ASX rare earths share Arafura Rare Earths Ltd (ASX: ARU) has fallen in the last month, so is now the time to pounce?
Arafura shares have slid 18% in a month and closed on Thursday at 40 cents apiece. For perspective, the S&P/ASX 200 Materials Index (ASX: XMJ) has dropped 3% in the past month.
Let's check the outlook for this ASX rare earths share.
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What's ahead for this ASX rare earths share?
Arafura Rare Earths is developing the Nolans neodymium and praseodymium (NdPr) project in the Northern Territory, 135km from Alice Springs.
Analysts at Bell Potter in April retained a "speculative buy" rating on Arafura with a 72 cents price target. This implies an upside of about 78% based on the latest share price.
This followed news Arafura had signed a binding offtake agreement with Siemens Gamesa Renewable Energy for its Nolans production.
Bell Potter analysts believe "this is a milestone" and supports the company's final investment decision on the project.
Under the agreement, Arafura would supply up to 400 tonnes per annum (tpa) of neodymium and praseodymium (NdPr) metal.
Offtake volumes would start at 200 tpa in 2026 and then lift to 360tpa in 2027 and 400 tpa in the remaining three years.
Commenting on the news, Arafura managing director Gavin Lockyer said:
We are delighted to have concluded negotiations for our second offtake agreement. Siemens Gamesa is the world's leading manufacturer of offshore wind turbines, and this agreement compliments our strategy to create supply diversification into the renewable & E-mobility sectors.
In late April, Arafura presented quarterly results to the market. The company had $153.4 million of cash reserves as of 31 March 2023.
However, the market price of NdPr oxide fell 26% to US$76 per kg during the quarter due to "demand weakness for magnets in China". At the time, the company said:
China remains the largest user of sintered magnets for applications such as electric vehicles (EVs), wind generation technology, consumer electronics and appliances, and demand in these sectors is experiencing lower manufacturing output since the beginning of the COVID-19 pandemic in 2020.
Share price snapshot
Arafura shares have lifted 14% in the past 12 months.
This ASX rare earths share has a market capitalisation of about $856 million based on the latest share price.
