MELBOURNE (June 20): Commodities trading firm Noble Group is set to take a small stake in ambitious Australian rare earths developer Arafura, raising its exposure to strategic minerals critical to high-tech industries and electric vehicles.
In a filing to the Australian Securities Exchange on Thursday, Arafura said that Noble's rare earths subsidiary Talaxis would underwrite A$7.2 million ($6.8 million) of a A$23.2 million share offering. According to Reuters calculations, that would give Talaxis a stake in Arafura of around 8%.
The offering was priced at a hefty discount -- A$0.085 compared to A$0.125 on Wednesday's close -- sending shares in Arafura skidding 20% on Thursday. Prior to the offer, the developer's market value was around A$98 million.
"We recognise the growing importance of technology metals to the global renewable energy sector, as well as to broader technological industries," Noble Chairman Paul Brough in the statement. "Noble Group sees this as a core, strategic business growth area."
Rare earths are a group of 17 minerals critical to a wide array of industries, from high-tech consumer electronics to electric vehicles and sophisticated military equipment.
China is the world's largest producer of the metals and state-owned news outlets have reported that as part of the trade dispute between it and the United States, it could cut its shipments there, stoking supply concerns. The United States imports 80% of its rare earths from China.
Arafura is developing the Nolans project in Australia's Northern Territory, seeking to secure US$1 billion in funding for the project that includes a processing plant.
It is one of a handful of development projects in the country that have in recent months seen more strategic interest after years in limbo.
Australia contains only 2.8% of the world's rare earth reserves, according to the United States Geological Survey.
However, the country accounts for more than half of the new projects in the global pipeline.
Noble, the once mighty commodity trader, completed its drawn-out US$3.5 billion debt restructuring late last year, emerging as a leaner, Asia-focused coal-trading business.
The investment is its second into a rare earths project. It is the largest shareholder in Canada-listed Mkango Resources, which has a high-grade rare earths deposit in Malawi, with a 12.5% stake.
