Arafura Rare Earths Limited

Thank you for standing by and welcome to the Arafura Rare Earths Limited December 2024 quarterly report and best of call. All participants are in a listen-only mode. If you wish to ask a question via the phones, you will need to press the star key followed by the number one on your telephone keypad. If you wish to ask a question via the webcast, please enter it into the ask a question box and click submit. Participants may submit their questions at any time and are encouraged to submit them early. I would now like to hand the conference over to Mr. Darryl Kazubo, Managing Director and CEO. Please go ahead.

Thanks, Harmony, and good morning, everyone, and thanks for attending today's quarterly shareholder update. My name is Darryl Kazubo, your Managing Director, and with me today we have Peter Sherrington, our CFO. I'm going to provide you with an overview of our progress through the quarter, as well as a view on market conditions before opening up to Q&A. Our most important task in unlocking shareholder value is of course securing the equity we need to get to a fully funded solution. As stated before, once we achieve this we will announce our final investment decision enabling us to move into construction. We have made significant progress this quarter against our funding strategy that we remain steadfastly confident in with the announcement of a $200 million commitment from the National Reconstruction Fund as our first cornerstone investor. This further demonstrates strong Australian Government support for our project because of the benefits it brings to Australia but also the world in diversifying the critical supply chain of NDPR that is of fundamental importance to the energy transition. You will note that the Australian Government were the first lenders to commit to our project which then helped us build momentum to secure the remaining debt. We see the same momentum building as we continue to progress our engagement with other potential cornerstone investors to lock in more than half of our required equity. These cornerstone investors include customer organisations that need our NDPR and other country government seeded funds looking to promote the diversification of critical mineral supply chains. We are confident of achieving this despite what are currently challenging market conditions. We believe that Arafura's timing of constructing Nolans will prove to be a very well-timed counter-cyclical investment. We continue to target a final investment decision by the end of this half and are doing everything we can to progress funding as fast as possible. However, I do need to continue to point out that the timelines are driven by our potential cornerstone processes, energy diligence, and that we are progressing this in a market where NDPR pricing is coming off multi-year lows. The recent National Reconstruction Fund commitment as an example took many months to conduct due diligence and to negotiate as they made sure that this commitment reflected their mandated objectives and we made sure that this commitment would look after current shareholder interests as well as drawing new investors whilst not conflicting with our lender agreements. The reason why we know we will ultimately be successful is because there is a lot at stake across the globe. We are talking about electric vehicles and wind turbine sectors whose revenue will ultimately be measured in the trillions of dollars per annum, being dependent on NDPR supply, where demand is expected to double over the next decade. As it stands today, nearly 90% of supply is controlled by one country, If you look at the supply side of the equation, we are the only MDPR ore to oxide project that is ready to move into construction. In other words, there are not a lot of near-term options to solve this growing structural supply deficit and dependence on MDPR supply, hence why I know we will be successful. We often get asked about how our off-take agreements are progressing. Our biggest drawcard in securing equity from customers is our offtake. Consequently, you can expect future announcements on large offtakes to be linked to equity. We have demand for our offtakes that exceed our offtake target by 2 to 1. Being able to sign up straight offtakes has not been difficult for some time now. In terms of our cost forecast, we are in line with or running slightly better than our forecast. We have a cash runway that takes us into the third quarter of this year with a healthy buffer. Most activities during the quarter revolved around advancing our funding strategy, securing or improving our position with project-related contracts, and engineering assessment of CAPEX and operating improvement initiatives, noting that we will always be pursuing improvement initiatives to offset the inevitable CAPEX and schedule pressures that arise over time. We continue to look at ways to reduce spend and trade this off against our ability to be ready to start executing the project as soon as we call fit. It is important that we have the people, the planning and contracts ready to go immediately post-fit so that we can enter execution on the front foot where spend and project activities are well controlled from the get-go. This will help ensure that safety, cost and schedule can be well managed from the very start. You only have one opportunity to enter project execution phase in a controlled state, which sets you up to remain in control. If you don't enter construction phase in a well-prepared and controlled state, it is very difficult to get back into a well-controlled state whilst protecting your schedule. And lastly, allow me to make some comments on the market conditions. You'll have noted that NDPR pricing over the quarter has shown some firmness and is sitting some 25% above recent multi-year lows. As we think about pricing, it is very important to distinguish between short-term pricing dynamics and medium-term pricing dynamics, which are ultimately much more important to Arafura. Short-term, we have China controlling nearly 90% of NDPR production. where they have been setting production quotas that have suppressed pricing to where they have been at times losing money or essentially profit neutral, which is clearly not sustainable. The medium-term dynamics, however, will be more defined by the doubling of demand over the next decade, a pretty bare supply pipeline of NDPR projects being able to come into production over the next five to ten years. Governments and large multinational NDPR-dependent companies becoming increasingly anxious about the need to grow and diversify supply. And lastly, the introduction of tariffs or other forms of trade constraints coming out of the US or Europe. I think it's fair to say that any announcements regarding further efforts to encourage diversification of NDPR supply is going to be good for us, noting that the forecaster Argus project that an inducement price for NDPR needs to be some two to three times what we are seeing today in order to see sufficient NDPR supply emerge outside of China. Arafura is very well positioned for this change in dynamics, given that we will have first quartile unit cost production due to our phosphoric acid by-product credits, where even at today's pricing, we would be materially cash flow positive. In summary, we have the right project, Thank you. If you wish to ask a question via the phones, you will need to press the star key followed by the number one on your telephone keypad. And if you do wish to ask a question via the webcast, please type it into the Ask a Question box.

We'll pause momentarily for any phone questions to register. Once again, to ask a phone question, please press star one. There are no phone questions at this time. I'll hand back to your speakers to address your webcast questions.