Arafura Rare Earths (ASX: ARU) has received further government support for its Nolans project with the signing of a binding term sheet for $200 million with the National Reconstruction Fund Corporation (NRFC).

The company says the receipt of the convertible notes is a key milestone in its strategy of securing government seeded funds.

In March 2024 Arafura secured conditional Australian government approval for a debt financing package of approximately $866 million to progress the Nolans project in the Northern Territory.

The company has also received government support from Germany and Canada.

Strategic and economic importance

Managing director, Darryl Cuzzubbo, said the $200 million commitment from the NRFC demonstrates the strategic and economic importance of Nolans to the Northern Territory and Australia.

“This is indeed a significant day for Arafura and the Nolans Project.

This deal has been months in the making and de-risks the equity funding required for the development of Nolans.”

The NRFC, a corporate Commonwealth entity, has been set an agenda to invest in opportunities that diversify and transform Australia’s industry and economy. It has $15 billion to invest using direct loans, equity investments and loan guarantees.

Growing jobs and a skilled workforce

Chairman, Martijn Wilder, said the NRFC’s role is to invest in Australian businesses and projects that design, refine and make to transform capability, grow jobs and a skilled workforce, and diversify the economy.

“Rare earth minerals are strategically important resources that are crucial to modern economies and the global transition to net zero,” Mr Wilder said.

“Arafura’s Nolans project demonstrates the enormous contribution that Australia can make to the global supply of rare earth minerals and the considerable opportunities for Australia to add value to the raw materials that it mines.”

The $200 million in convertible notes will have a total tenor of 15 years and a conversion period of 7 years (non- convertible for first 2 years).

They are convertible at a 40% premium to the reference price, which will be determined by the future equity raising required to fully fund and develop the Nolans project.

World class asset

Nolans will mine and process one of the world’s largest deposits of neodymium and praseodymium rare earths over a mine life of at least 23 years.

The project comprises the development of a rare earths mine and processing facilities (including beneficiation, extraction and separation plants) located 135km north of Alice Springs in the Northern Territory.