Arafura’s shovel-ready Nolans NdPr project has received a shot in the arm after securing a non-binding letter of support from the Australian Government.

Export Finance Australia – the country’s export credit agency – is proposing a $200m senior debt facility with a 15-year term subject to typical conditions required for financing of this nature.

Importantly, the facility will cornerstone a broader banking debt facility that is currently being progressed with a target mix of foreign ECAs and commercial banks.

Here’s why.

Financing big projects can often be a chicken and egg situation with offtakers wanting to see financing in place before committing while financiers ask for binding offtake before opening their purses.

In such situations, debt financing from government bodies such as EFA can often be the proverbial stick that gets the ball rolling.

As part of the initial phase of this debt process, Arafura Resources (ASX:ARU) has engaged Macquarie Capital to refine the Nolans project debt financing strategy, targeting ECAs and lender engagement.

With the adoption of a more traditional front-end engineering and design (FEED) model, the company expects to achieve a final investment decision for Nolans in the second half of 2022.

“Arafura is delighted to be working with EFA and Macquarie to secure a senior debt funding package which can greatly assist in financing the Nolans Project,” managing director Gavin Lockyer said.

“Following the COVID-19 pandemic, we have seen increasing focus on governments globally to support the development of diversified critical raw material supply chains and provide auditable and sustainable supply chains for NdPr oxide.

“We are hoping to secure binding senior debt terms in line with the target Final Investment Decision date, subject to market conditions.”

Nolans NdPR project

The Nolans NdPr (neodymium-praseodymium) project near Alice Springs is poised for development with all approvals in place and a robust feasibility study that gets more attractive as NdPr prices increase.

Its mining inventory of 39 years also ensures a long mine life while potential customers have already qualified Arafura’s product range.

Demand for NdPr is likely to remain high given the strong demand for permanent magnets that are essential parts of electric motors.

 

 

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.

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