Shares in Arafura Rare Earths Ltd (ASX: ARU) have surged to levels not seen in more than a decade after news broke that the Australian Government will invest up to US$100 million in its Nolans Rare Earths Project.
In Washington, DC, overnight, US President Donald Trump and Australian Prime Minister Anthony Albanese signed a historic bilateral framework on critical minerals, which will pump at least US$1 billion from each country into the critical resources sector over the next six months.
Arafura's Nolans Project in the Northern Territory was one of two projects singled out for special treatment, with Mr Albanese saying that Australia would invest US$100 million in equity in the project.
He went on to say:
Once operational, this project will produce 5% of global rare earths – essential for energy security and defence. The historic framework signed today will assist both countries in achieving resilience and security of critical minerals and rare earths supply chains, including mining, separation, and processing, through use of economic policy tools and coordinated investment.
China chokehold to be broken
A US-Australia Critical Minerals Supply Security Response Group will also be established to identify priority minerals and supply vulnerabilities, as the countries try to break the stranglehold that China has over the development of critical minerals such as rare earths, where it accounts for about 70% of global supply.
China recently added five new rare earth elements to the list of minerals over which it has export controls, sending shockwaves through the commodities markets.
Rare earth elements are crucial for defence and renewable energy projects; however, there are few large producers outside of China at the moment.
Leading Australian project
Arafura's Nolans project is 135km north of Alice Springs and has an expected mine life of 38 years, generating an expected average EBITDA of US$460 million per year.
The company is yet to make a final investment decision on the project, which would produce neodymium-praseodymium (NdPr) at a rate of 340,000 tonnes of concentrate per year.
Arafura Managing Director Darryl Cuzzubo said in a statement to the ASX on Tuesday that it was imperative that the nation's rare earths industry be developed.
Since April, we have seen unprecedented disruptions to global trade and supply chain vulnerabilities exposed. By pioneering thoughtful supply chain diversification today, we are securing the foundational, long-term solutions required to meet the growing demands of tomorrow. With demand for both light and heavy rare earths forecast to grow significantly over the next three decades, Arafura's fully-integrated ore to oxide project has us well-positioned to meet a disproportionate share of that future growth.
Arafura shares hit an early high of 62 cents before settling back to be trading at 61 cents, up 27.1%.
The company's shares have increased from as little as 10.5 cents over the past year, with shareholders who got in at that level sitting on more than fivefold returns over the period.
