The Arafura Resources Limited (ASX: ARU) share price is sinking by more than 6% on Friday afternoon. This comes after the company released its most recent quarterly activities report after Thursday's closing bell.
At the time of writing, shares of the rare earths producer are down 6.45% to 29 cents apiece.
Let's go over the highlights of the report for the quarter ended 30 September 2022.
What did Arafura report?
- Net cash used in operating activities: $14.17 million
- Net cash used in investing activities: $1.06 million
- Cash and cash equivalents at end of the period: $49 million
- Estimated quarters of funding available: 3.2
Arafura made progress within its front-end engineering and design works (FEED) for its Nolans project during the quarter. This included finalising key process design documents for its hydrometallurgical plant and commencing the tendering of its on-site power station.
The company also commented on its macro environment both in Australia and internationally. It expects more attention drawn to neodymium-praseodymium oxide (NdPr) production thanks to the National Reconstruction Fund earmarking $1 billion to "move Australia further up mineral value chains" through mineral processing development.
On a global level, Arafura expects China's increasing aggression towards Taiwan as a catalyst for the world to need an alternative to China for NdPr production, which could potentially play in its favour.
It also mentioned that the United States' Inflation Reduction Act of 2022 has earmarked a sizable $US369 billion for energy security and handling climate change, which could benefit Australian mineral producers.
What else did the company announce?
Arafura notes that the spot price of NdPr contracted considerably over the quarter, dropping 32% from US$139 per kg to US$94 per kg. This was said to be due to softer Chinese demand, particularly for magnets used for its domestic economy.
However, in the near future, the outlook for magnet demand is anticipated to improve by 2023, growing to 300,000 tonnes, which Arafura described as being "much higher" than the demand observed in 2022.
Overall the company notes that the renewable energy and e-mobility markets will help keep demand for NdPr stable.
Arafura share price snapshot
The Arafura share price is up around 40% year to date. That's considerably better than the performance of the S&P/ASX 200 Index (ASX: XJO), which is down almost 9% over the same period.
The company's market capitalisation is around $535.50 million.
