Arafura Nears Critical Investment Decision for Flagship Rare Earths Venture

Shares of Arafura Rare Earths (ASX: ARU) have climbed approximately 5% in recent sessions to around AUD 0.305. This upward movement coincides with the approaching Final Investment Decision (FID) for the company's cornerstone Nolans Project, now just weeks away with a target set for Q1 2026. Market focus is intensifying on whether this pivotal corporate milestone will catalyze the stock's next significant move.

Arafura's financial position was substantially reinforced in late 2025 through a comprehensive capital raise, securing roughly AUD 481.4 million. The initiative comprised an institutional placement of AUD 475 million and a Share Purchase Plan (SPP) for retail investors that contributed AUD 7.1 million.

A central feature of this raise was a strategic AUD 125 million investment from Hancock Prospecting, granting the mining conglomerate a 15.7% stake in Arafura. This commitment is widely viewed as a strong endorsement of the Nolans Project's economic viability and strategic importance. Furthermore, the equity cushion is supplemented by conditional debt financing commitments totaling USD 1.05 billion, covering a major portion of the estimated USD 1.226 billion required for the project's development.

Broad International Governmental Support

The project benefits from extensive backing from government agencies across allied nations, underscoring its geopolitical significance in building non-Chinese rare earths supply chains. Key support includes:
* Export Finance Australia: A conditional commitment for up to USD 100 million in equity.
* U.S. Export-Import Bank: A Letter of Interest for potential financing of up to USD 300 million.
* Germany's Raw Materials Fund (Deutscher Rohstofffonds): A planned EUR 100 million participation, currently undergoing due diligence.

Notably, Nolans is one of only two projects prioritized under the "US-Australia Critical Minerals Framework" announced in October 2025.

Should investors sell immediately? Or is it worth buying Arafura?

Sector Tailwinds and Market Context

Arafura's valuation is buoyed by a favorable macro environment for rare earths equities. Chinese export restrictions on permanent magnets are intersecting with robust demand growth from electric vehicle and wind energy sectors, amplifying the need for diversified supply sources. The company notes that global demand for rare earths is projected to roughly double over the next decade. Currently, China controls an estimated 90–99% of the global value chain, presenting a supply risk for Western industrial firms.

Share Performance and Volatility

The recent share price gain marks a breakout from a prior consolidation range, with the AUD 0.30 level now seen as a key psychological support. The stock's performance highlights its sensitivity to financing and project milestones:
* Year-to-date 2026 gain: Approximately 9–11%.
* Calendar year 2025 performance: A surge of 134.78%, significantly outpacing the S&P/ASX 200.
* 52-week range: AUD 0.11 to AUD 0.62.

Elevated trading volumes reflect assessments by institutional and private investors of the likelihood of a positive FID outcome.

The Path Forward Post-FID

A favorable FID would trigger the large-scale construction of what is planned to be Australia's first fully integrated "ore-to-oxide" rare earths facility. The operation is designed for an annual production capacity of 4,440 tonnes of neodymium-praseodymium (NdPr) oxide, equating to roughly 4% of global magnet rare earths supply.

Arafura's schedule anticipates approximately 42 months from the FID to the commencement of production. The current investment thesis rests on three core pillars: the strengthened balance sheet, the strategic anchor shareholder Hancock Prospecting, and the coordinated support from government institutions in Australia, the U.S., Germany, and South Korea. All attention is now fixed on the imminent FID, expected this quarter, which is set to define the project's—and the share's—trajectory.