Arafura Rare Earths (ASX: ARU) has signed a binding 100-tonne-per-annum (tpa), five-year offtake agreement with commodity trader Traxys Europe.

Arafura will supply Traxys with neodymium-praseodymium (NdPr) oxide from its Nolans project in Australia, with an option for a further 200tpa at Arafura’s discretion.

Neodymium and praseodymium are two rare earth elements crucial for manufacturing strong permanent magnets used in electric vehicles, wind turbines and other technologies.

Critical mineral supplier

Luxembourg-headquartered Traxys has more than 20 offices across four continents, delivering critical materials to global supply chains to support the diversification and resilience of the rare earths market.

The new agreement is conditional on the completion of construction and development of the Nolans project, the commencement of commercial production and ramp-up.

The deal’s pricing is in US$ and contractual, broadly referencing the NdPr Ex Works China price.

Nameplate target

Managing director Darryl Cuzzubbo said the agreement builds on Arafura’s target of signing binding offtake sales for 80% of Nolans’ nameplate capacity of 4,440tpa, with the Traxys deal representing as much as 8% of that target.

“With only 34% of the product from Nolans remaining to be marketed, our ongoing negotiations mean we are well positioned to reach our target,” Mr Cuzzubbo said.

“This arrangement complements our global supply chain diversification strategy and highlights the desirability of securing product from a Tier 1 jurisdiction like Australia and a project like Nolans with globally recognised ESG credentials.”

Additional NdPr volume

Mr Cuzzubbo said the option to place additional NdPr volume will enable the company to effectively manage its annual contract supply commitments and the variability in product delivery schedules from its original equipment manufacturer and component manufacturing offtake customers.

He added that the company continues to receive strong interest from a range of parties aligned with its offtake and investment strategy.

Analysts are forecasting NdPr oxide prices to improve in 2025 due to a narrowing of the surplus and the potential for deficits driven by strong demand, particularly for NdFeB magnets in electric vehicles and wind turbines.