ARU Chart Thread, page-2904

Please find below and attached a letter from Arafura’s MD and CEO Darryl Cuzzubbo:

DearShareholder

Recently there has been misinformation circulating publicly about Arafura. I would like to directly address this misrepresentation of facts and talk about how it is hurting our Company's reputation and shareholder value at a pivotal point in theCompany’s growth ambitions.

Let me start by thanking you for your support over an extended period, noting that you have stuck with us through our challenges. A declining NdPr price has brought challenging market conditions, but despite these external challenges, we have made significant progress. Most recently securing A$1.2 billion of debt and completion support with nine lenders across five countries. There have been very few companies that have pulled this off, particularly with the market volatility. It has been long-term shareholder support that has enabled us to get to this point.

We are now working towards removing the funding risk overhang on our share price by securing the equity to reach a final investment decision on Nolans.

Our message to governments and potential investors is that the only way to overcome China's Control of the NdPr market, notably oversupply and suppressed pricing which directly impacts our share price, is to bring projects like Nolans into production. The message that we are Australia’s leading rare earths project is resonating and we continue to build credibility and our profile amongst these stakeholders.

Let me personally address the specific concerns recently raised, directly with us and publicly on social media:

Use of funds to date

In 2023 significant funds were allocated to advancing the Project, which included the important step of completing early works. This was done for several reasons:

getting the Company to the point where we could reduce the Project’s critical path in the order of nine months

derisking project execution by enabling main construction activities to commence across the site once project funding has been received

We Completed roadworks to enable access to the site, installed and commissioned water infrastructure, and completed the installation of the 200-person construction camp facilities. This means that once we secure the funding, we can immediately release construction contracts and commence work on site.

This significant investment in early works construction is helping advance us insecuring required equity. It also puts Arafura in the best position to meet the timing expectations of our offtake partners, which will mitigate China’s control of the market and pricing, which in turn can help our share price.

Interim capital raise

The interim capital raise was done for the primary reason of improving our financial runway so that it was not a concern for new investors that would stop them providing the equity to reach FID.

Why would institutional investors give us close to U$S800 million in equity if we were running out of cash? If they did, they would likely want it to be at a discount to the share price to compensate for the risk, which is hardly helpful for our current long standing shareholders. Unused interim capital raised will come off the ultimate equity raise i.e., it will go towards building the project.

Final Equity raise and current shareholder dilution

I Understand the concern, which was the primary reason we did a shareholders update post announcing debt closure.

Allow me to make a few key points.

We pursued a maximum possible debt strategy. This means that additional equity is minimized and hence shareholder dilution is minimized. With that said, we were always going to need a large equity raise to support a capital-intensive project like Nolans.

However, regarding the final equity raise, shareholder ownership dilution is different to shareholder value dilution. The equity raised is anticipated to go straight to the market capitalisation of the Company, supported by the project entering its next phase of development.

Furthermore,the final equity raise removes funding risk for our project which today is an inevitable drag on share price i.e. one would expect to ultimately see a share price re-rating once funding risk can be put behind us.

Our focus is to attract as much interest as possible in the final equity raise so that we pull this last step off, whilst recognising that higher demand will enable a more attractive pricing point. We firmly believe that this approach is in the best interest of our existing shareholders.

Lastly,please remember that the conditions of the final equity raise will be voted on by existing shareholders – not incoming investors. This means that it must be attractive to you to get voted up.

Remuneration

The misinformation being circulated is attempting to convince people that I have a vested interest in a declining share price. This could not be further than the truth and the following will help clarify this.

The Board uses independent external remuneration advisors to benchmark competitive remuneration packages and ensure the structure of those packages reflect good governance. Reflective of our non-revenue generating stage, fixed remuneration is kept at or below the median of the market with more weight on long-term equity-based at-risk pay compared to our comparator peer group.

Performance rights that have been included in my employment offer have not yet been granted and will be subject to your approval.

Valuation of performance rights typically will use a 5-day volume-weighted average price (VWAP) of the Company’s share prior to calculation date, which for incentives would typically be the employment commencement date.

To ensure fairness, my total number of incentives in the upfront grant will be equal to the higher of this calculation and $0.20 (being the 5-day VWAP used in the grant of incentives to existing staff in December 2023). This means I will receive less performance rights than I would have had a 5-day VWAP to my commencement date been used, however it was agreed that this would be fair given the share price was depressed at the time of my commencement.

The Reference point of $0.20 for calculating the number of performance rights was determined by the Board at the time of my appointment in February. Once granted any performance rights will only vest into actual shares if the milestones to which they have been linked are achieved.

If the milestones are not achieved, my team and I receive nothing. Any reduction in share price below $0.20 will reduce the value delivered to me if, and when, they vest into shares. Any increase in share price above $0.20 will increase the value to me. This aligns my reward and that of my team with our shareholders. This is standard good governance in executive remuneration. The correct avenue to disclose a grant of unquoted equity securities such as performance rights, including details such as their reference point, is an ASX announcement at the point of granting and/or inclusion in the Annual Report, which was the avenue which we used.

Information Has also been circulated that I have already received $1.1 million for the achievement of the debt milestone. Again, this is simply not true. Aspreviously mentioned, I have not yet been granted any performance rights and when I am, subject to your approval, the first milestone will be the commencement of main construction which has not yet been met. This Information was contained in the ASX announcement 5 February 2024 and all remuneration to 30 June 2024 was disclosed in the Remuneration Report contained in the Annual Report released to ASX on 21 August 2024.

It was disappointing to hear about the level of misinformation being circulated when the correct information is publicly available and easily accessible on ourwebsite.

Canaccord fee

Fees paid to Canaccord and UBS as Joint Lead Managers (JLMs) from the recent capital raising were disclosed on the Form 3B (Part 7E) lodged with the ASX on 24 July 2024.

A management fee and underwriting fee for a total of five percent of funds raised was shared by the JLMs, this fee is aligned with the market for raises of this size. We note a fee of $3 million for Canaccord alone has been referred to publicly. Again, this is simply not true. The actual fee is approximately 10 percent of this. I have no idea of where the $3 million figure came from.

We also note there has also been recent discussion of ‘giving the fund arranger $160 million – when one of them is Canaccord’.

Again, this is simply not true. We assume this figure has been picked from the ASX Arafura presentation from 23 July 2024 on page 6, which shows financing costs of $168 million. Please refer to the relevant footnote which shows this amount consists of debt establishment and commitment fees, interest expense incurred during construction and ramp up and equity raising fees. Please note approximately only 20 percent of these costs are incurred as equity raising fees which will be shared amongst all of the joint lead managers.

Short Selling

With the two recent placements focus has been on ensuring institutional investors that are brought onto the register that have a long-term investment mandate.

For theJuly 2024 capital raise there were a number of hedge funds with mandates possibly aligned with shorting, these groups all received only a fraction of the amounts they bid in the placement.

Our focus,as with all placements, is to allocate as much of the issue to the higher quality investors and those with long-term mandates.

Arafura periodically conducts a detailed ownership analysis of the share register which sometimes includes stock lending and short selling. Unfortunately, and similar to all Australian listed companies, this analysis is unable to provide us with complete transparency as we can often identify only 20 percent of the ASICshort positions reported.

The best thing we can do with those that are short against us is to just focus on taking the company forward where they ultimately realize that it isn't prudent to bet against us. This is where I would like our focus to be.

New Management team

We have established a new management team whilst more than halving the contractors working for Arafura. This improves ownership and costs but most importantly sets us up for delivering the construction phase. We would not deliver the project on time and budget if we started recruiting the appropriate skilled team once we achieved FID given that it can take six months or more to secure talent.

Furthermore,most sophisticated investors want to see that we have a proven management team in place that will deliver the project before they invest with us.

I believe that we are incredibly fortunate to have attracted the team that we have. Iknow from talking to investors that they see the quality of our team as very positive, and it is disappointing that this is being questioned.

In closing,I would appreciate asking one thing from you.

If Accusations are being made, could you please ask for the fact base that supports the accusation so that you can independently decide whether this is something that has merit or not. The spread of unfounded and uninformed accusations is harming our Company’s reputation and could potentially impact our efforts to secure the necessary funding which, once secured, we expect will trigger a share pricel-rating given that the funding risk overhang will be behind us.

I feel that over the last few weeks we have spent a lot of time responding to baseless conspiracy theories. This is taking limited company resources away from key activities that will actually deliver shareholder value.

Again, thank you for your support. It is not taken for granted. We would not be at this critical juncture without it.

Yours Sincerely

DarrylCuzzubbo

Arafura MD & CEO