Shares in critical metals producer Australian Strategic Materials Ltd (ASX: ASM) are losing ground and are now down 11% on the day at $10.13.
ASM shares lost territory directly from the open as investors responded poorly to an announcement on the company's Dubbo project optimisation. Here are the details.
What was announced?
ASM confirmed "strong financial results as an outcome of the Optimisation Study and Enhanced Project Addendum" for its Dubbo project.
The study was based on Alkane Resources Ltd's optimisation study that was released to the market way back in 2018.
ASM advised the revised financials are based only on the initial ore reserve of 18.9 million tonnes (Mt). Substantial additional measured and inferred mineral resources beneath the ore reserve are excluded from this study, per the release.
The updated base case for the 20-year life of mine is expected to achieve a pre-tax net present value (NPV) of $2.361 billion on a pre-tax project internal rate of return (IRR) of 23.5%.
ASM notes that this is a 6% improvement on the pre-tax IRR compared to the 2018 study.
The company also says that the optimisation simplifies the Dubbo Project process flow sheet, and incorporates "new operating strategies that will reduce operating costs and improve the ESG performance" of the site.
Examples of such strategies include increasing the brine concentrator capacity, thereby halving water consumption; refurbishment of the railway line to simplify project logistics and provide new categories of local entry level jobs; and the development of a "chlor-alkali plant" – reducing the cost of reagents and their transportation.
According to ASM, these strategies facilitate ESG benefits by "reducing water consumption, reducing the handling and quantum of process chemicals, and reducing the number of trucks on local roads, required for the Dubbo Project".
Management commentary
Speaking on the announcement, ASM Managing Director, David Woodall said:
I am delighted with the outcomes of the Optimisation Work which demonstrates the financial strength of the Dubbo Project and ASM's focus on a sustainable future delivering improved performance and ESG outcomes. The Optimisation Work supports a strong go forward case and is an exciting development for ASM, our partners and shareholders. The Optimisation Work confirms we have a project that can integrate into our metals business to create an alternate, sustainable, secure and stable long-term supply of critical metals and oxides. This places ASM in an exceptional position in the critical metals value chain, as the vertically integrated owner of a globally significant polymetallic resource in Dubbo, and the capability to produce critical metals from this resource to the highest environmental standards.
In the past 12 months, the Australian Strategic Materials share price has soared over 137% after rallying a further 58% this year to date.
Over the last month, it has reverted back down sharply and now trades 22% in the red over that time, and is a further 19% down over the last week of trade.
