Australian heavy rare earths producer Northern Minerals (ASX: NTU) has provided its consolidated financial report for the financial year ended 30 June 2020, and the independent auditors report thereon.
Browns Range Pilot Plant Operations
During FY20, the Pilot Plant milled 19,314 tonnes of ore and produced 124,607 kg of rare earth carbonate. These operations allowed us to continue to test the pilot plant operation and collect valuable data to drive innovative solutions and improvement.
A major shutdown was undertaken in the first quarter to enable modifications to the kiln feed system. These modifications addressed scale build up in the kiln, throughput rates and availability. These works were successful, with a notable increase in kiln performance when operations recommenced after the shutdown.
On 22 November 2019 the Company officially opened the Training2Work facility as a part of a program that is being jointly undertaken with the Wunan Foundation. The Training2Work facility was established to enable members of the local indigenous community at Ringer Soak and Halls Creek to be trained in the skills that are required for positions in and around the mine site.
In March 2020, a decision was made to temporarily suspend operations at the Browns Range Pilot Plant and move to care and maintenance due to the Covid-19 restrictions. This suspension involved the temporary stand down of most site based staff (except for a small care and maintenance team), along with corporate office staff as well as the implementation of several cashflow saving measures.
On 1 July 2020, the Company made the decision to partially restart operations at the Browns Range Pilot Plant Project. This decision was made following the lifting of Commonwealth biosecurity restrictions applied to the Kimberley region as a part of Covid-19 control measures. The partial return of pilot plant operations at Browns Range resulted in about three quarters of the previous Project workforce being re-mobilised. Initial operations will focus on test work in the beneficiation circuit followed by tests in the hydrometallurgical circuit along with mechanical construction and installation of the ore sorter.
Research & Development (R&D) Projects
A total of 271 individual R&D experiments were originally planned for the duration of the three-year Pilot Plant stage and additional experiments have been performed based on new information obtained from the experiments done to date.
In the 2020 financial year, experiments were conducted on all areas of the plant, including fine grinding, magnetic separation, flotation, sulphation bake, leaching, purification, ion exchange, rare earth precipitation and waste water treatment.
Major breakthroughs were achieved in improving the efficiency and operation of the sulphation bake kiln. These resulted from tests on the kiln that led to significant changes to the equipment, including: seals, feed system, materials of construction, and mechanical devices designed to limit scaling in the kiln to improve availability and throughput.
A rare earth separation study was commenced early in the year with US company K-Technologies, Inc. (K-Tech) to assess the possibility of producing separated rare earth oxides that currently require separation in China. K-Tech is focussed on processes which involve continuous ion exchange, continuous ion-chromatography and other related advanced separation methodologies.
Initial bench scale test work completed by K-Tech showed that the Stage 1 continuous ion exchange process was successful with the rare earths (RE) loading in preference to the non-RE on the resin. Regeneration was successful and the composition and the regeneration solution showed that final nonRE/RE ratio is in the range that would allow for the regeneration solution to be used as the feed for the Stage 2 continuous ion chromatography step, where initial separation of the rare earths by group begins.
Completion of this work was ultimately delayed as a result of the impacts of shutdown orders in the US as a result of the Covid-19 pandemic.
During the reporting period, the Company terminated the offtake agreement with Lianyugang Zeyu New Materials Sale Co., Ltd. (JFMAG) and entered into a new offtake agreement with German conglomerate, thyssenkrupp Materials Trading Gmbh (TK).
The new offtake agreement included all mixed heavy rare earth carbonate stockpiled at Browns Range as well as future production from the Browns Range Pilot Plant Project.
A total of 3 shipments comprising 157,076kg of Rare Earth Carbonate were sold to TK during the year.
In August 2019, the Company released assay results from diamond drilling completed at the Dazzler and Iceman prospects. The diamond drilling programme, which comprised 3 drill holes at Dazzler and one at Iceman was designed to twin and validate the reverse circulation drilling programmes undertaken in 2018 and early 2019. One of the diamond drill holes at Dazzler was drilled to provide samples for metallurgical test work. Results from the first twinned hole shows the interval as being narrower but much higher grade, while the second showed an interval width approximately the same as the twinned hole but a significantly lower grade.
Further drilling commenced in September 2019, including 3,797m of infill and exploration RC drilling in the Dazzler-Iceman area and 641m exploration RC drilling at four other prospects. Significant results from this drill programme included 52m @ 4.15% TREO from 20m and 20m @ 0.62% TREO from 16m.
In January 2020, the Company announced high grade copper assays following a selective rock chip sampling program at the Company’s 100% owned John Galt Project. A selective rock chip sampling program was conducted during October 2019 over an area of 2.0km x 0.5km and of the 24 samples collected and analysed, 12 returned assays of greater than 1.0% Cu.
In April 2020 an update to the Mineral Resource estimate for Dazzler was released. The inferred Mineral Resource was estimated at 214,000 tonnes at 2.33% TREO comprising 5,000,000kg TREO using a cut-off grade of 0.15% TREO. This was a 50% increase in the contained TREO from the maiden Mineral Resource estimate reported in March 2019.
Exploration activities were temporarily suspended along with other activities at Browns Range as a result of the impacts of Covid-19.
Following the restart of operations at Browns Range, the Company announced that exploration would be ramped up over the next 12 months with a budget of $4.5 – $5.0 million being allocated for greenfields exploration, further evaluation of identified mineralisation and to boost confidence in resources, with the objective of increasing the overall life-of-mine potential of the project.
Corporate R&D Funding
In early 2019, the Company lodged a formal appeal with AusIndustry regarding its initial decision that the Company’s activities were ‘ineligible R&D claims’ for the FY17 and FY18 periods. On 24 February 2020 the Company was advised that AusIndustry had completed a review of its initial decision and subsequently found that most of the Company’s R&D activities for these periods were in fact eligible.
In August 2020, the Company announced that it had reached a settlement agreement with the Australian Taxation Office (ATO) that settled all matters relating to the FY17 and FY18 R&D tax offset claims. The settlement agreement also documented the agreed refundable R&D offset claim for the FY19 as well as a framework for reviewing the Company’s refundable R&D offset claim for FY20.
In June 2019 the Company announced a A$21.95 million placement and Accelerated Non-Renounceable Entitlement Offer. The placement was completed for A$15 million via the issue of 333,333,333 fully paid ordinary shares at $0.045 per share. The Entitlements offer for A$6.95 million was offered on a 1 for 13 basis at a price of $0.045 per fully paid ordinary share. A total of A$2.66 million was received during FY19 with the balance (A$ 4.29 million) received in FY20.
In July 2019, the Company announced it had entered multiple subscription agreements with sophisticated investors, for the placement of 483,870,970 fully paid ordinary shares at an issue price of $0.062 per share to raise A$30 million before costs. A total of A$25.7 million of the A$30 million was received before the agreement was terminated on 31 January 2020 due to non-payment of the remaining balance.
In August 2019, the Company entered into a subscription agreement with Baogang Investment (Australia) Pty Ltd (BGIA) to raise A$20 million at A$0.062 million per share via the issue of 322,580,645 fully paid ordinary shares. The investment by BGIA was subject to shareholder approval, Australian Foreign Investment Review Board (FIRB) approval as well as regulatory approvals in the People’s Republic of China. On 20 April 2020, the Company was advised by BGIA that the Treasurer of the Commonwealth of Australia, following an assessment by the FIRB, had prohibited the transaction.
In December 2019, an amendment was made to the JHY Investments Pty Ltd (JHY) convertible note terms. The $4.0 million convertible note subscription was due to mature on 31 December 2019. The Company successfully negotiated an extension of the maturity date for the notes for a further year and at a lower interest rate of 10% (previously 16%). The maturity date for the notes is now 31 December 2020 and the interest rate was reduced to 10% from 1 January 2020. As consideration for agreeing to amend the terms of the notes, the Company issued 2 million fully paid ordinary shares in the Company to JHY.
On 2 March 2020 the Company entered into a Convertible Security Funding Agreement with Lind Global Macro Fund, LP (Lind). Under the funding agreement the Company received a net amount of A$2.5 million (after deduction of commitment fees payable to Lind of $125,000), from the issue of one unsecured convertible note with a face value of A$3 million. The A$2.5 million funding was received on 6 March 2020. As a part of this transaction, the Company also agreed to issue Lind with 34,000,000 unlisted options with an exercise price of $0.045 and expiry date of 2 March 2024 along with 60,000,000 fully paid ordinary shares which were to be used as collateral for the purposes of the funding agreement.
On 7 May 2020, the Company issued 52,631,579 fully paid ordinary shares to a nominee of Lind in respect of the conversion of A$1 million of the face value of the convertible security.
On 22 June 2020 a replacement convertible security was issued to Lind in accordance with the Convertible Security Funding Agreement announced on 2 March 2020 following shareholder approval being obtained at the Company’s general meeting held on 18 June 2020. The replacement convertible security was issued with a face value of A$2 million.
On 20 April 2020 the Company announced it had entered into subscription agreements with various sophisticated investors to raise A$22 million (before costs) via private placement and in 4 tranches.