ARU
Arafura Rare Earths LTD
ASX
Arafura achieves major debt funding milestone
Sentiment:
Project Funding Update
22 July 2024 6:12 PM
Arafura Rare Earths secures conditional credit approvals for US$775 million in senior debt funding for the Nolans Project, marking a significant step towards a final investment decision.
Delay expected
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
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.
Summary
- Arafura Rare Earths has secured conditional credit approvals for US$775 million in senior debt funding from export credit agencies and commercial lenders for the Nolans Project.
- The company also secured an US$80 million Cost Overrun Facility (COF).
- The debt funding includes significant support from Australian and international export credit agencies, highlighting the geostrategic importance of the project.
- The weighted average tenor of the US$775 million senior debt facilities is 12.2 years.
- A preliminary study indicates the potential to expand production capacity at Nolans and process third-party feedstock.
- The company has completed an extensive due diligence program with financiers to obtain credit approved commitments.
- Offtake discussions are well advanced toward achieving the required minimum 80 percent of nameplate production after project ramp up.
- The project's total funding requirement includes US$1,226 million in pre-production capital costs.
- A robust and conservative funding solution was designed for the Project (Lenders Contingency) which increases the Projects total funding requirement by US$67 million.
- The company has completed an in-house preliminary study which considered the possibility of expanding the size of the processing facility at Nolans (Phase 2 Study).
- The PFS will require an investment of approximately A$15 million and is planned to be commissioned once a final investment decision has been made with respect to Nolans.
- The company intends to commence the process of obtaining the necessary government and regulatory approvals for a Phase 2 expansion around the same time.
- The company had cash and cash equivalents of US$28m as of 30 June 2024 plus remaining grant funding under the Modern Manufacturing Initiative of US$11m.
Sentiment
Score: 8
Explanation: The announcement is very positive due to securing significant debt funding, which de-risks the project and paves the way for a final investment decision. The potential expansion also adds to the positive outlook.
Positives
- Securing US$775 million in senior debt funding and an US$80 million Cost Overrun Facility (COF) significantly de-risks the Nolans Project.
- Strong support from export credit agencies highlights the strategic importance of the project.
- The potential expansion of the processing facility (Phase 2) could enable the company to process third-party rare-earth feedstocks.
- The loan facilities are eligible Green Facilities under Arafura's Green Loan Framework (GLF).
- The subordinated Standby Liquidity Facility (SLF) of up to US$200 million provided by EFA provides another layer of funding contingency and ensures that Nolans is funded through first production and ramp-up to nameplate.
Negatives
- The debt facilities remain conditional on final documentation and satisfaction of conditions to drawdown customary for secured project financing arrangements of this nature.
- The project is reliant on securing equity funding to meet the balance of the project's funding requirement.
- The Lenders Contingency increases the Projects total funding requirement by US$67 million.
Risks
- The project is subject to customary risks associated with project financing, including final documentation and satisfaction of conditions to drawdown.
- The company needs to secure equity funding to meet the balance of the project's funding requirement.
- The Phase 2 expansion is contingent on positive results from the pre-feasibility study and a final investment decision.
- There is a 3-month delay in first production and adjustments to mining and labour costs.
Future Outlook
The company aims to secure equity funding and reach a final investment decision for the Nolans Project in 2024, while also exploring future growth opportunities through a potential Phase 2 expansion.
Management Comments
- Managing Director and CEO Darryl Cuzzubbo said securing conditional approval for more than US$1 billion of debt funding and completion support is an incredible result.
- Darryl Cuzzubbo said the cost overrun facility and standby liquidity facility have further derisked the Project for commercial lenders and investors.
- Darryl Cuzzubbo said the Australian government has led the way in debt funding through EFA and NAIF, which unlocked international support from export credit agencies in Korea, Canada and Germany.
- Darryl Cuzzubbo said the company continues to make monumental leaps toward reaching FID at Nolans.
- Darryl Cuzzubbo said the company is also looking at future growth opportunities, aligning to growing global demand for rare earths and becoming a third-party rare earths downstream processing hub.
Industry Context
This announcement is significant in the context of the global push for diversified rare earth supply chains, particularly for NdPr used in electric vehicles and wind turbines. The Nolans Project aims to be one of Australia's first ore-to-oxide rare earths processing facilities, contributing to the development of Australian downstream processing capability.
Comparison to Industry Standards
- Arafura's Nolans Project aims to compete with established rare earth producers like Lynas Rare Earths, which operates the Mount Weld mine and processing plant in Western Australia.
- The project's ore-to-oxide processing facility aligns with the industry trend towards integrated supply chains, similar to projects being developed by other companies seeking to reduce reliance on Chinese processing capacity.
- The debt funding secured by Arafura is comparable to financing arrangements for other large-scale mining projects, with the involvement of export credit agencies indicating strong government support, similar to projects like the Roy Hill iron ore mine in Western Australia.
Stakeholder Impact
- Shareholders will benefit from the reduced risk profile of the project and the potential for future growth.
- Employees will have increased job security and opportunities as the project progresses.
- Customers will have access to a diversified and responsibly sourced supply of NdPr.
- Suppliers will benefit from increased demand for goods and services during the construction and operation phases.
- Creditors are provided with a robust funding structure and completion support facilities.
Next Steps
- Secure strategic equity funding for a final investment decision (FID).
- Negotiate and finalize loan documentation with lenders.
- Satisfy conditions to drawdown customary for secured project financing arrangements.
- Continue offtake discussions to achieve the required minimum 80 percent of nameplate production.
- Commission a pre-feasibility study (PFS) for the Phase 2 expansion.
- Obtain necessary government and regulatory approvals for a Phase 2 expansion.
Key Dates
- 16 March 2020: Major Increase in Mine Life for the Nolans Project ASX announcement
- 11 May 2021: Refer ASX Announcement
- 7 June 2017: Detailed Resource Assessment Completed ASX announcement
- 11 November 2022: Company's ASX announcement
- 14 March 2024: Announcement of US$533 million in debt funding from Export (NAIF) ASX Announcement
- 1 July 2024: Refer to ASX Announcements
- 4 July 2024: Refer to ASX Announcements
- 23 July 2024: ASX presentation date and investor briefing call
Keywords
Nolans Project, Rare Earths, Debt Funding, Arafura, NdPr, Export Credit Agencies, Final Investment Decision
ARU
Arafura Rare Earths LTD
ASX
Sector: Materials
Filings with Classifications
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.
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.
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.
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
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.
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.
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).
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.
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
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.
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.
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
10 September 2024 6:18 PM
Share Purchase Plan Results
- The SPP raised $4.6 million (before costs).
- A previous placement raised $20 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.
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
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.
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
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.
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
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.
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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