Arafura Rare Earths Limited

ASX:ARU

Arafura Rare Earths Limited

ASX:ARU
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$0.190 (+2.7%)
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#92
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Forum Topics ARU ARU ARU - 68% Debt Funding Secured

Pinned straw:
Parko5
Added 2 months ago

https://wcsecure.weblink.com.au/pdf/ARU/02810642.pdf

Export Development Canada has provided US $300 million. Which brings the secured Debt to 68%.

Great news...and once again....selling walls put up to hold the SP in place by manipulators.

Some of my thoughts:

  • This is the first of many more annoucements to come to pump up the SP for a capital raise.
  • I expect these other annoucements to include the final debt package from the Korean Export Credit Agency (or whatever they are called). I know from the CEO that these guys were late to the party and have been coming up to speed. So they will be the last part of the debt package.
  • Then in the background the off take agreements have been in negotiation...with ARU having the upper hand and improving the terms. But these will then drop into an annoucement.
  • Then the Cap Raise. As I have mentioned in other posts, I don't think retail will be included because the ASIC rules state the Offer Price has to be at a discount to the av monthly SP. And this will be too low. Whereas for instiutions they can have the offer price at any price.
  • Over the weekend, a group of us ARU shareholders went over everything. Including many news paper articles, asking the authors who their sources were, speeches from US delegations in Australia, the White House policy annoucements etc etc.....And we think that there could be an annoucement 'soon' about Nolans Phase 2....and a US bueiness related to US Defence....taking a large % of Phase 2 and potentially finacning it. There is a bit of specuialtion in this......but there are too many public comments made in speeches etc. And US Govt is worried about China stopping/reducing export of NdPr.


So i'm probably going to add to my holding. I can't do this on Strawman because of the % rules.

Even if retail do get to partake in a cap raise...it will be at higher prices than now.

Parko5
2 months ago

Note - I bought a large amount of ARU shares today.


I re ran my dilution calc as follows:


So at this point it is pretty hard to know: 

- what SP they will raise at; and 

- the amount they will raise. I believe we have to take out the money spent to date (approx $150 million Dec 2022 raise but there may be other design costs etc that can be taken out. Say another $20 million) 


- If we assume the total Project Cost is AUS $1.68 billion. 

- We know they want to raise US $775 million of debt (AUS $1.156 billion). 

- That leaves about AUS $520 million 

- Then take out about AUS $170 million 

- Leaving about AUS $350 million to be raised from equity.


And lets assume they raise at about $0.40 (close to what Gina entered at) That results in a 30% dilution.


So at NdPr priced at US $150 /kg a post raise SP of about $1.33.


Obviously ex China pricing is key to the valuation. I make the following points: 

- ARU CEO has publically stated the off take agreements are well above current prices and profitable for ARU. I would assume the price to be somewhere between US $100-150/kg NdPr. 

- The full effects of US tarrifs and upcoming Euro tarrifs are yet to be felt in pricing. Global businesses will always take the cheapest option. But that is why the US and Euro tarrifs are a game changer for ARU. Also ESG will play a larger role in the years to come. Global businesses will need to source all their rare earths from ex China supply. And Ex China supply is only 10% of world production! And even without the ex China tail wind (or tornado), the demand from the energy transition will massively outstrip supply. Have a read of the IEA reports.


Also, as I have discussed with some other ARU shareholders, my analysis is "valuing" ARU. But it doesn't take into account the 'exuberance' effect that may occur. ARU has qualities that will appeal to the market in the future post FID:

- Energy transition

- Govt 'backed'

- ESG

- Long term


These four qualities will attract Superannuation funds. Have a look at BHP's slide in their bid for Anglo....superfunds make up about 50% of their shareholders. Currently ARU would have almost zero. Even if that percentage only went up to 10%.....that is massive buying!


Anyway...i bought a significant amount today against the bots. I'm ARU long. 

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