Arafura Rare Earths Limited (ASX: ARU) has announced a significant milestone, securing a $200 million investment commitment from the National Reconstruction Fund Corporation (NRFC) to support the development of its flagship Nolans Project.
This investment will be facilitated through unsecured convertible notes, positioning Arafura to deliver Australia’s first ore-to-oxide rare earths processing operation.
Key Details of the Investment
- Convertible Notes: The $200 million investment will be structured as convertible notes with a 15-year tenor and a seven-year conversion period. Conversion is non-permissible for the first two years.
- Conversion Terms: Notes will convert into Arafura shares at a 40% premium to the reference price, determined during the company’s future equity raise to fully fund Nolans.
- Coupon Rate: Interest on the notes will accrue at the 3-month Bank Bill Swap Yield (BBSY) + 3.0% per annum, payable via new shares or by capitalizing the amount into the notes’ face value.
If the notes are not converted into shares, the coupon margin increases by an additional 3.0%, and the total value, including accrued interest, will be redeemable in cash at maturity.
Strategic Significance
Arafura’s Managing Director, Darryl Cuzzubbo, emphasized the strategic importance of the Nolans Project:
“This $200 million commitment from the NRFC highlights the project’s importance to both the Northern Territory and Australia as a whole. This investment significantly de-risks the equity funding required for Nolans’ development and brings us closer to a final investment decision.”
The NRFC’s Chairman, Martijn Wilder AM, also highlighted the broader implications:
“Rare earth minerals are critical to modern economies and the transition to net zero. Arafura’s Nolans Project demonstrates the potential for Australia to contribute to global supply chains and add value to raw materials domestically.”
What’s Next for Arafura?
The issuance of the convertible notes is contingent on several conditions:
- Finalization of long-form documentation.
- Shareholder approvals under ASX Listing Rule 7.1.
- Completion of an equity raising to fund Nolans.
- Securing key offtake agreements.
Arafura expects the notes to be issued upon completing these steps, coinciding with the planned Final Investment Decision (FID) for Nolans in the first half of 2025.
About the Nolans Project
Located in the Northern Territory, the Nolans Project is set to become a key player in the global rare earths supply chain. The facility will focus on producing neodymium-praseodymium (NdPr) oxide, a critical material for clean energy technologies like wind turbines and electric vehicles.
The NRFC’s Role
The National Reconstruction Fund Corporation, established in 2023, is a Commonwealth entity tasked with transforming Australia’s industrial and economic landscape. With $15 billion allocated to priority areas—including resources, renewables, and defence capability—the NRFC aims to foster innovation, grow jobs, and enhance Australia’s value-added industries.
This investment marks a pivotal step in realizing Arafura’s vision, signaling strong government and institutional support for the Nolans Project. With this backing, Arafura is well-positioned to lead Australia’s rare earths industry into a new era of growth and global competitiveness.
