Arafura Resources says it is on track to supply five per cent of the world's rare earths thanks to a huge deposit in Central Australia.
The Australian-based company will receive $30 million to help build the country's first rare earth separation plant at its Nolans Project, 135 kilometres north of Alice Springs.
Managing director Gavin Lockyer said a separation plant in the Northern Territory would be pivotal for the industry.
"It's where all the real value-add is done to our product," Mr Lockyer said.
The funding is part of the federal government’s $240m injection into the rare earths industry and is aimed at reducing reliance on China, which holds up to 80 per cent of the product.
"You've only got to look at geopolitical situation at the moment, where, globally, companies are trying to diversify supply chains," Mr Lockyer said.
"The world has been wholly reliant on one supplier.
Chain reaction
In the past six months Arafura's share price has climbed by more than 60 per cent, with its market value now sitting at about $430 million.
"The wind is behind us in terms of geopolitical activity at the moment," Mr Lockyer said.
"Around the globe customers are looking to diversify their supply chains, we fit right into that space."
Arafura Resources is seeking $1 billion in investment, of which it has acquired $300m.
In full operation the mine has a design capacity of 340,000 tonnes of concentrated product per year.
The minerals will be used in the production of electric vehicles, as well as alternative green energy sources such as wind and solar power.
"There's a growing need for electrification of motor fleets and wind turbines," Mr Lockyer said.
Water worries
The Alice Springs-based Arid Lands Environment Centre (ALEC) said it was watching the construction of the Nolans rare earth project closely.
Policy officer Alex Vaughn said he recognised the importance of rare earths, but would like to ensure minimal environmental impacts.
"We advocate for a renewable energy transition and that will involve the mining of rare earths," he said.
"There needs to be comprehensive and rigorous management and oversight that's transparent around the operations … to ensure that this can operate sustainably."
ALEC is particularly concerned about Arafura's 4.8 gigalitre groundwater licence.
"It's quite a substantial water licence and it's an area that hasn't had a lot of extraction before," Mr Vaughn said.
ALEC would also like to see the environmental approvals being conducted by the NT department of Environments, Parks and Water Security, rather than the Department of Industry, Tourism and Trade.
"Currently, mining management plans have limited oversight and limited opportunities for public consultation, which reduces the ability to build trust in the process," Mr Vaughn said.
Arafura Resources says it is keen to work through concerns with environmental groups and pastoralists.
"We're going to be here for a long time and we want to make sure that we're operating in the community as a good community member," Mr Lockyer said.
ABC Rural contacted the Caason Group, which owns the Aileron pastoral lease where the proposed mine will be located, but the group declined to comment.
