Australian Strategic Materials Ltd (ASX:ASM, OTC:ASMMF) has signed another key contract for the Dubbo Project in Central West New South Wales with global engineering company Bechtel Mining and Metals, Inc to carry out Front-End Engineering Design (FEED) services.
This new contract for ASM’s rare earths and critical minerals project will deliver a critical path toward the company’s final investment decision (FID).
It will see Bechtel progress design of the process plant and non-process infrastructure (NPI) facilities at the Dubbo Project to support the company commencing the execution phase.
“Deep understanding of project”
“We are delighted to announce this contract with Bechtel, one of the world’s leading engineering and construction companies with extensive experience in the mining and metals sector, ” ASM managing director and CEO Rowena Smith said.
“The Bechtel team bring deep understanding of the Dubbo Project through their prior work on the NPI services contract and have established a proven ability to deliver and work collaboratively in their performance to date on this work.
“The FEED services will progress our engineering work and provide critical inputs to enable us to take final investment decision and commence execution of the Dubbo Project.”
Shares up
ASM shares have been as much as 9.75% higher intra-day to A$1.52.
READ: Australian Strategic Materials fields US$600 million LoI from US EXIM for Dubbo Project; shares jump
The Bechtel contract follows ASM last week receiving a Letter of Interest (LoI) from the Export-Import Bank of the United States (US EXIM) for up to US$600 million (~A$923 million) in a debt funding package.
US EXIM is the US federal government’s official export credit agency and the LoI is linked to the potential US content (equipment, goods and services) to be supplied in the construction phase of the Dubbo Project and the key strategic role the project can play in the critical minerals supply chain.
This LoI for the construction phase follows Export Finance Australia’s previous conditional finance support of A$200 million debt funding for the Dubbo Project.
Bechtel contract scope
Key areas of the work involved in the Bechtel contract scope include:
- Progressing the engineering in readiness for commencement of the execution phase, and to support the procurement of long lead items and site preparation works.
- Finalise the Dubbo Project strategies, execution plans, baseline scope and standards to drive the procurement process for engagement of the execution contractors and to support ‘readiness’ for execution.
- Identify early works opportunities for program reduction and or reduction of implementation risk.
In parallel, ASM subsidiary Australian Strategic Materials (Holdings) Pty Ltd (ASMH) will complete work required to meet the project environmental impact statement and development consent commitments required during the FEED services period.
Toward feasibility study
At completion of the FEED services, Bechtel will deliver to ASMH documentation that will support (along with other inputs and work to be undertaken) ASMH finalising a feasibility study on the construction and operation of the project.
This study, which will include an updated capital cost estimate, operating cost estimate and project schedule, will allow ASM to progress key funding activities and provides a critical path to taking an FID on the Dubbo Project.
Bechtel’s services under the contract will be provided on a rates basis for work completed and is estimated to be about A$55 million (~US$36 million).
Commencement of the work by Bechtel is conditional upon ASMH confirming it has received funding for the work, all necessary approvals to proceed with the work and ASMH issuing Bechtel with a notice to proceed.
Project timeline
ASMH is anticipated to be in a position to commence the FEED services in September 2024 and the estimated schedule for the FEED services is 18 months and is anticipated to be completed in the first quarter of 2026.
It is therefore expected that ASM will be in a position to take FID on the Dubbo Project in the first half of 2026.
Based on the estimated project duration in the Dubbo Project Optimisation Study, with project execution anticipated to take 27 months, production would commence in 2028.
New funding pathways
In addition to positioning ASM to take FID, the new contract and strategic partnership presents an opportunity for ASM to attract new funding pathways in North America and Australia.
Through the Australia-US Taskforce on Critical Minerals announced in May 2023, Australia and the US have committed to deepen bilateral collaboration on the critical minerals and materials that are vital to clean energy as well as defence supply chains.
Both the Australian and US governments have subsequently allocated budget to new and existing funding channels that support the objectives of the Taskforce.
“The Dubbo Project is a globally strategic project in the rare earths and critical mineral sector," said Bechtel Mining and Metals president Ailie MacAdam.
"We are delighted to be working with ASM in close partnership to progress the project and position it for success.
“Part of our collaborative approach has been to support ASM in identifying US government funding that has been allocated to develop critical minerals supply chains,” she said.
Eligible for EMP funding
The Export-Import Bank of the United States’ (US EXIM) Engineering Multiplier Program (EMP) is designed to generate additional exports of US goods and services overall and promotes Australia-US industry partnerships.
ASM’s FEED services contract with US-based Bechtel makes the Dubbo Project eligible for potential EMP funding and ASM has submitted a draft application to the program for >80% of the contract costs.
In recognition of this Australia-US collaboration, US EXIM has issued ASM a non-binding Letter of Interest (LoI) in support of its EMP application. This provides that US EXIM’s intention, subject to further due diligence and US EXIM Board approval, is to extend up to US$32 million (A$49 million) in debt funding for the FEED services.
“We are grateful to the Bechtel team for developing this contract in a collaborative manner that demonstrates the partnership approach required to build an alternative global critical minerals supply chain,” Smith said.
"Equally, we appreciate and are encouraged by the interest from US EXIM in its support of our EMP application. We look forward to continuing to work with Bechtel and US EXIM to formalise our submission now this contract has been signed.”