Arafura Rare Earths, an ASX-listed mining company, has secured a non-binding letter of interest (LOI) from the Export-Import Bank of Korea, Korea EXIMbank (KEXIM), for up to $150m (A$228.05m) in debt.

If approved, the $150m amount will be dispatched in two equal tranches. While $75m will be offered as a direct loan, an additional $75m will be provided as a debt guarantee.

Subject to further negotiations, KEXIM subsidiary KEXIM Global (Singapore) could also lend under a commercial bank tranche.

The debt financing will be used by the company to support its Nolans project, which hosts rare earths-phosphate-uranium-thorium minerals.

The project is located around 135km from Alice Springs in Australia’s Northern Territory (NT).

The measured resources at the project are 4.9 million tonnes with 3.2% of total rare earth oxides (TREO), 13% of phosphate, and 26.1% of neodymium and praseodymium (NdPr) enrichment.

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By GlobalData

Total resources are 56 million tonnes, with 2.6% of TREO, 11% of phosphate and 26.4% of NdPr enrichment.

KEXIM has signed the LOI, as the mine can produce NdPr that plays a critical role in the electrification of South Korea’s automotive sector.

The letter is linked to the binding offtake deal between Arafura and Korean automotive giant Hyundai Motor and Kia, to supply up to 1,500 tonnes per annum of NdPr oxide, signed last November.

This represents around 40% of the 85% annual production from the project that is available under long-term sales arrangements.

The debt funding from KEXIM follows the company’s strategy to fund the project with debt and follows the signing of a similar LOI with Canadian export credit agency Export Development Canada for up to $300m, in June this year.

It also secured letters of support from Euler Hermes in Germany for up to $600m, in relation to an offtake arrangement with German companies, this March.

Arafura Rare Earths managing director Gavin Lockyer said: “We are very pleased to welcome KEXIM’s Letter of Interest to provide debt financing support for the Nolans Project. Arafura’s foundation offtake agreement with Hyundai and Kia was the beginning of a meaningful relationship with Korea, and our engagement with KEXIM further strengthens that relationship.

“KEXIM’s indication of support for Nolans directly reflects the significant contribution that NdPr from the project will play in delivering upon Korea’s long-term aspirations to be a global leader in electric vehicles and other sustainability-focused technologies. We are delighted at the prospect of working closely with KEXIM as we continue our efforts to bring this globally significant project into full construction, and subsequently into production.”

In November 2022, the company secured approval from the NT government for its Nolan mining management plan. With authorisation, the company has the right to mine, construct and operate the project.