network spoke with leading American investment analyst James Dines at the RIU Melbourne Resources Round-up conference. Mr Dines stressed the importance of rare earths to the global economy.
"Rare earths are the elements of the future ... quintessential for the use in cell phones, electric cars, wind turbines, cruise missiles. Without rare earths, a modern economy would not be able to function. They are crucial. China controls 97 per cent of the production of it and they've got a virtual monopoly."
"I've been urging other countries not to give up or sell rare earths because they will be very, very important in the future," Mr Dines added.
Mr Dines is bullish on rare earths despite the current volatility in prices.
"In the next few years, there's going to be ups and downs [in the price of rare earths] as with any new technology ... However, I would say that, until additional production comes on stream, possibly five to ten years from now we're going to have a huge growth spurt [in demand for rare earths]."
Arafura taps into world's demand for rare earthsArafura Resources Limited
(ASX:ARU) Managing Director and CEO, Steve Ward, agrees that demand for rare earths is strong, and says the challenge for the industry is on the supply side.
"China is the largest supplier of rare earths and it's achieved that position since 1985, prior to 1985 it didn't supply any. We are seeing the beginnings of a new area where there will be supplies outside of China because the rest of the world is looking for diversity of supply. And that is where the opportunity is for Arafura, to become one of those new suppliers."
Arafura's flagship Nolans Project in the Northern Territory is geared towards providing a rare earths supply, with customers already in sight.
"Arafura has ... one of the three major world scale projects that will come to be this decade. We're well advanced through our bankable feasibility study. As part of that study we have selected a list of targeted customers we would like to develop long term relationships with. We are having a number of discussions with those targeted customers, currently, and have done and will do in the future," said Dr Ward.
Dr Ward says construction on the Nolans Project should be completed in about two years, and the picture will be even clearer once the feasibility study and finance is in place by the end of this year.
He added, "We are very conscious of coming to market as soon as we can. We have already secured one letter of intent with a major German organisation, and there is a lot of interest in our projects and products".
Paladin raises $68 millionPaladin Energy Limited
(ASX:PDN) raised $68.2 million last week, just short of its $70 million target. It says the funds will primarily be used to strengthen its balance sheets. The idea that Paladin would need to raise capital had been floated, but was widely unexpected when announced on Wednesday morning. Analysts voiced their doubts it would be enough, with some brokers saying the uranium miner would need to raise $300 million to $400 million to address its problems. Development of the Kayelekera mine in Malawi and expansion at its Langer Heinrich mine in Namibia has been costly. Paladin was a $5 stock before the fallout from Japan's Fukushima nuclear disaster, today the stock trades at around $1.20.
BHP forecasts resources jobs explosionBHP Billiton Limited
(ASX:BHP) has predicted the resources industry in Australia will need 170,000 extra workers over the next five years. According to the miner's own forecasts the resources boom will create 90,000 jobs in the industry by 2016. BHP's prediction is almost 60 per cent higher than government forecasts. Most of the jobs will be in the mining states of Western Australia and Queensland. The mining industry has backed the idea of using overseas workers, but is demanding the government spend more on mining focused training and university courses.
Sandfire's $390 million debt facilitySandfire Resources
(ASX:SFR) has secured a $390 million debt facility to complete its Degrussa copper and gold development in Western Australia. ANZ has signed off on the documentation. There had been a delay due to the bank having to engage the services of another independent expert to review and verify the feasibility studies, according to Sandfire chief Karl Simich. The increase of the loan from $360 million to $390 million was reportedly done at the suggestion of ANZ's independent expert, and not an indication of a cost blow-out. Sandfire expects the first load of high-grade direct shipping ore to leave Degrussa in the March quarter next year.
Melissa Beaumont Lee
