Arafura Secures A$200 Million Boost for Nolans Rare Earths Project
Arafura Rare Earths has locked in a A$200 million convertible note investment from the National Reconstruction Fund Corporation, marking a pivotal step toward developing Australia's first ore-to-oxide rare earths processing operation at Nolans.
- A$200 million convertible notes commitment from NRFC
- 15-year tenor with a 7-year conversion period and 40% premium conversion price
- Investment supports final investment decision and equity financing for Nolans Project
- Convertible notes are unsecured and subordinated to project financing
- Deal expected to catalyze further strategic investments and equity funding
Strategic Funding Milestone
Arafura Rare Earths Limited (ASX: ARU) has announced a significant funding commitment from the National Reconstruction Fund Corporation (NRFC), securing A$200 million through unsecured convertible notes to advance the development of its Nolans Project in the Northern Territory. This investment underscores the strategic importance of Nolans as Australia’s prospective first ore-to-oxide rare earths processing operation, a critical step in the global supply chain for these essential minerals.
Convertible Notes Structure and Terms
The convertible notes have a 15-year maturity with a conversion window spanning seven years, beginning two years after issuance. Conversion into fully paid ordinary shares will occur at a fixed price set at a 40% premium to a reference price determined by a forthcoming equity raising, which is expected to coincide with Arafura’s final investment decision (FID) for Nolans. During the initial conversion period, interest accrues at 3-month BBSY plus 3%, payable quarterly in shares or capitalised into the note principal, with no cash interest payments. If conversion does not occur, the coupon margin increases to 6% above BBSY, with redemption options available thereafter.
Catalyst for Further Investment
This NRFC commitment is more than just capital; it acts as a strong endorsement from a government-backed entity with a mandate to add value to Australian resources. Arafura’s Managing Director, Darryl Cuzzubbo, highlighted the deal as a de-risking event for the equity funding required to bring Nolans to fruition. The investment is expected to catalyse additional equity funding and attract strategic partners, crucial for the project’s successful development and commissioning.
Conditions and Next Steps
The issuance of the convertible notes remains subject to several conditions, including shareholder approvals, completion of the equity financing, and securing key offtake arrangements. The company anticipates announcing further details on the equity raise and progressing toward the FID within the first half of 2025. The NRFC’s involvement aligns with its broader mission to diversify and transform Australia’s industrial base, particularly in sectors critical to the net-zero transition and economic resilience.
Strategic Implications
Rare earth elements are vital to modern technologies and clean energy solutions, and Australia’s ability to process these domestically represents a strategic advantage. The Nolans Project, supported by this substantial funding commitment, positions Arafura as a key player in the global rare earths market and reflects growing government support for value-adding resource projects. This development could have far-reaching implications for supply chain security and Australia’s role in the critical minerals sector.
Bottom Line?
Arafura’s NRFC-backed funding deal sets the stage for a decisive final investment decision and could reshape Australia’s rare earths landscape.
Questions in the middle?
- What will be the final terms and pricing of the upcoming equity financing tied to the Nolans Project?
- How quickly can Arafura secure the remaining funding and offtake agreements to meet its FID timeline?
- What strategic partners or investors might be attracted following this government-backed commitment?
