Arafura nabs indicative US$150m financing for Nolans rare earths project from Korea’s KEXIM

Arafura has received in-principle support from Export-Import Bank of Korea (KEXIM) for up to US$150m debt financing
Support linked to binding offtake arrangement with Hyundai and Kia
Arafura is targeting financial contractual close by March 2024

Special Report: Arafura is another step closer to developing its Nolans rare earths project in the NT with the receipt of in-principle support from Export-Import Bank of Korea for up to US$150 million of debt financing.

Nolans is particularly endowed in valuable NdPr, enough to underpin production of about 4,440tpa of NdPr oxide along with 474tpa of heavy rare earths oxide and 144,393tpa of phosphoric acid for a minimum 38 years.

This represents about 5% of current global demand.

Arafura is targeting mobilisation of its operational workforce to Nolans in 2025, with ramp to its nameplate of 4400tpa of NdPr targeted in 2027.

Binding offtake agreements have already been reached with two customers, which together account for about 53% of the targeted 85% annual production from Nolans secured under long-term sale arrangements.

In June, the company nabbed in principle support for up to US$300m ($437.8m) in debt financing form Canadian export credit agency Export Development, which followed in-principle letters of support from Germany’s Euler Hermes for up to US$600m in untied loan guarantees in relation to offtake by German companies, and up to US$350m combined from Export Finance Australia and the Northern Australia Infrastructure Facility.

Now, Arafura Rare Earths (ASX:ARU) has received a non-binding Letter of Interest (LOI) from KEXIM for the provision of up to US$150 million in debt financing for the project.

Shoring up Korean supply chains

The in-principle support from KEXIM is linked to the strategic nature of NdPr supply and its critical role in the electrification of Korea’s automotive manufacturing sector.

The LOI is linked to the binding offtake arrangement in place with and Hyundai Motor Company and Kia Corporation for the supply of up to 1,500 tonnes per annum of NdPr oxide (or NdPr metal equivalent), representing approximately 40% of the 85% annual production from Nolans available to be secured under long term sales arrangements under ARU’s offtake strategy.

“We are very pleased to welcome KEXIM’s Letter of Interest to provide debt financing support for the Nolans project,” ARU MD Gavin Lockyer said.

“Arafura’s foundation offtake agreement with Hyundai and Kia was the beginning of a meaningful relationship with Korea, and our engagement with KEXIM further strengthens that relationship.

“KEXIM’s indication of support for Nolans directly reflects the significant contribution that NdPr from the project will play in delivering upon Korea’s long-term aspirations to be a global leader in electric vehicles and other sustainability-focused technologies.

“We are delighted at the prospect of working closely with KEXIM as we continue our efforts to bring this globally significant project into full construction, and subsequently into production.”

US$150m in two tranches

The US$150 million will consist of two tranches – an amount equal to or more than US$75 million as a direct loan, and an additional amount equal to or less than US$75 million as a debt guarantee.

The KEXIM direct loan must be equal to or greater than KEXIM debt guarantee facility.

The direct loan from KEXIM reduces the overall liquidity requirements from commercial banks for the indicative funding structure. KEXIM subsidiary KEXIM Global (Singapore) may also lend under the commercial bank tranche, subject to further negotiation.

The company does note however, that KEXIM’s indicative support is not a commitment, and its participation is subject to its standard due diligence procedures, which include but are not limited to financial, legal, technical, environmental and social, financing structure, tax, corporate reputation, anti-corruption, third party due diligence, business ethics, compliance and corporate governance related policies and practices.

 

This article was developed in collaboration with Arafura Rare Earths, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

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