The Arafura Resources Limited (ASX: ARU) share price has taken off in the past month.
This ASX rare earths share has rocketed 79% since market close on 28 February. In today's trade alone, the company's shares are soaring more than 15% higher at the time of writing.
Let's take a look at why Arafura is having such a good month.
Rare earth deposit
The Arafura Resources share price has stormed ahead since receiving a $30 million grant from the federal government. The funding will go towards a $90.8 million rare earth separation plant at the company's Nolans project near Alice Springs in the Northern Territory. Arafura's shares have surged 65% since the announcement on March 16.
Arafura Resources believes it can provide 5% of the world's rare earths, the ABC reported recently. Managing director Gavin Lockyer sees the separation plant as pivotal for the industry. He told the ABC:
It's where all the real value-add is done to our product. If you don't build a separation plant, then that product will have to go offshore – namely China – for downstream processing.
In announcing funding for the project, the federal government described the plant as "the first of its kind rare earth separation plant in Australia and only the second outside China". In a statement signed off by Prime Minister Scott Morrison and Energy Minister Angus Taylor, the government said:
The $90.8 million project, located in the Northern Territory, will leverage Australia's mineral processing expertise to develop rare earth separation technology not currently available here now, creating 650 jobs at the peak of construction and new high-value export opportunities.
Electric vehicle demand
The Arafura share price may also be lifting amid growing consumer sentiment towards electric vehicles (EVs). Rare earths are critical in the manufacture of EVs. As my foolish colleague James noted recently, there is optimism higher oil prices will accelerate the shift to electric vehicles. The crude oil share price has surged 10.28% in a month, Trading Economics data reveals.
In other news, Arafura was added to the All Ordinaries Index (ASX: XAO) in March.
Arafura Resources share price snapshot
The Arafura Resources share price has surged 84% in the past year, while it has soared 62% year to date.
For perspective, the S&P/ASX 200 Index (ASX: XJO) index has returned about 9% over the past year.
The company has a market capitalisation of about $527 million based on the current share price.
