Arafura’s Nolans rare earths Project has progressed closer towards full funding after receiving a non-binding letter of in-principle support for an untied loan guarantee of up to US$600m.
The offer from German export credit agency Euler Hermes Aktiengesellschaft follows the appointment of Germany’s KfW IPEX-Bank as an additional mandated lead arranger and bookrunner to arrange and syndicate the debt financing facility and provide ECA structuring advice.
Euler Hermes’ offer is indicative only and conditional on Arafura Rare Earths (ASX:ARU) entering into offtake agreements with German-based companies, and the corresponding quantities of neodymium praseodymium (NdPr) products ultimately being processed in Germany into permanent magnets or powertrains if approved.
However, securing this loan guarantee will represent nearly two-thirds the estimated capital cost of $1,394m (US$933m) for Nolans, meaning that the company will be that much closer towards securing the funding it needs.
Further support has also been secured from the Australian Government’s Northern Australia Infrastructure Facility (NAIF), which has increased its non-binding in principle support for project financing from $100m to $150m.
However, while the Nolans Project has fulfilled the strategic assessment phase of the NAIF decision process, a final investment decision can only be made following satisfactory due diligence and approval by the NAIF board.
“We warmly welcome the support of Euler Hermes and ongoing engagement with EFA and NAIF,” managing director Gavin Lockyer said.
“The Nolans Project closely aligns with global customers’ critical raw material diversification plans and their ESG priorities. Support from Australian and international export credit agencies is a direct reflection of the value this represents.
“We look forward to close ongoing relationships with Euler Hermes, EFA and NAIF as we continue to progress offtake negotiations and the project moves through its next critical phases toward full funding, construction and first production.”
Arafura had previously raised $121m through a capital raising that also brought Gina Rinehart in as a 10% shareholder.
Nolans rare earth Project
The Nolans Project is expected to produce 4325t 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 for Nolans. This uses 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.
More long lead orders are expected to take place soon, paving the way for early works to begin.
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.