Arafura Resources to Establish Global Rare Earths Hub in Northern Territory

Arafura Resources has a shovel-ready rare earth deposit in Australia's Northern Territory that is said to meet more than 5% of the global demand for heavy rare earths. The company, which has full approval for its Nolans rare earth project with huge reserves of 29.5 million tons at 2.9% total rare earth oxides and good infrastructure nearby, as well as a supply agreement with South Korea.

The Nolans project, located 130 kilometers north of Alice Springs in the Northern Territory of Australia, includes shovel-ready neodymium and praseodymium ("NdPr") heavy rare earth project. These two heavy rare earth elements are important components in the manufacture of permanent magnets used in wind turbines and electric vehicles.

The company plans to launch production at Nolans in 2022. Arafura Resources has negotiated with off-take partners and recently signed a joint declaration of cooperation with Korea Mine Rehabilitation and Mineral Resources Corporation ("KOMIR") that will facilitate the supply of rare earths to the Korean market.

In the same week that the Arafura supply agreement was signed, a Memorandum of Understanding (MOU) was also signed between the Mineral’s Council of Australia and KOMIR. The MOU aims to enhance cooperation between Australia and South Korea in the exploration and development of key minerals, making the Arafura agreement more substantive.

Current internal forecasts expect the company's production to account for 5-10 percent of global demand for neodymium and praseodymium, according to Arafura. The Northern Australia Infrastructure Facility and Export Finance Australia have agreed to provide conditional letters of support to Arafura for a total of $300 million.

Nolans hosts a high-value NdPr content, accounting for 26.4% of the total rare earths content. The Nolans deposit has an estimated mine life of 38 years, which includes only the top 200 meters of vertical depth, below which significant upside potential lurks.

The Nolans project is ideally located with modern infrastructure, just 10 km from the Stewart Highway and adjacent to the Amadeus gas pipeline. The pipeline currently transports natural gas from its Amadeus gas basin to Darwin, allowing Arafura to easily tap into it to meet its energy needs.

Arafura Resources' next step will be to complete the front-end engineering and design, or "FEED" work, which is currently underway. The company plans to use the FEED work to establish a fixed price prior to a construction tender in the second half of 2022.

Current supply and demand dynamics seem to indicate that NdFeB prices will continue to strengthen in the future due to the lack of new supply, and Arafura has signed off-take partnership agreements with its major customer base in Korea.

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