The ball is really rolling for Arafura to secure senior debt for the development of its Nolans rare earth project after receiving a letter of support from the NAIF.
The Northern Australia Infrastructure Facility’s non-binding letter sets out the terms of a potential senior debt facility of up to $ 100 million with a term of up to 15 years and the terms of the funding available.
Importantly, it follows on from the proposal by the Australian export credit agency Export Finance Australia for a $ 200 million senior credit facility with a term of 15 years, underscoring government support for critical minerals such as rare earths.
Taken together, the two senior government credit facilities could corner a broader bank credit facility that would allow providers to commit to binding agreements.
Arafura Resources (ASX: ARU) Managing Director Gavin Lockyer said the company is delighted with the support of the NAIF and will work with the agency to meet the relevant conditions needed to further develop the process.
“The Australian government’s critical minerals strategy is focused on developing critical mineral projects and downstream processing capabilities in Australia to strengthen sustainable supply chains,” he said.
“This is also in line with global clients’ critical plans for commodity diversification and their ESG priorities.
“The support of the Australian government improves our position in finalizing binding terms on senior debt with the aim of making a final investment decision in the second half of 2022.”
Arafura has also applied for grants under the government’s $ 1.3 billion Modern Manufacturing Initiative for portions of its front-end engineering and design program directly related to establishing downstream processing capabilities.
Nolans is currently the only shovel-ready neodymium-praseodymium (NdPr) -focused rare earth project in Australia with all environmental permits.
The project – located approximately 135 km north of Alice Springs – has an ore reserve of 29.5 million tons with a total rare earth oxide content of 2.9 percent, with NdPr accounting for 26.4 percent of the rare earth content.
It will process high quality segregated rare earth oxides domestically and ensure that all value is created in Northern Australia.
Arafura recently updated the Feasibility Study for Nolans, which shows net present value (NPV) and internal rate of return (IRR) – both measures of profitability on a project – from previously $ 968 million and 17.97%, respectively, to $ 1.4 billion and 18.1% improved, respectively.
Operating costs are estimated at a low $ 24.76 ($ 31.59) per kilogram of NdPr oxide, while earnings before interest, taxes, depreciation, and amortization were estimated at $ 354 million per year based on that a service life of the mine of 38 years.
This article was developed in collaboration with Arafura Resources, a Stockhead advertiser at the time of publication.
This article does not constitute financial product advice. Before making any financial decisions, you should consider independent advice.