The ball is well and truly rolling for Arafura to secure senior debt to develop its Nolans rare earth project after receiving a letter of support from the NAIF.

The without commitment letter from the Northern Australia Infrastructure Facility sets out the terms for a potential senior debt facility of up to $100m with a facility term of up to 15 years and the conditions required for the financing to be provided.

Importantly, it follows on Australian export credit agency Export Finance Australia’s proposal for a $200m senior debt facility with a 15-year term and highlights the government’s support for critical minerals such as rare earths.

Taken together, the two government senior debt facilities could corner a broader banking debt facility that will allow offtakers to commit to binding agreements.

Arafura Resources (ASX:ARU) managing director Gavin Lockyer said the company was extremely pleased to receive the support from the NAIF and would work with the agency to meet the relevant conditions needed to advance the process.

“The Australian Government’s critical minerals strategy is focussed on the development of critical mineral projects and downstream processing capacity within Australia to strengthen sustainable supply chains,” he explained.

“This is also aligned with global customers’ critical raw material diversification plans and their ESG priorities.

“The Australian Government’s support improves our position in finalising binding senior debt terms with the target for a Final Investment Decision in the latter half 2022.”

Arafura has also applied for grant funding under the government’s $1.3bn Modern Manufacturing Initiative for portions of its front-end engineering and design program that relate directly to the establishment of downstream processing capabilities.

Nolans project

Nolans is currently the only shovel-ready neodymium-praseodymium (NdPr) focused rare earths project in Australia with all environmental approvals in place.

The project – located about 135km north of Alice Springs – has an ore 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.

It will process high grade separated rare earth oxides domestically, ensuring that all value-adding is performed in Northern Australia.

Arafura recently updated the feasibility study for Nolans that improved net present value (NPV) and internal rate of return (IRR) – both measures of a project’s profitability – from the previous $968m and 17.97% to $1.4bn and 18.1% respectively.

Operating costs are estimated at a low US$24.76 ($31.59) per kilogram of NdPr oxide while earnings before interest, taxes, depreciation, and amortisation have been estimated at $354m per annum based on a life of mine of 38 years.




This article was developed in collaboration with Arafura Resources, 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.