Arafura Rare Earths’ German move brings deal closer to conclusion

A German company has signed an agreement that will inject up to $896m into a Territory mining project. Read how the deal will work.

Management at Arafura Rare Earths Limited’s Nolan’s Project has signed a non-binding loan guarantee dependent on entering offtake agreements with German companies.

German export credit agency Euler Hermes has announced in-principle backing for a untied loan guarantee of up to US$600m ($A896m) with the Central Australian rare earths prospect.

A statement posted by Arafura on the Australian Stock Exchange said the German government had backed the agreement.

“Euler Hermes has informed (Arafura) that the Federal Ministry for Economic Affairs and Climate Action has confirmed the in-principle eligibility for an untied loan guarantee for the financing of the Nolans Project,” the statement said.

“The untied loan guarantee of US$600m is non-binding, indicative only and if approved, the guarantee would be conditional on Arafura entering into offtake agreements with German-based companies.”

Nolans Bore, a rare earths operation 135kms north of Alice Springs, operated by Perth-based Arafura Resources

It said the guarantee was also conditional on “corresponding quantities of neodymium praseodymium (NdPr) products ultimately being processed in Germany into permanent magnets or powertrains”.

“Any final guarantee amount will be determined with reference to the offtake volume processed in Germany, final offtake structures with German companies and NdPr market conditions at the time.”

To secure a final and binding financing decision from Euler Hermes, Arafura and KfW will be required to file a formal application with the German government.

This will be supported by additional economic, technical and legal information along with details relating to environmental and social aspects of the project”.

Arafura Managing Director Gavin Lockyer. Picture: (A)manda Parkinson

“Arafura will provide further updates to the market as it works to finalise its offtake arrangements and progress any formal application,” the ASX statement said.

As well, the Northern Australia Infrastructure Facility (NAIF) has increased its contribution to the project by $50m to $150m.

Arafura managing director Gavin Lockyer said if Euler Hermes and NAIF financial streams were implemented “they would form a meaningful component of the broader debt facilities being progressed”.

“Export credit agencies are a source of government-backed financial support for projects recognised to be of sovereign significance,” he said.

“International markets recognise the Nolans Project as a sustainable source of neodymium and praseodymium (NdPr), key to the manufacture of permanent magnets that are a critical component of most electric vehicles and much of the world’s renewable energy technology.

“Export credit agency support for Nolans to date reflects the significance attached to the project by international markets as they seek to achieve decarbonisation targets and move toward a net zero future.

“We warmly welcome the support of Euler Hermes and ongoing engagement with Export Finance Australia, commercial banks and other international export credit agencies in relation to the project,” he said.

Hyundai has signed a memorandum of understanding with Arafura Resources around the Nolans Project.

“The Nolans Project closely aligns with global customers’ critical raw material diversification plans and their environmental, social and governance priorities. Support from Australian and international export credit agencies is a direct reflection of the value this represents.

“We look forward to close ongoing relationships with Euler Hermes, EFA and NAIF as we continue to progress offtake negotiations and the project moves through its next critical phases toward full funding construction and first production.”

It’s been a busy few months for Arafura, which wants to develop the Nolans rare earths prospect about 135km north of Alice Springs.

In November, the company inked an offtake agreement with Korean vehicle manufacturer Hyundai and in December rich-lister Gina Rinehart announced Hancock Prospecting had invested $60m into the project and earlier this month, the NT News reported early construction work on the project was about to begin.