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Arafura Rare Earths shares fly on finance deal for NT rare earths play

Updated: Mar 21

A US$533 million (AU$805 million) debt financing deal with the Commonwealth Government has sent Arafura Rare Earths share price flying today, giving it a lift of more than 87 per cent on huge intraday trading volumes.

The debt financing package deal has been struck through the government’s Export Finance Australia (EFA) and Northern Australia Infrastructure Facility (NAIF) – two of its biggest lenders of resource development finance. The company believes the facility for its Nolans rare earths project in the Northern Territory could provide the impetus it needs to obtain its remaining debt and equity funding requirements.

Management says it will provide it with a stronger platform from which to build to its “globally-significant” production of the rare earths, neodymium and praseodymium.

News of the deal gave Arafura’s share price immediate momentum, with it jumping to an intraday high of 27.5c after closing yesterday at just 14.7c. More than 115 million of the company’s shares, worth nearly $28 million, changed hands during the period.

As part of the package, under the government’s Critical Minerals Facility (CMF), the EFA will provide a subordinated standby liquidity facility of up to US$200 million (AU$300 million) to help manage any increases in capital expenditure and operating costs incurred during ramp-up. The NAIF has also agreed to provide additional funding of up to US$33 million (AU$50 million) as part of a cost overrun facility.

Securing debt facilities of US$533 million from EFA and NAIF is a critical achievement for the Nolans Project and signifies its economic importance to Australia and the Northern Territory. Gaining this level of support from the Commonwealth Government is a critical milestone in becoming a globally significant producer of Nd-Pr, a product essential for electric vehicle and wind turbine manufacturers to achieve future growth targets as part of the energy transition.
Arafura Resources managing director and chief executive officer Darryl Cuzzubbo

Debt finance Export Credit Agencies (ECAs) are playing an important role in supporting the Nolans project.

Export Development Canada (EDC) has provided a letter of interest for debt financing up to US$300 million (AU$450 million), while 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.

Generally, an untied loan guarantee comes with a requirement for an offtake agreement with a company that is based within the lending nation. Arafura’s offtake agreements with South Korea’s Hyundai Motor Company and Kia Motors should satisfy that condition.

In addition, an offtake agreement with Germany’s Siemens Gamesa Renewable Energy is ideal due to that country’s Allianz Trade (formerly Euler Hermes) providing in-principle support for an untied loan guarantee of up to US$600 million (AU$900 million). The facility is contingent on an offtake agreement with a German company.

Arafura says it expects to use about US$100 million (AU$150 million) of the Allianz funding. It says it is seeking approved credit terms for about US$775 million (AU$1.17 billion) of senior debt across all lenders.

The funding, when approved in full, would be used as the catalyst for a significant equity raising that would enable construction, commissioning and first production at the Nolans project.

The Nolans rare earths development is a shovel-ready, world-class neodymium-praseodymium (NdPr) project in the NT, about 135km north of Alice Springs. Access to 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.

The project has a resource underpinning 4440 tonnes per annum of NdPr oxide production and a minimum 38-year mine life. All NT government approvals have been secured, with a mineral license and mining authorisation granted and a native title agreement is in place.

The conditional loan finance received is evidence of strong support borne out of the Federal Government’s critical minerals policy. The Nolans project aims to be Australia’s first ore-to-oxide rare earths processing facility to deliver sustainably mined and processed rare earth products to its global customers.

Arafura has binding offtake agreements in place that have already met about 53 per cent of its binding offtake target.

Management has indicated that four other companies are in contract negotiations, representing about 42 per cent of the binding offtake target. It includes a deal with GE Vernova for 375 tonnes per annum of NdPr oxide that is currently being finalised.

The automotive sector is forecast to be the primary consumer of neodymium magnet supply, with a prediction by energy consultancy firm Wood Mackenzie that about 51 million electric vehicles (EVs) are likely to be sold in 2032. Achieving supply-demand balance in the next decade would require a compound annual growth rate (CAGR) in NdPr supply of about 6.9 per cent.

The forecast supply gap represents about 88 per cent of current global supply – equivalent to more than 12 Nolans projects.

Arafura expects to be commissioning its processing operations in 2026 and first production early the following year. With the ramp-up in demand for magnet rare earths expected at about that time, it might be a case of perfect timing.

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