Arafura hits a crescendo following cornerstone REE offtake deal with Hyundai and Kia
Arafura’s goal of becoming a significant rare earths producer has passed a major milestone with South Korean automotive siblings Hyundai and Kia signing a cornerstone binding offtake agreement.
Under the seven-year agreement, Hyundai and Kia will purchase 600 tonnes of neodymium and praseodymium – in the form of NdPr oxide or NdPr metal at their election, in the first year of production that will increase to 1,500tpa of NdPr oxide equivalent when the Nolans Project achieves nameplate production capacity in the fourth year.
Importantly for Arafura Rare Earths Limited (ASX:ARU), the supply commitment represents about 40% of the 85% annual production available to be secured under long-term sales agreements.
Additionally, the company signed a non-binding Heads of Agreement for the discussion of a potential strategic investment by Hyundai and its affiliates in Arafura.
NdPr production from the Nolans Project in the Northern Territory is currently expected to begin in 2025 subject to project financing, completion of construction and development and commissioning of the Project.
“We are delighted to have concluded negotiations to execute our first binding offtake agreement which includes the exercise of the option provided in the MoU to take the full offtake volume of 1,500 tpa in relation to the Nolans Project,” managing director Gavin Lockyer said.
“This establishes the foundation for a long-term partnership, and we are proud to have committed to supplying NdPr to Hyundai, a respected global automotive leader”.
Under the binding offtake agreement, pricing will be determined using a formula-based mechanism referencing the NdPr Price Ex Works China price per tonne.
Commercial NdPr oxide provided by Arafura must have a grade of at least 99% and the agreement is subject to certain conditions such as construction and development of the Project, commencement of commercial production and ramp up.
The contract is in line with the company’s strategy to target original equipment manufacturers (OEMs) from geographic regions with supportive Export Credit Agencies.
Discussions are underway for remaining 60% of the planned production set aside for binding offtake with a range of multi-national companies including GE Renewable Energy, which signed a non-binding Memorandum of Understanding for collaboration in July 2022.
This article was developed in collaboration with Arafura Rare Earths, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.