Arafura Rare Earths Limited

Thank you for standing by and welcome to the Arathura Rare Earths Limited December 2025 quarterly report investor call. All participants are in listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question via the phone, 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 webcast, please enter it into the ask a question box and click submit. I would now like to hand the conference over to Mr. Daryl Kazubo, Managing Director and CEO. Please go ahead.

Thank you, Kylie, and good morning, ladies and gentlemen, and thank you again for joining us for our quality update. I'm sure I've engaged with many of you already, but for anyone new, my name is Daryl Kazubo, your Managing Director. Again with me today is Peter Sherrington, our CFO, who again most of you would be very familiar with. But also joining us today is Tommy Vanderbilt, Tommy joined us about 12 months ago. He is our Chief Project Officer and he'll become a regular attendee as we move through FID and into construction. Similar to previous updates, what I'd like to do is just talk a little bit about the macroeconomic developments that we see that are shaping the future direction of the rare earth sector. I'll then talk to how we are going in finalising The last 10% of the funding with our cornerstone investors that will enable us to call FIT. I'll then hand over to Peter, and Peter's going to take us through where we sit from an overall funding perspective so you can see just how close we are. And then we're going to wrap up with Tommy, who will provide a brief update on our readiness to execute the project soon after calling FIT. and then we'll open up to Q&A. So let me first talk about the macroeconomic dynamics that we see at play. So whilst the situation is dynamic, there are a couple of underlying fundamentals that will continue to shape what we see playing out. If I just take you back in time, last April China introduced export control constraints where China could control who got what rare earths into what region and for what use? These controls remain in place today and provide China the ability to control with precision who does and does not get access to rare earths. They have set themselves up to control rare earth supply in a very targeted manner. China subsequently introduced further export constraints last October, but these were wound back to just those constraints that were introduced in April last year, when a 12-month truce was agreed to between the US and China. Now, whilst this truce resulted in reduced speculation as to what is at stake should rare earths not be available, the reality is that nothing has structurally changed with respect to an ex-China supply of rare earths. China still controls today nearly 90% of the world's supply and will use this bargaining chip as and when they need to until the world diversifies its supply chain, which is going to take a number of years. We just can't unravel quickly what took the Chinese three decades to establish. In this period, we have seen rare earths pricing continue to firm to where just last weekend the NDPR pricing pushed through the $100 kilo barrier on the Asian Metals Index. This represents greater than an 80% increase in the last 12 months. It is also worth noting that the world's first ex-China pricing by BMI is consistently higher than the Asian Metals Index, most recently by a further $10 a kilo. This shift has occurred post the announcement of the mountain pass deal where the US government introduced a floor pricing of $110 a kilo and post the supply disruptions with mountain pass feed no longer going to China to be processed. The recent event where China stopped exporting dual use rare earths to Japan further highlights China's readiness to use this bargaining chip as they need and you would expect China to prioritise their domestic consumption of Rare Earths over exports should there be a structural NDPR supply deficit which a number of forecasters are predicting in the medium term. During all of this, we've also observed in our dealings directly with customers that they recognise the need to move away from the Asian metals index pricing as this has been the mechanism by which China has prevented a rest of world Rare Earths supply chain being developed. We note that S&P, a highly regarded global forecaster, are, in addition to BMI, now looking to introduce their own ex-China Rare Earths Pricing Index. We've seen our own Australian government play a key role here through the US-Australia Critical Minerals Framework and the Critical Minerals Strategic Reserve, not only supporting the rare earths sector in Australia and their trading partners, but also potentially introducing a different pricing mechanism which helps us moved to a global functioning market price index. Independent forecasters anticipate that a functioning market index will be in the $140 to $160 a kilo range, reflecting the true fundamentals of medium-term supply scarcity and the strategic value of having a reliable rare earth supply chain. You can see that as time goes on, the establishment of an independent and transparent NDPR index is looking increasingly likely. Now, I call these developments out because whilst exactly how geopolitics will unfold is uncertain, there are a couple of things that we can be confident of. Firstly, China will continue to use their tremendous bargaining chip of railroad supply as and when they need to, and have set themselves up to do precisely this. This is going to continue for some time, knowing that it will take years to structurally address the lack of diversification in the rare earth supply chain. As geopolitical tensions inevitably resurface, we can expect elevated investor attention to return to the rare earth sector. So in other words, there is still much to play out in the rare earth sector. Secondly, what I want to emphasise the most is that pricing dynamics are improving and I am confident that with the right and continued geopolitical support, we will ultimately see a market functioning price index established. Critically, we believe rare earths pricing will move to a higher level that reflects the underlying fundamentals. This is something that is important to us, as you can imagine, because it really is the biggest value driver for your company and something that we are acutely conscious of as we look to lock in the remaining cornerstone off-track agreements. So let me now turn to providing you with a funding update. We have made significant progress with Cornerstone Investors, where due diligence and documentation is in an advanced phase for EFA, the National Reconstruction Fund, and the German Law Materials Fund, for an initial €50 million, noting that with the German Law Materials Fund, a potential second €50 million is subject to a separate decision post-locking in a further 500 tonnes of offtake. This has taken a little longer than we had anticipated, but we need to recognise that we are one of the first projects to progress through these newly established government seeded processes. You can be assured that we are progressing this as quickly as possible, as demonstrated by the fact that we are either the first or the second project in a long list of projects to progress through these three newly established funding mechanisms. As we round out the funding and off-takes, we want to essentially achieve two outcomes. We want to secure the remaining equity with long-term cornerstone investors as fast as possible so we can call fit and get moving into construction. The second outcome is we want to secure as favourable pricing terms as we can for the remaining off-takes, knowing that customer preparedness to move away from the Asian Metal Index is growing with time. The pricing terms that we get today is better than the pricing terms we could have got just a few months ago. And the reality is that this trend is likely to continue. What I'm saying here is that whilst calling Fed will be the most significant catalyst for the company in its history, the value of the company will to a large degree be defined for the next decade or so by the seven-year contract pricing terms that we are negotiating now. We literally have half a dozen pathways to close out funding. With 90% funding locked in, the question is no longer about whether we will achieve it or not, but rather are we getting the best possible terms for our off-takes in securing the remaining equity. Phased between closing out funding and off-take agreements quickly versus negotiating hard for a couple of months longer to secure best pricing terms, we will choose the latter given the long-term benefit for the company. Now with that said, we are targeting the end of this quarter to finalise the necessary agreement which will then enable us to seek shareholder approval next quarter and call fit. I can assure you that we're doing everything we can to secure the best possible terms as quickly as we can so we can all move on to why we joined the company which was to build and operate what will be a truly Australian iconic project With that, now I'll hand over to you, Peter. Thank you.

Thanks Daryl. So Darryl's already set out that it's been a pretty significant period for the geopolitical focus and the impact on rare earths. And there's also been a lot of rare earth corporate activity. So this has been an incredibly busy period for the Arafura team. And we've been successful in making substantial progress in executing the NOLANS funding strategy, which I'll cover off in this session. To frame the discussion, I'll refer back to Figure 2 in the quarterly, which is the Nolans funding bridge. The Figure 2 graphic sets out the funding strategy for Nolans project. If you refer to the stack column on the right-hand side, you can see the company has a total funding requirement of $1.6 billion U.S., This cost is substantially made up of the capital cost for construction, but also includes working capital, the financing costs during ramp up, and also the equity-backed component of the cost overrun account. In addition to the total funding requirement of 1.6, we have in place completion support facilities of US$280 million. These remain undrawn under our base case scenario, but it does provide us with total funding sources of $1.9 million. If you've followed the Nolans funding strategy from previous presentations and quarterlies, you'll see that we've now made material progress and addressed specifically the public markets component of the funding solution, which I'll touch on shortly. and have during the quarter substantially progressed the due diligence and final documentation with our cornerstone investors as already set out by Darryl. This included the announcement by the Australian Prime Minister of conditional approval of up to US$100 million of equity investment by EFA. Indicatively, these sources of cornerstone funding that Darryl has set out leave approximately US$134 million outstanding. and we're working with multiple pathways being progressed to close out the remaining equity requirement in the near term. As already set out, one pathway includes additional investment by the German Royal Materials Fund. We're seeking to capitalise on favourable magnet feed market conditions as outlined by Darrell. We've seen an increase in our engagement with European and German partners in particular. as we look to secure an additional 500 tonnes for annum of NDPR offtake to support potential further investment by the German Raw Materials Fund. Noting that any further investment from the German Raw Materials Fund would be conditional on securing that 500 tonnes of offtake, it would also require approval by the Inter-Ministerial Council. With respect to the debt facilities, excluding ING, all credit approvals are current, with EDC refreshing their credit approval during the December quarter. ING have provided a letter of support and are working to finalise their credit approval in conjunction with contractual close of the debt facilities and FID. Those activities are underway now with ING. We saw positive share price momentum through October for Arafura and for a number of rare earths companies in general, following a number of key announcements, including further export restrictions by China in early October and the US-Australian Critical Minerals Framework in late October as well. Against the backdrop of these activities, we successfully launched and completed an Australian $475 million two tranche placement in October. This was followed with an associated SPP and tranche two of that raising closing in December alongside the SPP. Again, we're pleased to see the strong participation from existing shareholders. including our substantial shareholder Hancock's Prospecting, as well as welcoming a number of new shareholders to our register. We ended the period with cash on hand of Australian $570 million up from $90 million the previous quarter. The increase included proceeds from the October placement. including the tranche two proceeds and the SPP. And this also included tranche two and SPP funds from an earlier August placement with the settlement occurring in the quarter just completed. The important component here is the increased cash position, significantly strengthens the balance sheet and demonstrates the company's ability to move into project execution when strategic equity is secured. Completion of the private placement has significantly de-risked the project funding requirement and has provided us with the opportunity to make significant progress with Cornerstone investors, off-take groups and final documentation with lenders, knowing that the private placement component of the funding has now been completed. I'll just briefly refer back to the Appendix 5B cash flow. You can see expenditure during the period included $3.4 million in project development activities to support execution readiness as we ensure we can hit the ground running post-FID, which is obviously a segue into handing my session over to Tommy, our Chief Projects Officer, who'll provide you with a brief update for the project. Thanks, Tommy.