Why Arafura Shares Fell 23% Despite Securing AUD 475 Million in Funding

Arafura Shares Fell Even Though It Just Raised AUD 475 Million

Arafura Rare Earths announced today that it has successfully secured an institutional placement worth AUD 475 million at 28 cents per share, drawing strong participation from both existing and new investors. The placement was led by Hancock Prospecting, which committed AUD 125 million, lifting its stake in Arafura to approximately 15.7%.

For those unfamiliar, a placement is a form of capital raise that allows a company to issue new shares directly to institutional investors.

What makes this announcement particularly interesting is that Arafura also plans to launch a share purchase plan for retail investors something companies often do when they believe their stock is undervalued.

Given the recent pullback in Arafura’s share price, this move helps balance out the dilution from the placement while signalling management’s confidence in the company’s long-term value.

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Arafura Advances Nolans Project with Major Funding Boost and World-Class Resource Base

A large portion of the funds raised will be directed toward the construction phase of the Nolans Rare Earths Project in the Northern Territory. This project is anchored by the Nolans Bore deposit, one of the largest and most thoroughly explored rare earth resources globally. For investors, this raise not only strengthens Arafura’s balance sheet but also brings it a step closer to becoming a key player in Australia’s rare earth supply chain.

The Nolans deposit has been independently measured and verified under JORC 2012, Australia’s benchmark standard for reporting mineral resources meaning the figures are reliable and transparent. The resource contains approximately 56 million tonnes of material, grading an average of 2.6% total rare earth oxides, confirming it as one of the more significant deposits of its kind.

Nolans Project Positioned to Supply Up to 10% of Global NdPr Demand

Management noted that the recent capital raise positions Arafura to make a final investment decision by early 2026, paving the way for project construction. Once operational, the Nolans Project is expected to produce around 4,440 tonnes of neodymium-praseodymium (NdPr) annually equivalent to roughly 5–10% of global demand. If executed successfully, this would firmly establish Arafura as a major player in the global rare earth supply chain and a key contributor to Australia’s critical minerals strategy.

Arafura shares react to 35–40% Share Dilution

Before the raise, Arafura’s June 2025 balance sheet showed cash reserves of approximately AUD 150–170 million, against an estimated capital requirement of more than AUD 1.5 billion for the Nolans Project, inclusive of debt.

The new AUD 475 million placement meaningfully strengthens Arafura’s financial position, extending its cash runway and improving its leverage in ongoing debt negotiations with export credit agencies such as Export Finance Australia (EFA), the Northern Australia Infrastructure Facility (NAIF), and the US EXIM Bank all of which have been involved in prior financing discussions.

However, this capital injection also brings notable dilution, with roughly 1.7 billion new shares issued representing a 35–40% increase in the company’s share count. This explains the share price decline following the announcement, as investors adjusted for the expanded equity base despite the longer-term funding benefits.