Arafura defies sell-off in ASX mining shares to stay buoyant. Is this why?

The Arafura Resources Limited (ASX: ARU) share price kept its head above water on Wednesday.

At the end of the day, shares in the rare earth minerals exploration company settled at 34 cents apiece, bang on the same price they closed at yesterday. That may not sound like much to cheer about, but in the context of the broader market, it is.

The S&P/ASX 200 Index (ASX: XJO) was tenderised today, with the benchmark index wiping off 1.43% from yesterday. Notably, the materials sector shouldered a fair chunk of the selling.

Several big ASX mining shares, such as BHP Group Ltd (ASX: BHP) and Fortescue Metals Group Limited (ASX: FMG), experienced falls in excess of 2.3%. So, why is it that the Arafura Resources share price stood tall?

Joining an index comes with its perks

Firstly, there were details regarding the issuing of performance rights to leadership today. However, there was no material information from the small-cap exploration company. In light of this, we need to search further to find what might have supported Arafura while other shares fell.

On Monday, The Motley Fool Australia reported on Arafura’s inclusion in the S&P/ASX 300 Index (ASX: XKO) as per the September quarterly rebalance. During that session, the hopeful neodymium and praseodymium producer rallied 17%.

There is a chance that Arafura Resources enjoyed continued buying on Wednesday as index funds sought to replicate the proposed rebalanced benchmark.

At the close, the company had witnessed more than 11.8 million shares swap hands. This far surpasses the average value of around 8.1 million.

What else could be fuelling the Arafura share price?

Another factor that might have helped Arafura shares fend off selling pressure is the elevated interest in rare earth shares.

Toward the end of August, Andrew ‘Twiggy’ Forrest’s Wyloo Metals revealed its intentions to invest in Hastings Technology Metals Ltd (ASX: HAS). The fellow rare earth explorer would be using some of the funds received by Wyloo to take a stake in Canadian-listed magnet maker Neo Performance Materials.

Interest in rare earth mining shares has been elevated in recent times as China ties have loosened. As a result, countries have been seeking ways to reduce their reliance on the People’s Republic for the key material.

The post Arafura defies sell-off in ASX mining shares to stay buoyant. Is this why? appeared first on The Motley Fool Australia.

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More reading

• 3 ASX mining shares that rocketed more than 15% on Monday
• These 6 ASX mining shares are now in the ASX 300
• Why is the Arafura share price surging 10% on Monday?
• Why is the Arafura share price leaping 5% today?
• 3 ASX mining shares primed for an ‘exponential’ energy transition: expert

Motley Fool contributor Mitchell Lawler 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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