Resources projects attract equity funding under NAIF reforms
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Reforms to the Australian government’s Northern Australia Infrastructure Facility (NAIF) will allow it to commit up to $500m to equity investments in mining projects.
Previously, the NAIF was precluded from taking equity in companies, and it is hoped the measure will enable it to support more projects with its funding.
“The changes will speed up the flow of funds to approved projects, give projects a greater range of debt-support options, and allow NAIF to make equity investments,” Keith Pitt, minister for resources, water and northern Australia, said.
The reforms flow from a review into the workings of the NAIF published this week. NAIF will now be allowed to take a non-controlled equity stake in a mining project.
“These measures, together with reforms announced in the [October] budget, will transform the NAIF into a more proactive investor for the benefit of northern Australia,” the minister said.
NAIF has an investment fund worth $5bn, and can commit a maximum of $500m to a single project; also, its investment period has been extended by five years to June 2026.
The government infrastructure fund has already committed $2.4bn to investment projects.
Rare earths and uranium and thorium exploration company Arafura Resources (ASX:ARU) is one beneficiary of the government initiative.
The company’s $1bn Nolans project in the Northern Territory is a candidate for potential funding support through NAIF and Export Finance Australia.
Nolans will produce the key rare earth elements of neodymium and praseodymium which are used to manufacture magnets for a range of modern technologies.
These include wind turbines, robotics, EVs, MRI machines, and mobile phones and tablets.
“Governments around the world are seeking to partner in opportunities to diversify the supply chain to prevent disruption,” said the company in a presentation.
This strategy has been adopted by governments in European countries, Japan, South Korea and the US.
President Donald Trump signed an executive order in October declaring a ‘national rare earth supply chain emergency’, noted the company in its presentation.
Nolans will generate an after-tax cash flow of $968m on a net present value basis, and employ 620 people at its peak.
The project has one of the lowest operating costs for a rare earths project of only $US23.70 per kilogram, compared to current market prices of about $US52/kg.
Each one-tonne batch of rare earths product from Nolans will have a unique product identifier and barcode to facilitate easy tracking through the supply chain.
The company’s Beyondie project received a NAIF loan worth $74m, and additional funding of $10.5m in the form of a debt facility to support its capital raising.
At Stockhead we tell it like it is. While Arafura Resources is a Stockhead advertiser, it did not sponsor this article.