Arafura motoring ahead after signing NdPr offtake MoU with Hyundai
Arafura has signed a memorandum of understanding (MoU) with South Korean car giant Hyundai Motor Company, a move that boosts confidence in its Nolans neodymium-praseodymium project.
Under the MoU, the two companies will negotiate an offtake agreement for the sale of NdPr oxide from the Nolans project in the Northern Territory on a cost, insurance, and freight (CIF) basis over a seven-year period from 2025.
This would cover between 1,000t and 1,500t per annum of NdPr oxide when the project achieves full production capacity in 2027.
Should Arafura Resources (ASX:ARU) and Hyundai execute a definitive binding offtake agreement – expected by September 2022 – the deal will underpin the Nolans development and account for just over a third of the estimated production of 4,440tpa.
The MoU fits perfectly with the company’s strategy of targeting automotive original equipment manufacturers (OEMs) from geographic regions with supportive export credit agencies.
It also follows a Joint Statement of Cooperation that the company signed with Korea Mine Rehabilitation and Mineral Resources Corporation (KOMIR) in February, which recognises the strategic importance of Australian critical minerals projects supporting Korea’s industrial development and participation in electrification and renewable energy economies.
“The signing of the MoU represents a fantastic outcome and validates the Tier-1 credentials of the Nolans Project as one of the world’s premier next generation NdPr ore to oxide projects,” managing director Gavin Lockyer says.
“The Nolans Project is strategically significant for Tier-one customers as it offers scale and supply chain diversification and security that will underpin their EV technologies.”
Under the MoU with Hyundai, the pricing for any sale would be determined quarterly using a formula-based mechanism referencing the NdPr oxide Ex Works China price per tonne.
An industry recognised customary discount in recognition of the long-term offtake agreement would also be applied.
The supplied commercial grade NdPr oxide will also have a purity of plus 99% total rare earth oxides while both parties will work collaboratively to engage with relevant Export Credit Agencies to access debt funding and guarantees linked with critical materials procurement for use in Korean based manufacturing
Additionally, the binding offtake agreement will be subject to Arafura securing project finance to develop Nolans and completion of its construction, development and commissioning.
The company is also continuing its engagement with a range of other parties interested in long-term offtake from the Nolan’s Project that are aligned with its strategy.
Front-end engineering and design work on the project is on track while a fixed price construction contract which will be the basis of making a Final Investment Decision is currently expected in the second half of this calendar year.
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.