Arafura’s Nolans NdPr project attracts in principle US$300m debt funding from Canada’s EDC

Arafura is another step closer to funding development of its Nolans rare earths project in the NT with the receipt of in principle support for up to US$300m ($437.8m) in debt financing.

The Letter of Interest from Canadian export credit agency Export Development Canada for the provision of potential financing is based on General Electric Company’s (GE) support for the project, which is focused on producing neodymium and praseodymium (NdPr) used in the fabrication of permanent magnets.

It also is in line with the company’s debt-led funding strategy for Nolans, following as it does on in-principle letters of support from Germany’s Euler Hermes for up to US$600m in untied loan guarantees in relation to offtake by German companies and up to US$350m from Export Finance Australia and the Northern Australia Infrastructure Facility.

EDC’s potential funding is likely to reduce the proposed US$510m debt financing facility targeted by Arafura Rare Earths’ (ASX:ARU) mandated lead arrangers (Société Generale and KfW- IPEX Bank) and bookrunners.

The GE connection

Arafura and GE are currently negotiating a long-term sales agreement for the supply of NdPr from Nolans for use in the manufacture of permanent magnets used in GE’s offshore wind turbines – a follow-up to their Memorandum of Understanding in 2022.

GE might also supply cogeneration power plant technology including its aeroderivative LM2500 gas turbine and associated equipment to Nolans’ independent power provider, to support the power and heat requirements of the project’s processing facility.

“We are delighted to receive indicative support from Export Development Canada for the Nolans Project,” managing director Gavin Lockyer said.

“This is further demonstration of the strategic significance that international governments place on the project and its capacity to provide a sustainable supply of critical NdPr to meet the needs of major businesses in key global jurisdictions.”

EDC is a financial Crown corporation dedicated to helping Canadian businesses make an impact at home and abroad by providing financial products and knowledge they need to confidently enter new markets, reduce financial risk and grow their business.

Nolans a potentially significant NdPr producer

The Nolans Project is expected to produce 4,325 tonnes of NdPr oxide per annum over four decades with first production expected in 2025.

Arafura has already awarded a contract to Worley subsidiary Chemetics to supply a sulphuric acid plant using Worley’s proprietary CORE-SO2 process which promises significantly lower capital cost and sulphur dioxide emissions than conventional sulphuric acid plants.

The smaller size of the plant will also reduce the requirement for site installation labour, reducing risks posed by labour shortages in Australia’s mining, engineering and construction sectors.

Binding offtake agreements have also been reached with two customers, which together account for about 53% of the targeted 85% annual production from Nolans secured under long-term sale arrangements.

This article was developed in collaboration with Arafura Rare Earths, 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.