Arafura Secures Final Funding Tranche for Rare Earths Project

The Australian rare earths developer Arafura Rare Earths has successfully closed a major equity raising, marking one of the largest capital injections in the nation’s resources sector for 2025. The move brings the company a significant step closer to a final investment decision for its flagship Nolans project.

Equity Placement and Shareholder Dilution

The capital raise was executed in two tranches, culminating in a total of approximately AUD $475 million. The final institutional placement, completed on December 12, involved the issue of 1.26 billion new shares at AUD $0.28 each, raising AUD $351.6 million. Combined with the first tranche, the company has issued roughly 1.7 billion new shares, resulting in considerable dilution for existing shareholders.

A concurrent share purchase plan for retail investors, which closed on December 9, aimed to raise up to AUD $50 million. The results of this offering are scheduled for release on December 15.

Major Backer Reinforces Position

The institutional placement attracted strong interest, with Hancock Prospecting emerging as the cornerstone investor. Already the largest shareholder, Hancock contributed approximately AUD $125 million to the raise. Shareholders had previously approved the second tranche with an 87.9% vote at a meeting held on December 5.

Debt Package Fully Structured

On the debt financing side, Arafura has secured a complete package. Export Development Canada confirmed on December 1 the extension of its credit approval for USD $300 million, maintaining the original terms agreed in May 2024. All other consortium lenders have also upheld their commitments.

The total senior debt facility stands at USD $775 million, with an additional USD $80 million cost overrun facility. The lending consortium includes Export Finance Australia, the Northern Australia Infrastructure Facility, KEXIM, and commercial banks KfW IPEX-Bank, Commonwealth Bank, and ING.

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Path to Final Investment Decision

With the equity raising nearly complete, one final piece remains. The company is awaiting a credit guarantee from Germany’s Euler Hermes for a tranche worth approximately AUD $115 million. Upon securing this, Arafura anticipates making its final investment decision in the first quarter of 2026.

Construction on the Nolans project is expected to begin 3 to 6 months after that decision, targeting first production for 2028 or 2029.

The Nolans Project at a Glance

Located about 135 kilometers north of Alice Springs in the Northern Territory, the Nolans project is poised to become one of Australia’s first integrated rare earths processing facilities.

• Project Life: 38 years
• Annual Production: 4,440 tonnes of neodymium-praseodymium (NdPr) oxide
• Capital Cost: USD $1,044 million to first production
• Post-Tax NPV8: USD $1,729 million (base case)
• Post-Tax IRR: 17.2%

The operation is designed to supply approximately 4% of global NdPr demand. These materials are critical components for the permanent magnets used in electric vehicle motors and wind turbines.

The significant share issuance has weighed on the stock, with the issue price of AUD $0.28 sitting well below previous trading levels—a typical discount for large placements but a point of pressure for existing holders. The company’s market capitalization currently fluctuates between AUD $760 and AUD $860 million.