ARU
Arafura Rare Earths LTD
ASX
Quarterly Activities Report and Appendix 5B
Sentiment:
Quarterly Activities Report
22 July 2024 8:49 PM
Arafura Rare Earths secures conditional approval for over US$1 billion in debt funding for the Nolans Project, marking a significant step towards a final investment decision.
Capital raise
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.
Summary
- Arafura Rare Earths achieved significant milestones in the second quarter towards reaching a final investment decision (FID) for the Nolans Project.
- The company received conditional approval for more than US$1 billion in debt funding and completion support subsequent to the quarter.
- This debt funding includes US$300 million from Export Development Canada and US$150 million from KEXIM.
- The company is advancing its offtake and equity strategies, targeting FID by the end of 2024.
- Project execution schedule from FID to start-up remains at 37 months.
- Arafura had cash reserves of A$42 million as of 30 June 2024.
- The company spent approximately A$0.7 million on exploration and evaluation, A$3.5 million on corporate activities, and A$10.6 million on project development during the quarter.
- Binding offtake agreements comprise 58% of the total offtake target volume.
Sentiment
Score: 8
Explanation: The document presents a positive outlook with significant progress in securing debt funding and advancing the Nolans Project towards FID. While challenges remain, the overall tone is optimistic and indicates strong momentum.
Positives
- Securing over US$1 billion in debt funding significantly de-risks the Nolans Project.
- The company is on track to reach a final investment decision by the end of 2024.
- Binding offtake agreements covering 58% of the targeted production provide revenue certainty.
- The appointment of a Chief People Officer completes the new Leadership Team structure.
- Cash outflows from reoccurring activities reduced by ~A$11m in the current quarter, averaging ~A$5m per month (versus ~A$9m per month in the prior quarter).
Negatives
- The NdPr oxide price remains subdued at US$50.44 per kilogram, below the average breakeven price for the industry.
- The company spent A$10.6 million on project development activities during the quarter, contributing to a decrease in cash reserves from A$58 million to A$42 million.
- Condition 8 of the EPBC approval requires the five EMPs to be approved prior to the commencement of construction. An application is under assessment by DCCEEW to amend Condition 8 of the EPBC approval.
Risks
- Securing the remaining equity funding is crucial for reaching FID.
- Delays in obtaining necessary environmental approvals could impact the project schedule.
- Fluctuations in NdPr oxide prices could affect project economics.
- The indicative project schedule is subject to change and contingent on various factors including market conditions.
Future Outlook
Arafura aims to reach a final investment decision (FID) by the end of 2024 and commence construction immediately upon reaching FID, with a project execution schedule of 37 months to start-up.
Management Comments
- 'Finalising our debt funding strategy is a phenomenal achievement,' said Managing Director Darryl Cuzzubbo.
- He added that the support from export credit agencies and commercial lenders signifies the Nolans Project as a global opportunity to secure a diversified NdPr supply chain.
- The company remains laser focused on reaching FID by the end of this year.
Industry Context
The announcement highlights the strategic importance of Arafura's role in developing a diversified global NdPr supply chain, particularly in light of increasing demand for rare earths driven by the energy transition and geopolitical factors such as import tariffs on Chinese products.
Comparison to Industry Standards
- Arafura's securing of over US$1 billion in debt funding is a significant achievement, placing it in a strong position compared to other rare earth projects that often struggle with financing.
- Lynas Rare Earths, a major player in the industry, has also received government support for its projects, indicating a broader trend of public investment in rare earth supply chains.
- The 37-month project execution schedule is comparable to other large-scale mining projects, but its success will depend on efficient execution and management of risks.
Stakeholder Impact
- Shareholders: Positive impact due to reduced financial risk and progress towards project development.
- Employees: Increased job security and potential for new employment opportunities.
- Customers: Greater certainty of NdPr supply from a diversified source.
- Suppliers: Opportunities for contracts and partnerships related to the Nolans Project.
- Creditors: Reduced risk due to secured debt funding and project progress.
Next Steps
- Finalizing the equity funding strategy.
- Securing final environmental approvals.
- Commencing construction activities upon reaching FID.
- Progressing offtake negotiations for the remaining portion of the target.
Key Dates
- 31 January 2023: Referenced ASX Announcement regarding Net Zero Pathway.
- 16 March 2020: Referenced ASX announcement regarding Major Increase in Mine Life for the Nolans Project
- 11 May 2021: Referenced ASX Announcement regarding Planned Production of 4,440 tpa.
- 11 November 2022: Referenced ASX Announcement outlining detailed capital cost estimates.
- 22 April 2024: Arafura was represented at the Rare Earths Conference.
- 7 May 2024: Arafura was represented at the Canaccord Genuity Global Metals & Mining Conference.
- 10 May 2024: Arafura was represented at the 121 Mining Investment Conference.
- 27 May 2024: Referenced ASX announcement.
- 29 May 2024: Arafura was represented at the Critical Minerals Conference.
- 30 June 2024: End of the reporting quarter; Arafura had A$42 million in cash reserves.
- 1 July 2024: Referenced ASX announcement and Arafura was represented at the AKBC Seoul delegation.
- 4 July 2024: Referenced ASX announcement.
- 23 July 2024: Date of the ASX announcement; Arafura announced completion of its debt-led funding strategy.
Keywords
Nolans Project, Rare Earths, NdPr, Debt Funding, Offtake Agreements, FID, Arafura
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.
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.
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.
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.
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 October 2024 9:24 PM
Annual Report
- Arafura is actively seeking equity funding to reach a final investment decision on the Nolans Project.
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.
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.
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
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
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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