Arafura Rare Earths (ASX:ARU) has posted a jump of 66 percent in share value after securing federal government funding of US$533 million for its Nolans project in the Northern Territory.
Inking the deal represents the final step for Arafura in securing debt and equity funding for the project, which is set to become Australia’s first ore-to-oxide rare earths processing facility.
Canberra’s race to secure a domestic critical minerals supply chain continues to roll on in the background.
The Commonwealth debt finance package is built around a US$125 million limited-recourse senior debt facility under the federal government’s A$4 billion Critical Minerals Facility (CMF), which will be administered by Export Finance Australia (EFA), together with A$150 million limited-recourse senior debt facilities from the Northern Australia Infrastructure Facility (NAIF).
Both facilities have a tenor of 15 years with interest rates and conditions precedent to financial close customary to arrangements of this nature.
The project will also be boosted through the EFA’s provision of a subordinated Standby Liquidity Facility (SLF) of up to US$200 million under the CMF to help manage any increases in capital expenditure and operating costs incurred during ramp up.
EFA also has conditional approval for further funding of up to US$75 million on its Commercial Account to take part in the ECA covered tranches and Cost Overrun Facility (COF).
Finally, NAIF has agreed to provide added funding up to A$50m via a proportion of the COF.
Arafura managing director and CEO Darryl Cuzzubbo, said the funding underscored the global importance of the project.
“Securing debt facilities of US$533 million from EFA and NAIF is a critical achievement for the Nolans Project and signifies its economic importance to Australia and the Northern Territory,” he said.
“Gaining this level of support from the Commonwealth is a critical milestone in becoming a globally significant producer of neodymium and praseodymium.
“Being able to secure these debt terms … brings us significantly closer to making a final investment decision and contributing to a lower carbon future.”
Arafura will also be seeking funding for the Nolans project from international and commercial financiers, for a further US$550 million of senior debt facilities.
Arafura is trading at 25c at 2:19 pm AEDT.