ARU
Arafura Rare Earths LTD
ASX
2024 Annual Report
Sentiment:
Annual Report
16 September 2024 2:10 AM
Arafura Rare Earths Limited secured over US$1 billion in conditional debt funding approvals, marking a significant milestone for its Nolans Project and positioning it as a key player in the ex-China rare earths supply chain.
Capital raise
A $20 million institutional placement was completed.
A share purchase plan is targeting an additional $7 million, with potential for up to $3 million in oversubscriptions.
Summary
- Arafura Rare Earths Limited (ARU) completed its debt-led funding strategy, securing over US$1 billion in conditional approvals from nine export credit agencies and commercial lenders.
- The Australian Government contributed a US$533 million debt funding package to the project.
- The company secured 58% of its 80% offtake target, with advanced negotiations ongoing for over 133% of the target.
- ARU invested A$40 million in early works construction, making the Nolans Project 'shovel ready'.
- The Nolans Project's base case NPV (8% discount rate) is US$1.73 billion, with an IRR of 17.2% and average annual EBITDA of US$460 million over 38 years.
- The incentive case NPV is US$2.55 billion, with an IRR of 20.6% and average annual EBITDA of US$592 million over 38 years.
- The company announced a successful capital raise of $20 million through an institutional placement, aiming for an additional $7 million through a share purchase plan.
- A preliminary study suggests a potential 150% increase in processing capacity at Nolans, establishing it as a third-party processing hub.
- The average NdPr price over the past 12 months was around US$60/kg, down from US$140/kg in 2022.
- The company predicts a significant supply gap of NdPr by 2032, estimating an incentive price of US$163/kg.
Sentiment
Score: 7
Explanation: The overall sentiment is positive, reflecting the significant achievement of securing substantial debt funding. However, the ongoing challenges of low NdPr prices and the need for further equity financing temper the overall score.
Positives
- Secured over US$1 billion in conditional debt funding.
- Significant government support (US$533 million from Australia).
- Substantial progress on offtake agreements (58% of target secured).
- Nolans Project is shovel-ready after A$40 million investment in early works.
- Strong project economics with high NPV and IRR in both base and incentive cases.
- Successful capital raise.
- Potential for significant expansion of processing capacity.
Negatives
- NdPr price decline to US$60/kg from US$140/kg in 2022.
- Significant loss for the year ($100,974,432).
Risks
- Funding risk: Dependence on securing equity funding to meet conditions precedent for debt drawdowns.
- Communicable disease outbreaks: Potential disruptions to operations and supply chains.
- Exploration, production, and project development risks: Cost and schedule overruns, production stoppages, and technical challenges.
- Price volatility of rare earth elements: Uncertainty in securing favorable contracts and potential impact of government intervention.
- Metallurgy and hydrometallurgy risks: Scale-up challenges and inconsistent product recovery.
- Capital cost risk: Potential for cost overruns due to inflation and other macroeconomic factors.
- Operating risks: Fires, explosions, environmental hazards, and other accidents.
- Reliance on key personnel and advisors.
- Reliance on third-party infrastructure.
- Reserve and resource estimate uncertainty.
- Native title issues: Potential delays and costs associated with negotiations.
- Environmental regulations: Potential for more stringent regulations and increased compliance costs.
- Title risks: Uncertainty in securing and maintaining tenure over mining tenements.
- Legislative changes, government policy, and approvals: Potential delays or changes in approvals.
- Occupational health and safety risks.
- Third-party risks.
- Insurance risks.
- Litigation risks.
- Climate change risks: New regulations, market changes, and physical risks.
- Financial risks: Market risk, foreign exchange risk, interest rate risk, and liquidity risk.
- General market and economic factors.
- Competition.
- Force majeure events.
- Russia-Ukraine and Israel-Palestine conflicts: Uncertain future impact on global markets.
- Data and information technology risks.
Future Outlook
The upcoming year will focus on securing the remaining equity funding to reach a final investment decision (FID) for the Nolans Project, securing the balance of the long-term offtake target, and advancing project development through engineering and construction activities. The company will maintain financial prudence to ensure sufficient liquidity.
Management Comments
- 'The past 12 months have been transformative at Arafura Rare Earths.'
- 'This is an incredible achievement led by Chief Financial Officer (CFO), Peter Sherrington.'
- 'We now have in place a bespoke and robust debt funding solution that includes project completion support provided by an US$80 million cost overrun facility and a subordinated standby liquidity facility of US$200 million.'
- 'I would like to thank former Managing Director and CEO Gavin Lockyer for his leadership and commitment to Arafura and the Nolans Project during which he progressed the Company from explorer to a project-ready organisation and for his contribution in securing Arafuras international standing and reputation.'
- 'We welcome two highly experienced new non-executive directors Mike Spreadborough and Roger Higgins, both bring the credentials required to steer Arafura through to a Final Investment Decision (FID) and its next phase of growth.'
- 'In my first letter to shareholders as the Managing Director and CEO of Arafura Rare Earths, I want to express my confidence in the future of the Company and our flagship Nolans Project, a large, highly strategic source of rare earths in the Northern Territory.'
- 'Now that the debt portion has been finalised, our focus is on securing the equity to enable a final investment decision.'
- 'I am confident Arafura is well positioned as the worlds next major rare earths producer.'
Industry Context
This announcement positions Arafura Rare Earths as a significant player in the growing ex-China rare earths market, driven by increasing global demand for rare earths in electric vehicles and renewable energy technologies and supported by government policies in the US and EU aimed at diversifying supply chains away from China. The company's success in securing significant debt funding highlights the strategic importance of its Nolans Project and its potential to address the anticipated supply deficit.
Next Steps
- Securing the required funding to deliver the Nolans Project.
- Securing the remaining portion of the company's long-term offtake target.
- Advancing project development through engineering and construction activities.
- Refreshing the company's values and purpose.
Key Dates
- 30 June 2024: End of the financial year
- July 2024: Debt funding package finalized; completion of early works
- 23 July 2024: Announcement of over US$1 billion in conditional debt funding approvals
- 29 August 2024: Closing date for director elections
- 17 October 2024: Date of Annual General Meeting
- February 2024: Darryl Cuzzubbo commenced as Managing Director and CEO
- 5 February 2024: Gavin Lockyer resigned as Managing Director and CEO
- 26 July 2024: Chris Tonkin resigned as Non-Executive Director
- 8 April 2024: Mike Spreadborough and Roger Higgins appointed as Non-Executive Directors
- 22 November 2023: FY23 Sustainability Report released
- 31 October 2023: Quarterly Activities Report and Appendix 5B released
- October 2023: Capital cost guidance released
- December 2023: FY2024 Long Term Incentive Plan issued
- 31 December 2023: Stewart Watkins ceased employment
- 11 November 2022: Nolans Project Update released
- 15 November 2022: Nolans receives Mining Authorisation from NT Government
- 14 February 2019: Mark Southey appointed as Chairman
- 1 January 2011: Chris Tonkin first appointed as Non-Executive Director
- 23 July 2013: Gavin Lockyer first appointed as Managing Director and CEO
- 1 December 2019: Cathy Moises first appointed as Non-Executive Director
- 1 November 2021: Darryl Cuzzubbo first appointed as Non-Executive Director
- 7 June 2017: Detailed Resource Assessment Completed
- 16 March 2020: Major Increase in Mine Life for the Nolans Project
- 9 March 2020: Drilling Confirms Deep Extensions to Mineralization
- 26 June 2020: Native Title Agreement Executed for Nolans Project
- 22 July 2020: Nolans Mineral Leases granted by NT Government
- 9 February 2021: Mineral Leases granted by NT Government secures Borefield
- 11 May 2021: ASX Announcement regarding Planned Production
- 7 February 2019: Nolans Project Definitive Feasibility Study
Keywords
Rare Earths, Nolans Project, NdPr, Project Financing, Debt Funding, Offtake Agreements, Australia, ESG, Mining, Hydrometallurgy, Capital Raise, Electric Vehicles, Wind Turbines, Supply Chain
ARU
Arafura Rare Earths LTD
ASX
Sector: Materials
Filings with Classifications
Capital raise
20 May 2025 12:10 AM
Conference Presentation
- The company requires a new equity requirement of US$793m (including COF).
- Less NRFC US$133m (A$200m).
- Remaining new equity requirement of US$660m.
Delay expected
20 May 2025 12:10 AM
Conference Presentation
- The sources and uses of funds section includes an increase in ramp-up period from 2 years to 3 years and a 3-month delay in first production.
Delay expected
29 April 2025 6:47 PM
Quarterly Activities Report and Appendix 5B
- The final investment decision for Nolans has the potential to extend beyond the previously advised window of the first half of 2025 calendar year due to the assessment of a potential joint venture structure.
Capital raise
29 April 2025 6:47 PM
Quarterly Activities Report and Appendix 5B
- Arafura is assessing a potential joint venture (JV) structure which could significantly reduce the equity required to fund Arafura's remaining project interest.
- The company and its advisors regularly consider and assess options put forward by third parties (including potential corporate and project-level transactions) which could, if implemented, give rise to an alternative pathway to the funding and development of the Project for the benefit of shareholders.
Capital raise
4 March 2025 4:21 PM
Investor Presentation
- The company plans to raise equity through industry cornerstones, institutional investors, and an offer to new and existing shareholders.
- The equity raise is intended to fund the US$1.2 billion Nolans Project.
Better than expected
19 February 2025 12:53 AM
Interim Financial Report
- The net loss decreased compared to the previous year (A$18.85 million vs A$66.87 million).
Capital raise
19 February 2025 12:53 AM
Interim Financial Report
- Arafura signed a binding term sheet with the NRFC for a A$200 million investment through unsecured convertible notes.
- The company may seek additional equity to reduce the amount of funding being sought through public raising.
Delay expected
31 January 2025 12:53 AM
Update to Agreement
- The gas supply agreement deadline has been extended from February 4, 2025, to March 31, 2025.
Capital raise
29 January 2025 4:20 PM
Quarterly Activities Report
- The company is engaging with other potential cornerstone investors to secure the remaining equity required for the project.
- The A$200 million investment from the NRFC is expected to be a catalyst for attracting additional equity funding.
Delay expected
29 January 2025 4:20 PM
Quarterly Activities Report
- The gas supply agreement condition precedent date has been extended to 4 February 2025, with potential for further extension.
Capital raise
14 January 2025 4:23 PM
Funding Announcement
- The convertible notes will convert into shares at a 40% premium to the reference price, which will be determined by a future equity raising.
- The company expects to announce the equity financing around the time of the Final Investment Decision for the Nolans Project.
Delay expected
19 December 2024 5:36 PM
Project Update
- The condition precedent date for the gas supply agreement has been extended from December 31, 2024, to February 4, 2025.
Delay expected
19 December 2024 3:30 PM
Operational Update
- The condition precedent date for the gas supply agreement has been delayed from December 31, 2024, to February 4, 2025.
Delay expected
19 December 2024 3:53 AM
Operational Update
- The condition precedent date for the gas supply agreement has been extended from December 31, 2024 to February 4, 2025.
Capital raise
2 December 2024 7:23 PM
Sustainability Report
- A$20 million was received from sophisticated institutional investors.
- An additional A$4.6 million was received from existing shareholders through a share purchase plan.
Capital raise
21 October 2024 4:00 AM
Revised Presentation
- The company is seeking to raise the remaining equity funding through an offer to new and existing shareholders.
Capital raise
16 October 2024 9:27 PM
Annual Report Presentation
- The company is seeking to raise the remaining equity funding needed to commence construction.
Capital raise
16 October 2024 9:24 PM
Annual Report
- Arafura is actively seeking equity funding to reach a final investment decision on the Nolans Project.
Delay expected
16 October 2024 9:24 PM
Annual Report
- While the company is making progress, the timeline for reaching a final investment decision has been extended due to the complexities of securing funding in a challenging market environment.
Capital raise
16 September 2024 2:10 AM
Annual Report
- A $20 million institutional placement was completed.
- A share purchase plan is targeting an additional $7 million, with potential for up to $3 million in oversubscriptions.
Capital raise
16 September 2024 2:04 AM
Annual General Meeting Notice
- If all Placement Options are exercised, the Company will raise an additional $17,578,125 (before costs) to further progress the development of the Nolans Project and for general working capital purposes.
Capital raise
10 September 2024 6:18 PM
Share Purchase Plan Results
- The SPP raised $4.6 million (before costs).
- A previous placement raised $20 million.
Worse than expected
10 September 2024 6:18 PM
Share Purchase Plan Results
- The SPP raised $4.6 million, which is less than the targeted $7 million.
Capital raise
5 September 2024 6:18 PM
Capital Raising Announcement
- A$20 million placement completed in two tranches.
- A$7 million target for the share purchase plan (SPP), with a potential for A$3 million in oversubscriptions.
Capital raise
3 September 2024 11:29 PM
General Meeting Results
- Share issuance under Tranche 1 and Tranche 2 of a placement.
- Share issuance under the SPP (including shortfall offer).
- Share issuance to directors under the SPP.
Capital raise
2 August 2024 1:35 AM
Share Purchase Plan Announcement
- Arafura Rare Earths is conducting a Share Purchase Plan (SPP) to raise A$7 million before costs.
- The company may accept oversubscriptions up to A$3 million.
- The SPP offer price is A$0.16 per new share.
Capital raise
1 August 2024 6:19 PM
Prospectus
- The company may offer SPP Shortfall Shares to specific investors if the SPP does not reach its target of $7 million.
- The company has conditional approval for US$775 million in senior debt facilities, an additional US$80 million for a cost overrun facility (COF) and a further US$200 million in the form of a standby liquidity facility (SLF).
Delay expected
28 July 2024 7:28 PM
Gas Sales Agreement Announcement
- The condition precedent date of the Arafura GSA has been extended by five months to December 31, 2024.
- The start date of the Arafura GSA has been deferred by two years to January 1, 2028.
- The NGP is not expected to reopen until later this year.
Delay expected
28 July 2024 6:58 PM
Gas Sales Agreement Announcement
- The Arafura GSA supply start date has been deferred by two years to January 1, 2028.
- The Northern Gas Pipeline (NGP) is not expected to re-open until later this year.
Capital raise
28 July 2024 6:35 PM
Announcement and Media Release
- The company will require further gas contracting and funding arrangements by Central to progress appraisal wells at Mereenie and Palm Valley.
Delay expected
28 July 2024 6:35 PM
Announcement and Media Release
- The Arafura GSA has been amended, deferring the supply start date by two years to January 1, 2028.
Capital raise
23 July 2024 7:23 PM
Trading Halt Request
- Arafura Rare Earths is completing the placement component of a capital raising.
- The trading halt is pending an announcement regarding the completion of this placement.
Capital raise
22 July 2024 8:49 PM
Quarterly Activities Report
- The company intends to execute a capital raising to secure the equity required for the project.
- Barrenjoey has been appointed as a third joint lead manager alongside UBS AG and Canaccord Genuity to assist in raising the equity.
Delay expected
22 July 2024 6:12 PM
Investor Presentation
- The sources and uses of funds includes adjustments for a 3-month delay in first production.
Capital raise
22 July 2024 6:12 PM
Project Funding Update
- The company needs to raise new equity to meet the balance of the Projects funding requirement.
- The COF equity component of US$80 million is targeted to be raised at the same time as the new equity.
Delay expected
22 July 2024 6:12 PM
Project Funding Update
- The project includes an increase in ramp-up period (from 2 years to 3 years), and a 3-month delay in first production.
Capital raise
22 July 2024 6:12 PM
Investor Presentation
- The company is focused on securing equity, leveraging strategic nature of NdPr.
- The balance to be raised through offer to new and existing shareholders.
Capital raise
28 May 2024 9:00 PM
Conference Presentation
- The company is planning a potential build-up of equity capital.
- Customer/strategic commitment will drive participation of financial groups.
- The balance to be raised through offer to new and existing shareholders.
Capital raise
28 April 2024 6:26 PM
Quarterly Activities Report
- The company intends to execute a capital raising when debt financing with key credit approvals is in place.
- The company is targeting a substantial portion of the equity requirement via cornerstone investors ahead of launching a public equity raising with institutions and retail investors.
Capital raise
22 April 2024 3:09 AM
Conference Presentation
- The company is planning a potential build-up of equity capital.
- The company has appointed Joint Lead Managers.
- The company is seeking customer/strategic commitment to drive participation of financial groups.
- The company is planning to raise capital through an offer to new and existing shareholders.
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