Arafura signs rare earths offtake with Hyundai, set to supply 5% of global NdPr by 2025

Emerging rare earths producer Arafura (ASX: ARU) has defined the market’s sea of red, up 17% at noon after signing a non-binding memorandum of understanding (MoU) with Hyundai.

MoU key terms

• Parties to negotiate a binding offtake agreement for the supply of up to 1,000 to 1,500 tonnes per annum of NdPr Oxide

• Agreement to commence in 2025 for a seven year term

• Supply represents over one third of the forecast annual production capacity of 4,440 tonnes 

• Parties will also work collaboratively to engage Export Credit Agencies for debt funding and guarantees 

Nolans Project rundown

The Nolans Project is situated north of Alice Springs in the NT.

The company is currently progressing front-end engineering design (FEED), targeting tender for a fixed price construction contract which will lead into a final investment decision in the second-half of 2022. 

Source: Arafura Bell Potter Unearth Conference Presentation (February 2022)

In parallel with FEED studies, Arafura said it is in discussions with 10 parties for more than 260% of planned production, with a view to secure 85% as binding offtake agreements.

From a production standpoint, the forecasted annual production capacity of 4,440 tonnes represents approximately 5% of global NdPr demand.

To add some perspective, Lynas (ASX: LYC) produced 15,761 tonnes of rare earth oxides and 5,461 tonnes of NdPr in FY21.

NdPr prices

Neodymium (Nd) prices have retreated from late February all-time highs, in-line with the broad-based pullback for green metals like lithium.

Factors including weakness across equity markets, Chinese lockdowns and recession risks have weighed.

Source: TradingEconomics

Despite the recent pullback in prices, Lynas said in its March quarter results that "[Lynas] "continues to receive many approaches from end users seeking to secure their raw material sourcing over the longer term."

Arafura 12-month price chart