Arafura Rare Earths Broadens Nolans Appeal with Heavy Rare Earths Offtake and Premium Convertible Note

Arafura Rare Earths has secured its first binding offtake agreement for heavy rare earths, a move that extends the commercial reach of its Nolans project beyond the flagship neodymium-praseodymium output. Under a framework deal with Traxys North America, the company will supply 500 tonnes of NdPr oxide and 7.5 tonnes of dysprosium-terbium oxide each year for an initial five-year term, with an extension option. The pricing is pegged to US-dollar international benchmarks including Benchmark Minerals Intelligence and S&P Global Platts North America.

The inclusion of DyTb – critical ingredients in high-performance permanent magnets for electric vehicles and defence applications – gives Nolans a strategic edge. Dysprosium and terbium supply is even more concentrated in China than light rare earths, making any non-Chinese source valuable. Traxys intends to funnel the material into US supply chains for the automotive, defence and technology sectors, with potential integration into the US EXIM Bank’s Project Vault. The detailed offtake contract is expected within six months.

Confidence in the project’s financial foundations was reinforced days earlier when Arafura signed a binding A$200 million convertible note with the National Reconstruction Fund Corporation on 12 May 2026. The conversion price of A$0.476 per share sits 44% above the recent ASX closing price of A$0.33 – a clear signal that the government-backed fund sees value rather than seeking a discount. That premium contrasts with earlier equity placements from KfW and Export Finance Australia at A$0.2447 apiece, which carried a 12.6% discount.

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The convertible note forms part of a debt-driven financing strategy as Arafura targets a final investment decision by the end of June 2026. Alongside the NRFC facility, the company has already raised A$230 million in equity and arranged over US$1 billion in conditional debt packages. KfW and Export Finance Australia are also backing a planned A$230 million capital increase, which shareholders will vote on 10 June 2026. All financing conditions must be met by 1 December 2026 or the commitments lapse.

On the offtake side, Arafura now has binding agreements covering 66% of the planned annual production of roughly 4,440 tonnes of NdPr oxide. Lenders typically require 80% before releasing funds, leaving a gap of about 1,200 tonnes per year. Management is in talks with European buyers for around 500 tonnes of that shortfall, meaning the Traxys deal does not close the hole entirely but shrinks it meaningfully.

The market backdrop remains volatile. NdPr oxide fell 21% in April to US$99.61 per kilogram, a decline analysts attribute to profit-taking and destocking rather than a structural shift. The market is expected to remain in a supply deficit, with attention turning to China’s next mining quota, due in June. Construction preparation is advancing: Arafura has signed a compensation agreement with pastoral group ATAYF and purchased an existing camp with over 200 rooms to enable a rapid build-out once the investment decision is made.

With Nolans scheduled to start output in the second half of 2029 and a construction window of 37 months, the next few weeks are critical. The shareholder vote on 10 June and the FID before end-June will determine whether Arafura can convert its growing portfolio of agreements – spanning premium convertible notes, heavy rare earths offtake and German-backed equity – into a fully financed project that chips away at China’s stranglehold on the rare earths supply chain.

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