Earnings Transcript for ARU.AX - Q4 Fiscal Year 2023

Unidentified Company Representative: I'll just kick off with some administrative details about our call this morning. Welcome to Arafura Rare Earths Quarterly Investor Briefing for the Quarter Ending 31st December 2023. All attendees this morning on the call will have an opportunity to ask questions when we get to that portion of the call. [Operator Instructions] We'll have a 45-minute call duration this morning adjusted to allow for a slightly late start time due to some technical issues. I'll hand over to Mark now.

Mark Southey: Okay. Thanks Sami. Thank you to the shareholders for the opportunity to take you through -- update you as our quarterly has just come out. Today, we've got myself, Mark Southey as Chairman here; Gavin Lockyer as the Managing Director; we've got Darryl Cuzzubbo joining us also a Non-Executive Director in Arafura here; and of course, Peter Sherrington, our CFO. Gavin probably been in hand pretty much straight over to you for -- just to talk on to the update.

Gavin Lockyer: Yes, sure. Thanks Mark and thanks, everybody, for your interest in attending today. I guess the quarter really saw us winding down a lot of activity or closing out those activities at site, which were being undertaken in order to make the site ready ahead of construction. And so those activities were closed out during the quarter, which means that we now have water, we have access roads, and we have half a fly camp built ready to go for when the financing is in place and the construction is ready to get into full swing. So, that workflow was always scheduled to finish in this quarter, and that's now completed. And obviously, the cash spend associated with that will be significantly reduced over the next quarter. In terms of operational readiness, Darryl Cuzzubbo, who is a Non-Executive Director of Arafura and also sits on our Project Advisory Committee has been spending a fair bit of time in the Perth office, working with the project team, identifying measures to look at cost reduction, but also to start considering building the operational capacity of the organization, and I'll hand you over to Darryl in a minute to talk a bit further about that. Obviously, the fully underwritten placement was done in December. The funds there are predominantly to be used to maintain project momentum, whilst the company is looking to finalize the debt financing, which has, as you all know, taken a little bit longer than we anticipated. So, the target of that raising was really to make sure that we had sufficient capital to make sure that the fundraising activities that we were looking at for the wider funding project financing activities are able to be completed. And Peter will talk about some of the achievements we made, particularly with the Korean export credit agency in KEXIM on as we go through this briefing. So, again, we would have also seen the announcement today around the SPP closing for AUD 6.5 million. And I'd just like to thank all those shareholders that participated and continue to support the company in a positive manner. So thank you very much for your support. Darryl, did you want to talk about the activities that you've been working on over the period?

Darryl Cuzzubbo: Sure. Thank you, Gavin, and thank you, everyone, for giving us the opportunity to give you a little bit of an update this morning. As Gavin said, my name is Darryl Cuzzubbo, I've been on the Board for a bit over two years and bring a mix of operational skills of project delivery skills given the roles that I had in both BHP and Orica. Whilst we're waiting to secure finance, we want to make sure that we're using the time to be absolutely ready for the project delivery phase, but also for the commissioning and operational phase, so that we can move safely and quickly into operations post delivering the project. It's along these lines, I want to give you a little bit of an update on the operational readiness side and why it's so important. It's the operational readiness side that makes sure that we do, we navigate the transitions that we've got to go through in a safely controlled way, but also quickly. I would argue that the single biggest lever that we have to de-risk project delivery and to ramp-up quickly and to get into cash flow generation quickly is to have a solid operational readiness plan and people in place to pull it off. The operational readiness also ensures that ultimately as we get into stable operations, we can de-bottleneck the plant and ultimately push it beyond its nameplate capacity. Now the scope that we're talking about, it's broad. It covers everything from making sure that we've got the right processing controls in place to run the plant safely, having the right asset management or maintenance strategies in place, the right procurement strategies, the right service providers, so that we've got OpEx optimized, the right IT systems. But the most important thing of all is to make sure that we've got the right skills, the right people with the right training when we need them within the right organizational culture to ramp up, plan up safely and quickly and bring in the commissioning timeline. I draw your attention to Fortescue. If you look at Fortescue, when they brought their mines on, agri redefined what was possible around productivity, around capital intensity and unit cost. And the enabler of that was making sure they had the right skills, right people when they needed it as their mines went into production. And this is even more important for Arafura, given the complexity of our plan. So at this point, our aim is two-fold. One is have a very robust plan covering those broad sorts of topics that I mentioned, so that as we secure finance, we know exactly what we need to do. And this keeps us proactively on the front foot. The second thing is to make sure that we've got the right organizational structure as we get -- as we move out of project development mode into project delivery mode and ultimately into operations and that we're recruiting the right people into those leadership positions. We've been testing the market for the sorts of people that we want to bring into our organization and it's been pleasing that we've been able to attract high caliber people and as we lock them in we'll obviously be able to share more with you. And the draw card for these people has been -- has been Nolans project and is sort of an organization that we want to create, which is an organization that's obviously crucial to the energy transition and one that I think will be iconic, both of the Northern Territory and for Australia. And if I might just stop there, we'll obviously share be able to see more as we secure these people and as we get this operational this plan in place and really trigger it once financing is secure. Thank you. And I'll hand back to you, Gavin.

Gavin Lockyer: Sorry, how many times we heard that over the last few years. Sorry about that. I guess the last sort of dot point on the highlights list for the Appendix 5B that was lodged this morning was around KEXIM, Peter. And I guess, more generally there's been a couple of questions around the Australian government and their interest in the project around financing. So you might want to address both those at the same time.

Peter Sherrington: Look, I might take it back a step and just quickly touch on offtake as well, Gavin. So

Gavin Lockyer: Yes, sure. Sorry.

Peter Sherrington: So that's okay. Look, I – Look, and this ties in with the discussion around the funding that Gavin has already mentioned, the shareholders will know we're targeting offtake of around 85% to secure the project financing. There is some flexibility there. It's probably something in the range of 80% to 85% just to give some sense around those numbers, the Hyundai and Siemens can measure, offtake agreements account for 55% of that target. We have contract negotiations and when we say contract negotiations, these are very advanced offtake agreements with another 1,600 tonnes of NdPr, which accounts for another 45% of that offtake target amount. So we're very well positioned there with offtake the strong interest in Nolan's NdPr for supply chain diversification. We also importantly have more than sufficient offtake with groups and volumes that are now strategically aligned and linked to the ECAs that we're approaching for project funding. Really around offtake from this point on, it's about examining opportunities that we may bring into the final offtake group, which would potentially displace some of those groups are in advanced contract negotiations. But engaging with specific groups and there is only a small number of them, who we are a larger multinational OEMs, who we are now targeting for strategic investment. So we have sufficient offtake lock the way to cover the debt requirements. Any new groups that come in to displace others because they will be strategic from an equity point of view. So we're really looking to optimize that that final offtake structure now. And probably with some competitive tension, there's the opportunity to examine that. Rolling into the project funding, probably…

Gavin Lockyer: Sorry, Peter. Sorry, just before you do that, there's been a number of questions about GE and where they sit. I think the shareholders I've spoken to on the phone, I've made them aware of the link between EDC, Export Development Canada and also procurement of turbines. But perhaps you'd just like to comment on where you see that at the moment.

Peter Sherrington: Yes. So the GE contract is very advanced. We have fortnite [ph] engagement with GE. There's a strong strategic link in the project that goes beyond just the offtake. As Gavin has mentioned, Export Development Canada is US$300 million of the project funding of $775 million. In addition to that, we have an arrangement on procurement for gas turbines for power generation at site. There are a number of things that we're working on with GE in addition to the offtake and probably the complexity we have around finalizing the offtake is the GE Renewable Energy division is currently being demerge from the GE consolidated group. So there's a couple of things going on there that are probably holding us up, executing the final agreement. But the discussion we have ongoing with them is not around volume and it's not around pricing structures. It's around the fundamentals of how all of those things interact with each other. On the project funding, so the -- probably the key thing during the quarter was the introduction of KEXIM to the lender group. We have significant offtake into Korea, and it's all being targeted at energy transition and EV mobility through the offtake arrangement with Hyundai and Kia. We've been engaged with a number of the Korean ECAs since probably late 2022. Probably one of the game changes for us was during the year that the mandate for KEXIM was changed to enable it to have a greater focus on energy transition and particularly for critical materials for energy transition. This was a catalyst for us to our power engagement with KEXIM and we were fortunate enough that they were able to move very quickly in the context of ECAs and large lenders by 1, December, they actually were able to issue that letter of intent for funding of up to US$150 million, which really rounded out our final project financing structure. So there was a slot within the financing structure. We knew debt sizing was appropriate at US$775 million, but we had $150 million shortfall, which we had earmarked for our Korean ECA. The good outcome from the engagement with KEXIM is that they actually split the $150 million to two tranches, half being a $75 million direct lend and the other half being a $75 million ECA guarantee, so a guarantee that we'll sit across the commercial lenders. The upside of that is that the commercial tranche reduced to $175 million. So a large proportion of the offtake of the project funding is now tied down as direct lend from ECAs. It's probably a better structure than we actually had planned to put in place. I think it's actually a really good outcome for the project in terms of showing the strong strategic support from those export credit agencies in addition to the -- we have support from Export Finance Australia and the Northern Australian infrastructure facility for roughly US$225 million. And then the rest of the offtakers have assisted us in attracting those the balance of the debt funding of $300 million from export development Canada tied to GE, $150 million tied from KEXIM tied to Hyundai and Kia, and then the funding from Euler Hermes by way of the ECA guarantee being tied to offtaking the journey from Siemens Gamesa Renewable Energy and a couple of other offtakers who are sitting in the contract negotiation phase. So we're in a really strong position with an excellent debt structure. It has some complexities given that we have a number of export credit agencies within the structure. The work around the debt funding is advancing quite well. The introduction of KEXIM to the funding structure has enabled the other lenders to advance their credit proposals and their credit papers, and including EFA and NAIF, those groups are now very advanced with the their credit approvals, because they can see how this final funding structure will work. And we're working really hard to continue to advance to our target of locking down the funding structuring in Q1 of this calendar year. So KEXIM has been a catalyst for advancement of the approval processes. There's still some work going on in the background around due diligence and from a technical perspective, some legal DD. Those work programs are all very advanced. We also have an environmental and social DD program running. That's a really big focus for the export credit agencies. That work is also very well advanced. We've also provided some additional resources to KEXIM around legal assistance with legal counsel here in Australia. And ramped up access to the advisors around technical and also environmental and social. So as we can fast track them and bring them up to the same timeline process as the rest of the lenders. So probably quite an important catalyst, the introduction of KEXIM to the funding group, but really proud and quite, I think, we've done a good job in bringing together a really good funding structure that we probably haven't seen for a rare earth project before.

Gavin Lockyer: And I think you shouldn't undersell the fact, Peter, that you've got five jurisdictions you're dealing with here, Australia, Korea, Germany and Canada and others. And you're trying to align debt term sheets such that they're all equal, and bringing all that together has not been necessarily an easy task when they all have their own individual credit processes and due diligence processes. So it's been a pretty big task and effort by the team.

Peter Sherrington: Yes. That's right. The team has done a good job of pulling that together. And I think, the lenders though are all working very well together. We were getting good traction where lenders are attending weekly all party meetings and we have planned some face-to-face meetings to start to wrap up the long-form documentation for the process. So yes, a lot of work, hard work is being done, and -- but it's -- I think it's an outstanding result from a debt structuring perspective. I think that's about it for me on offtake and project fund -- funding.

Unidentified Company Representative: Gavin, is there anything additional you'd like to add at this point?

Gavin Lockyer : No, I don't think so. I think there's -- you probably want to move into maybe some of the questions, Amy.

A - Unidentified Company Representative: Correct. So those attendees on the call who'd like to ask a question. I welcome to raise a hand. We then have some questions that have not already answered have been submitted via the chat function and will be addressed. We'll begin with those raising hands now. Stephen Schubert.

Unidentified Analyst: Hi. Yeah, just wondering about the fall in the NdPr price and what that's doing, particularly for the commercial debt negotiations, whether it is increasing the risk that, that won't come off.

Darryl Cuzzubbo: Shall I?

Peter Sherrington: So I'm happy to handle it. So…

Darryl Cuzzubbo: Yeah. Go ahead. Okay.

Peter Sherrington: Look, I think it's a really good question. I mean, obviously, we perhaps saw the issues that some of the lithium producers are facing or the lithium developers and can see that that's impacting their debt sizing. I think from our point of view, our forecasting has always been quite conservative from a -- for the funders. So we rely on independent market consultant. Their pricing forecasts have probably always been fairly conservative and debt sizing has been based on those forecasts. I think lithium probably achieved some very significant highs, probably had much more volatility or upside in its pricing experience over the last couple of years. NdPr has not had those same sorts of swings in pricing. So look, I agree that it's a risk that we continue to watch. We have our pricing forecast that our lenders are focused on. So there's less focus on spot price and more focus on the forecast price. The other thing that is very different about the NdPr space is we don't see the supply chain pipeline that we've seen with lithium producers. The number of NdPr producers that are sitting in the development pipeline is quite modest. And then in addition to that, the numbers that are sitting in the pipeline for development for ore through to oxide to create those diversified value chains. So you need to be producing at least an oxide to feed into that diversified value chain. There is actually only a few groups that sit in that part of the supply chain from a development perspective. So the supply side story is very different, much more capital-constrained, technology barriers. So advanced projects sitting in the NdPr development space are actually fairly rare. And that's probably a key differentiator that we've seen from some of the other critical materials. So – yeah, take your point. The lower NdPr price is a risk. It's actually the price forecast that is a larger focus for the lenders, rather than spot price. And there's probably a fairly good understanding of the issues and the collect cities around the limits on the pipeline for new supply.

Unidentified Analyst: And of course, that's why you have price protection and price ceilings in some of the contracts to help ease the, I guess, concerns of any of the lenders that are there?

Peter Sherrington: Yeah.

Unidentified Company Representative: Thank you. Bennet [ph]?

Unidentified Analyst: Can you hear me? Hello?

Unidentified Company Representative: Yes.

Unidentified Analyst: Yeah. Good. Thanks Peter. That was an interesting update. I just want to clarify you're saying that you're expecting the funding side of things to be completed in the first quarter of this financial year. So I think we heard that many times before, I just want to make sure that you will have a lot more certainty around this statement again.

Peter Sherrington: Yes. So I think the major challenges we have in terms of the project financing, when we put out the updated schedule, we were fairly confident that KEXIM would come into the structure at that point in time. We've had a fairly good indicator from them that they felt that they could get through to their LOI phase in early December, which they did on the 1st of December. So, we've got a lot of momentum in terms of hitting that target. I think probably the key risk for us around the debt funding target hitting that date is really around KEXIM given it's the last one into the syndicate, and we want all of the lenders to maintain some momentum and not feel as though they don't need to wrap-up their work programs because KEXIM still has only just come into the syndicate. So, as I mentioned, the way we're managing that is providing every resource possible for KEXIM. We'll have a face-to-face workshop with KEXIM over the next month in advance of face-to-face meetings with all of the lenders. So, we're throwing everything we can at trying to hit that target for March and ensuring that all the lenders are up to speed. I think that's probably the strongest of undertaking I can give around that. But we're certainly throwing every resource we have at getting all those parties across the line for that Q1 target.

Mark Southey: I'd just like to reinforce on that comment that as you said, it's a target. That particular target is not a date that's under our control, unfortunately. We're subject to how fast that moves and we are certainly resourcing it to get there. But the -- that -- but for us, that's a target date, but it's not a date that we control, and that's just a fact.

Unidentified Analyst: Sorry, gentlemen. But seeing that that part of the puzzle looks like to be wrapped up by end of first quarter, hearing what market is spiking. But how do you feel about the current share price and completing the other part equity side of the funding as well as the -- and looking at how things are going forward, when do you think you can announce in FID, because you talked about FID 2022? And I guess having listened to Darryl with the progress of the -- or the construction work, are we putting the cart before the horse in this situation? I mean, I expressed my concern in the past about building all this accommodation and everything sitting idle at the moment and there's a lot of care and maintenance in it. So, I guess for shareholders who have been with the company for 20 years like myself, we are very concerned that we seem to be dragging on this FID delay all along the line that we've been sucked into on capital raising after another. We just want to see the company survive. We're not sellers. We want to see the company going with the 38 years of production. But give us some confidence they can deliver rather than talking about it and delaying the timeline.

Gavin Lockyer: Bernard, you touched on the equity side of things. And certainly, at a share price where it is, it's difficult. And look, there's a number of reasons why our stock price could be where it is. Obviously, there's the shorting which everybody is talking about. There's the recent cap raising would have driven it down towards 16. And I know I appreciate that it's below that now. And also, you've got the NDPR price at some extremely low levels compared to where it's been over the last two years. So -- and our share price, as you well know, typically tracks the NDPR price. That aside, what I can tell you is what we are working towards. And I should tell you that in the recent -- and somebody has asked about Hancock, look, Hancock participated in their pro rata share in the cap raising. And so their percentage ownership hasn't changed -- since December 2022. They remain supportive. However, we -- just like you shareholders, they expect us to deliver. And we've certainly been receiving the same message from them that we've received from all of you. In terms of what we're doing regarding the equity, look, we continually work with Hancock. We work with other strategic investors, including potential offtake partners. In terms of going through a due diligence process and bring them up to speed for the bigger capital raising. And we certainly think that if we can secure the debt, as Peter has outlined, we have agreed term sheets. The debt stack then is locked in. We would expect a significant rerating of the stock. And that's no sort of that's no secret. I think that's a stock standard expectation in the market. There'd be some stock rerating at that point in time. And so we've been working with a number of groups, strategic cornerstone potential investors groups that we think can write big licks of equity for the bigger capital raising that we need to do. And so we're working through processes with them to ensure that when we are ready to go if market conditions are suitable, then we'll certainly hit the button, and it's not like we're sitting back waiting for the debt to be finalized before we move into the equity component that's certainly been an ongoing piece of work for the last at least 18 months to two years

A –Unidentified Company Representative: Thank you, Gavin. Regan [ph] I’ll turn to you.

Q – Unidentified Analyst: Yes. Thank you very much. Good morning, everyone. Just a couple of questions from me and probably just following on from the previous questions. Just that debt finalization by the end of Q1, is that sort of tied to locking up a further 1,750 tonnes under binding offtake? And I guess what gives you sort of the confidence that you're going to secure those in the next two months

Gavin Lockyer: So lenders won't necessarily require all of them to be at binding contract phase in order to go through their credit approval process. They've got pretty good visibility on who the groups are that we're engaging with. Obviously, some of them have linked in with the export credit agencies there's been engagement between those lenders and the export credit agencies or how their value chain would work. They have an understanding of how advanced we are in the engagement with these groups. So our intention would be to have the bulk of them locked down as binding offtake agreements or agreements that are set and agreed in principle. There may still be one or two of them who are sitting back at MOU with key terms locked down, the contracts still to be finalized. And then finalization of those arrangements will be a CP to the first drawdown on the facilities. So I think the off-take is unlikely to be the issue that holds us back from completing credit approvals and the financing by Q1.

Unidentified Analyst: Okay. Got that. And potentially, just following on from the first question with regards to sort of a downgrading of the price. We saw what happened to Liontown those in the back of Wood Mac downgrading their price, which flowed through to the lenders. I guess, if we see something similar happen to you guys, is that obviously going to affect the project? And is there sort of a potential that the project scope is adjusted on the back of that similar to what Liontown has done

Gavin Lockyer: Yeah. So I think we've been preparing -- so our independent marketing consultant prepares market updates for us on a periodic basis. Our last report from them has probably been prepared and reflects the -- the lower NdPr price. Whilst we've got a low NdPr price, we haven't had the same level of volatility over the last 12 months is perhaps what lithium has had. And whilst I agree that's still a risk that we get a market consultants report and an impact on debt sizing. Having said that, I see that without -- sort of, I don't have any insight as to exactly where Liontown is at. But from our point of view, I'd probably see the greatest risk around pricing trend as being at first drawdown because that's when debt sizing will really be reexamined again. And I think that where we see at the moment is our pricing forecast have probably already picked up most of the negative position around NdPr, which has been in the marketplace for most of the calendar year, and has been at a low point, whereas probably lithium has been trending down and is now at a low point, whereas we've been sitting there for a little while. And I think it's already been reflected in our debt sizing and in our forecasting, Reagan.

Unidentified Analyst: Thanks. So I'll leave it there.

Unidentified Company Representative: Connor?

Unidentified Analyst: Hi, guys. Thanks so much for following this call. I think I'll speak for pretty much most shareholders. We've seen price go from near $0.70 down to $0.12. I understand there's a range of factors that contribute to that. You mentioned -- so we've got strategic equity. We've got funding and we've got off-take. So we've got all these things that we've been hearing, and it sounds like everything is well advanced and we're proceeding towards hopefully, April. But I'm just wondering, when -- or in what order will these sorts of announcements come out? So we -- as shareholders, we hope that these positive announcements are going to come out in the next couple of months. Are we going to hear off-take first or strategic equity or funding. I'm just trying to one figure out, is it the chicken or the egg, what sort of comes first? And what's the sort of the flow on of these announcements that we are expecting to hit?

Gavin Lockyer: I think, you're right, it's chicken and egg and debt wants to be last, equity wants to be last and the off-take is want to be last. So, I can't give you a definitive answer there, Connor, but really, we're working on those three key work streams. Equity would definitely be after the debt whether there's some offtakes between now and the debt, I don't know, but those two work streams would be the key ones that you could keep an eye out for in terms of potential announcements.

Unidentified Analyst: Okay. Thank you

Unidentified Company Representative: Thank you. I'll make a call now for any attendees wishing to raise a hand and ask the question before we move to the submitted questions. Okay. Panel, I'll just go ahead and read some of these direct from the screen. Is there any possibility excess funds from the recent capital raising activity could be used for a share buyback, considering the advantage you would place on buy side pressure and decreased shares on registry. Can you please provide a comment?

Gavin Lockyer: Look, I'm not up to speed with ASIC requirements for share buybacks. But to be perfectly honest, we wouldn't have gone out to raise the capital if we didn't need it to fund project progression. So unlikely, but I note that I've received a number of queries around this, and I will look into it. But look, I think possibly we got three out of five directors here on the board. I'm sure the other two would have some comments around this. But we wouldn't have raised the capital if we were intending to just simply give it back, that's for sure.

Unidentified Company Representative: Thank you. I'll put this to the combined panel again. Could you address the market's perception of the China risk?

Gavin Lockyer: Well, yes, it's -- I mean, it's always been a risk. We operate in a market that is controlled by China. They continue and they continue to influence price. And where in DPR price sits right now just makes no logical sense to me and to I'm sure many other people. We understand also that where it currently sits, it's significantly below the cost of production for the -- one of the largest rare earth producers in the world, in China, Northern again. So logic would say that these current prices don't reflect reality in terms of demand and supply. And I think the fact they had to increase quotas in the last quarter of last year just to meet demand. I think, is a sign that the price of NDPR is not really reflective of the underlying market. And the Australian government, I think, realized this, hence the reason for their support through groups like NAF and Export Finance Australia because they realize that they need to get a couple of -- they need to get additional supply into the market to help try and break this deadlock. So yes, China is always going to be a risk. I guess the only way we can address that is just like [indiscernible] and that's to get into production.

Unidentified Company Representative: Thank you. We've had several questions submitted for the attention of the panel regarding short-selling activity ongoing short-selling activity. If you can provide commentary on that and what, if any, steps are being taken to address ongoing short selling.

Gavin Lockyer: Look, I can start. I think we have written to a number of shareholders on this topic. Short-selling is not illegal as has been suggested by a number of -- I see questions on this panel. Short-selling is a legal activity that is regulated by ASIC. And we can argue whether it's regulated directly or not, that's a separate argument. And I'm not sure if anybody on this call actually saw my article that went into the AFR just before Christmas addressing this very issue that really the Australian government, if they want to protect critical mineral industries and develop critical mineral industries, they really need to address the short-selling because it's not just Arafura. It's a whole raft of critical minerals projects that are all requiring large capital amounts to be raised in order to get into production, and we're all being targeted by the shorts. We do monitor it, yes, is one of the questions, what can we do about it? I don't think there's a lot we can do about it other than to deliver good news to the market, get our stock price up and take them out. And we saw a lot of them disappear at the last cap raising. And for those that have questioned it, we do not have any insight as to who is the funds that are lending their stock, but we believe that those that participate in the cap raisings are not part of that shorting group.

Unidentified Company Representative: Thank you. Any additional comment from the panel on short-selling? We've had a question, or several questions submitted regarding the recent placement and share purchase plan and the decision to include options in the placement, but not in the SPP. Could I ask the panel to comment on that decision, please.

Gavin Lockyer: Look, in order to get the cap raising across the line with the institutional investors, we needed to, I guess, sweeten the deal for one of the better phrase. And so that's where the market was pricing the deal. Was it $0.16 with those options? That was really out of our control if -- to get the deal across the line. In terms of not offering it to shareholders, the volume of options that would have been needed to be issued would be quite small. In fact, a number of holdings linked to $1,000 investment would certainly be pretty miniscule. And I'm not sure if I'm correct here, but they may even be non-marketable parcels. So in terms of the volume of options that would have been needed to be issued and the administrative -- I guess, administrative work in the background, it just wasn't viable to issue options to the SPP

Unidentified Company Representative: Thank you. We have time for one final question now. We've received one via the chat panel. Can you please comment on how long the cash will last with the current lower cash burn rate?

Gavin Lockyer: I'm sure CFO, you can answer that one.

Peter Sherrington: Look, we have a number of levers. So we’ll endeavor to make the cash last for whatever period we require through to the point where we have project funding secured. So our strategy at the moment is to decelerate and manage the expenditure. So the expenditure will be focused on things that are key to maintaining project momentum from a development perspective and probably ensuring that the debt funding processes are being properly resourced. The plan will be to accelerate those expenditure programs as we get more confidence around the project funding milestones being hit. So as when the eventual project funding is secured, we move into construction with some momentum. So, that initial program of works that was completed was all about being construction ready. That work is now done. We can now drop back those development activities and then accelerate them again. So we did that capital raise in December without really knowing we were concerned with how the new year would look. And we wanted to ensure that we had sufficient resources to provide ourselves with contingency in the event that there is something that arises around funding or more so from a market perspective, we are positioned to weather a storm. So yeah, there's no real response. The level of funding that was secured, we'll use a number of levers to make sure it takes us through to the point where we have the project funding secured.

Unidentified Company Representative: Thank you. That covers off the submitted questions. Some additional commentary has been submitted. If there is anybody else currently attending the call who'd like to ask a final question, we have time probably for one more, if someone wants to raise their hand otherwise, I'll pass back to the panel for final comments. Steven Schubert, I see.

Unidentified Analyst: Yeah. Just another Rare Earths project in WA. Hastings Tech Metals has split their process that they're just going to mine and not process as much due to inflationary pressures on their build cost. Is Arafura considering anything like that as if the debt financing doesn't come off in the way that you're hoping?

Gavin Lockyer: Look, I think we have gone through these studies historically, looking at whether we could sell a mineral concentrate or a mixed rare earth carbonate. The economics aren't great, and particularly even worse at sort of these pricing levels. I guess the other comment to make is that our off-takes are linked to producing rare earth oxides and or rare earth metal. So to change that strategy would not be appropriate. Additionally, all of that material must go into China. If you're not producing an oxide, the material has to go into China for further processing. And again, once it goes in there, you lose line of sight of your product. And historically, there's not been a lot of confidence that that material would actually be able to come back out to the customers which you've identified or agreed for the product to go to. So for us it's not really something that we're reconsidering. I think in terms of the CapEx blowouts with Hastings, I think most of the market wasn't very surprised to be perfectly honest. All I can say is that we constantly monitoring our CapEx. We've put our updates as often as we can. We took a big hit in November 2022, which captured a lot of the commodity and the price inflationary pressures. And we're doing ongoing trending analysis as was released last quarter. So I'd like to think that we're at least balancing our argument as to not going to a carbonate with the fact that we are putting a lot of focus on making sure that our costs are maintained – contained.

A – Unidentified Company Representative: Thank you. If there are no further questions, I'll pass back to you, Mark, to close out the call.

Mark Southey: Great. Thank you very much. Well, look, I hope that's given the shareholders that attended so a bit more insight into where we're at. I mean there's no doubt, the critical mineral sector is not without its challenges at the moment and particularly around NdPr price. We've had a number of really strong tailwinds. And it's just worth remembering most of those tailwinds still remain in price. The biggest challenge we have is probably obvious challenges around that NdPr price in terms of what's immediately affecting our share price improvement. But we are trying to build in resilience and a lot of focus has been gone in over the last few months and going forward is to make sure that we build resilience into Arafura because we understand that we're also not in control of all of those time lines, and we don't want to lead into the sense of being overoptimistic when we're not in control of those time lines. So as far as NdPr, though, overall, our offtakers have a very strategic view about this commodity and the oxides. I don't believe they have a strong focus on the spot price at the end of the day. I think it's there. The end market growth is still massive here. And there are very few real alternative sources of supply. So I think we should still all be feeling very, very positive about the future and where we're going. So on that note, I'd just like to thank the management here and the other directors, but more importantly, the shareholders and for your patience with Arafura. Thank you.

Unidentified Company Representative: Thank you. The call will be closed out now.

Gavin Lockyer: Thanks, everyone.

Peter Sherrington: Thank you.