A billion-dollar mining project will be financially unsustainable unless the company receives more funding, an independent auditor has found.
Key points:
- A billion-dollar mine is facing an uncertain future, with an auditor warning it needs to receive more funding to continue running
- Over 1,000 jobs depend on the Dubbo Project, which is run by the company Australian Strategic Minerals
- The company says it is in "positive" talks with the government and other potential debt partners
More than 1,000 jobs are riding on the Dubbo Project, a proposed rare earth minerals mine by the company Australian Strategic Minerals (ASM).
An independent audit from PricewaterhouseCoopers (PwC) found the company needed to raise more money in order to continue running.
The company's interim report, which was released this week, found its overall loss increased 38 per cent from June to December 2022.
"The continuing viability of the group and its ability to ... meet its debts and commitments as they fall due are dependent on the group [raising more capital, sourcing new customers, and qualifying for financial support]," the report found.
The Dubbo Project aims to mine rare earth and critical minerals in Toongi, near Dubbo, and export them to Korea.
The company has estimated the construction phase will cost $2.5 billion and employ 1,000 workers, with 270 full-time jobs expected when the mine is up and running.
The Dubbo Project has been in the works for more than 20 years.(Supplied: ASM)
In a statement, a company spokesperson said they were confident it would be able to secure additional funding.
"We continue to undertake positive discussions with potential equity and debt partners, including governments, to source funding to develop Dubbo," the spokesperson said.
"Dubbo is a world-class project with strong financials that will generate great returns for shareholders and opportunities for the Dubbo region."
The report noted the company's loss included $3.5 million from the reduction in Korean raw materials prices.
Supplier competition flagged
It also noted growing competition from new minerals suppliers, which it said "could adversely impact on financial performance and growth if ASM is unable to adapt".
The Australian Securities Exchange shows the ASM's share price has fallen nearly 83 per cent in the last 12 months.
An analysis by Morningstar Sustainalytics found ASM had a "high" ESG risk rating, meaning the company has a high level of Environmental, Social, and Governance risk.
Professor Tim Harcourt, who interviewed ASM's managing director for an episode of his video series The Airport Economist, said the company had been "leading the charge" into the Korean mineral markets.
Tim Harcourt has a book and a video series called The Airport Economist.(ABC News: Dan Irvine)
"Australian Strategic Minerals in Dubbo is a perfect example; they've been the flagship of the Australia-Korea relationship in recent years, particularly during COVID times," Professor Harcourt said.
"Some of the geopolitical issues in China have really brought South Korea to the fore along with India, Japan, and some of the ASEAN [Association of Southeast Asian Nations] countries.
"I think a lot of exporters in Australia are looking more broadly at the north-east Asian, and south-east Asian markets."