Special Report: The fact that rare earths has got industry and government in a fluster over tightening supply has sent institutional investors to Arafura’s door offering up cash.

Arafura Resources (ASX:ARU) wasn’t in need of money, but was approached by a number of key institutions, both domestic and offshore, tabling commitments to the tune of $7m.

At the end of the March quarter, the company had about $21m cash in the bank.

But these institutions wanted to be sure Arafura had the cash it needed to keep the development of its Nolans neodymium-praseodymium (NdPr) project in the Northern Territory on track.

The fully committed placement is being done at an issue price of 6.2c, and while that is a slight discount to the share price prior to the announcement, it is much less of a discount than many other raisings are being done at right now in Australia, according to managing director Gavin Lockyer.

“Canaccord’s involvement as lead manager is very welcome at this stage as it has global reach into key equity markets and is capable of managing that component of project financing, which is likely to total a few hundred million dollars,” he said.

“Some of the institutional investors that participated in recent raisings have stuck firm and were instrumental in making this happen.

“This provides us with a great deal of confidence as we edge closer to final production commitment.”

The new funds will be used to undertake early engineering works for pre-front end engineering and design, execution readiness activities for the Nolans project and for general working capital purposes.

Critical mineral supply security has become a key issue for governments, particularly in the US and Australia.

Concerns about the fragility of supply chains, particularly the Chinese dominated rare earths sector, prompted Australia and the US to strike a deal late last year to co-operate on developing their critical mineral assets.

Fuelled in large part by the trade war with China, US President Donald Trump has issued executive orders to secure critical minerals, especially rare earths, supplies outside of China while Australia set up its Critical Minerals Facilitation Office at the beginning of this year.

“The Nolans project is the only new NdPr oxide project in Australia with all environmental approvals granted to deliver advanced materials into the critical minerals supply chain,” Lockyer said.

“The significant interest from new and existing institutional investors is a strong endorsement of Arafura’s 100 per cent owned Nolans project and the role it is expected to play in diversifying rare earth supply chains whilst seeding new industry in Australia, one of the world’s safest and secure jurisdictions.”

The project has a reserve of 29.5 million tonnes grading 2.9 per cent total rare earth oxides, with NdPr making up 26.4 per cent of the rare earths content.

This is expected to produce about 4,325 tonnes of NdPr oxide over 39 years at an operating cost of less than $US24 per kilogram.

 

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This story was developed in collaboration with Arafura Resources, a Stockhead advertiser at the time of publishing.
This story does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

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