Arafura Resources signs initial agreement for rare earth processing in the U.S.

(Reuters) - Australian rare earths miner Arafura Resources Ltd <ARU.AX> on Monday said it had signed a preliminary agreement with a U.S. based company for the treatment of a certain variety of its rare earth concentrate.

Under the letter of intent, USA Rare Earth LLC's plant will process Arafura's high purity mixed middle-heavy rare earths carbonate product (SEG-HRE product) from its Nolans Bore Neodymium-Praseodymium (NdPr) deposit in northern Australia.

Arafura's products - which include high-purity NdPr and SEG-HRE, both a type of rare earth mineral - are largely used by magnet producers, also finding applications in the manufacture of electric and hybrid vehicles and wind turbines.

The company said USA Rare Earth and its joint venture partner Texas Mineral Resources Corp <TMRC.PK> have submitted a tender for the U.S. Department of Defense's request for proposals to build a heavy rare earths separation plant in the United States.

Concerns that China, the world's largest rare earths producer, could use its supplies as a bargaining chip in its trade war with the United States has led to growing measures by Washington to boost its domestic production capacity.

In a separate statement, Pini Althaus, chief executive of USA Rare Earth, said its collaboration with Arafura was "an example of concrete steps demonstrating how the U.S. and Australia can address the need for a reliable rare earth supply chain independent of China".

USA Rare Earth added that it and Arafura have agreed to execute a definitive agreement in the first quarter of fiscal 2020.

Arafura's shares rose as much as 4.6% to a near three-week high against the benchmark .AXJO which traded 0.4% lower by 2315 GMT.

(Reporting by Soumyajit Saha in Bengaluru; Editing by Sandra Maler)