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Arafura Resources focuses on Final Investment Decision in mid-2022 for Nolans project

It is “very optimistic” about the year ahead in getting the Nolans Project fully funded and ready for production.

Arafura Resources Ltd - Arafura Resources focuses on its Final Investment Decision in mid-2022 for its Nolans project

Arafura Resources Ltd (ASX:ARU) is focused on its reaching its Final Investment Decision for its Nolans Neodymium and Praseodymium (NdPr) Oxide Project in the Northern Territory in mid-2022. 

The company is “very optimistic” about the year ahead in getting the Nolans Project fully funded and ready for production when the global economy is desperate for a secure and alternate supply of its critical minerals.

It is “exceptionally well-placed” to capitalise on the ever-escalating global demand on the back of strengthening NdPr prices and forecast shortage of the product. 

Chairman Mark Southey said: “With strong project economics, secured development tenure and our social license to operate, we have never been better placed to execute the Nolans project. 

Critical year for Arafura

“The 2021 financial year was a critical year for Arafura. With strengthening rare earths pricing and increased interest from financiers and potential offtake partners as well as optimisation of the process plant design and mine scheduling following the ore reserve update, there was a strong case to review the findings from the Definitive Feasibility Study delivered in 2019.

“With extremely positive results, confirming the financial viability of the Nolans Project, this has enabled us to prepare for Front-End Engineering and Design (FEED), a critical step to progress the commercialisation of Nolans NdPr Project towards offtake and project funding.

“As the world focuses on ESG, Arafura has set its goal ‘to be a trusted global leader and supplier of choice for sustainably mined rare earth products', helping our customers deliver clean and efficient technologies.

“Arafura has committed to achieve net-zero carbon emissions by 2050, with its greenhouse gas reduction options study well advanced to set interim targets to meet this goal.”

Offtake progress

Arafura continues to advance its rare earth product offtake arrangements with parties in Japan, Europe, South Korea, the US and for its phosphoric acid product with parties in India.

Commercial discussions to secure offtake arrangements with European partners, who are seeking alternative supply sources from transparent and ESG-compliant suppliers are all progressing positively.

With changes to global priorities around sustainability and ESG standards, Nolan’s strong alignment with sustainability goals is meeting the changing mandates of key-end users.

In fact, it is starting to become evident that Nolan is emerging as the supplier of choice to secure supply NdPr oxides from a sustainable mining and processing source from Australia.

Arafura managing director Gavin Lockyer said: “We continue to advance discussions on key terms with various European end-users in the automotive and wind industry,

"European customers’ immediate objectives are to establish supply security and jurisdictional diversification of the NdFeB magnet supply chain and traceable product from a sustainable mining and processing source."

Project update

Supply chain partners in Europe, China and Japan have confirmed that the product is well within the required key specification for use in their processes.

The feasibility study update follows extensive work from the Arafura team and confirmed ultra-low operating costs of US$24.76/kg NdPr oxide and robust financial metrics for the Nolans Project, showing an outstanding net present value (NPV) of $1.4 billion and average EBITDA of A$354 million per annum.

It incorporates key improvements following the completion of the pilot program, allowing elements of the process flowsheet to be refined or optimised.

With the forecast supply shortage, the company has reviewed the process plant design and deferred cerium production to allow the company to focus on the ramp-up of on-specification high-value NdPr production.

To optimise the production profile and economic outcomes at Nolans, an updated mine scheduling was used based on the updated ore reserves and also include an associated minor increase in concentrate processing capacity.

These now form the basis of all its discussions with potential financiers and offtake partners.  

Domestic support

Increased support from the Australian Government has been seen with non-binding letters of support from both the Export Finance Australia and the Northern Australia Infrastructure Facility for senior debt facilities of $200 million and $100 million respectively, both for a 15-year term each.

“With sovereign support now achieved, we will continue to engage with key banks, advisors and export credit agencies (ECA) to execute our debt-led strategy from ECA-backed debt to attract project equity,” Southey added.

Approvals secured

All ancillary mineral leases to host the Nolans borefield in support of the mine and processing plant and allowing for the construction of a water diversion channel have been granted.

Having already secured both Federal and State environmental approvals, Nolans remains the only fully permitted ore to oxide rare earths project in Australia.

With renewed Major Project Status by the Australian Government for a further three years, Arafura retains ongoing focused support from the Australian Government’s Major Projects Facilitation Agency (MPFA) with Nolans recognised as an economically and strategically significant asset to Australia.

Coupled with the Indigenous Engagement Strategy released in the prior year, it continues to make strong commitments to the local community and as such retain its social license to operate.

Cash position

Arafura had a strong cash position of $10.8 million as at the end of June 2021.

Further, its two-tranche placement and share purchase plan will raise A$45.5 million to commence its FEED and for general working capital purposes.

Tranche 1 and Tranche 2 have already settled to raise $40 million before costs and following high shareholder interest and participation, the SPP closed early and is expected to settle on 20 August 2021 to raise $5.5 million before costs.

NdPr market

The demand for NdPr has increased more than anticipated, with tightening supply globally driven by the need for global powers to secure their supply chains of critical materials which are both sustainable and traceable.

Further rare earths are continuing to be recognised as a priority in the accelerated electrification of transport and renewable energy transitions to meet ambitious climate targets many countries are adopting and bringing into policy.

With market analysts forecasting that NdPr oxide demand to increase to 98,000 tonnes by 2030, Arafura is well placed to meet the potential supply gap by supplying up to 10% of the world’s rare earth magnet supply from the Nolans Project.

NdPr oxide prices strengthened through the financial year, increasing by 78% overall,  and looks to continue to strengthen through the year.

Quick facts: Arafura Resources Ltd

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