Rinehart-backed Arafura extends gains on $200m funding boost
Make us a preferred source
Make us a preferred source on Google
The news: Shares in Arafura Rare Earths continued to climb on the ASX after the Albanese government's National Reconstruction Fund Corporation (NRFC) committed to a $200 million investment in the Gina Rinehart-backed miner on Wednesday.
The numbers: Arafura shares were up 7.4% to 14.5 cents by 11:45am AEDT, having ended the previous session 17.4% higher.
The context: Bell Potter retained its 'hold' recommendation on Arafura but cut its valuation from 17 cents to 15 cents.
Analyst Regan Burrows said that while the additional funding support from the government is positive, the investment did not address the critical issues facing the company or its Nolans project.
The NRFC funding is contingent on Arafura securing the remainder of the project's development funding, reaching a final investment decision (FID), and securing further production offtake.
What they said: "At no fault to [Arafura], the market for funding multi-billion-dollar rare earth projects remains challenged," Burrows said.
"...Finalisation of offtake at price materially higher than the current spot price (USD55/kg [$88.18/kg]) are needed to gather momentum in [Arafura] and reduce future equity dilution.
"...Given spot has averaged USD65/kg over the last two years a material shift in winds is required for FID in the near-term in our opinion."
The source: Bell Potter research
