ASPIRING rare earths miner Arafura Resources is on a renewed push to progress its Nolans project in the Northern Territory and has set a date for mid-next year to decide whether to continue or walk away.
Arafura has been struggling to make headway on the project for most of the past decade, but chief executive Chris Tonkin told WA Business News now was the time to really push ahead.
“We’ve been working on this for seven years and we’ve had ups and downs; clearly the pressure is on us to move it along,” Mr Tonkin said.
The company needs $30 million interim funding for a feasibility study, which is planned for completion mid next year.
Beyond that a further $2 billion will be required to get the project into production by about 2016-17, if it’s given the green light.
That delay between investment and payback is lurther hampering Arafura’s attempts to sweet talk investors.
"The market is constrained, I can understand that, particularly for a project like ours that has a long gestation,” Mr Tonkin said.
“Ours will take about three years to be built; it’s a long lead time for long return.”
Few people are better suited to the difficult task than Mr Tonkin, who has a 25-year history in project financing across the resources, power and telecommunications sectors.
Mr Tonkin joined Arafura as a non-executive director in 2011, and was appointed chief executive officer in March; tasked with securing initial funds to complete a feasibility study for Nolans and the $2 billion capex beyond that.
“It's not like the 15 years we had before the GFC; you could have put a trained monkey out there and he could have raised the capital,” Mr Tonkin said of the challenge.
“We know there’s a lot of scepticism about whether we can raise the capital needed.”
The company has received positive feedback from Resource Capital Research, which said recent successful fundraisings should remove much of the market’s uncertainty.
Arafura announced last year it needed about $70 million to complete the feasibility study.
In March it raised $8.2 million through a share purchase plan, while a recent tax refund of $22.5 million from the federal government has given the company additional breathing space.
Long-time investor Chinese company ECE Nolans Investment also purchased shares worth $9.9 million, to bring its holding in Arafura up to 24 per cent.
ECE took a 19 per cent stake in lithium company Galaxy Resources this week - adding to its portfolio of resource investments, which also include niobium company Globe Metals and vanadium company TNG.
ECE was initially established as lead investor in the Arafura project, but the relationship has been less than perfect.
Mr Tonkin said the company reduced its holding in Arafura in 2009 when initial expectations of progress weren’t met.
Arafura has since worked hard to regain ECE's confidence, which involved board cutbacks and a reshuffle to cut costs.
Mr Tonkin said the capital injection was a sign of ECE's confidence in both the project and the company - a point which Resource Capital Research also made.
“(It) is a major statement of confidence in the project's future and the potential downstream partnering,” it said in a recent research note.
The raisings have left Arafura still needing $30 million in the short term, something Mr Tonkin said the company was approaching cautiously.
“If we wanted to do something silly we could get the money ... but our share price is low and we are trying to do the right thing by our shareholders,” he said.
“We’ve tended to resist proposals by saying ‘no we don’t want your $ 100 million, just give us the $30 million’. Just getting the (smaller amount) is a heck of a lot harder than larger amounts.
“We just need to get the first one on board; if we can do that then it will start the ball rolling.”
