Arafura Rare Earths Limited (ASX:ARU): Are Analysts Optimistic?

Arafura Rare Earths Limited (ASX:ARU) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Arafura Rare Earths Limited explores for and develops mineral properties in Australia. The AU$581m market-cap company announced a latest loss of AU$96m on 30 June 2023 for its most recent financial year result. Many investors are wondering about the rate at which Arafura Rare Earths will turn a profit, with the big question being “when will the company breakeven?” We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

Check out our latest analysis for Arafura Rare Earths

Arafura Rare Earths is bordering on breakeven, according to the 3 Australian Metals and Mining analysts. They anticipate the company to incur a final loss in 2025, before generating positive profits of AU$62m in 2026. Therefore, the company is expected to breakeven roughly 3 years from now. What rate will the company have to grow year-on-year in order to breakeven on this date? Using a line of best fit, we calculated an average annual growth rate of 45%, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.

Given this is a high-level overview, we won’t go into details of Arafura Rare Earths' upcoming projects, though, take into account that by and large metals and mining companies, depending on the stage of operation and metals mined, have irregular periods of cash flow. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

One thing we’d like to point out is that Arafura Rare Earths has no debt on its balance sheet, which is rare for a loss-making metals and mining company, which usually has a high level of debt relative to its equity. The company currently operates purely off its shareholder funding and has no debt obligation, reducing concerns around repayments and making it a less risky investment.

Next Steps:

There are key fundamentals of Arafura Rare Earths which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at Arafura Rare Earths, take a look at Arafura Rare Earths' company page on Simply Wall St. We've also compiled a list of essential aspects you should look at:

1. Historical Track Record: What has Arafura Rare Earths' performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Arafura Rare Earths' board and the CEO’s background.
3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.