Iron ore magnate Gina Rinehart has sunk another $125 million into Arafura Rare Earths Ltd (ASX: ARU) to help fund the company's Nolans rare earths project in the Northern Territory.
The investment comes as part of a $475 million capital raise finalised by the company late on Tuesday, and will increase Ms Rinehart's stake in the business to about 15.7%, up from 10.01%.
Ararfura will raise $475 million in two tranches, with the second, $351.6 million tranche, requiring shareholder approval.
Existing shareholders in the company will also be able to subscribe for a total of $50 million in new shares at the placement issue price of 28 cents per share.
Arafura shares were in a trading halt on Tuesday, with the shares last changing hands at 37.5 cents.
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Cashed up
Arafura said in a statement to the ASX late on Tuesday that following the settlement of the placement, it would be in a strong cash position with about $584 million in the bank.
Arafura managing director Darryl Cuzzubbo said the capital raise "marks a transformational milestone as we advance towards a final investment decision for the Nolans rare earths project''.
Mr Cuzzubbo added:
Combined with our conditional $200m equity-linked commitment from the National Reconstruction Fund Corporation and up to US$100 million conditional equity investment from Export Finance Australia, together with our US$775 million of conditional base senior debt, proceeds from this placement will substantially de-risk the total funding required for the development of Nolans. Following this placement, we will continue to advance discussions with strategic customers and partners, for the balance of the funding required including the German Raw Materials Fund which is in the appraisal phase for a potential equity investment of up to about €100 million.
Chinese dominance to be challenged
Arafura was one of the companies that won government support under a new critical minerals framework announced by Prime Minister Anthony Albanese and US President Donald Trump last week.
That framework is designed to reduce the reliance on China for the supply of rare earths elements, which it currently dominates the market in.
Mr Cuzzubbo said the development of projects such as Nolans, in the Northern Territory, was crucial to meeting the supply needs of industries such as defence and renewables going forward.
The convergence of support from Australian and United States government agencies, announced under the landmark US-Australia Framework for Securing Supply in the Mining and Processing of Critical Minerals and Rare Earths, underscores the geopolitical significance of Western rare earth supply chains and the Nolans Project, being Australia's first fully integrated ore to oxide rare earths operation.
Shareholder approval for the second tranche of the capital raise is expected to be sought at an extraordinary general meeting to be held sometime in December.
