Ann: Quarterly Activities Report and Appendix 5B, page-2

Important part

OFFTAKE AND PROJECT FUNDING
Offtake
Arafura continues to advance its rare earth product offtake arrangements with parties in Japan, Europe, South
Korea, the USA and China, and for phosphoric acid product with parties in India. Commercial discussions with
European partners are progressing towards securing offtake arrangements as key end users have greater
urgency to broaden their supplier base in response to future supply risk and ESG priorities. Purchasing strategy
by European automakers is shifting from battery to motor competency with priority over securing sustainable
e-motor raw materials such as NdPr. Arafura’s NdPr aligns with European offtake partners’ requirements to
source battery materials from transparent and ESG compliant suppliers to meet production of their next
generation e-motors. Arafura is advancing sustainability and responsible sourcing requirements to meet global
standards as a commitment to offtake partners for awarding of definitive agreements. In other markets like
India, rare earths security for their own EV development plans are emerging as a priority and Arafura has
commenced engagement with various end users for future supply from Nolans.
Arafura continues to work with potential offtake and supply chain partners to develop a trusted value chain
with greater transparency and traceability across the magnet supply chain. The traceability and transparency
supply model differentiates Arafura from other developers and builds integrity and trust with offtake partners.
Arafura’s metal tolling partner is a key part of our trusted supply model and completion of a toll processing
agreement with the metal convertor is in progress. No formal or binding agreements with these parties have
been entered into and the Company at this stage has no certainty as to the timing and likelihood of concluding
binding agreement terms. Details of these arrangements will be announced to ASX when formal agreements
have been executed.
Project Funding
With the ongoing geopolitical focus on supply chain risk for critical raw materials, Arafura continues to progress
its engagement with key banks, advisor groups and Export Credit Agencies (ECA). With political pressure
forcing policy change to encourage diversification of critical minerals supply chains, the Company has
increasing confidence that its debt-led strategy to leverage the “halo effect” of the ECA-backed debt structure
to attract project equity, will enable the project to secure its funding requirements. Engagement with potential
finance partners and advisors has informed Arafura’s decision to review the Nolans execution strategy and
incorporate the detailed FEED. This will reduce execution risk by allowing construction tenders to be received
concurrently with the FID.
The Company is working to gain sovereign finance support, particularly from Export Finance Australia (EFA)
and the Northern Australia Infrastructure Facility (NAIF) to provide momentum for its engagement with other
ECAs for the targeted debt facilities. Although the program is slower than anticipated, engagement remains
positive. It has been announced that the NAIF reforms focusses on providing projects with a greater range of
debt-support options, including allowing NAIF to make equity investments in projects. Additionally, the
reforms aim to streamline the approval process and increase NAIF’s risk appetite to back more job-creating
projects. On 25 March 2021, it was announced that the NAIF reform Bill had passed through the House of
Representatives and would head to the Senate. This is positive as the proposed changes enable NAIF the ability
to provide equity in addition to debt, less constrained debt approval conditions and allowing NAIF and EFA to
jointly support the same project. There is no doubt there is significant alignment between the Nolans project
and the Australian Government’s critical mineral initiatives which include the establishment of the Critical
Minerals Facilitation Office and supporting EFA funding of critical minerals projects through the Defence Export