Arafura Resources Ltd (ASX:ARU) has ticked off the completion of tranche-1 of a $40 million placement after raising A$21,074,054 before costs to institutional and sophisticated investors.
Tranche-2 is subject to shareholder approval.
The company issued 175,617,114 new shares as part of its plan to fund front end engineering and design (FEED) activities at its Nolans Neodymium and Praseodymium (NdPr) Oxide Project in the Northern Territory.
This two-tranche placement will be followed by a share purchase plan (SPP) to raise up to $5 million.
Strong investor support
Arafura’s institutional offer garnered strong support from domestic and international investors, with firm commitments to raise the full $40 million at 12 cents per share.
Meanwhile, the ASX-lister’s SPP will take place at the same price as the placement, representing a 29.4% discount to the last closing price of ARU shares and a 29.1% discount to the five-day volume-weighted average price.
Neither the placement nor the SPP is underwritten.
Placement
Tranche-2 which aims to issue nearly 158 million additional shares at the same price and raise almost $19 million, requires shareholder approval.
To garner shareholder support, Arafura intends to hold a meeting in early August.
Arafura hopes to issue tranche one shares on or around July 2, followed by a proposed tranche two issue on August 13.
Shovel-ready project
ARU managing director Gavin Lockyer said: “On behalf of the board, I would also like to thank our shareholders for their ongoing support.
“The Nolans Project is the only new shovel ready NdPr oxide project in Australia capable of delivering advanced materials into the critical minerals supply chain.
“The company welcomes the support of new and existing shareholders and looks forward to applying their funds towards advancing the Nolans Project.
“Nolans has the potential to diversify rare earth supply chains whilst seeding new industry in Australia, one of the world’s safest and most secure jurisdictions.”
Where will the money be spent?
Funds procured via Arafura’s latest equity raise will support the development of its flagship rare earths asset, which is on a mission to eventually supply between 5 and 10% of global demand for NdPr oxide.
The Nolans Project has an estimated 38-year mine life and is described by Arafura as a world-class, shovel ready rare earths play.
Nolans has an estimated $1.4 billion net present value, with life of mine cash costs calculated at US$24.76 per kilogram.
Demand for NdPr oxide is predicted to spike over the next decade, expected to double from 47,000 tonnes in 2020 to 98,000 tonnes in 2030 according to data from researcher CRU.
When it comes into production, the Nolans Project is set to be Australia’s first vertically integrated source of separated rare earths oxides and the world’s second-largest scale non-Chinese source of rare earths.
Arafura wants to reach a final investment decision for the asset in 2022’s second half, which is when the NdPr market is poised to enter a deficit thanks to underinvestment in the rare earth oxides supply chain.
Accelerated demand for the material will likely follow growth in the electric vehicle and renewable energy markets.