Arafura’s Discounted Placement Raises Dilution Concerns Ahead of Key Vote

Arafura’s Strategic Capital Raise

Arafura Rare Earths Limited has announced a substantial capital raising initiative comprising a two-tranche institutional placement expected to raise approximately A$475 million, complemented by a A$50 million share purchase plan (SPP) for existing shareholders. The placement price is set at A$0.28 per new share, representing a notable discount to recent trading prices, underscoring the company’s urgency to secure funding for its flagship Nolans Rare Earths Project.

Backing from Hancock and Institutional Underwriters

Hancock Prospecting, Arafura’s largest shareholder, has committed A$125 million to the placement, which will elevate its ownership to approximately 15.7%. Aside from Hancock’s commitment, the placement is fully underwritten by prominent financial institutions, providing a strong vote of confidence in Arafura’s strategy and the project’s prospects. The first tranche of the placement, raising around A$123.4 million, will proceed without shareholder approval, while the second tranche, targeting A$351.6 million, awaits approval at an Extraordinary General Meeting scheduled for December 2025.

Funding the Nolans Project and Beyond

The proceeds from this capital raising will be primarily directed towards the Nolans Project’s capital and financing costs, as well as corporate and working capital needs. This initiative, combined with conditional equity commitments from the National Reconstruction Fund and Export Finance Australia, alongside conditional senior debt facilities, substantially de-risks the project’s financing structure. The company is targeting a Final Investment Decision in the first quarter of 2026, a critical milestone that will pave the way for construction and eventual production.

Geopolitical and Strategic Significance

The timing of this capital raise aligns with broader geopolitical developments, including the US-Australia Framework for Securing Supply in Critical Minerals and Rare Earths. The Nolans Project is positioned as Australia’s first fully integrated rare earths operation, attracting interest from government-backed funds and strategic partners such as the German Raw Materials Fund. The involvement of entities like the Export-Import Bank of the United States further highlights the project’s strategic importance in global supply chains for critical minerals.

Opportunities for Existing Shareholders

In addition to institutional investors, Arafura is offering existing eligible shareholders the opportunity to participate in the SPP at the same discounted price. This move aims to broaden shareholder participation and support while providing a cost-effective way for loyal investors to increase their holdings. The SPP is subject to shareholder approval and is expected to open in early November 2025.