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Australia will provide up to A$840 million ($550 million) for the first combined rare earths mine and refinery in the country’s Northern Territory, owned by Arafura Rare Earths, Prime Minister Anthony Albanese said on Thursday.
Arafura expects the funding, mostly in government loans, for the Nolans project north of Alice Springs in central Australia to be matched by investment from international and commercial financiers.
The investment comes as Australia and its allies diversify the global supply chain for rare earths after Covid-19-related snarls highlighted supply risk in China which produces more than 80% of the world’s rare earths.
“We will deliver critical jobs and economic development in the heart of the Territory and the north,” Albanese said in a statement.
Arafura, whose largest shareholder is mining magnate and Australia’s richest person Gina Rinehart, saw its shares open up as much as 59% at A$0.235 after the news on Thursday. They had been in a trading halt since Wednesday pending news of debt financing.
The project will be Australia’s third rare earths processing plant after Lynas Rare Earths’ Kalgoorlie operations and Iluka Resource’s Eneabba heavy rare earths plant which is under development – both in the country’s west.
Arafura already has supply agreements with Hyundai Motor, Kia Corp and Siemens Gamesa Renewable Energy, and a provisional agreement with General Electric.
Its funding includes loans of $325 million under the government’s Critical Minerals Facility (CMF), A$200 million through the Northern Australia Infrastructure Facility, up to $75 million from Export Finance Australia and a further A$30 million in grants under the Modern Manufacturing Initiative.
Backed by the funding, Arafura in an exchange filing said it plans a major equity raising to complete the funds needed for construction, commissioning and first production.
Rare earths are used to make powerful magnets and are essential for renewable energy and defence technologies. Electric vehicle motors, wind turbines, robotics and mobile phones all rely on rare earths.
Prices of rare earths neodymium and praseodymium (NdPr) have slumped as China has ramped up supply to levels well below those needed when it comes to seeking finance for a new project, said analyst Daniel Morgan at Barrenjoey.
“A lot of these projects face economic challenges… Getting private money is very difficult,” he said, adding there is a role for government to help companies enter production given the strategic nature of the industry.
In 2022, the government approved a A$1.25 billion loan for Iluka’s Eneabba plant through the CMF.
Iluka in December said the project was delayed and that costs were likely to have increased by around 20%.
Lynas is the world’s biggest producer of rare earths outside China, which it mines at Mount Weld in Western Australia. It has been allocated $258 million from the US government to build the first commercial heavy rare earths separation facility in the United States.
($1 = 1.5088 Australian dollars)
(By Melanie Burton; Editing by Muralikumar Anantharaman and Christopher Cushing)
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