Gina Rinehart’s Hancock Prospecting has committed another $85 million to Arafura Rare Earths one day after the company greenlit development of its Nolans project.
Gina Rinehart’s Hancock Prospecting has committed another $85 million to Arafura Rare Earths one day after the company greenlit development of its Nolans project in the Northern Territory.
Hancock’s order comes as part of a $350m placement aimed at swelling Arafura’s coffers to more than $900m ahead of construction commencing on the $1.6-billion rare earths mine.
It will lift Mrs Rinehart’s majority stake in Arafura to about 17.5 per cent, or more than $300m.
“Hancock Prospecting is pleased to support development in the Northern Territory, and support Arafura with additional investment to enable the start of construction of the Nolan’s Bore rare earths project, which will play a vital strategic role in the global critical minerals supply chain,” Mrs Rinehart said.
Existing shareholders will be able to participate in a separate $25m capital raising.
Arafura chief executive Darryl Cuzzubbo said the financial backing of Hancock Prospecting and the federal government had been instrumental in the company’s ability to reach FID.
“Sometimes, Aussies, we can be a little bit critical of our large institutions,” he said.
“We have dealt with many countries and many governments, and I can tell you that the support that we get from the Australian government… it is the most comprehensive and methodical.”
The federal government has committed about $1.2bn in debt or equity to the Nolans project to date via Export Finance Australia ($750m debt and equity), the Northern Australia Infrastructure Facility ($200m debt) and the National Reconstruction fund ($200m equity via convertible note).
On Thursday it struck a non-binding deal to buy up to 500 tonnes per year of magnet-making material neodymium-praseodymium oxide for the federal strategic critical minerals reserve.
Support has also been forthcoming from Germany, Korea, Canada, and the US.
Speaking in Perth on Thursday, Mr Cuzzubbo said without market intervention rare earths projects in Australia would struggle to get up.
“The rare earths sector has needed government intervention because it has not been a functioning market, the pricing mechanism has not reflected the market fundamentals” he said.
“The US has fractured that pricing environment by putting in price floors but the ultimate destination is to have a price index for rare earths that is independent and transparent.
“If we can move to that, we won't need the sort of government intervention that we have needed to date.”
Arafura has signed up with Luxembourg-based metals trader Traxys, one of three companies picked by the US to procure critical minerals for its own reserve.
Traxys purports to enforce stronger ESG credentials on its sources than industry peers.
“Other producers, other consumers need to move to that index,” Mr Cuzzubbo said.
“Australian mining projects are valued because we do what we say and we have the highest environmental standards.
“We need a price index that reflects market fundamentals, and part of a price index is it has incentive pricing.”
On breaking China’s market dominance in the rare earths sector, Mr Cuzzubbo said the quality of Nolans’ orebody would place it at the bottom of the global cost curve.
The project will be a rarity outside of China in that it will process ore into oxides, taking its product beyond the carbonates typically refined prior to being shipped to customers.
“That has meant that the funding challenge is much more significant, and that's why we have needed support from key investors, government support,” Mr Cuzzubbo said.
“It is more jobs in Australia, more processing in Australia, and we can provide an alternative supply chain outside of outside of China.”
The non-binding 500 tonne offtake signed by the federal government would deliver enough NdPr oxide for 500,000 electric vehicles.
Arafura expects construction to take about three years, followed by a two-year ramp up of the mine and processing centre.
Mr Cuzzubbo said expansion of the project could unlock rail transport opportunities in the NT.
- The journalist is an Arafura Rare Earths shareholder
