Arafura’s NdPr on the menu as GE Renewable Energy goes hunting for raw resources for wind turbine tech

Neodymium and praseodymium are high demand critical rare earths, a point that has been amply highlighted by GE Renewable Energy revealing its MoU for their supply from Arafura.

While Arafura Resources (ASX:ARU) was quick to note that there is no certainty to the timing and likelihood of reaching binding agreements, the fact that a multi-billion dollar multinational company of GE’s calibre is interested in buying NdPr from the company’s Nolans Project is a significant vote of confidence.

To top it off, the memorandum of understanding includes a potential strategic investment by GE in the company to be negotiated in conjunction with the NdPr sale and purchase agreement.

GE Renewable Energy is keen on establishing a secure supply of the two critical rare earths for the manufacture of wind turbines.

NdPr is used to produce NdFeB permanent magnets that are used for wind turbines and electric vehicle motors.

Big fans of wind turbines

With over 600kg of these magnets required for every megawatt of wind turbine generation capacity, securing the required rare earths will substantially de-risk the supply chain, provide supply security and support the growth of the local offshore wind sector.

This is potentially very lucrative for Arafura given that analysts are forecasting that the volume of annual offshore wind installations will more than triple from 6.1 gigawatts in 2020 to 23.1GW in 2025 due to the need to meet net zero by 2050.

“The signing of this MoU to collaborate with a Tier 1 OEM is a terrific outcome,” Arafura managing director Gavin Lockyer said.

“Long-term, Nolans NdPr may be used in magnets critical for power generation from GE’s Haliade-x12MW, one of the most powerful offshore wind turbines on the market.

“It is very gratifying that a new supply chain model, along with transparency of the value chain, will ensure we know exactly where our NdPr will be used, whether it is in a particular EV model or a series of wind turbines.

“The contribution of Nolans NdPr to enable clean energy technologies to decarbonise the world is becoming more and more apparent.”

GE Renewable Energy vice president and chief technology officer Danielle Merfeld said the MoU is another example of the company’s efforts to develop strategic collaborations that can help us accelerate the energy transition.

“Working with Arafura gives us a new and exciting option to obtain reliable, sustainable, and competitive sources of key materials going forward that will help us lower the cost of renewable energy,” she says.

The MoU follows on the company’s previous non-binding MoU with General Motors to evaluate opportunities to improve supplies of heavy and light rare earth materials and magnets, copper and electrical steel used for manufacturing of electric vehicles and renewable energy equipment.

Nolans on track to be a major rare earths supplier

According to an updated feasibility study last year, the $1 billion Nolans Project in the Northern Territory will produce 4440t of NdPr oxide annually along with 474t of heavy rare earths oxide and 144,393t of phosphoric acid.

The project is a long life, generational asset with 38 years of mine life, an after-tax NPV of $1.4 billion and IRR after tax of 18.1%.

However, these numbers are decidedly conservative as NdPr oxide currently commands a price of more than US$130/kg, well up from US$84/kg last May.

In April, the company tasked Societe Generale and National Australia Bank with securing a US$510 million debt finance package for the project.

It has already received letters of support from Export Finance Australia and the Northern Australia Infrastructure Facility for senior debt facilities of up to $200 million and $100 million respectively for up to a 15-year facility term subject to typical conditions including lender agreements.

It was also awarded a $30m grant from Canberra’s Modern Manufacturing Initiative last month which will contribute to the construction of the rare earth separation plant.

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.