Why did the Arafura share price just leap more than 11%?

The Arafura share price is rocketing on Thursday. But why?

| More on:
Female miner smiling in front of a mining vehicle as the Pilbara Minerals share price rises

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Arafura Rare Earths Ltd (ASX: ARU) share price is flying higher today.

Shares in the S&P/ASX 300 Index (ASX: XKO) rare earths miner closed yesterday trading at 18 cents. In morning trade on Thursday shares are changing hands for 20 cents apiece, up 11.1%.

For some context, the ASX 300 is up 1.1% at this same time.

Investor interest appears to be stoked by another major funding announcement.

Arafura share price leaps on German funding news

The Arafura share price is soaring after the company announced that the German government has issued conditional approval for up to US$115 million (AU$173 million) in Untied Loan Guarantees from Euler Hermes.

The funds would support debt financing for Arafura's rare earths Nolans Project.  

The agreement with Euler Hermes will secure neodymium and praseodymium (NdPr) supplies for German-based companies, including Siemens Gamesa. This further sets Arafura up as an important provider of rare earths outside of China.

The miner noted that the approval from Euler Hermes is the final German export credit agency (ECA) approval required to complete its senior debt structure. With this approval, Arafura can finalise its targeted US$775 million senior debt funding for the Nolans Project with commercial lenders.

Arafura must maintain ECA-linked offtake agreements for the term of the loan guarantee.

Commenting on the conditional funding approval sending the Arafura share price soaring today, managing director Darryl Cuzzubbo said, "Today Arafura reached another significant milestone in announcing conditional approval of US$115 million in untied loan guarantees from Euler Hermes."

Cuzzubbo added:

We continue to demonstrate the increasing geostrategic importance of the Nolans Project and developing a diversified global NdPr supply chain, this time by securing German export credit agency support.

This agreement is linked to offtake with German-based companies, including our key customer Siemens Gamesa, who are global leaders in building wind turbines to advance the energy transition.

We look forward to working closely with Euler Hermes as we progress the Nolans Project.

Arafura said it has already completed an extensive legal, technical and financial due diligence program with financiers, adding that offtake discussions with potential counterparties are "well advanced".

Arafura's ore to oxide business model has enabled it to secure high-quality offtake counterparties.

The miner will update the market once the expected binding agreements are entered into.

How has the rare earths miner been tracking?

The Arafura share price has been recovering from a big sell-off in 2023. With today's intraday gains factored in, shares in the ASX rare earths miner are up 17% so far in 2024.

Motley Fool contributor Bernd Struben 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.

More on Resources Shares

View from below of a man with a shovel standing by a hole he has dug in the garden, with blue sky in the background.
Resources Shares

Are Rio Tinto shares worth digging into amid the miner's FY25 outlook?

Let’s explore the outlook for the ASX mining share.

Read more »

A man in his 30s with a clipped beard sits at his laptop on a desk with one finger to the side of his face and his chin resting on his thumb as he looks concerned while staring at his computer screen.
Resources Shares

Why are BHP shares trudging lower on Friday?

Iron ore is a central talking point for BHP's outlook.

Read more »

Miner looking at a tablet.
Resources Shares

Fortescue shares: Here are the must-know highlights from FY24

The financial year just past had its ups and downs for shareholders.

Read more »

View of a mine site.
Resources Shares

Goldman Sachs just upgraded this ASX 200 stock to a buy

It sees the recent sell-off as an overreaction – and an opportunity.

Read more »

Three satisfied miners with their arms crossed looking at the camera proudly
Share Gainers

3 best-performing ASX 200 mining shares of FY24

One commodity is the common thread for this trio of top-performing ASX 200 mining shares.

Read more »

Three miners looking at a tablet.
Resources Shares

What went right and what went wrong for the BHP share price in FY 2024?

BHP shares gave back their first half-year gains and then some in the second half of FY 2024. But why?

Read more »

A female worker in a hard hat smiles in an oil field.
Resources Shares

Bell Potter names the best ASX mining stocks to buy in FY25

These could be top picks for investors looking for access to the mining sector.

Read more »

Group of smiling coal miners in a coal mine
Energy Shares

Why are ASX 200 coal shares smashing the market today?

ASX 200 coal shares are racing higher even as the benchmark sinks on Monday. But why?

Read more »