Shares in Australia’s Arafura Resources shot up more than 30 per cent after it struck a deal with China’s Shenghe Resources to consider developing its Northern Territory rare earths mine.

Shenghe, a rare earths producer already, will investigate whether it wants to co-fund the junior explorer’s Nolans project under a memorandum of understanding.

Arafura’s shares had climbed 2.8 cents or 30.4 per cent to 12 cents by 1515 AEST.

The rare earths market is dominated by the Chinese, who control 97 per cent of supply of the resources, which have a range of uses including in electrical products.

Arafura’s major shareholder is the state-owned East China Mineral Exploration and Development Bureau.