Arafura raising $40m to fund Nolans engineering work

Investors are backing Arafura’s $40m placement, which positions the company to progress its Nolans NdPr project by funding FEED activities.

This comes after the company received firm commitments from international and domestic institutional investors for the placement of more than 333.3 million shares priced at 12c each, which represents a 29.1% discount to the 5-day volume weighted average price of the company’s shares.

Arafura Resources (ASX:ARU) notes that the capital raising will be used to start front-end engineering design studies for the Nolans neodymium-praseodymium project in the Northern Territory and for general working capital purposes.

Petra Capital was the sole lead manager and sole bookrunner to the placement.

The company is offering existing shareholders the opportunity to participate in a share purchase plan to raise up to an additional $5m.

Nolans has an ore reserve of 29.5 million tonnes grading 2.9 per cent total rare earth oxides with high-value NdPr making up 26.4 per cent of the rare earths content.

A recently updated feasibility study improved net present value and internal rate of return – both measures of a project’s profitability – to $1.4bn and 18.1% respectively.

“We are delighted with the support for the placement, and welcome a number of Australian and offshore institutional investors to the register,” managing director Gavin Lockyer said.

“The Nolans Project is the only new shovel-ready NdPr oxide project in Australia capable of delivering advanced materials into the critical minerals supply chain.

“The company welcomes the support of new and existing shareholders and looks forward to applying their funds towards advancing the Nolans Project.

“Nolans has the potential to diversify rare earth supply chains whilst seeding new industry in Australia, one of the world’s safest and most secure jurisdictions.”

FEED work is expected to take about 12 months and the company remains on track to make a final investment decision for Nolans in the second half of 2022.

Rare earths boom

Arafura’s progress on Nolans comes as the US moves to reduce its reliance on China for its rare earths, which are instrumental to much of what makes the modern world tick.

This includes its Department of Defense supporting Lynas’ construction of a rare earths refinery in Texas and it’s not a stretch to think that some of that attention might turn to resources in Australia.

Australia itself has backed the Nolans project with the Northern Australia Infrastructure Facility recently setting out terms for a potential senior debt facility of up to $100m with a facility term of up to 15 years in a without-commitment letter.

The company had previously received a proposal from Export Finance Australia for a $200m senior debt facility with a 15-year term.

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.