Arafura Resources Ltd (ASX:ARU) is trading higher after announcing that it has negotiated an agreement with Hyundai Motor Company to extract neodymium and praseodymium (NdPr) from its Nolans project in the Northern Territory.
The offtake deal with the South Korean brand, which Arafura describes as “one of the most progressive automotive groups in the world”, would take place on a cost, insurance and freight (CIF) basis on seven years from 2025.
“Level 1 identifiers”
Arafura Managing Director Gavin Lockyer said: “The signing of the MoU represents a fantastic achievement and validates the Tier 1 credentials of the Nolans project as one of the world’s first NdPr ore projects to be oxidized. new generation.
“The Nolans project is strategically important for Tier 1 customers because it provides scale and supply chain diversification and security that will underpin their electric vehicle technologies.”
Recognizing the significance of the deal, investors sent ARU shares up to 14.3% higher at A$0.40 in the first hour of ASX trading.
Increase in production by 2027
The drawdown would include approximately 1,000 to 1,500 tonnes per year of NdPr oxide when the Nolans project reaches full production capacity in 2027, potentially just over a third of the estimated average annual production capacity of 4,440 tonnes. of Nolans once it picks up.
Arafura and Hyundai are working towards executing a final binding levy agreement by September this year.
The parties will also work collaboratively to engage with relevant export credit agencies to access debt financing and guarantees related to the purchase of critical materials for use in Korea-based manufacturing.
The price of any sale would be determined quarterly using a formula-based mechanism that references the ex-factory price of NdPr oxide in China per tonne. A customary industry-recognized discount in recognition of the long-term off-take agreement would also be applied.
Commercial grade NdPr oxide must be greater than or equal to 99% total rare earth oxide (TREO).
Binding agreement on the horizon
Arafura and Hyundai will endeavor to agree the terms and execute a final and binding offtake agreement by September 2022.
The parties would work collaboratively to engage with relevant export credit agencies to access debt financing and guarantees related to the purchase of critical materials for use in Korea-based manufacturing.
The final and binding offtake agreement would be subject to the satisfaction of certain customary conditions, including Arafura obtaining project financing to develop the Nolans project – which will include a mine, enrichment, a rare earths and a rare earths separation plant – and the completion of the construction, development and commissioning of the project.
Recognition of strategic importance
The signing of the MoU follows the joint statement of cooperation signed by Arafura and the Korea Mine Rehabilitation and Mineral Resources Corporation (KOMIR) in February, recognizing the strategic importance of critical Australian mining projects supporting Korea’s industrial development. and its participation in electrification and renewable energy savings.
Arafura’s purchasing strategy for Nolans has been to target automotive original equipment manufacturers (OEMs) in geographic regions with supporting export credit agencies, working with customers who are strategically aligned with the value proposition of company in terms of supply chain diversification, product traceability and security of supply with high ESG standards.
Demonstrated commitment to an EV future
Hyundai has demonstrated its global leadership and commitment to an electric vehicle future by securing critical minerals to reduce risk in its permanent magnet supply chain and Arafura welcomes its interest in becoming a founding customer.
Arafura continues to advance its engagement with a range of other parties interested in the long-term exploitation of the Nolan Project that are aligned with its exploitation strategy.
About Hyundai Motor Company
Founded in 1967, Hyundai Motor Company is present in more than 200 countries with more than 120,000 employees dedicated to meeting the real challenges of mobility around the world.
Hyundai is investing in cutting-edge technologies such as robotics and Advanced Air Mobility (AAM) to deliver game-changing mobility solutions, while pursuing open innovation to introduce future mobility services.
Hyundai says it is continuing its efforts to introduce zero-emission vehicles equipped with advanced hydrogen fuel cell technologies and electric vehicles, in pursuit of a sustainable future for the world.