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Arafura lures new $300m finance pot for NT rare earths play

Arafura Rare Earths is edging closer to a financial investment decision on its Nolans project in the Northern Territory. Credit: File

Arafura Rare Earths (ASX: ARU) says US$300 million (AU$452 million) in debt financing from Export Development Canada (EDC) is conditionally approved as a final investment decision on its Nolans project in the Northern Territory edges closer.

The Nolans rare earths operation is a shovel-ready, world-class neodymium-praseodymium (NdPr) project in the Top End and sits about 135km north of Alice Springs. The project has a resource underpinning 4440 tonnes per annum of NdPr oxide production and a minimum 38-year mine life.

Importantly, the latest agreement with the Canadian export credit agency – which builds on a letter of interest received in June last year – means the company has achieved conditional approvals for 68 per cent of its targeted US$775 million (AU$1.168 billion) in senior debt funding for the operation.

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 global energy transition.

In 2022, the company signed a non-binding memorandum of understanding to negotiate a long-term sale and purchase agreement to secure rare earths for GE’s renewable energy division. The agreement also outlined a potential strategic equity investment in Arafura by GE.

Debt financing from EDC signifies the increasing geostrategic importance of the Nolans Project and securing global diversity in the NdPr supply chain. EDC has responded strongly to Nolans as a strategic opportunity that will underpin the electrification economy. NdPr is critical in electrical vehicles, wind turbines and robotics. Arafura Rare Earths managing director Darryl Cuzzubbo

The Nolans 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. Access to the site is provided via a major nearby airport and there is also other infrastructure including the Stuart Highway about 10km to the east, major rail access in Alice Springs and a deepwater port in Darwin.

Management says the EDC facility will be conditional upon Arafura achieving the 80 per cent binding offtake target. The company has agreed in principle with the lenders to a binding offtake target of 80 per cent, reduced from its previous target of 85 per cent of nameplate capacity.

The latest deal follows a debt financing agreement in March with the Commonwealth Government, which is providing about $30 million in grants and financing of $495 million from the $4 billion Critical Minerals Facility, $200 million through the Northern Australia Infrastructure Facility and up to $115 million through Export Finance Australia’s commercial arm.

The Export-Import Bank of Korea (KEXIM) is also providing an in-principle finance offer for a US$75 million (AU$115 million) loan, in addition to an untied loan guarantee for the same amount.

All NT Government approvals for Nolans are secured, a mineral license and mining authorisation have been granted and a native title agreement is in place. There is also strong government support due to a close alignment with the Federal Government’s critical minerals policy.

The company has binding offtake agreements in place with Hyundai Motor Co., Kia Motors and Siemens Gamesa for up to 2020 tonnes per annum of NdPr oxide from Nolans. With conditional approvals for the majority of its debt facility in place, Arafura appears to be in the box seat as a final investment decision on its shovel-ready Nolans rare earths project rapidly approaches.

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