Hyundai MoU puts Arafura on the road to offtake deal

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Neodymium and praseodymium are essential components in electric vehicles.
Camera IconNeodymium and praseodymium are essential components in electric vehicles. Credit: File

Arafura Resources is one step closer to securing an international binding offtake agreement for its Nolans rare earth project in the Northern Territory. The company has signed a non-binding Memorandum of Understanding with South Korean automotive giant Hyundai Motor Company to collaborate towards Arafura supplying neodymium-praseodymium oxide across a potential seven-year term starting in 2025.

According to Arafura, the potential offtake deal will include between 1000-1500 tonnes of the rare earths oxide per annum when the Nolans project reaches its expected full production target in 2027.

The figure amounts to more than one third of the project’s estimated annual production capacity of 4400 tonnes.

Neodymium and praseodymium are essential components in the manufacture of permanent magnets within electric vehicles that are seen as the key players in the de-carbonised economy of the future.

The Nolans project, sitting 130km north of Alice Springs, has a projected mine life of 38 years, a post-tax net present value of $1.4b and an internal rate of return sitting at 18.1 per cent from a capital outlay of $1.056b.

According to company’s most recent project update earlier this month, Arafura expects first production of the rare earths oxide at Nolans in 2025 and rated its average annual EBITDA at $354m.

We look forward with great optimism about the next steps in the offtake agreement process and the impetus this will provide for the development of our rare earths deposit at Nolans, which is strategically and economically important for Australia.

The signing of the MoU represents a fantastic outcome and validates the Tier-1 credentials of the Nolans project as one of the world’s premier next generation NdPr ore to oxide projects.

Arafura Managing Director Gavin Lockyer.

The signing of the Hyundai MoU follows the Joint Statement of Cooperation signed by Arafura and the Korea Mine Rehabilitation and Mineral Resources Corporation, or “KOMIR” in February, recognising the strategic importance of Australian critical minerals projects in supporting Korea’s industrial development and participation in electrification and renewable energy economies.

Arafura has all the required regulatory approvals in place and last year received major project status from the Northern Territory government. The government backing affords the company ample opportunities to explore potential offtake partners ahead of starting production along with myriad other benefits.

Arafura’s offtake strategy for the Nolans Project has been to target automotive original equipment manufacturers from geographic regions with supportive export credit agencies.

Arafura and Hyundai now plan to work towards agreeing terms and executing a definitive binding offtake agreement by September 2022.

Is your ASX-listed company doing something interesting? Contact: matt.birney@wanews.com.au

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