The Australian Strategic Mtrls (Hldngs) Ltd (ASX: ASM) is in the spotlight this morning on its positive scoping study.
The Australian Strategic Materials share price surged 5.3% to $5.60 in early trade when the S&P/ASX 200 Index (Index:^AXJO) gained 0.8%.
The $633 million market cap materials group released its internal scoping study that found a strong financial rational to build a 5,200 tonnes per annum (tpa) metals plant in Korea.
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Strong scope for ASM's Korean plant
The study estimated the cost to build the plant at US$35 million to US$45 million and is forecasted to generate US$180 million to US$190 million in annual revenue.
This should translate to an earnings before interest, tax, depreciation and amortisation (EBITDA) between US$45 million and US$50 million a year.
The plant will produce high-purity neodymium iron boron powder and titanium powder using the company's patented low-energy technology.
Final investment decision by mid year
On the back of this positive study, the board has pushed the button on a US$1.5 million detailed design engineering study.
This will provide a fully engineered scope of works and further refine capital estimates, which will help it make a final investment decision by June 2021.
Construction of the plant is expected to be completed by mid-2022. If all goes well, plant capacity will be expanded to 16,000tpa by the end of 2024 to meet potential demand from Korean manufacturers.
Expansion plans to help underpin ASM's share price
"Korea is phase one. Once complete, this will provide the template for future ASM metals plants in other regions," said the company's managing director, David Woodall.
"We'll now continue to progress our 'mine to manufacturer' strategy using our pilot plant furnaces in the second half of 2021, with the production of titanium and rare earth permanent magnet alloy powders.
"This will enable ASM to commence providing critical metals directly into the Korean manufacturing sector."
ASX rare earth shares are the flavour of the month
Rare earths are hot property due to a double tailwind. These minerals are essential to manufacture electric vehicles and other technologies for decarbonising the world. Further, manufacturers are looking for supply outside of China, which has a near monopoly of rare earths.
This means foreign governments will be willing to provide grants and funding to ASX rare earth companies.
Australian Strategic Metals received US$4.5 million from the South Korean government in 2020 while the Lynas Rare Earths Ltd (ASX: LYC) share price is surging after securing US government funds for its plant.
