Arafura share price tumbles 7% on quarterly update

The rare earths miner has released its September quarter activities report.

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The Arafura Resources Limited (ASX: ARU) share price is falling 7.3% on Tuesday after the rare earths developer released its quarterly activities report for the period ending 30 September.

At the time of writing, the Arafura share price is 19 cents.

Arafura is an ASX mineral explorer and owner of the Nolans Project in the Northern Territory. It develops neodymium-praseodymium oxide (NdPr), which is used in electric vehicles (EVs) and wind turbines.

Let's check out the details of the report.

Arafura share price down amid project costing increase

Arafura announced that the capital cost to first production at Nolans would be approximately A$1,680 million.

That's about a 5.7% increase from the capital cost estimate provided in Arafura's project update last November.

The company said the cost bump did not constitute a material change to overall capital cost estimates.

Arafura said it is working closely with its lenders to "ensure a robust funding solution for Nolans targeting up to US$775 million of senior debt", excluding a cost overrun facility.

Funding is the "key factor" impacting the timetable for delivery of the Nolans Project.

Arafura explained:

The Company is targeting finalisation of project funding activities in the first quarter of 2024 and will provide the market further guidance regarding the Nolans schedule in relation to full construction and commissioning works once the funding timeline becomes more certain.

Early construction works were completed in the September quarter.

Arafura has now commissioned several lots of next-phase work, including the first two stages of the construction of the camp, which will house approximately 200 workers.

What else did management say?

Earlier this month, the board of directors visited the site.

At the annual general meeting on 19 October, chair Mark Southey commented:

It's a truly impressive site in scale and readiness and Arafura is now strongly positioned to move into full construction in the first half of 2024, pending the outcome of ongoing funding activities.

Southey said that Arafura had moved "into a new stage of maturity in realising the Nolans Project as the world's most significant new rare earths operation".

He added:

Both pricing volatility and increasing end-market demand clearly underpin the need for a diversified global NdPr supply chain.

In this context, the strategic importance of Nolans as the world's only ore-to-oxide NdPr operation is clear, and Arafura's steps forward in establishing the Project over the past 12 months are even more relevant.

Arafura share price snapshot

The Arafura share price has taken a dive in 2023, down 56% in the year to date.

By comparison, the S&P/ASX All Ordinaries Index (ASX: XAO) is down 2% over the same period.

Motley Fool contributor Bronwyn Allen 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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