Why did the Arafura share price surge over 7% higher on Friday?

The Arafura Rare Earths Ltd (ASX: ARU) share price was a strong performer on Friday.

The rare earths developer’s shares ended the day 7.5% higher at 35.5 cents.

Why did the Arafura share price charge higher?

Although the Arafura share price was chugging along nicely for most of the day, it went into overdrive late in the session after the company released an update.

That update relates to the 100%-owned Nolans Neodymium-Praseodymium (NdPr) Project in the Northern Territory.

According to the release, the company has updated the findings of the 2021 Feasibility Study Update, which “re-confirms Nolans as an exceptionally valuable world-class NdPr rare earths project.”

The release reveals that based on a life of mine NdPr Oxide price of US$130.10 per kg, the company expects to generate annual revenue of US$587 million from its rare earths sales.

As for earnings, including estimated phosphoric acid sales revenue of US$65 million per annum and based on operating costs of US$195 million per annum, management expects Nolans to generate EBITDA of US$409 million per annum.

‘Exceptionally valuable’

Arafura’s managing director, Gavin Lockyer, was pleased with the update. He said:

This Update re-confirms Nolans as an exceptionally valuable world-class NdPr rare earths project, with the capacity to deliver strong financial returns over an initial long mine life of 38 years. With NdPr offtake progress at the binding contract stage and the opportunity for strategic investment, particularly from quality partners such as the Hyundai Motor Company, we anticipate that project financing will continue to gain momentum.

The Nolans NdPr Project is one of the only construction ready rare earth oxide projects of scale in the western world. The significant size of the Nolans deposit provides customers with improved security of supply for critical raw materials. Our “Ore to Oxide” process at a single site provides comfort that the product is being derived from processes aligned with those customers’ ESG priorities. Forecast long-term sustained demand growth for NdFeB magnets, required to support the manufacture of electric vehicles and wind turbines, is being driven by global commitment to a net zero future.

Lockyer also notes that a lack of NdPr sources outside of China puts the company in a strong position. He said:

Also, given the lack of alternative NdPr sources outside of China, there is the rising imperative for nations to secure sustainable diverse supply chains. This market environment provides a supportive platform which positions Arafura as the next global rare earth oxide producer and the immediate impetus to move ahead with greater confidence than ever before.

The post Why did the Arafura share price surge over 7% higher on Friday? appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro 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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