Arafura Resources share price extends gains on Friday, up 100% since March

Arafura extends gains on Friday to close the week higher

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Key points

  • Arafura Resources posted its quarterly update today
  • Shares have closed 6.7% higher, extending a now month-long rally for the company
  • The Arafura share price has spiked 113% in the last 12 months

Shares of Arafura Resources Ltd (ASX: ARU) lifted higher on Friday and finished 6.76% in the green at 39 cents apiece.

The Arafura share price also finished 6% higher for the week, bringing its total return to 100% since mid-March.

The company released its quarterly activities and operations update today. Let’s take a look.

Arafura Resources quarterly update

Key takeouts from the quarter include:

  • Neodymium and Praseodymium (NdPr) pricing continued to increase to US$152/kg in the quarter
  • Appointment of Societe Generale and National Australia Bank to execute export credit agency driven debt funding strategy
  • Strong cash position of $33.5 million to continue Front-End Engineering Design (FEED)
  • FEED works progressing in line with schedule
  • Award of $30 million grant under Federal Government’s Modern Manufacturing Initiative for Nolans rare earth separation plant

What else happened this quarter?

As NdPr prices continued to rise last quarter, this has reinstated a stroke of confidence for the company moving forwards.

“[P]ricing continued to increase… providing confidence of sustained higher prices and strong project economics,” the company noted.

At the Nolans NdPr Project, located in the Northern Territory, FEED works continued during the quarter across multiple fronts, Arafura says.

The company aims to develop the world’s second rare earth separation plant outside of China at the site.

Works included a range of updates, such as engineering design progress at the hydrometallurgical plant, and additional costs for a strategic pivot at the sulphuric acid plant.

The company noted in its report:

A review of the delivery strategy for the Nolans sulphuric acid plant recommended a move away from a modular solution

The impact of this strategy is an increase in up-front costs from A$1,056m to A$1,150m through the movement of A$93.4 million from sustaining capital expended in years one and two into pre-production capital. The overall impact of this movement on the financial return on the project is minimal.

Meanwhile, the company also made several preparations to advance on its project(s), with completion dates set around April and/or May 2022.

To engage the community, it held a roadshow throughout the Northern Territory to provide prospective stakeholders the opportunity to get involved with the project.

What’s next?

Arafura says that it is on track to execute its funding strategy, with the Nolans project aligning closely to the Government’s 2022 Critical Minerals strategy.

It also continued to engage in offtake discussions for “strategic investment with key parties who recognise the value of a de-risked NdPr value chain through long-term offtake and strategic investment in the upstream value chain.”

At this stage, the company has no certainty as to the timing and likelihood of securing strategic investment – these arrangements will be announced to the ASX if (and when) formal agreements have been concluded.

Arafura Resources share price snapshot

The Arafura share price has spiked 113% in the last 12 months after a strong gain this year to date, where its gained 88%.

During the previous month, it has lifted 16% and sits in the green across all time frames after running hot since March this year.

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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