Up 106% in a year, why is this ASX 300 rare earths stock leaping higher again today?

S&P/ASX 300 Index (ASX: XKO) rare earths stock Arafura Rare Earths Ltd (ASX: ARU) is charging higher today.

Arafura shares closed yesterday trading for 33 cents. In early morning trade on Wednesday, shares are swapping hands for 35 cents apiece, up 6.1%.

For some context, the ASX 300 is down 0.6% at this same time.

With today’s intraday gains factored in, Arafura Rare Earths shares are now up 105.9% in 12 months, smashing the 4.1% one-year gains delivered by the benchmark index.

Here’s what’s catching investor interest today.

ASX 300 rare earths stock leaps on offtake agreement

Arafura Rare Earths shares are in the green today after the company announced that it had signed a binding offtake term sheet with Traxys North America.

Traxys is a global physical trader and merchant in the metals and natural resources sectors.

Under the agreement, Arafura Nolans Project (a wholly owned subsidiary of the ASX 300 rare earths stock) will supply Traxys with 500 tonnes a year of neodymium-praseodymium (NdPr) oxide.

The supply agreement is for five years, with the companies having the option to extend this by two years if they both agree to do so.

The price Arafura Rare Earths receives for its NdPr oxide will be linked to an independent and transparent global seaborne index. Traxys will make payment in US dollars, leaving total revenue in Aussie dollars subject to foreign exchange moves.

What did Arafura management say?

Commenting on the offtake agreement helping boost the ASX 300 rare earths stock today, Arafura managing director Darryl Cuzzubbo said, “We have long believed that the right partners would define the quality and durability of Arafura.”

Cuzzubbo added:

The offtake relationships we have established are not just transactional arrangements. They reflect growing alignment between industry participants and government-supported initiatives aimed at establishing resilient critical minerals ecosystems as an imperative, not merely an opportunity.

As we advance this strategic agreement, we achieve another milestone in delivering the company’s broader long-term offtake objectives and financing strategy in support of a future investment decision.

The ASX 300 rare earths stock said it expects to finalise and execute a long form offtake agreement prior to the sunset date, which is six months from the execution of the term sheet.

The agreement remains subject to customary conditions, which include Arafura undertaking a Final Investment Decision (FID) for the Nolans Project.

Nolans is planned to be among Australia’s first ore-to-oxide rare earths processing facilities. Located in the Northern Territory, Nolans would provide a critical source of rare earths outside of China.

The post Up 106% in a year, why is this ASX 300 rare earths stock leaping higher again today? appeared first on The Motley Fool Australia.

More reading

• Why did this ASX 300 stock just crash 15% to a 52-week low?
• Which ASX 200 mining services provider is charging higher on a big contract win?
• Does Bell Potter think the Life360 share price is dirt cheap?
• Why are CBA shares crashing 8% today?
• Fortescue shares push higher despite order to pay Yindjibarndi $150m damages

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.