ASX-listed Arafura Rare Earths has received conditional approval for up to $300m in debt finance from Export Development Canada (EDC) for its Nolans Project.

The Nolans Project will encompass a mine, process plant and related infrastructure to be constructed and located at the Nolans site.

This move is a significant step in diversifying the global supply chain for rare earth materials, essential for offshore wind turbines.

EDC’s financing is a result of a geostrategic partnership facilitated by GE Vernova, highlighting the Nolans Project's importance in the rare earth materials sector.

The support is tied to a non-binding memorandum of understanding with GE Renewable Energy and supply agreements with Canadian firms.

Terms for the EDC senior debt facility, including interest rates and conditions precedent to financial close, are expected to be standard for such agreements.

As per the proposed common terms deed, the EDC facility's availability is contingent upon Arafura meeting an 80% binding offtake target.

This target has been revised down from the previously stated 85% of nameplate capacity post-ramp-up, following an agreement in principle with the lenders.

Arafura's commitment to energy transition and supply chain diversification has garnered backing from various export credit agencies (ECAs) and government bodies for the Nolans Project's financing.

The proposed debt facilities, totalling $775m, include direct loans from ECAs and government agencies, as well as a commercial bank portion backed by ECA debt guarantees.

In early March 2024, Arafura initiated a request for proposals to secure limited-recourse project finance from several commercial banks.

The commercial bank tranche benefits from untied loan guarantees from Euler Hermes and KEXIM. Arafura is in discussions with a select group of international and domestic banks to finalise the remaining project financing and associated banking services.

Conditional approvals from the Commonwealth Government and EDC have provided leadership and impetus for the lender group to finalise credit approvals for the remaining senior debt facilities.

Arafura has already completed a comprehensive due diligence process with financiers and is in advanced stages of offtake negotiations with potential counterparties.

Arafura managing director Darryl Cuzzubbo said: “Debt financing from EDC signifies the increasing geostrategic importance of the Nolans Project and securing global diversity in the NdPr supply chain.

“EDC has responded strongly to Nolans as a strategic opportunity that will underpin the electrification economy. NdPr is critical in electrical vehicles, wind turbines and robotics.

“We are thrilled to be working with EDC and remain impressed with their innovative thinking and commitment to accelerating a lower carbon future. This announcement today brings us closer to a final investment decision on the Nolans Project.”