Why has the Arafura Resources (ASX:ARU) share price dropped 9%?

The Arafura Resources Limited (ASX: ARU) share price is down today after news the company pushed delivery of its Nolans Project back by 8 months.

| More on:
asx share price falling lower represented by investor wearing paper bag on head with sad face

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Arafura Resources Limited (ASX: ARU) share price has fallen today after news the company has pushed delivery of its Nolans Project back by 8 months.  The company also announced it won't be initially mining cerium at the rare earth project. These adjustments to the company's former plans come as it optimises its execution strategy.

At the time of writing, the Arafura share price is 9% lower than yesterday's close, trading for 18 cents apiece.

Let's take a deeper dive into the mineral exploration company's news.

Optimising the project's execution strategy

Today's news from Arafura is that it's decided to modify the execution strategy of the development of its Nolans Project. The new strategy will be a traditional detailed front-end engineering and design (FEED) model.

Nolans Project is to be a rare earth mine, mining neodymium-praseodymium. It's located in the Northern Territory.

Arafura states the FEED model will result in a more competitive tendering process, a reduced risk for contractors and more cost certainty.

It will mean the contracts for construction and engineering will be split and, according to the company, will be more competitive as a result.

Also, its engineering contract will be carried on rates to a target cost, including performance and design warranties for the plant. The tendering of other contracts, such as the numerous on-site plants and infrastructure, will also be started.

All this will make the process 8 months longer than originally planned, due to the extended tendering process.

The company also shared its plans to defer the production of cerium at the project. Arafura said the optimisation process found cerium delivered only limited value to the project, as there will potentially be a future oversupply of the rare earth mineral. Only 5% of the project's initial income was expected to come from cerium production.

Arafura said it was looking into federal government grants to help fund the FEED program. It has also applied for a grant through the Modern Manufacturing Initiative.

Commentary from management

Arafura managing director Gavin Lockyer said the project was "shovel-ready", with Arafura still optimising its delivery and funding:

Arafura's ore to oxide model is a differentiator from other companies that are only proposing to produce concentrates or intermediate products for processing elsewhere, and the feedback we've received from both customers and financiers indicates strong support for that approach and for the shift to the more traditional FEED model for the project.

Arafura Resources share price snapshot

The Arafura share price has performed well on the ASX lately, despite today's setback. Currently, Arafura shares are up 40% year to date and up by 203% over the last 12 months.

The company has a market capitalisation of around $234 million, with approximately 1.1 billion shares outstanding.

Should you invest $1,000 in S&P/ASX 200 right now?

Before you buy S&P/ASX 200 shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and S&P/ASX 200 wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 30 April 2025

Motley Fool contributor Brooke Cooper 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 Bruce Jackson.

More on Resources Shares

Miner holding cash which represents dividends.
Dividend Investing

Invested $8,000 in Fortescue shares 5 years ago? Guess how much passive income you've banked!

Fortescue is popular among passive income investors for paying two fully franked dividends per year, even during COVID.

Read more »

Miner looking at a tablet.
Resources Shares

BHP shares are up 9% in a month. Are they still good value?

Is Australia’s largest miner a big opportunity?

Read more »

Three miners wearing hard hats and high vis vests take a break on site at a mine as the Fortescue share price drops in FY22
Resources Shares

Did you catch what happened with the big 3 ASX 200 mining stocks in April?

BHP, Rio Tinto, and Fortescue all reported their latest mining results in April.

Read more »

Miner looking at a tablet.
Resources Shares

After its earnings result, what's Macquarie's price target on Fortescue shares?

Let’s dig into what Macquarie thinks of Fortescue after its quarterly update.

Read more »

Two mining workers on a laptop at a mine site.
Resources Shares

The Mineral Resources share price is down 72% in a year. Time to pounce?

Two top experts ran their slide rules over Mineral Resources shares. Here’s what they found.

Read more »

Miner looking at a tablet.
Resources Shares

Mineral Resources share price shoots 15% higher on third-quarter report

The ASX 200 iron ore and lithium giant has released its 3Q FY25 activities report.

Read more »

Image from either construction, mining or the oil industry of a friendly worker.
Resources Shares

Why Macquarie says this ASX 200 mining stock could rocket 67% in a year

Macquarie forecasts a big potential rebound for this diversified ASX 200 miner.

Read more »

Female miner smiling at a mine site.
Resources Shares

3 reasons why the Fortescue share price could still be a buy

Here’s why I view Fortescue as an opportunity.

Read more »