MoU to negotiate an offtake agreement for the sale of NdPr Oxide from the Nolans Project on a CIF basis over a 7-year term commencing in 2025
Arafura and Hyundai Motor Company sign non-binding MOU for neodymium and praseodymium offtake. (Credit: Khusen Rustamov from Pixabay)
Arafura Resources Limited (ASX: ARU) (“Arafura” or the “Company”) is pleased to announce that it has signed a non-binding memorandum of understanding (MoU) with one of the world’s most progressive automotive groups, South-Korean based Hyundai Motor Company (Hyundai).
The MoU provides a framework for the parties to negotiate a binding offtake agreement for the supply of up to approximately 1,000 – 1,500 tonnes per annum (tpa) of NdPr Oxide from the Nolans Project to commence in 2025 for a seven year term on a “cost, insurance and freight” (CIF) basis (which potentially represents just over one third of the estimated average annual production capacity of 4,440 tonnes from Nolans following expected ramp-up).
The other key terms of the MoU are set out below:
- Pricing for any sale would be determined quarterly using a formula-based mechanism referencing the NdPr oxide Ex Works China price per tonne. An industry recognised customary discount in recognition of the long-term offtake agreement would also be applied.
- Commercial grade NdPr Oxide is intended to be ≥99.0%/TREO.
- The parties would work collaboratively to engage with relevant Export Credit Agencies to access debt funding and guarantees linked with critical materials procurement for use in Korean based manufacturing.
- The definitive and binding offtake agreement would be subject to certain customary conditions being satisfied, including:
- Arafura securing project finance to develop the Nolans Project (which will include a Mine, Beneficiation and Rare Earth Processing Plant and Rare Earth Separation Plant); and
- completion of construction, development and commissioning of the Nolans Project.
Arafura and Hyundai will work towards agreeing terms and executing a definitive binding offtake agreement by September 2022.
The signing of the MoU follows the Joint Statement of Cooperation signed by Arafura and Korea Mine Rehabilitation and Mineral Resources Corporation (KOMIR) on 28 February 2022, which recognises the strategic importance of Australian critical minerals projects supporting Korea’s industrial development and participation in electrification and renewable energy economies.
Arafura’s offtake strategy for the Nolans Project has been to target automotive original equipment manufacturers (OEMs) from geographic regions with supportive export credit agencies, working with customers that are strategically aligned with the Company’s value proposition of supply chain diversification, product traceability and security of supply with high ESG standards.
Hyundai has demonstrated its global leadership and commitment towards an EV future by securing the critical minerals to de-risk its permanent magnet supply chain and Arafura welcomes Hyundai’s interest in potentially becoming a foundation customer.
Arafura continues to advance its engagement with a range of other parties interested in long-term offtake from the Nolan’s Project that are aligned with its offtake strategy.
As detailed in the Company’s Project Update released to ASX on 11 May 2021, and subject to project financing, completion of construction, development and commissioning of the Nolans Project, Arafura expects first production of NdPr Oxide in 2025 with annual production expected to ramp up to 4,440 tpa in 2027 (refer to ASX Announcement Dated 11 May 2021). The front-end engineering design (FEED) initiated in August 2021 remains on track, targeting tender for a fixed price construction contract which will be the basis of making a Final Investment Decision, which is expected in the second half of this calendar year.
Commenting on the MoU, Arafura’s Managing Director, Gavin Lockyer, said: “The signing of the MoU represents a fantastic outcome and validates the Tier-1 credentials of the Nolans Project as one of the world’s premier next generation NdPr ore to oxide projects. The Nolans Project is strategically significant for Tier-one customers as it offers scale and supply chain diversification and security that will underpin their EV technologies”.
Source: Company Press Release