Gina puts faith in Arafura Rare Earths’ story, pumping $60m in to put Nolans Project on path to development
Australia’s richest person Gina Rinehart will end up with roughly 10% of Arafura Rare Earths Ltd by pumping a massive $60 million into the rare earths developer, underlining the excitement around the development of its Nolans Project.
The iron ore magnate, whose private company announced a massive $5.8 billion profit last week and spearheaded the construction of the US$7 billion Roy Hill iron ore mine, will tip in almost half of the $121 million firmly committed to a placement to accelerate the Nolans’ development schedule.
Coming just weeks after securing offtake MoUs with auto giants Hyundai and Kia, the placement signals the interest from the top echelon of the global investment community in the neodymium and praseodymium rich Nolans Project in the NT.
Arafura’s (ASX:ARU) Nolans mine will produce 4,440t a year of NdPr oxide along with 474t of SEG/HRE oxide and 144,393t of phosphoric acid over a 38-year mine life with a post-tax NPV of $2.4 billion and IRR of 19.3%.
It anticipates a long-term NdPr price of US$130/kg, as demand accelerates from the energy transition, averaging $573m in EBITDA a year.
A 45,000t supply gap is expected to emerge by 2030 – equivalent to 10 Nolans Projects – leaving a hole in the market for non-Chinese producers of electric vehicles and wind turbines, expected to make up 55% of magnet demand by 2035.
A FID is due in March, with long lead procurement to begin in January and financial close on the project is expected in mid-2023, with production starting in the second half of 2025.
That strong outlook for both Arafura and the emerging rare earths sector has been endorsed by major global investors and mining entrepreneurs, who have made the commodity one of the centrepieces of their investment strategies.
Rinehart is understood to have bought into other rare earths IPOs in recent days, while Andrew Forrest has both made private investments in rare earths and suggested it would diversify Fortescue’s iron ore mining business into the critical minerals.
In that context a near-development asset like Arafura’s Nolans is bound to draw major supporters in as awareness lands on just how critical Nolans and magnet rare earths will be to the energy transition.
A share purchase plan is also being launched for existing shareholders to raise about $12 million.
Funds will be applied to orders for long lead items, commencing fabrication for main plant construction and early works, and provides a pathway for ongoing engagement with strategic investors, offtake parties and debt financiers through 2023.
“We are extremely pleased with the number of new and significant Australian and offshore institutional investors joining our register including Hancock Prospecting, a company well experienced in large project developments,” Arafura MD Gavin Lockyer said.
“The widespread interest in this Placement reflects the increasing global awareness of the importance of our NdPr oxide product within the supply chains essential to energy transition.
“The Nolans Project is well positioned to become a ground-breaking strategic development for Australia with its single site ore to oxide business model.
“Nolans is important to all countries that are seeking diversified and robust critical material supply chains as they strive to achieve their net- zero emissions targets.”
So far 40% of ARU’s binding offtake target has been reached, with 1,500tpa committed to Hyundai and Kia.
Contract negotiations are ongoing for another 2,375tpa with customers in Japan and Europe, with another 2,600tpa worth of advanced offtake discussions with customers in Europe and the US.
ARU is targeting 85% of planned production as binding offtake before its FID, but demand is so high as much as 172% of its proposed target is covered under current negotiations.
“There is growing momentum behind the Nolans Project following the signing of our binding offtake with Hyundai and Kia and increasing confidence in our strong project economics as we transition into the construction phase,” Lockyer said.
“This funding will enable us to accelerate our development activities allowing commitment to long lead equipment and commencing on country earth works in preparation for our planned construction program in 2023.”
The SPP, priced like the placement at 37c, will open on December 15 and close on December 30, with results to be announced on January 3, 2023.
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.