Shares in Arafura Rare Earths (ASX:ARU) surged more than 77% yesterday after it was confirmed the company will receive A$840 million in funding from the Australian government to create a combined mine and refinery for the key renewable minerals.

Trading in the shares was halted ahead of the announcement with the shares at 14.75 cents. Once the news was formally released to the ASX (it was leaked from political sources in Canberra overnight Wednesday), the shares leapt, touching a day's high of 28 cents before finishing at 26 cents, up 76.87%.

As impressive as the gain was, it is still less than half the 52-week high of 56 cents in February 2023.

The deal follows Wednesday's announcement of government involvement in the $550 million funding package for lithium miner Liontown Resources to ensure it reaches first production from its Kathleen Valley spodumene project in Western Australia.

Arafura's Nolans neodymium-praseodymium open-cut mine and associated processing project are 135 kilometers north of Alice Springs and have an estimated mine life of around 38 years.

The company's biggest shareholder is Hancock Prospecting Ltd., controlled by Australia's richest woman Gina Rinehart, with a 9.1% stake. Hancock is also the largest shareholder in Liontown with 19.9%.

Nolans has an estimated mineral resource of 56 million tonnes with a grade of 2.6% of total rare earth oxides and 11% phosphate (P2O5). These extend 215 meters below the surface.

The news also puts means shareholders who took up scrip in the $20 million fund-raising last December are in the money.

The company raised $25 million (up from $20 million initially) through the placement of nearly 156 million new shares at 16 cents each.

Furthermore, it will issue one free-attaching option for every two new shares subscribed as part of the fully underwritten institutional placement.

These new options, around 62.5 million in number, will have an exercise price of 22.5 cents and expire 18 months from the date of issue.

Arafura is using the proceeds from the placement to keep work at Nolans continuing while the new package was nailed down.

Nolans will join the first project and mine - Lynas, which has the huge Mount Weld deposit near Kalgoorlie and is expanding its processing operations there and in Malaysia. It has received a small amount of aid from Canberra's critical materials funding facility.

Iluka got a finance package of $1.25 billion to help build its new processing operation at Eneabba in WA where it has mined and stockpiled heavy beach minerals for years.

Iluka's operation will be the first fully integrated rare earths refinery in the country, and it has done a deal to toll treat rare earths from its Browns Range deposits in WA.