ARU's Offtake/Funding Strategy

[John]

I was thinking about how Arafura will progress Nolans in two stages (Phase 1 at 4,400 tpa NdPr oxide, scaling up to 11,000 tpa in Phase 2). And that led me to think about how this ties into their broader global positioning – especially in the U.S.

There is clear demand from USA defense and wider USA industry and Washington is looking to de-risk from China.

And Gina Rinehart has been vocal about aligning Australia’s critical minerals strategy to where the long-term leverage and returns lie, often with a very pragmatic, global perspective. ie focus on USA.

So I have been thinking:

• More Korea - The work that ARU managment have done with Korea has been very good. And the Koreans seem to be willing to commit and they are positioning themselves as a major ex-china supplier to USA (Star/POSCO etc.). Is there a way ARU can get more from these deals?
• Less Euro - All the European off take parties seem to be so slow and unresponsive. Yes they talk big regarding all the energy transition etc...but when it comes time to commit...things just take ages. I'm not a fan of ARU management spending much more time with Europe. They just seem like time wasters. Much like the European Union.
• Go hard for USA - I think it make sense for Arafura to build a strong U.S. customer base (DoD, automakers, magnet makers), given this is where long term higher returns are likely to be. Plus there is Trump cash about to be splashed.......

What do others think?

 

[patarnoster]

I have always wondered about the Second Phase, it came out of nowhere and it felt like it complicated things, but at the same time yeah cool thats awesome, but why? I assume someone wants in on this second phase and with the murmurs of a JV, I think the JV was tied to Phase 2.

USA is making the big moves, ARU positining to fill in some gaps there makes sense.

I'm thinkin gKorea is cornerstone, Europe is a gap fill, and USA is the big fish.

 

[WideMouthFrog]

LYC are saying plenty of incoming magnet processing majorly coming out of US and Korea, and the magnet is the roadblock. Given DC's comments on thanking AL recently, it suggesting he has been given some guidance on what to shortcut in this industry.

As LYC have a magnet focus, I'm guessing ARU's magnet focus will be the JV from US - the land with big pockets ready for the ARU phase 2.

LYC's issue to processing higher volumes is their reliance on China. Yet they still pivot over to Malaysia. I feel they have lost their way given all this available opportunity in the west. Like you say John, the money is and always will be in the US.

 

[WideMouthFrog]

Whats missing here - apart from my speculation on the Orion/US JV? If the JV doesnt bring US$325M, then surely this shortfall could be found from Gina, Australian Super or Hyundai.

Does that mean the last capital raise at 19c, was the final capital raise?

 

[John]

I think it was very telling, in DC's letter, that the last Cap raise was not for extra 'cash runway', but rather it was part of the equity stack....

I am hopeful for other news this side of x-mas.

This project will be financed....and then the next problem is how to ramp up the staff! They have given themselves 3 months to ramp up. It is going to be an amazing place to work. All these financing questions will be history. And the focus will be on staffing, construction, costs etc. That will be fun. And attention will naturally turn to Phase 2....and also any tolling they might do for othr projects...and of course....acquisitions!!!

The more I have looked at every other project...the more I like the ARU story and strategy.....

 

[WideMouthFrog]

I think it was very telling, in DC's letter, that the last Cap raise was not for extra 'cash runway', but rather it was part of the equity stack....

I am hopeful for other news this side of x-mas.

This project will be financed....and then the next problem is how to ramp up the staff! They have given themselves 3 months to ramp up. It is going to be an amazing place to work. All these financing questions will be history. And the focus will be on staffing, construction, costs etc. That will be fun. And attention will naturally turn to Phase 2....and also any tolling they might do for othr projects...and of course....acquisitions!!!

The more I have looked at every other project...the more I like the ARU story and strategy.....

That's all good, but critically as shareholders, we are looking to capitalise on our investment, therefore management must ensure the value of the capital stack and subsequent restructure is favourable for us, not the incoming partners.

This project will be financed and that is not the issue. In this climate, a street post will get this project financed.

The major concern I have. Do they sell us out to the government, Gina, or GRMF.

ARU executive have historically have been very poor on strategy and looking after our value, and to expect they will look after us is placing the cart before the horse.

In other words, there is no sense in looking at staffing, construction costs etc, if your shareholding has lost its value due to poor structuring/negotiating of the incoming partners by the ARU executive.

Its now or never, and that's how this has to be approached. The timing or talk of when this will get done is the distraction, and the structural consideration is the only important topic. The SP increase can be all but eroded if they get it wrong.

As a start, I believe they should place the government (Aust. and German) equity (some or all) in the SPV (JV) - to preserve existing shareholder value in the primary entity.

 

[EddyMoney87]

Donald Trump ‘aggressively’ pivoting towards Australian critical minerals to shut down China monopoly​

Arafura Rare Earths managing director Darryl Cuzzubbo said it was no secret the US was trying to rapidly secure its supply of critical minerals and rare earths.
“Up until recently, they’ve been close to 100 per cent dependent on China,” he told The West.
“It was evident that they see Australia as a reliable ally, as a strong mining jurisdiction with quite advanced projects to meet that need.”
Arafura’s rare earths projects is close to securing the final equity needed and has been backed by financing from Australian Government sources.

US ‘aggressively’ pivoting towards Aussie critical minerals

The United States is eyeing investments in Australian critical minerals as it aggressively steps up its timetable to reduce America’s reliance on China.

thenightly.com.au

 

[John]

I think the next few weeks will be massive for ARU and some other Aussie RE miners. Glad i have my position built in ARU.

 

[EddyMoney87]

Today we see what the FOMO can do for us.
I built my position too. Startet 2021.
Long time waiting - for me at least!

 

[John]

Lets go!!!

I will just note...that this has happened before...pump and then dump.

However, it does feel like everything is almost lined up. Lets warm up those pens...and get it all signed.

And get those shovels ready....actually, they have been ready for a while!!!

 

[EddyMoney87]

Anthony Albanese will offer priority access to Australia’s critical minerals and rare earths to Donald Trump

Anthony Albanese will offer Donald Trump priority access to Australia’s critical minerals and rare earths when they meet this month so the US Defence industry isn’t reliant on China for the vital supplies.

The US and the UK will be given the chance to become preferred buyers for Australia’s rare earths after weeks of talks between the Prime Minister and strategic partners, The West understands.

With a JV Partner from America it should not work out - or it will never happen

Trump-Albanese meeting key to critical minerals stockpile

Anthony Albanese is going to offer Donald Trump priority access for America to buy Australia’s critical minerals and rare earths when they meet this month, so the US Defence industry isn’t reliant on China.

thewest.com.au

 

[EddyMoney87]

Albanese scrambles to lock in minerals deal before Trump meeting

Officials from the prime minister’s department have started contacting Australian miners about how they could contribute to the new $1.2 billion critical minerals strategic reserve, according to the confidential departmental brief obtained by this masthead.

Details about the Australian critical minerals reserve have been vague amid concerns that Australia lacked the funds to invest in hugely expensive extraction and processing.
Labor has invested billions in companies such as Iluka and Arafura to increase Australia’s rare earths processing capabilities. There is growing anticipation among government officials about projects in Gippsland, Victoria, including the Fingerboards project, which contains terbium required for US defence products.
The departmental brief confirms Australia is exploring “offtake agreements”, in which a government would commit to buying a certain amount of a resource.

The document reveals Labor is considering setting price floors, government loans and guarantees, together with other countries investing directly in Australian projects, in a sign of the government’s focus on defending local companies from heavily subsidised competition from China.

Albanese scrambles to lock in minerals deal before Trump meeting

Australia is considering price floors for critical minerals and pumping money into new rare earth projects under a resources deal with the US.

www.theage.com.au

 

[Andrew Ratcliffe]

Australia Mulls US Deal on $777 Million Rare Earth Fund

Discover how Australia considers partnering with the US on a $777M rare earth fund to counter China's market dominance.

discoveryalert.com.au

I'm thinking rare earths are the best place to have my money right now. Happy to see Arafura mentioned in multiple sources today. Gina probably has her media team hyping them up.

 

[EddyMoney87]

Today there is no better place to be like in REE!!!

Today ARU gets some love!

 

[John]

Gotta love a massive increase in SP on no news from the company. Ha.

 

[EddyMoney87]

ARU over Linked in

China’s Ministry of Commerce has moved to implement the strictest rare earths and permanent magnet export controls to date, prompting the Trump Administration to retaliate with the threat of increased tariffs on Chinese goods.

In the linked article below, Gracelin Baskaran, PhD, Director of the Critical Minerals Security Program for the Washington DC-based Centre for Strategic and International Studies, breaks down the latest developments and the national security implications for the US.

Arafura is thoroughly investigating how its Nolans Project in the Northern Territory can help the US and other nations with significant manufacturing sectors such as Korea and Germany reduce their reliance on China for rare earths.

LinkedIn

This link will take you to a page that’s not on LinkedIn

lnkd.in

China’s New Rare Earth and Magnet Restrictions Threaten U.S. Defense Supply Chains | Arafura Rare Earths Limited

China’s Ministry of Commerce has moved to implement the strictest rare earths and permanent magnet export controls to date, prompting the Trump Administration to retaliate with the threat of increased tariffs on Chinese goods. In the linked article below, Gracelin Baskaran, PhD, Director of the...

www.linkedin.com

AND

S. Korea to Work with U.S. and China on Stable AI Chip and Rare Earth Supplies.

https://twitter.com/x/status/1977560829735362816

 

[Old Grommit]

That's all good, but critically as shareholders, we are looking to capitalise on our investment, therefore management must ensure the value of the capital stack and subsequent restructure is favourable for us, not the incoming partners.

This project will be financed and that is not the issue. In this climate, a street post will get this project financed.

The major concern I have. Do they sell us out to the government, Gina, or GRMF.

ARU executive have historically have been very poor on strategy and looking after our value, and to expect they will look after us is placing the cart before the horse.

In other words, there is no sense in looking at staffing, construction costs etc, if your shareholding has lost its value due to poor structuring/negotiating of the incoming partners by the ARU executive.

Its now or never, and that's how this has to be approached. The timing or talk of when this will get done is the distraction, and the structural consideration is the only important topic. The SP increase can be all but eroded if they get it wrong.

As a start, I believe they should place the government (Aust. and German) equity (some or all) in the SPV (JV) - to preserve existing shareholder value in the primary entity.

"ARU executive have historically have been very poor on strategy and looking after our value, and to expect they will look after us is placing the cart before the horse." So you dont think that the 10years + of educating the Australian Government to create a lending mandate by EFA, NAIF and development of the Critical Minerals Facilitation Office together with aligning all these groups with their counterparts in Korea, Eu , UK and now USA meant we had a lack of strategy !! It also led to the development of the investment strategy for the national reconstruction fund upon which this management has relied on for part of the equity funding.

 

[SJVR-3005]

In regards to the performance rights. Is it right to read this as ARU is aiming for 50% cornerstone as a minimum, 75% cornerstone as a potential? So we could see equity funding be 75% cornerstone which is way above the proposed 50-60% we have been told. This is great news right? and could be linked with the US and/or JV.
It may not even need another public raising.

Also thanks all. Love reading this and been invested for a couple years now. Cheers

 

[John]

"ARU executive have historically have been very poor on strategy and looking after our value, and to expect they will look after us is placing the cart before the horse." So you dont think that the 10years + of educating the Australian Government to create a lending mandate by EFA, NAIF and development of the Critical Minerals Facilitation Office together with aligning all these groups with their counterparts in Korea, Eu , UK and now USA meant we had a lack of strategy !! It also led to the development of the investment strategy for the national reconstruction fund upon which this management has relied on for part of the equity funding.

Hi @Old Grommit

Yeah I agree. The market has been constantly changing. And ARU have changed that strategy over time to adapt.

For me, the main things that dissapointed me:
- The guidance on FID
- The capital raises at low share prices (when we did have a SP of 70+ cents)....i would love to know why there was no capital raise at this time???
- The shorting and blatent manipulation of arafrua shares.

I think the first two things were def in management's control. And could have been done much better. And would mean we have more shareholder value than we currently have.

And the shorting and manipulation of arafrua shares....I think the Aust Govt should be putting measures in place to stop this illegal activities.

But I do think previous management have done an amazing job with the debt package. This is a high risk category of mine...and so getting to 50% debt is a massive achievement. And the stategy of using offtake to lock in equity was also a good plan. But we have not yet seen the results. And currently management have had to pivot.

And yeah...that debt package would have taken at lof time to convince all the Govt related entitieis and ministers why it was important.

 

[John]

View attachment 83In regards to the performance rights. Is it right to read this as ARU is aiming for 50% cornerstone as a minimum, 75% cornerstone as a potential? So we could see equity funding be 75% cornerstone which is way above the proposed 50-60% we have been told. This is great news right? and could be linked with the US and/or JV.
It may not even need another public raising.

Also thanks all. Love reading this and been invested for a couple years now. Cheers

I think in these types of performance targets, they need to give some head room for better than expected outcomes.

And given what the US is proposing to do for critical minerals (and RE)...this 75% cornerstone equity could happen.

But I have always thought....there will be a rush from the institutions, just before FID, when they realise what is really going on in the market, and how well positoned ARU is within the market to be a global leader.

Also look at what JP Morgan is proposing....spending $1.5T.....some of that will fall into ARU...

https://rareearthexchanges.com/news...iency-push-critical-minerals-quietly-central/