Australian critical metals developer Arafura Rare Earths (ASX:ARU) has signed an offtake agreement with global wind turbine manufacturer Siemens Gamesa Renewable Energy.
The offtake agreement centres on the supply of neodymium-praseodymium from its Nolans Project to Siemens over a 5-year term which can be extended for a further 2 years by mutual agreement.
Under the agreement, 200 tonnes per annum (tpa) of neodymium-praseodymium will begin in 2026, increasing to 360tpa in the second year, and 400tpa in years 3 to 5 to align with the ramp-up of the project.
Other key terms of the offtake agreement include pricing being contractual but determined by referencing the neodymium-praseodymium Ex Works China price per tonne, and commercial grade neodymium-praseodymium/total rare earth (TREE) must be more than 99%.
The offtake is subject to certain conditions precedent being satisfied by no later than 30 September 2026, such as Arafura becoming eligible for Untied Loan Guarantee cover from UFK-Guarantees of the Federal Republic of Germany for financing a raw material project, completing construction and development of the project, as well as starting commercial production and ramp up.
Siemens Gamesa is the world’s leading manufacturer of offshore wind turbines, and this agreement complements our strategy to create supply diversification into the renewable and E-mobility sectors”
Commenting on the offtake agreement, Arafura Rare Earths Managing Director, Gavin Lockyer says: “We are delighted to have concluded negotiations for our second offtake agreement. Siemens Gamesa is the world’s leading manufacturer of offshore wind turbines, and this agreement complements our strategy to create supply diversification into the renewable and E-mobility sectors.”
The company’s share price on the Australian Securities Exchange (ASX) had risen by 4.16% to $0.020 as of 1:20pm AWST.
Arafura reports the neodymium-praseodymium from Nolans will be used to manufacture permanent magnets used in offshore wind turbines assembled at Siemens Gamesa’s Cuxhaven production facility in Germany.
The company says this process aligns with Arafura’s offtake strategy to target original equipment manufacturers from geographic regions known to have supportive Export Credit Agencies (ECAs) and the recent appointment of KfW IPEX-Bank as an additional mandated lead arranger and ECA structuring bank for the project’s debt financing.
The offtake agreement will support ongoing discussions with German ECA Euler Hermes which recently provided Arafura with a non-binding letter of in-principle support for an indicative only untied loan guarantee of up to US$600 million.
A final guaranteed amount will be determined with reference to the offtake volume processed in Germany, final offtake structures with German companies, and neodymium-praseodymium market conditions at the time.
As reported in November 2022, the company expects first production of neodymium-praseodymium oxide to occur in 2025, with annual production anticipated to ramp up to 4,440tpa in 2028.
These dates are dependent on securing remaining offtake agreements, and funding on appropriate terms to develop the project, as well as construction, commissioning, and ramp up of the project.
Siemens Gamesa Renewable Energy is a global wind turbine manufacturer that has installed 130 gigawatts of clean and sustainable energy around the world.
Images: iStock
