On a day of market carnage, shares of Arafura Resources Ltd [ASX:ARU] appear to have escaped unscathed.
At time of writing, the Arafura Resources share price sits at 9.3 cents, unchanged from when markets opened.
Comparing Arafura to Lynas Corporation Ltd [ASX:LYC] makes for interesting reading.
Periods of strong correlation linked to trade war fears.
Interestingly, it took longer for the panic around rare earth supply chains to hit Arafura (where the red arrow is below):
This could indicate that investors were still tooling up on rare earth investments. We take a look at Arafura’s Northern Territory rare earths project and where their intended offtake partners will come from.
ASX gets pummelled, but ARU share price holds its ground
With trade war fears resurging on a fresh Trump twitter blast, the ASX 200 [XJO] fell sharply on open, and has lost 2% so far.
This was the Trump tariff move that triggered the plunge:
Curiously, or perhaps not so curiously for rare earth investors, the Arafura share price held its ground.
In the past the Arafura Resources share price has responded positively to increased trade tensions.
Arafura Resources aiming for 2022
Here are some highlights from their most recent investor presentation:
- Definitive Feasibility Study completed in February 2019
- ‘Only permitted site in Australia for rare earths mining, extraction and separation, including radioactive and other waste management from all processes’
- Seeking offtake customers from Japan, South Korea, Europe, and the US
- 23-year mine life
- Nolans Project needs US$726 million to meet CAPEX requirements
It’s a mammoth project and if it gets off the ground, its projected low operating costs could see it ride out any falls in NdPr prices.
With Arafura’s Nolans project slated for commissioning in 2022, who knows how the state of world trade will look?
If Trump manages a second term, you could reasonably expect a continued focus on where the West gets its rare earths from.
Beyond this, EVs loom as a long-term driver of value for Arafura and others.
For Money Morning