A billion-dollar mining project will be financially unsustainable unless the company receives more funding, an independent auditor has found.
More than 1,000 jobs are riding on the Dubbo Project, a proposed rare earth minerals mine by the company Australian Strategic Materials (ASM).
The company's most recent accounts, audited by PricewaterhouseCoopers (PwC), show the company needs to raise more money in order to continue operating.
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.
A company spokesperson said ASM had $230 million in net assets and $70 million in cash, which it said was sufficient to take the project through to the next phase of development when, as planned, further funding would be sought for the Dubbo Project.
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.
"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."
Demand still growing
University of Technology Sydney research director Nick Florin said there was both a growing demand and a growing supply for rare earth minerals.
He said rare earth minerals were a necessary ingredient in phones, batteries, electric vehicles, and other forms of technology.
"Australia is not alone in terms of heavily investing in supply chains for these critical ingredients for our technology and the transition to renewable energy systems," Dr Florin said.
"There's been a consistent and continuing growth trend in terms of lithium ion batteries for electric vehicles.
"That demand will continue into the foreseeable future."
Dr Florin said it was vital Australia ensured its new rare earth mineral mines were made to be as environmentally sustainable as possible.
Editor's note 21/3/23: The article has been amended to correct the name of the company and add detail about the sustainability of the first phase of the project.
