The Arafura Resources share price is down 7% this morning

The Arafura Resources Limited (ASX: ARU) share price is fighting back after plunging in early trade this morning.

Shares in the rare earth minerals explorer were down by as much as 7% this morning. At the time of writing, they have clawed back to 36.5 cents each, 2.67% lower than yesterday’s closing price.

Let’s find out why the Arafura Resources share price is in the red.

Why are Arafura Resources shares dropping?

There are a number of factors driving the weakness in the Arafura Resources share price today.

The ASX market is suffering from a brutal sell-off across Wall Street overnight after worse-than-expected news on inflation.

At the time of writing, the S&P/ASX 200 Index (ASX: XJO) has plunged 2.72%. A heavy fog of pessimism has overcome the markets as the US consumer price index (CPI) came in at higher levels than forecast. The core CPI, which excludes volatile food and energy prices, rose 0.6% in August.

Arafura Resources operates in the materials sector, which is also down 2.23% at the time of writing.

The rare earth minerals explorer is still in the exploration stage, so the current macroeconomic events don’t directly affect its top line. However, it does increase overall operational costs for the business.

The main rare earth minerals that Arafura Resources is attempting to extract include neodymium and praseodymium products. These form part NdFeB magnets, which help make everyday items like wind turbines, robots, and electrical vehicles become smaller, lighter, mobile, and more affordable.

The acceleration in the shift towards renewable energy resources could help it fend off negative macroeconomic factors.

Arafura Resources share price snapshot

In the last year, Arafura Resources shares rose by 135% and momentum remains strong with a jump of 30% in the past month.

This compares to the ASX 200’s 8.4% loss in the past year and almost 4% drop over the last month.

The market capitalisation of Arafura Resources is around $629 million.

The post The Arafura Resources share price is down 7% this morning appeared first on The Motley Fool Australia.

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More reading

• Why investors might be getting excited about Arafura shares
• Arafura defies sell-off in ASX mining shares to stay buoyant. Is this why?
• 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?

Motley Fool contributor Raymond Jang 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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