MINEX Forum

Tag: Arafura Rare Earths

  • Germany to Expand Raw Materials Fund by Up to €500 Million and Considers Sovereign Wealth Fund Conversion From 2028

    Germany to Expand Raw Materials Fund by Up to €500 Million and Considers Sovereign Wealth Fund Conversion From 2028

    Germany is planning to increase the firepower of its national raw materials fund by as much as 50% to €1.5 billion, as Chancellor Friedrich Merz’s government moves to accelerate the diversification of critical mineral supply chains away from Chinese dominance and expand the vehicle’s potential scope toward a broader sovereign wealth fund.

    Chancellor Merz’s coalition has agreed after months of internal wrangling to raise the fund’s cash resources by between €300 million and €500 million from 2027, according to people familiar with the matter. The fund, managed by state-owned lender KfW and forming part of Germany’s broader Germany Fund, takes equity stakes in and issues state guarantees for raw materials projects globally. Officials from both the finance and economy ministries confirmed the government intended to increase the fund’s capacity without providing further detail.

    The agreement resolved a dispute between the two ministries over how much risk the state should assume in projects that frequently carry high default probabilities. Officials ultimately agreed that increasing the capital base would allow risks to be spread across a broader portfolio and enable the issuance of more guarantees per investment.

    Coalition discussions also addressed the possibility of expanding the fund beyond commodities from 2028 onward to encompass domestic security, defence and infrastructure projects including power grids — or converting it into a full sovereign wealth fund. No agreement has been reached on that broader question and negotiations are continuing.

    The fund has so far supported only two projects: a €150 million commitment to Vulcan Energy’s lithium extraction venture in Germany, which helped unlock approximately €2.2 billion in total investment, and up to €50 million for Arafura Rare Earths’ rare earth project in Australia. At least two additional investments are expected before the end of the year.

    The additional funding requires parliamentary approval as part of the 2027 budget process in July and could still change. Officials considered exempting such investments from Germany’s constitutional borrowing cap on national security grounds, as has been done for defence spending, but that approach was shelved due to legal and constitutional obstacles. Fund resources are already treated outside the debt brake because they are booked through KfW as financial transactions.

    Questions remain about the fund’s adequacy relative to its ambitions. Support is currently capped at roughly €150 million per project, even as the broader aim is to catalyse as much as €100 billion in investment.

  • Arafura Rare Earths Locks In $145 Million Australian Government Financing as Nolans Project Reaches $659 Million in Committed Funding

    Arafura Rare Earths Locks In $145 Million Australian Government Financing as Nolans Project Reaches $659 Million in Committed Funding

    Arafura Rare Earths has finalised agreements with Australia’s National Reconstruction Fund Corporation for approximately $145 million in government support, bringing the total equity and equity-like commitments secured for its Nolans rare earths project in the Northern Territory to around $659 million.

    The agreements formalise a commitment whose key terms were first established in January 2025, with the final contracts now completed and the conversion price at which government support could be transformed into Arafura shares also defined. The National Reconstruction Fund Corporation is a state-owned body established to support domestic manufacturing and industrial capability.

    The latest milestone follows binding commitments secured in April 2026 from Germany’s raw materials fund and Export Finance Australia, which together significantly expanded the project’s financing base. The Nolans project is planned to become Australia’s first facility to combine rare earth mining with downstream processing at a single integrated site — a distinction that has attracted attention from governments seeking to build rare earth supply chains outside China.

    Despite the progress, several key steps remain before full financing can be achieved and a final investment decision made. Major project loan agreements still need to be finalised, shareholders must be engaged, and all conditions precedent to the investment decision must be satisfied.

    Arafura is seeking to supply neodymium-praseodymium oxide for use in permanent magnets for electric vehicle motors and wind turbines, with planned output of 4,440 tonnes per year from the second half of 2029.

  • Race to Lock Up Rare Earths Supply Leaves Germany and South Korea Exposed, Warns Arafura CEO

    Race to Lock Up Rare Earths Supply Leaves Germany and South Korea Exposed, Warns Arafura CEO

    Germany and South Korea face a critical vulnerability in their rare earths supply chains as the United States and Japan move rapidly to secure long-term agreements with the world’s limited pool of non-Chinese producers, the chief executive of Australian rare earths developer Arafura has warned.

    The alert comes as China’s export restrictions on key rare earth minerals — imposed last year — continue to reverberate through the automotive and defence industries globally, accelerating a scramble among Western nations to lock up alternative supply. With only two Western producers currently operating at scale — Australia’s Lynas Rare Earths and US-based MP Materials at its Mountain Pass deposit — available supply outside China is extremely constrained.

    The US has already secured Mountain Pass output through a government deal with MP Materials, covering a significant portion of American demand. Lynas this month concluded a long-term supply agreement with Japan Australia Rare Earths running through 2038, alongside a shorter-term deal with the Pentagon. With Lynas’ supply now effectively committed, Arafura CEO Darryl Cuzzubbo said his company had observed a marked increase in urgency from prospective buyers. “The EU and in particular Germany, and Korea are quite exposed — where are they going to get their supply from?” he said.

    Arafura is positioning its Nolans project in Australia’s Northern Territory as one of the few remaining sources of meaningful non-Chinese supply. The project is planned to produce 4,440 metric tons per year of neodymium-praseodymium (NdPr) oxide — a key material used in rare earth permanent magnets for electric vehicles and wind turbines — from the second half of 2029, representing roughly 4% of projected global supply. The company already holds supply agreements with Hyundai Motor, Kia, Siemens Gamesa Renewable Energy and commodity trader Traxys.

    Arafura is now seeking to place a further 1,200 tons of NdPr oxide to bring secured supply to 80% of planned output — a threshold required by project lenders before a final investment decision can be made and construction begins. Cuzzubbo said negotiations were underway with multiple parties, with pricing the determining factor. “We haven’t put all of our eggs into one basket — the one that gets there first on the right sort of pricing regime is the one we’re going to go with,” he said. Arafura is seeking terms in line with those achieved by Lynas, which locked in a price of $110 per kilogram of NdPr oxide in both its recent deals. China-based spot prices currently sit at around $103 per kilogram.

    Beyond direct supply agreements, Arafura expects to participate in Australia’s A$1.2 billion ($836 million) strategic critical minerals reserve, which is due to begin operating in the second half of this year. Cuzzubbo called for the reserve’s floor price mechanism to be anchored to an independent international benchmark — such as that published by Benchmark Minerals Intelligence — rather than to Chinese market prices, which he argued have distorted the global market. “The market is broken — you need to create a functioning market,” he said. “A floor price will take uncertainty out of pricing, which has been very uncertain given China’s control, and that will help bring in investors.”

    He also framed the reserve as a strategic tool for Australian diplomacy. “It is a bit of a bargaining chip that the Australian government can use with its allies,” he said, adding that it could help accelerate project development across the sector.