Our short term objectives are focused on ensuring that the Nolans project has all approvals and commercial agreements, enabling us to capitalise on rare earths and phosphate market opportunities.

This will include construction of a rare earths processing plant with a plan for production from Nolans in 2012. Test work to date has provided significant progress in the definition of the flow sheet required for the engineering of a processing plant to recover the rare earths, phosphate, uranium and by-product calcium chloride. A bankable feasibility study is underway to provide economic certainty to the project.

Approvals documents including Notice of Intent (NT Government), Project Referral (Federal Government, Department of Environment and Water Resources) and application for Mineral Lease (NT Government) have been submitted. Responses to these documents will form the basis of an Environmental Impact Statement and Bankable Feasibility Study (Q4 2008).

Test work has indicated that the production of technical grade phosphoric acid (H₃PO₄) is likely with the most commonly trading product as merchant grade (52%) phosphoric acid. In 2006, the world demand for phosphoric acid was 34 million tonnes of P₂O₅ and growing at about 2% per annum.

Phosphoric acid is an important industrial acid used in the manufacture of fertilisers, for the anti-corrosion treatment of metals and the production of inorganic phosphates, especially detergent and food grade phosphate compounds. In Australia, phosphoric acid is almost entirely confined to the production of phosphate fertiliser.

The world trade for phosphate based products is an active and transparent commodity market.

Australia was a net importer of phosphate rock last year even with the supply from the Southern Cross operation in north western Queensland. The Australian Bureau of Statistics for March 2006 states that Australia imports about 825,000 tonnes of phosphate rock per annum. The general market outlook for the supply of phosphoric acid in Australia and the world market looks optimistic. Arafura's marketing strategy will hinge around niche markets where market share can be secured from economies of supply. There is excess phosphoric acid production capacity in the world and expansions in northern Africa can strongly influence price.

Calcium chloride is a chemical compound that is used for two primary purposes. These are:

• As an anti-freeze product used to de-ice airports and roads in regions where winter snow and ice require removal to enable the use of air and road transport; and
• As a binding agent and dust suppressant for unsealed roads.