The Arafura Resources Limited (ASX: ARU) share price is tumbling 5.7% amid the explorer holding its annual general meeting today.
Other rare earths miners are also struggling today. Lynas Rare Earths Ltd (ASX: LYC) is down 4.5% and Iluka Resources Limited (ASX: ILU) is down 1.6%.
Arafura is an ASX mineral explorer and developer of neodymium-praseodymium oxide (NdPr). This mineral is a critical ingredient in the manufacture of electric vehicles (EVs) and wind turbines.
Its flagship prospect is the Nolans Rare Earths Project in the Northern Territory.
Arafura gave an investor presentation at its AGM held in Perth this morning.
Chair Mark Southey also delivered an address. He outlined his key observations for 2022 and the challenges that lie ahead for Arafura in 2023.
At the time of writing, the Arafura share price is 30 cents.
What did the Arafura chair say to shareholders today?
Southey said COVID-19 "continued to cast its long shadow across the globe" in 2022:
… the impact of COVID related stimulus and disrupted global supply chains have probably been far greater this year than anticipated by most businesses and Governments.
The natural inflationary impact of these two elements has been exacerbated by some of the most consequential geo-political events for decades.
Critically for Arafura, the events in 2022 have even more clearly demonstrated the strategic importance of our rare earths product to developed nations.
Heightened awareness of the importance of robust and sustainable supply chains … is of great strategic and commercial advantage to Arafura and ultimately to our shareholders.
What's the future look like for Arafura?
Looking to the future, Southey is optimistic, saying:
Forecasts show that the EV outlook will outperform earlier market expectations with manufacturers continuing to set ambitious goals for EV production targets.
Within the project team, 2022 was a critical year for practical and technical progress.
Your Board is increasingly confident that market demand, supply chain and sustainability factors, together with a firming and robust NdPr price are all moving in the direction required to enable us to undertake FID to commence construction of the Nolans Project, targeting first production of NdPr Oxide in 2025.
Southey said there were challenges on the horizon, though:
… we cannot ignore the challenges the economic environment brings. Among the many items now being carefully monitored by the Board is the inflationary impact of economic events on the potential cost of our development, particularly in materials and labour.
Sorry we locked you out of that capital raising
Arafura undertook a capital raising in August to secure $41.5 million through institutional and professional investors only.
The company issued approximately 156.7 million new shares at an issue price of 26.5 cents per share. That was 17% lower than the Arafura share price at the time.
Arafura also offered about 78.4 million options at an exercise price of 34 cents, expiring in 18 months.
Investors weren't impressed, and the Arafura share price fell 14% on the day of the announcement.
Southey said the board "appreciates that many of our other loyal shareholders would like to have participated in this most recent capital raising".
He assured shareholders there would be "future opportunities for shareholders to back our rare earths vision".
Southey said:
Undertaking a capital raising of any form in recent times has been challenging because of the unpredictability and volatility of the ASX and global markets.
In this context, the Board made the strategic decision to deepen our involvement with a number of significant new and existing investors, who were interested in providing substantive long-term support for our vision.
… we believe their presence on the register will have a longer-term significance.
The money went towards further development of the Nolans Project.
Arafura share price snapshot
Arafura shares are among the few ASX shares trading in the green for the year to date.
The Arafura share price is up 29% in 2022 so far. It is up 40% over the past 12 months.
By comparison, the S&P/ASX All Ordinaries Index (ASX: XAO) is down 13% in 2022 and 11% over 12 months.
