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Arafura Rare Earths builds on Korean stronghold with financing deal

Updated: Mar 21

Arafura Rare Earths’ Nolans project in the Northern Territory is expected to churn out 4440 tonnes of neodymium-praseodymium oxide per annum. Credit: File

Arafura Rare Earths has backed up offtake deals with Korean motoring giants Hyundai and Kia by securing up to US$150 million (AU$225 million) in debt financing for its Nolans project in the Northern Territory from the Export-Import Bank of Korea (KEXIM).

Management says funding will consist of two tranches, with an amount equal to or more than US$75 million (AU$112.5 million) as a direct loan and an additional amount equal to or less than US$75 million as a debt guarantee. The letter of intent from KEXIM is directly related to the binding offtake deal struck with Hyundai and Kia in November last year for Arafura to supply up to 1500 tonnes per annum of neodymium-praseodymium (NdPr) oxide from Nolans.

The supply amount represents about 40 per cent of the available 85 per cent of annual production from Nolans outlined under Arafura’s offtake strategy. The company’s NdPr project boasts a resource estimate of 56 million tonnes at an average 2.6 per cent total rare earths oxide (TREO) and 11 per cent phosphate.

A significant component of the project will be downstream processing, with Arafura signalling its clear intent for a beneficiation, extraction and separation plant. It is believed to be one of the only advanced ore-to-oxide projects of scale in the western world and is expected to churn out 4440 tonnes of NdPr oxide a year when it hits peak production in 2028.

The company says the in-principle support from KEXIM is linked to the strategic nature of NdPr supply and its critical role in the electrification of Korea’s automotive manufacturing sector.

Arafura’s foundation offtake agreement with Hyundai and Kia was the beginning of a meaningful relationship with Korea, and our engagement with KEXIM further strengthens that relationship. KEXIM’s indication of support for Nolans directly reflects the significant contribution that NdPr from the Project will play in delivering upon Korea’s long-term aspirations to be a global leader in electric vehicles and other sustainability-focused technologies. Arafura Rare Earths managing director Gavin Lockyer

KEXIM was established to facilitate the development of Korea’s economy and enhance economic co-operation with foreign countries through the provision of financial support for export and import transactions, overseas investment projects and the development of overseas natural resources.

The non-binding agreement for Arafura follows a similar deal in June when it received a letter of interest from Canadian export credit agency Export Development Canada (EDC) for the potential funding of up to US$300 million (AU$441 million).

Management says EDC’s support is linked to a strategic arrangement between the credit agency and global giant General Electric Company (GE) to advance the energy transition.

Last year, the company also signed a non-binding memorandum of understanding to negotiate a long-term sale and purchase agreement to secure rare earths for General Electric’s renewable energy division. The agreement also outlined a potential strategic equity investment by GE in Arafura.

The latest letter of interest follows a provisional untied loan guarantee of up to US$600m (AU$882 million) from major German export credit agency Euler Hermes Aktiengessellschaft. Arafura has also secured a combined $350 million from Export Finance Australia and the Northern Australia Infrastructure Facility.

With so much international interest – particularly from such notable suitors –in the potential offtake from Nolans, Arafura looks to be sitting in the box seat as it moves towards the development of its flagship operation at Australia’s Top End.

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