ASX rare earths share Arafura has crashed 40% in 3 months. Is this a massive buying opportunity?

Could now be the time to buy?

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

ASX rare earths share Arafura Rare Earths Ltd (ASX: ARU) has plummeted in the last three months.

The company's share price has fallen 43% from 60 cents at market close on 24 February to the current share price of 36 cents. Arafura shares shed nearly 8% on Thursday alone.

Let's take a look at what is going on with this ASX rare earths share.

Arafura is developing the Nolans neodymium and praseodymium project in the Northern Territory.

The company is not the only ASX rare earths share that has descended in the last three months. Lynas Rare Earths Ltd (ASX: LYC) shares have declined nearly 13%, while Peak Rare Earths Ltd (ASX: PEK) shares have fallen 16%.

In early May, Arafura signed a non-binding cooperation agreement with FYI Resources Ltd (ASX: FYI) to look at developing the Minhub Mineral Sands Processing facility in the Northern Territory.

In April, the company signed an NDPR offtake agreement with Gamesa Renewable Energy, a global wind turbine manufacturer.

Earlier in the month, managing director Gavin Lockyer presented at the Future Facing Commodities Conference in Singapore. The company noted production from the Nolans project is due to start in the second half of 2025.

Looking ahead, a May report from Adamas Intelligence is predicting global demand for rare earths to increase in the future.

The report tips global demand for Neodymium Iron Boron (NdFeB) magnets will increase at a compound annual growth rate of 7.5% between 2023 to 2024. This will be driven by growth in electric vehicles and wind power uptake, the report notes.

The NeFeB permanent magnet market is the greatest market for NdPR oxide, according to Arafura's website, which states:

Arafura's product mix is ideally suited to meeting demand from leading magnet producers in Japan, Korea and China, as well as automotive and wind turbine end users in Europe, Japan, Korea and the USA that are securing product for their value chain.

Meanwhile, in April, Bell Potter analysts placed a speculative buy rating on Arafura shares with a 72 cent price target. This followed the company's offtake agreement with Siemens Gamesa Renewable Energy.

The Arafura share price has fallen nearly 23% in the year to date.

Arafura has a market cap of about $761 million based on the latest share price.

Motley Fool contributor Monica O'Shea has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. 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 Scott Phillips.