MELBOURNE - Arafura Rare Earths said on Thursday it had approved the development of its $1.6-billion Nolans project in Australia's Northern Territory, which is set to be the country's third-biggest rare earths operation by the end of the decade.

The project is designed to deliver 4 440 t of neodymium-praseodymium (NdPr) oxide annually, targeting markets outside China amid growing demand for rare earths used in electric vehicles and wind turbines.

Arafura secured financing commitments from the export credit agencies of the United States, Canada, Germany and South Korea, alongside global trading houses and manufacturers as Western countries step up efforts to diversify away from dominant rare earths producer China.

Arafura will supply South Korean automakers Hyundai and Kia, Germany's Siemens Gamesa RE, and commodity trader Traxys' Luxembourg and US units.

Shares of Arafura rose as much as 13.6% to A$0.335 in their biggest intraday gain since March 11. The benchmark stock index was up 1.5%, as of 04h40 GMT.

Construction on the project, which has been in the making since the deposit was discovered three decades ago, will begin in September, with first production expected from mid-2029.

Arafura secured a $1.6-billion funding package including a significant buffer and is backed by Australia's richest person, Gina Rinehart, whose Hancock Prospecting owns a 15.5% stake.

RAISING GLOBAL SUPPLY

Arafura will become Australia's third-biggest rare earths producer after Lynas Rare Earths, the world's largest producer outside China, which produced 6 600 t of NdPr in the last financial year, and Iluka, which has 5 500 t of NdPr capacity and is expected to start production next year.

Australia is pushing to be the top supplier of rare earths to its allies, and Arafura is slated to supply 500 t of NdPr to the country's strategic minerals reserve, which is set to be up and running by year-end.

The project itself is set to meet as much as 5% of world demand, according to Australian government projections.

“This announcement today is a really important step forward for the Australian rare earths industry," Treasurer Jim Chalmers said.

"Rare earths are an absolutely golden opportunity for our country. This is essential to our economic security and to our national security.”

Arafura said engineering contractor Hatch has been engaged to support development.

The final investment decision came after a multi-year financing and offtake strategy.