Funding Uncertainty Looms as Arafura Seeks Shareholder Approval for $50m SPP
Arafura Rare Earths Limited has announced a Share Purchase Plan (SPP) targeting $50 million to support its Nolans Project, subject to shareholder approval. The offer allows eligible shareholders to subscribe for shares at a discounted price, with potential oversubscriptions up to $20 million.
- SPP targets $50 million with $0.28 per share issue price
- Offer open to eligible Australian and New Zealand shareholders
- Shareholder approval required at December 5, 2025 meeting
- Funds to support Nolans Project capital and financing costs
- SPP not underwritten; oversubscription capacity of $20 million
Context and Capital Raising Strategy
Arafura Rare Earths Limited (ASX – ARU) has unveiled a Share Purchase Plan (SPP) aimed at raising up to $50 million, with the option to accept oversubscriptions of up to $20 million. This initiative follows a recent $475 million placement, predominantly underwritten except for a $125 million commitment from Hancock Prospecting Pty Ltd. The SPP is designed to provide eligible shareholders in Australia and New Zealand the opportunity to purchase additional shares at $0.28 each, representing a 25.3% discount to the last traded price before the announcement.
Offer Details and Shareholder Participation
The offer is open to shareholders registered as of 7 – 00pm AEDT on October 27, 2025, excluding those in the United States or acting on behalf of US persons. Eligible shareholders may subscribe for up to $30,000 worth of shares without brokerage or transaction fees. The SPP is non-renounceable, meaning rights cannot be transferred. Applications must be received by 5 – 00pm AEDT on December 9, 2025, with the issue of shares expected around mid-December, pending shareholder approval.
Use of Proceeds and Project Funding
Funds raised through the SPP, alongside proceeds from the placement and existing cash reserves, will be allocated to the capital and financing costs of the Nolans Project, including managing cost overruns and general working capital. The Nolans Project, a significant rare earths development in Australia's Northern Territory, has an estimated capital expenditure of US$1.2 billion. The company has secured conditional credit approvals for substantial debt facilities but requires equity funding to meet customary financing conditions.
Risks and Shareholder Approval
The SPP is not underwritten, introducing uncertainty regarding the final amount raised. If the target is not met, the company may offer any shortfall shares to select investors, subject to shareholder approval. The issuance of new shares under the SPP and any shortfall offer is contingent on approval at a general meeting scheduled for December 5, 2025. Directors and related parties may only participate if shareholders approve. The company highlights various risks including funding challenges, market volatility for rare earth elements, operational risks, and regulatory considerations.
Implications for Shareholders
Participation in the SPP will dilute the holdings of non-participating shareholders. The company anticipates issuing approximately 178.6 million shares if the SPP is fully subscribed, increasing the total shares on issue to nearly 4.8 billion. Oversubscriptions could raise this to 250 million shares. The company does not currently pay dividends and makes no assurances regarding future returns. Investors are advised to consider the speculative nature of the investment and consult professional advisers.
Bottom Line?
As Arafura seeks shareholder backing for this pivotal capital raise, the market will watch closely for subscription levels and the company’s ability to secure full project funding.
Questions in the middle?
- Will shareholders approve the SPP and related placement at the December meeting?
- How will the company manage potential shortfalls if the SPP does not reach its target?
- What impact will ongoing geopolitical and market risks have on rare earth pricing and project viability?
