ARU
Arafura Rare Earths LTD
ASX
Quarterly Activities Report and Appendix 5B
Sentiment:
Quarterly Activities Report
28 April 2024 6:26 PM
Arafura Rare Earths secures US$533 million in government support, advances Nolans Project funding, and focuses on strategic partnerships amid NdPr market fluctuations.
Capital raise
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.
Summary
- Arafura Rare Earths (ARU) received US$533 million in Commonwealth Government support for the Nolans Project.
- Darryl Cuzzubbo commenced as Managing Director and CEO in February.
- The company recruited two new non-executive directors and three executive team members.
- Gas supply agreements were secured for the Nolans Project.
- A$6.5 million was raised under a Share Purchase Plan.
- Project spend rate was significantly reduced after completion of early works.
- Nolans is shovel ready, and construction will begin after a final investment decision (FID).
- The price of NdPr oxide decreased by 21.3% in the quarter, from US$62.85 to US$49.47 per kilogram.
- Arafura is targeting FID in the second half of 2024.
- The project execution schedule from FID to start-up remains at 37 months.
- The company had cash reserves of approximately A$58 million as of March 31, 2024.
- The company expects cashflow runway through to the fourth quarter of the 2024 calendar year.
Sentiment
Score: 7
Explanation: The sentiment is cautiously optimistic. The company has secured significant government funding and is progressing towards a final investment decision. However, the decrease in NdPr oxide prices and the need for further funding introduce some uncertainty.
Positives
- The company secured US$533 million in government funding, de-risking the project's financial outlook.
- The appointment of a new Managing Director and CEO and key leadership team members strengthens the company's management.
- Gas supply agreements have been secured, ensuring access to natural gas for the Nolans Project.
- The Share Purchase Plan raised A$6.5 million, providing interim funding.
- Nolans is shovel ready, positioning the company to commence construction immediately after FID.
- The company received the second payment under the Modern Manufacturing Initiative Grant Agreement (MMI Agreement) with the Commonwealth, highlighting the ongoing support of Nolans from the Commonwealth.
- The second payment totalled A$9m and brings total funding received under the MMI Agreement to A$15m.
Negatives
- The price of NdPr oxide decreased by 21.3% in the quarter, impacting potential revenue.
- Engineering and procurement for the Sulphuric Acid Plant and Beneficiation Plant are on hold until funding is secured.
- Arafura paid a penalty to DCCEEW of around $16,500, based on single contravention of Condition 8 of the EPBC approval.
Risks
- Securing the remaining debt and equity funding for the Nolans Project remains a key risk.
- Fluctuations in NdPr oxide prices could impact the project's profitability.
- Delays in obtaining third-party approvals from lenders, offtake partners, and cornerstone investors could affect the project schedule.
- The company has no certainty as to the timing and likelihood of successfully concluding binding offtake agreements being entered into.
- The indicative project schedule is subject to change and is contingent on the completion of construction and development, commissioning, and general market conditions.
Future Outlook
Arafura is focused on securing funding for a final investment decision in the second half of 2024, with construction to commence immediately afterward. The company anticipates future announcements on debt funding, offtake, and cornerstone equity.
Management Comments
- 'We are laser focused on securing funding in support of a final investment decision to get main construction activities underway at the Nolans Project.'
- 'The standby liquidity facility of US$200 million as part of the Government finance package is a remarkable achievement as it provides a buffer in the event of a cost and schedule overrun through ramp up.'
- 'We have also started a scoping study for what Nolans phase 2 would look like and I look forward to sharing more on this initiative over coming months.'
Industry Context
The report highlights the importance of securing NdPr supply for the energy transition, aligning with global efforts to diversify rare earth sources outside of China. The European Union's Critical Raw Materials Act underscores the strategic importance of local extraction and processing capabilities.
Comparison to Industry Standards
- Arafura's Nolans Project aims to become one of only three NdPr oxide producers outside of China, positioning it to compete with companies like Lynas Rare Earths and MP Materials.
- The project's focus on downstream processing to produce rare earth oxides aligns with the Northern Territory Government's royalty regime, which incentivizes higher levels of processing.
- The company's engagement with international governance standards such as IFC Performance Standards and the Equator Principles demonstrates a commitment to responsible and sustainable mining practices, comparable to industry leaders in environmental and social governance.
Stakeholder Impact
- Shareholders will benefit from the secured funding and potential for increased project value.
- Employees will see job creation and security as the project progresses.
- Customers will have access to a diversified source of NdPr oxide.
- Suppliers will gain from contracts related to the project's construction and operation.
- Creditors are provided with a standby liquidity facility to manage any increases in capital expenditure and operating costs incurred during ramp up.
Next Steps
- Secure remaining debt and equity funding.
- Obtain final approvals from lenders, offtake partners, and cornerstone investors.
- Commence construction immediately after a final investment decision.
- Progress operational licensing and environmental management plans.
- Continue stakeholder engagement with government, communities, and environmental groups.
Key Dates
- February 2024: Darryl Cuzzubbo commenced as Managing Director and CEO.
- 5 February 2024: Darryl Cuzzubbo was announced as Arafura's Managing Director and CEO.
- 13 February 2024: Arafura announced natural gas supply agreements to unlock access to local natural gas from 2026.
- 14 March 2024: Announcement of Commonwealth Government debt package.
- 19 March: The Council of the European Union approved the Critical Raw Materials Act.
- 31 March 2024: End of the reporting quarter; Arafura had cash reserves of ~A$58m.
- Second half of 2024: Target for final investment decision (FID).
- Fourth quarter of 2024: Company expects cashflow runway through to this point.
Keywords
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.
Disclaimer: This summary was generated by artificial intelligence and its accuracy is not guaranteed. The information provided here is for general informational purposes only and does not constitute financial advice, recommendation, or endorsement of any kind. It may contain errors or omissions. You should not rely on this information to make financial decisions. Always seek the advice of a qualified financial professional before making any investment or financial decisions. Use of this information is at your own risk.