Arafura Resources has tasked two world leading mining financiers with securing a US$510 million debt finance package for its Nolans rare earths mine and separation plant in the Northern Territory in a major milestone for the project.

The news comes ahead of a planned final investment decision, as the ducks begin to line up for the company, which also has significant federal backing for the nation-leading neodymium-praseodymium development.

Societe Generale and National Australia Bank will be the initial Mandated Lead Arrangers and Bookrunners to arrange the debt finance for Nolans, 135km north of Alice Springs.

It will target debt funding for 60% of the project capital development costs, with the US$510m debt mandate to comprise of US$150m from the initial MLAs on a best efforts basis, export credit agency finance and additional MLA banks or a syndication process if required.

Subject to customary conditions like due diligence, terms and conditions, credit approval and entry into binding facility agreements, it is the latest example of the solid backing of the business and government sectors for the critical rare earths project.

Arafura (ASX:ARU) 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.

Appointment an ‘important milestone’

“The appointment of the MLAs represents an important milestone in the Company’s progress towards a final investment decision this year,” Arafura MD Gavin Lockyer said.

“The MLAs have significant international and domestic expertise in natural resources project financing and our ability to attract them reflects the quality of the underlying Nolans Project.”

Nolans is a major development for the Northern Territory and the Australian rare earths industry.

It is arriving at a good time, with prices of NdPr oxides near historic highs and stronger government support than ever for the development of critical minerals resources.

NdPr is most prominently used in permanent magnets, key materials in electric vehicles and wind turbines that are fetching near record highs.

The Federal Government has made the support of rare earths mining and processing in Australia a major priority to help diversify the sector away from China, where more than 85% of downstream production currently takes place.

According to an updated feasibility study last year the $1 billion Nolans project 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%.

But that was released when rare earths prices were much lower than they are today, with prices for NdPr rising from US$84/kg in May last year to around US$130/kg today according to the Shanghai Metals Market.



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.