May 22 (Reuters) - Australia's Arafura Rare Earths said on Friday it plans to raise about A$350 million ($250 million) in a share placement backed by Gina Rinehart's Hancock Prospecting, to help fund development of its Nolans project.
The share placement plan comes a day after the miner approved the development of its $1.6 billion project in the Northern Territory, which is set to be the country's third-biggest rare earths operation by the end of the decade.
Arafura will issue shares worth about A$175.5
million at A$0.260 apiece in the initial tranche, representing a 16.1% discount to the stock's last close on Thursday. In the second tranche, it will issue shares of A$174.5 million subject to shareholder approval.
Hancock Prospecting, owned by Australia's richest person Gina Rinehart and also Arafura's largest shareholder, has committed to invest about A$85 million in the raising.
Upon completion of the fundraising, Hancock's stake in Arafura will rise to roughly 17.5% from 15.5% at present.
Arafura said proceeds from the placement will fully fund the equity component required to develop the Nolans project.
The miner has already secured financing commitments from the export credit agencies of the United States, Canada, Germany and South Korea, alongside global trading houses and manufacturers, as Western countries step up efforts to diversify away from China, the dominant rare earths producer.
The company said it has now secured about 93% of its binding offtake target for neodymium-praseodymium (NdPr) oxide from the project, following recent supply agreements and support from export credit agencies.
Australia is pushing to become the top supplier of rare earths to its allies, and Arafura is slated to supply 500 metric tons of NdPr to the country's strategic minerals reserve, which is set to be operational by year-end.
Arafura is also undertaking a share purchase plan to raise up to A$25 million from retail investors, it said.
Shares of the firm were on a trading halt.
($1 = 1.3998 Australian dollars)
(Reporting by Rajasik Mukherjee; Editing by Subhranshu Sahu)
