Arafura Rare Earths Limited (ASX: ARU) has signed a binding offtake agreement with its key foundation offtake partner, South Korean based Hyundai Motor Company.
Kia Corporation can make orders under the Offtake Agreement in its own right. This follows the signing of the non-binding Memorandum of Understanding with Hyundai earlier this year.
The Offtake Agreement is for the supply of NdPr from the Company’s Nolans Project to Hyundai over a seven-year term (which may be extended for a further five years by mutual agreement).
Under the Offtake Agreement, the Buyer may choose whether to be supplied with NdPr Oxide or its equivalent in NdPr Metal. Contract volumes (per Contract Year) for NdPr Oxide are 600 tonnes per annum (tpa) in year one, increasing to 1,500 tpa in years four to seven to align with ramp up of the project.
Supply of NdPr is currently anticipated to commence in calendar year 2025 subject to project financing, completion of construction and development and commissioning of the Project.
The other key terms of the Offtake Agreement are set out below:
▪ Pricing (in $US) is determined using a formula-based mechanism referencing the NdPr Price Ex Works China price per tonne.
▪ Commercial grade NdPr Oxide/Total Rare Earth Oxide (TREO) must be ≥99.0%.
▪ The Offtake Agreement is subject to certain conditions precedent being satisfied by no later than 30 June 2026, such as completion of construction and development of the Project, commencement of commercial production and ramp up.
In addition, Arafura has also entered into a non-binding HoA with Hyundai. Under the HoA, Arafura will commence discussions for strategic investment with Hyundai and its affiliates. Any subscription funds raised by the company are intended to be applied towards funding a portion of the equity component of the development funding required for the Project. The potential investment has not yet been determined and is subject to further negotiation between the parties. Arafura will make a further announcement to the ASX if definitive and binding subscription agreements are finalised and executed in the future.
Arafura’s offtake strategy for the Project has been to target original equipment manufacturers (OEMs) from geographic regions with supportive Export Credit Agencies and Arafura continues to receive strong interest from a range of parties that are aligned with its offtake and investment strategy. Arafura has a view to secure 85% of its planned production as binding offtake, with the remaining 60% under negotiation with a range of multi-national companies (including GE Renewable Energy where a non-binding MoU for collaboration was signed in July 2022).
Subject to project financing, completion of construction and development and commissioning of the Project, Arafura currently anticipates first production of NdPr Oxide from the Project in 2025 with annual production expected to ramp up to 4,440 tpa in 2027.
The front-end engineering design (FEED) initiated in August 2021 remains on track, including tendering of the various major construction contracts, which will inform the Final Investment Decision.
“We are delighted to have concluded negotiations to execute our first binding offtake agreement which includes the exercise of the option provided in the MoU to take the full offtake volume of 1,500 tpa in relation to the Nolans Project,” Managing Director, Gavin Lockyer, said.
“This establishes the foundation for a long-term partnership, and we are proud to have committed to supplying NdPr to Hyundai, a respected global automotive leader”.
For further information please visit: https://www.arultd.com/
