Arafura Rare Earths Limited

Thank you for standing by and welcome to the Arafura Rare Earths Limited March 2026 quarterly investor call. All participants are in a listen only mode. There will be a presentation followed by a question and answer session. If you would like to ask a question by the phone, you'll need to press the star key followed by the number one on your telephone keypad. If you would like to ask a question by the webcast, please enter it into the ask a question box and click submit. I will now like to hand the conference over to Mr. Darryl Kizubo, Managing Director and CEO. Please go ahead.

Thanks, Darcy. And good morning, ladies and gentlemen. Thank you again for joining us for another quarterly investor briefing. It is our pleasure to provide you with an update on what has been a very busy quarter. With me, as usual, is Peter Sherrington, our CFO, and Tommy Vanderbilt, our Chief Project Officer. Similar to previous updates, what I'd like to do is just talk to a few external events that continue to shape developments in the rare earth sector. which we need to be mindful of as we work to secure the best outcomes for your company. What we'll also do is cover off on a couple of achievements during the quarter and why they are significant before turning to how we're progressing towards FID which as per the last quarter update we are still targeting to achieve FID this quarter. Keeping to that time will enable us to start construction next quarter. I'll then hand over to Peter to provide an overview of key financial events for the quarter, and then Tommy will talk about our execution readiness, and in particular the focus that we have on recruiting the right people, having well-developed plans that we're ready to execute, and making sure that we secure the most commercially competitive contracts possible when the FID flag drops. And then at that point we'll open up to Q&A. So let me just start by a few key developments in the market. So First, you might have noticed that the NDPR price has varied during the quarter between $100 to $130 a kilo on the Asian Metals Index, which is around the floor pricing that has been set by the US government and more recently by the Japanese. The Independent Benchmark Minerals Intelligence Index continues to track above the Asian Metals Index by about $10 a kilo. If you look at our website, you'll see that we track both of those indices in terms of pricing. You can get a daily update. What we're seeing around pricing gives us a level of confidence that China's control over pricing is being reduced through the introduction of floor pricing and other mechanisms. However, as a sector, we continue to believe that moving volumes to a pricing index, such as BMI, which is completely independent and transparent, and hence can be trusted by investors to reflect market fundamentals. It's also important to note that S&P Global Platts have also introduced their own Rare Earths Pricing Index for supply into the US, which is great to see. Over the quarter, we saw Linus announce a deal through which it has largely locked in its current volumes with Japan until 2038 with a floor price of $110 a kilo and a profit-sharing arrangement. above $150 a kilo. This is important because as we were negotiating our final off-takes, we were engaging with some of the same parties that Linus was. And as you can imagine, it was always going to be hard to get a well-priced off-take whenever Linus' volumes were on the table. As I said in our last investor update, securing well-priced off-take agreements that reflect the change in price dynamics will play a significant role in setting the value of your company essentially for the next decade. Hence, it's always been important to get the best possible outcome here rather than the quickest outcome. At the end of March, we saw the Australian government announce that they had passed legislation through both houses in supporting the Critical Mineral Strategic Reserve. This is providing a very wide-ranging mandate to the government export credit agency Export Finance Australia to execute agreements for the purchase of critical minerals, including rare earths, to be held as part of the reserve. The Australian government actually did this well ahead of time. So when they flagged that they would do this by the end of June, they actually did it by the end of March, which I think is a bit of an illustration of how important the Australian government sees this. And lastly, in terms of macro developments, we're seeing elevated fuel prices due to the Iranian war. and they have been a cut list in increasing demand for electric vehicles, which, as you know, is the biggest gross driver for Rare Earths over the next decade. In China, which is the largest automotive market in the world, EVs have now achieved price parity with conventional internal combustion engine vehicles and in many cases are cheaper. In fact, there's this article just last week that refers to two-thirds of EVs being cheaper than a typical internal combustion engine vehicle. Also last week, Chinese battery manufacturer CATL announced a new EV battery with a range of up to 1500 kilometres and a charging time of less than 10 minutes. Now the reason why I point these out is that you can see that these developments is going to increase the demand for EVs as economies of scale tip from internal combustion engines towards EVs. So let me now just turn to a couple of milestones that were achieved by our referrer during the quarter. So we announced our partnership with Cleantech to assess a lower cost and more effective way of separating rare earths with a particular focus on what is possible with heavy rare earths from Nolan's. We're in the middle of doing trials on this. As mentioned in previous quarters, We want to recover additional heavies from the Nolens project from the waste liquor recovery stream and process them to a separated rare earth similar to what we're doing with NDPR rather than selling heavies as part of a seg heavy rare earths combined product. The reason for this is that we will get a better pricing arrangement for bundling lights and heavies together. And that's for two reasons. So firstly, you know, we all are very aware that China is traditionally controlled about 90% of NDPR, but they're traditionally controlled about 98% of heavies. So supply risk of heavies is even greater than the supply risk for lights. But furthermore, as we see emerging magnet manufacturers outside of China, They today don't have the capability or technology equivalent to China, so they need more heavies in the mix in order to make a magnet that performs as well as a Chinese magnet. So we see demand for heavies going up and supply risk being greater. Hence why we want to increase our heavies and sell heavies as a bundled product with our lights to get the best possible pricing from the market. Now this project to produce and process heavies is separate to our phase one, and it will be subject to a different decision point, and we expect to make that decision sometime after calling FID for phase one. Assuring this value creation option, however, in parallel with phase one, is helping us secure remaining off-takes for the most favourable terms possible. During the quarter we also announced our compensation deed agreement with the partialist, who owns the land on which the NOLAZ project is situated. You'll note that the agreement involves Arafura issuing the partialist with shares, while he also saw fit to invest his own money to increase his holding in Arafura. This is a super clear demonstration of the alignment and the support that we have from the landowner, which is of course incredibly appreciated and important, particularly as we look to starting construction shortly. It also puts us on a very strong footing as we look to progress future opportunities with our pastures, such as progressing Phase 2. So now let me talk to you about FID. So as already mentioned, we continue to target this quarter for calling FID, which will enable us to start construction next quarter. Although this is in completely different in our control, we are increasingly confident that this will happen. There are two main tasks that we've previously flagged as needing to achieve in order to call fit. The first three we spoke about being fully funded. However, given we are over 90% funded and we have multiple options to close that gap, including equity from cornerstone investors and equity potentially tied to offtake, we're very comfortable in achieving this Hence, this is not the primary precursor to calling fit. The last remaining and primary precursor to calling fit is to secure one more offtake agreement so that we have a clear line of sight to satisfy the lender's requirement of having 80% of our production accounted for through offtake agreements. As we've been consistent on saying this, it is important to us that this is on an independent, and Transparent Pricing Index, where pricing reflects market fundamentals, which, as you know, are currently very strong, and we believe will get even stronger in the future. We have been having multiple engagements in relation to placing additional offtake, and we basically said to the different parties, whoever gets there first gets the offtake, and we remain steadfast in our commitment to achieve this in time to take fifth this quarter. With that said, I'm now going to hand over to Peter to talk to Progress during the quarter from a financial perspective. Thank you, Peter.

Yeah, thanks, Sarah. In March, shareholders would have noted that the company executed binding agreements with two cornerstone investors for subscriptions totaling approximately 230 million Aussie dollars. The respective investments were for 50 million euros from KFW, which manages the German Raw Materials Fund and US$100 million from Export Finance Australia. The strong support from these two state-backed funds provided another indication of the strategic importance of the NOLANS project and what we see is its critical role it's playing in facilitating diversified rare earth supply chains. The investment by the German Raw Materials Fund and EFA were done largely on similar terms and conditions, so there was significant alignment between the two investments. Both were at an issue price being at the lower of the VWAP for the 20-day trading period prior to each respective subscription agreement being executed, less a 10% discount, or at any lower price per share for shares offered to third-party investors in the lead-up to the completion of the KFW and EFA investment. The two investors have their respective conditions precedent but there is some similarities between them that must be satisfied prior to settlement. These include in the case of German Raw Materials Fund FIRB approval given that it's a foreign entity. Both investors require the project to be fully funded. execution or contractual close of the debt project finance facilities as part of that fully funded solution and then importantly shareholder approval of the facilities which is a requirement before they can be issued. Additional cornerstone investment has also been secured with the National Reconstruction Fund for a $200 million Aussie dollar convertible note facility. The terms for the convertible node have been agreed under a bindings term sheet, but we're currently in the process of advancing to a final agreement. Importantly, the final agreement, in addition to the convertible node agreement, will also require subordination deed between NRFC and the project finance lenders. It's important that the senior debt facilities do not become subordinated to the NRFC facility agreement. That subordination deed is advanced and there's largely significant agreement between the two parties around the completion of that document. Last year the company completed a capital raising of Australian $480 million, significantly de-risking the equity funding required for the Nolans project. At the 31st of March, we had a cash balance of $561 million Aussie dollars. The subscription agreements with the German Raw Materials Fund and EFA combined with the NRFC convertible note and cash represents funds on hand or binding commitments of around about Aussie $911 million. Taking into account these cash holdings and commitments and the project financing, the company requires just a further US$134 million to fully fund the project. This represents 10% of the total project funding required. The cornerstone equity commitments along with the debt financing facilities place Arafura in a strong position to achieve financial close for the project and the final investment decision in this current quarter. That's the key points from financing and project funding during the quarter. I'll hand over to Tommy who will talk about project execution.