Arafura Rare Earths (ASX: ARU) announced this week it has secured up to US$300M in debt financing from Export Development Canada (EDC) for its Nolans project in Australia’s Northern Territory.
The capital comes after Australia pledged up to A$840M this year as Western nations aim to diversify the global supply chain for rare earths and skirt supply risks, with China currently producing more than 80% of the world’s rare earths.
The connection between Arafura and EDC was facilitated by GE Vernova Inc in recognition of the significance of the Nolans Project and its role in diversifying supply chains for offshore wind turbines. Further, EDC’s support of the Nolans Project is linked to the non-binding Memorandum of Understanding with GE Renewable Energy and supply contracts from Canadian companies.
“Debt financing from EDC signifies the increasing geostrategic importance of the Nolans Project and securing global diversity in the NdPr supply chain.” Said managing director, Darryl Cuzzubbo. “EDC has responded strongly to Nolans as a strategic opportunity that will underpin the electrification economy. NdPr is critical in electrical vehicles, wind turbines and robotics. This announcement today brings us closer to a final investment decision on the Nolans Project.”
After the announcement, shares of the rare earths explorer climbed by 7.7% by 0115 GMT, compared to a 0.6% rise in the broader benchmark index.
The Nolans project is predicted to be Australia’s third rare earths processing plant after Lynas Rare Earths’ Kalgoorlie operations and Iluka Resources’ Eneabba heavy rare earths plant, which is under development.
Arafura said it had received conditional approval for 68% of the targeted US$775M senior debt funding for the project.
In November 2022, Arafura estimated capital costs for the Nolans project at about A$1.59B, according to the company’s 2023 annual report. The company is now working with a several foreign and domestic commercial banks to seek the remaining funding for the project, bringing it closer to a final investment decision.
The company, whose largest shareholder is Australia’s most wealthy person, Gina Rinehart, already has supply agreements with Hyundai Motor, Kia Corp, and Siemens Gamesa Renewable Energy. It also has a provisional agreement with General Electric.
