Arafura Rare Earths (ASX:ARU,OTC Pink:ARAFF) announced it has received conditional approval for up to US$300 million in debt financing for its Nolans project from Export Development Canada (EDC).
Located in Australia's Northern Territory, Nolans is a rare earths mining and processing operation focusing on the production of neodymium and praseodymium (NdPr). These elements are critical for manufacturing the permanent magnets used in electric vehicles, wind turbines and a variety of other high-tech applications.
Arafura is aiming to secure a total of US$775 million in senior debt funding to advance the asset.
"Debt financing from EDC signifies the increasing geostrategic importance of the Nolans Project and securing global diversity in the NdPr supply chain," said Managing Director Darryl Cuzzubbo in a Monday (May 27) announcement.
"EDC has responded strongly to Nolans as a strategic opportunity that will underpin the electrification economy. NdPr is critical in electrical vehicles, wind turbines, and robotics. We are thrilled to be working with EDC and remain impressed with their innovative thinking and commitment to accelerating a lower carbon future," he added.
The rare earths sector is seeing increasing attention due to its critical role in green technologies, and as countries around the world make efforts to diversify their supply away from China, which dominates the sector.
In addition to customary terms, the EDC debt financing will be conditional on Arafura achieving an 80 percent binding offtake target for Nolans. The company's broader funding strategy for Nolans involves various export credit agencies and government agencies. Arafura has already secured conditional Australian government approval for a US$533 million debt financing package. The arrangement includes participation from the government's Critical Minerals Facility.
The company is currently working with commercial banks and securing loan guarantees to meet its funding goals.
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Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.