Actions in a critical metals producer Australian Strategic Materials Ltd (ASX: ASM) are losing ground and are now down 11% on the day to $ 10.13.

ASM shares lost ground directly on the opening as investors reacted badly to an announcement about the optimization of the company’s Dubbo project. Here are the details.

What was announced?

ASM confirmed “strong financial results following optimization study and enhanced project addendum” for its Dubbo project.

The study was based on the Alkane Resources Ltd optimization study that was released to the market in 2018.

ASM indicated that the revised financial statements are based only on the initial ore reserve of 18.9 million tonnes (Mt). According to the press release, additional substantial measured and inferred mineral resources under the ore reserve are excluded from this study.

The updated baseline scenario for the 20-year mine life is expected to reach a pre-tax net present value (NPV) of $ 2.361 billion on a pre-tax project internal rate of return (IRR) of 23, 5%.

The ASM notes that this is a 6% improvement in pre-tax IRR compared to the 2018 study.

The company also claims that the optimization simplifies the Dubbo project process map and incorporates “new operating strategies that will reduce operating costs and improve ESG performance” of the site.

Examples of such strategies include increasing the capacity of the brine concentrator, thereby halving water consumption; the renovation of the railway line to simplify the logistics of the project and offer new job categories at the local level; and the development of a “chlor-alkali plant” – reducing the cost of reagents and their transport.

According to ASM, these strategies facilitate ESG benefits by “reducing water consumption, handling and the amount of process chemicals, and reducing the number of trucks on local roads required for the Dubbo project.”

Management commentary

Speaking on the announcement, ASM CEO David Woodall said:

I am delighted with the results of the optimization work which demonstrates the financial strength of the Dubbo project and ASM’s focus on a sustainable future with better performance and ESG results. The optimization work supports a solid case and constitutes an exciting development for ASM, our partners and shareholders. Optimization work confirms that we have a project that can fit into our metals business to create an alternative, sustainable, secure and long-term supply of critical metals and oxides. This places ASM in an exceptional position in the critical metals value chain, as the vertically integrated owner of a globally significant polymetallic resource at Dubbo, and the ability to produce critical metals from this resource in accordance with standards. highest environmental standards.

Over the past 12 months, the Australian Strategic Materials share price has climbed more than 137% after rising 58% this year to date.

Over the past month it has come back sharply lower and is now trading 22% in the red during this time frame, and 19% higher in the last week of trading.