Arafura Resources has reached an important milestone in the development of the Nolans Rare Earths Project by signing a land purchase contract with OneSteel Limited (ASX: OST), securing the site for the Whyalla rare earths processing complex.

Signed contracts were exchanged with subsidiary OneSteel Manufacturing Pty Ltd to purchase 800 hectares of land at Whyalla in South Australia, which will help underpin Arafura’s position as one of the very few near-term producers of rare earths. 

The Nolans Project in the Northern Territory is regarded as one of the world's largest undeveloped rare earths projects and is aiming for rare earth oxide production from 2013.

The project will use a production process developed in Australia, and will be one of the first major producers outside of China for users worldwide.

Under the contract, which is subject to final government approvals, Arafura retains rights to access the Whyalla site to continue with detailed engineering and environmental studies.

Dr Steve Ward, Arafura managing director and CEO, said "Whyalla is a key part of Arafura’s business model which is to add value to resources in Australia and produce rare earth oxides for users worldwide using production processes developed in Australia.

“The Whyalla community and the South Australian and Northern Territory governments have been very supportive of our plans to deliver a project that will place Australia well and truly on the global rare earths industry map."

The land is located within the current OneSteel Whyalla landholding and the contract incorporates easements for the location of infrastructure.

In September 2010, Arafura and OneSteel signed an exclusivity deed to negotiate a formal sale agreement which has now been concluded. 

Earlier this month Arafura received Environmental Impact Statement (EIS) guidelines relating to development approvals for the Rare Earths Complex at the site.

The Whyalla site was identified after a comprehensive Australia-wide assessment, and has many of the characteristics necessary for the development and operation of a substantial minerals processing and chemical facility, such as availability of services, close proximity to transport infrastructure, and access to a skilled workforce. 

The company continues to progress work relating to the EIS approval.

Arafura recently expanded the scope of Bankable Feasibility Study (BFS) for the Nolans project and extended the expected completion date of the BFS by nine to twelve months.

The expanded BFS will not only reduce operating and capital costs and de-risk the proposed Rare Earths Complex at Whyalla, but take advantage of 1,221 per cent higher rare earths prices, by simplifying the project flow sheet to focus on rare earth products.

Notably, the average valuation for the Nolans Rare Earths mix has lifted to US$207.53/kg (FOB) in June 2011, compared to the June 2010 value. These higher prices are expected to continue because of the demand and supply equation for rare earths.

By the end of 2011 the company expects to have a much clearer understanding of the deposit’s capability to support expanded production far into the future, with sample analysis and geological interpretation of drill data well underway.