Arafura Resources eyes $45 million equity raise to support Nolans Project FEED studies

Arafura Resources Ltd (ASX:ARU) is chasing a $45 million cash injection to fund front end engineering and design (FEED) activities at its Nolans neodymium and praseodymium (NdPr) oxide project in the Northern Territory. The rare earths explorer will set out to raise $40 million from institutional investors via a two-tranche placement, followed by a share purchase plan (SPP) to raise up to $5 million. Arafura’s institutional offer garnered strong support from domestic and international investors, with firm commitments to raise the full $40 million at 12 cents per share. Meanwhile, the ASX-lister’s share purchase plan will take place at the same price as the placement, representing a 29.4% discount to the last closing price of ARU shares and a 29.1% discount to the five-day volume-weighted average price. Neither the placement nor the share purchase plan is underwritten. Funding “Australia’s only new shovel-ready NdPr oxide project” Arafura managing director Gavin Lockyer said: “We are delighted with the support for the placement, and welcome a number of Australian and offshore institutional investors to the register. “On behalf of the board, I would also like to thank our shareholders for their ongoing support. The Nolans Project is the only new shovel ready NdPr oxide project in Australia capable of delivering advanced materials into the critical minerals supply chain. “The company welcomes the support of new and existing shareholders and looks forward to applying their funds towards advancing the Nolans Project. “Nolans has the potential to diversify rare earth supply chains whilst seeding new industry in Australia, one of the world’s safest and most secure jurisdictions.” Nolans Project in the Northern Territory. Placement Under the placement, Arafura intends to issue more than 333 million shares over two tranches and raise $40 million. The rare earths explorer will first issue more than 175 million shares at 12 cents each to raise around $21 million under its existing placement capacity. However, tranche two, which aims to issue nearly 158 million additional shares at the same price and raise almost $19 million, requires shareholder approval. To gather stakeholder support, Arafura intends to hold a meeting in early August. Arafura hopes to issue tranche one shares on or around July 2, followed by a proposed tranche two issue on August 13. Share purchase plan All eligible Australia and New Zealand-based shareholders can participate in Arafura’s SPP and subscribe for up to $30,000 worth of new shares. The plan opens on July 5 and closes more than a month later on August 23, giving investors plenty of time to apply for new shares. Results will be announced one week later on August 30, with shares slated for issue on that same date. New ARU stock will commence trade the following day. Ultimately, the plan gives investors the chance to increase their ARU holding without incurring brokerage or transaction fees. Where does the money go? Funds procured via Arafura’s latest equity raise will support the development of its flagship rare earths asset, which is on a mission to eventually supply between 5 and 10% of global demand for NdPr oxide. The Nolans Project has an estimated 38-year mine life and is described by Arafura as a world-class, shovel ready rare earths play. Nolans has an estimated $1.4 billion net present value, with life of mine cash costs calculated at US$24.76 per kilogram. Demand for NdPr oxide is predicted to spike over the next decade, expected to double from 47,000 tonnes in 2020 to 98,000 tonnes in 2030 according to data from researcher CRU. When it comes into production, the Nolans Project is set to be Australia’s first vertically integrated source of separated rare earths oxides and the world’s second-largest scale non-Chinese source of rare earths. Arafura wants to reach a final investment decision for the asset in 2022’s second half, which is when the NdPr market is poised to enter a deficit thanks to underinvestment in the rare earth oxides supply chain. Accelerated demand for the material will likely follow growth in the electric vehicle and renewable energy markets.