Modelling Arafura

[John]

The following is a rough model for Arafura. Please do your own analysis and don't rely on my work. There could be mistakes.

So the model uses:
- Discounted cash flow analysis
- Provides an NPV which is then used as the Market Cap
- Share on issues is estiamted as per the notes (5.66 billion)



So at NdPr volume at 4,400 (Phase 1) i think the ARU SP should be about AUS $0.50. That is the "fair value" based on the assumptions above.

When i change the volume to 11,000 (Phase 2) (also need to adjust the Phosphoric Acid) and it takes phase 2 about three years to build (after Phase 1 is built) i get the SP to be about AUS $1.60. Also assumes no more capital required (ie uses the contingency savings from Phase 1 and some cash flows (minor)).

So in summary
- Phase 1 i value ARU at AUS $0.50
- Phase 2 i value ARU at AUS $1.60

This does not include:
- any HREE sales (i think in the short term will be minor)
- The additional US$300 million from USA Govt....or the revenue from this? It could just fund the Phase 2?
- tolling arrangements (this would just add to the bottom line - ie any additional capex/opex would be bourne by the counter party...and we just take margin)
- the deposit is still open at depth...so we could potentially do more than 11,000 tpa.
- I think there are massive savings in operations, tax etc...that will improve the economics. I just made broad assumptions.

All of these points above will add value to the "fair price"...... and should push the SP higher.

Two more things to add in regards to the ARU SP:

- FIRST - NdPr prices have been modelled with a Price Floor (US$110 per kg)....ARU may be able to achieve higher pricing. A VERY rough approx is...for every US$10 per kg NdPr goes up....adds about AUS$ 0.07 cents to the ARU fair value SP. So as an example..if NdPr goes to US$160 per kg (an extra $50)....the ARU SP would be about AUS $0.90. So ARU SP is highly sensitive to NdPr pricing. And remember...NdPr has hit US$220 per kg previously.
- SECOND - don't forget to add in the FOMO effect. Have a look at MP Materials. I did the same type of NPV analysis...and the BEST SP i could get for MP was about $20...then add in some things that might happen...i could get to about $40-50 per share...and I sold at $87...and the SP hit $97 per share....So watch out for the FOMO effect with ARU finally getting FID.


Remember - the above is not advice...do your own analysis.

 

[patarnoster]

My view is similar, regarding that 47c - 50c however that I think is the minium, I will add that it peaked at 62c with no FID and no funding certainty, so... that says a lot about FOMO.

With that in mind, if we take LYC as an example, they trade at A$2 to 2.5 billion per 1,000 tpa of NdPr output, just take the lower end of that and the price I see for ARU is between 60c to $1.44.

Somewhere in there its propped up by these premiums:

• Strategic
• Sovereign
• Security
• Scarcity
• Policy
• Offtakes
• Optionality
• Institutional
• Longevity
• Narrative

All that in mind, I think were looking at $1+ going into Phase 2 (As it would more than likely be priced in).

 

[John]

Something that obviously weighed heavy on the debt and equity participants…was getting into production and ramping up. Hence the massive contingencies.

But that will probably weigh on the minds of some fund managers.

You don’t get sacked for buying Gold and Silver. But buying rare earths….could end your career or potentially make it (if it performs).

But when comparing with LYC…we have to remember that ARU is not proven at scale yet. And it has been derisked with the over the top funding/contingencies. But people will still have it in their minds.

 

[SJVR-3005]

Thank you for this info!

For fun this is base case from my view if a clean FID is announced as expected from recent quarterly update noting 5.6 billion shares on issue for example:

Time from FID	Share Price	Market Cap	Notes
FID day–week	$0.38–0.45	$2.1–2.5bn	Relief rally
+1 month	$0.55	$3.1bn	Broker upgrades
+2–3 months	$0.70	$3.9bn	Momentum funds
+3–4 months	$0.85–0.90	$4.8–5.0bn	Peak optimism
+5–6 months	$0.65–0.75	$3.6–4.2bn	Normalisation

I'll probably sell a parcel around $0.7 - $0.9. DYOR, not financial advice, just some fun and something to come back to.

 

[patarnoster]

Thank you for this info!

For fun this is base case from my view if a clean FID is announced as expected from recent quarterly update noting 5.6 billion shares on issue for example:

Time from FID	Share Price	Market Cap	Notes
FID day–week	$0.38–0.45	$2.1–2.5bn	Relief rally
+1 month	$0.55	$3.1bn	Broker upgrades
+2–3 months	$0.70	$3.9bn	Momentum funds
+3–4 months	$0.85–0.90	$4.8–5.0bn	Peak optimism
+5–6 months	$0.65–0.75	$3.6–4.2bn	Normalisation

I'll probably sell a parcel around $0.7 - $0.9. DYOR, not financial advice, just some fun and something to come back to.

I like the look of this

 

[John]

Had a bit of fun with Chat GPT


So if we do a peer evaluation with Lynas...and assume a discount to Lynas (e.g., 25–60% of Lynas intensity until commissioning/ramp is de-risked). Also included the 100%.

- ARU at 4400 tpa and 5.6 billion shares...

• 30% of Lynas ⇒ ~A$0.32/share
• 50% of Lynas ⇒ ~A$0.54/share
• 100% of Lynas ⇒ ~A$1.07/share

- ARU at 11,00 tpa and 6 billion shares (add a little for a cap raise for additional capex)....

• 30% of Lynas ⇒ ~A$0.75/share
• 50% of Lynas ⇒ ~A$1.25/share
• 100% of Lynas ⇒ ~A$2.50/share

This peer analysis shows how Arafura’s potential valuation scales as it moves from a developer to a fully de-risked producer, using Lynas Rare Earths as the benchmark. Lynas is treated as a mature, steady-state NdPr producer, and Arafura is valued as a discounted percentage of Lynas’ market value per tonne of NdPr capacity to reflect construction and ramp-up risk. At Phase-1 scale (4,400 tpa NdPr and 5.6 billion shares), a typical developer discount of 30–50% of Lynas implies a valuation of ~A$0.32–0.54 per share, with full parity at ~A$1.07 per share if Arafura were ever valued equivalently per tonne.

At full expansion (11,000 tpa NdPr and ~6.0 billion shares, allowing for dilution), the same framework implies ~A$0.75 per share at 30% of Lynas, ~A$1.25 at 50%, and ~A$2.50 at full parity.

The key takeaway is that valuation is dominated by NdPr throughput and execution confidence. As Arafura scales production and de-risks delivery, the discount to Lynas can compress materially, driving step-changes in implied equity value even without assuming higher rare-earth prices.

 

[patarnoster]

Had a bit of fun with Chat GPT


So if we do a peer evaluation with Lynas...and assume a discount to Lynas (e.g., 25–60% of Lynas intensity until commissioning/ramp is de-risked). Also included the 100%.

- ARU at 4400 tpa and 5.6 billion shares...

• 30% of Lynas ⇒ ~A$0.32/share
• 50% of Lynas ⇒ ~A$0.54/share
• 100% of Lynas ⇒ ~A$1.07/share

- ARU at 11,00 tpa and 6 billion shares (add a little for a cap raise for additional capex)....

• 30% of Lynas ⇒ ~A$0.75/share
• 50% of Lynas ⇒ ~A$1.25/share
• 100% of Lynas ⇒ ~A$2.50/share

This peer analysis shows how Arafura’s potential valuation scales as it moves from a developer to a fully de-risked producer, using Lynas Rare Earths as the benchmark. Lynas is treated as a mature, steady-state NdPr producer, and Arafura is valued as a discounted percentage of Lynas’ market value per tonne of NdPr capacity to reflect construction and ramp-up risk. At Phase-1 scale (4,400 tpa NdPr and 5.6 billion shares), a typical developer discount of 30–50% of Lynas implies a valuation of ~A$0.32–0.54 per share, with full parity at ~A$1.07 per share if Arafura were ever valued equivalently per tonne.

At full expansion (11,000 tpa NdPr and ~6.0 billion shares, allowing for dilution), the same framework implies ~A$0.75 per share at 30% of Lynas, ~A$1.25 at 50%, and ~A$2.50 at full parity.

The key takeaway is that valuation is dominated by NdPr throughput and execution confidence. As Arafura scales production and de-risks delivery, the discount to Lynas can compress materially, driving step-changes in implied equity value even without assuming higher rare-earth prices.

Thats what i was thinking, calculating based on NDPR output. Good call.

 

[JVP73]

Had a bit of fun with Chat GPT


So if we do a peer evaluation with Lynas...and assume a discount to Lynas (e.g., 25–60% of Lynas intensity until commissioning/ramp is de-risked). Also included the 100%.

- ARU at 4400 tpa and 5.6 billion shares...

• 30% of Lynas ⇒ ~A$0.32/share
• 50% of Lynas ⇒ ~A$0.54/share
• 100% of Lynas ⇒ ~A$1.07/share

- ARU at 11,00 tpa and 6 billion shares (add a little for a cap raise for additional capex)....

• 30% of Lynas ⇒ ~A$0.75/share
• 50% of Lynas ⇒ ~A$1.25/share
• 100% of Lynas ⇒ ~A$2.50/share

This peer analysis shows how Arafura’s potential valuation scales as it moves from a developer to a fully de-risked producer, using Lynas Rare Earths as the benchmark. Lynas is treated as a mature, steady-state NdPr producer, and Arafura is valued as a discounted percentage of Lynas’ market value per tonne of NdPr capacity to reflect construction and ramp-up risk. At Phase-1 scale (4,400 tpa NdPr and 5.6 billion shares), a typical developer discount of 30–50% of Lynas implies a valuation of ~A$0.32–0.54 per share, with full parity at ~A$1.07 per share if Arafura were ever valued equivalently per tonne.

At full expansion (11,000 tpa NdPr and ~6.0 billion shares, allowing for dilution), the same framework implies ~A$0.75 per share at 30% of Lynas, ~A$1.25 at 50%, and ~A$2.50 at full parity.

The key takeaway is that valuation is dominated by NdPr throughput and execution confidence. As Arafura scales production and de-risks delivery, the discount to Lynas can compress materially, driving step-changes in implied equity value even without assuming higher rare-earth prices.

Any thoughts on how much is added to this valuation once we start processing ore from other mines?

 

[John]

Any thoughts on how much is added to this valuation once we start processing ore from other mines?

Well...any agreement struck will just be margin on top of what we already have. There are a bunch of ways it could be structured....but since we would be the only way for these guys to get to oxide (btw - i don't believe the Iluka will be able to do this)....so we should be taking no risk...and jsut adding margin to our bottom line. So any announcement....should add to the SP.

In terms of how much it would add depends on what type of rare earths (light, heavy etc.)....volume and complexity of that ore body (ie how economic). Plus they would want to have some off take lined up.....