The Arafura Rare Earths Ltd (ASX: ARU) share price is leaping after the company announced its first major offtake agreement.
The agreement will see the S&P/ASX 300 Index (ASX: XKO) mineral developer supplying automotive giants Hyundai and Kia with up to 1,500 tonnes of neodymium and praseodymium (NdPr) annually from its Nolans Project.
The Arafura share price is up 9.8% at the time of writing, trading at 33.5 cents.
Let's take a closer look at the news driving stock in the rare earths favourite sky-high on Monday.
Arafura signs first rare earths offtake agreement
The Arafura share price is soaring on news the company has secured an offtake agreement for around 40% of the Nolan Project's rare earths production available to be bought under long-term sales arrangements.
The agreement with Hyundai covers a seven-year term, with the potential for a five-year extension. Kia will also be able to make orders under the offtake agreement.
It follows an earlier memorandum of understanding between Arafura and Hyundai.
The agreement is for an initial volume of 600 tonnes of NdPr oxide, or the equivalent of NdPr metal, annually. The volume will be increased to 1,500 tonnes per annum to align with the project's ramp-up in the agreement's fourth year.
The supply of rare earths material is expected to kick off in 2025.
On top of the offtake agreement, Arafura and Hyundai have entered a non-binding heads of agreement. That will see the pair discussing a strategic investment with Hyundai and its affiliates.
The Arafura share price might also be gaining on the back of an update on offtake arrangements for the project's remaining production. It hopes to secure 85% of the Nolans Project's production under binding offtake agreements.
The company said it was receiving strong interest from parties aligned with its offtake and investment strategy. The remaining production is under negotiation with various multi-national companies, including GE Renewable Energy.
Arafura share price snapshot
This year so far has been good for the Arafura share price.
It has lifted 43% since the start of 2022. It's also trading 32% higher than it was this time last year.
Comparatively, the ASX 300 has dumped 9% year to date and 8% over the last 12 months.
