Arafura Rare Earths on Friday unveiled plans to raise approximately A$350 million (about $250 million) through a share placement intended to fund the equity component of its Nolans rare earths development in the Northern Territory.
The capital-raising is structured as two tranches. In the first tranche the company will issue shares worth about A$175.5 million at A$0.260 each, a level the company said represents a 16.1% discount to the stock's last closing price on Thursday. The second tranche, also for A$174.5 million, will be issued subject to shareholder approval.
Hancock Prospecting, controlled by Gina Rinehart and presently Arafura's largest shareholder, has committed to participate in the raising to the tune of about A$85 million. If the placement completes as planned, Hancock's holding in Arafura would increase to roughly 17.5% from its current 15.5% position.
Arafura said the proceeds from the placement will fully fund the equity component necessary to develop the Nolans project, which the miner approved for development a day earlier. The company values the Nolans development at $1.6 billion and said it expects the operation to become Australia’s third-largest rare earths facility by the end of the decade.
On the debt and commercial side, Arafura said it has secured financing commitments from the export credit agencies of the United States, Canada, Germany and South Korea, in addition to support from global trading houses and manufacturers. The company framed these arrangements in the context of Western efforts to diversify supply away from China, the current dominant producer in the rare earths market.
Regarding offtake, Arafura said it has now secured roughly 93% of its binding offtake target for neodymium-praseodymium (NdPr) oxide from the Nolans project, following recent supply agreements and the support of export credit agencies. The company is also slated to supply 500 metric tons of NdPr to Australia’s strategic minerals reserve, which is expected to be operational by the end of the year.
In addition to the institutional placement, Arafura is conducting a share purchase plan aimed at raising up to A$25 million from retail investors. At the time of the announcement, the company's shares were on a trading halt.
($1 = 1.3998 Australian dollars)