The Australian Government will provide up to A$840m ($550m) for the first combined rare earths mine and refinery in the country’s Northern Territory, owned by Arafura Rare Earths, Prime Minister Anthony Albanese said on Thursday.

Along with the government loan, Arafura is expecting funding from international and commercial financiers for the mine, which is located 120km north of Alice Springs.

Australia is looking to improve its rare earth supply chains after Covid-19 exposed risks associated with strong reliance on China, which produces more than 80% of the world’s rare earths.

Albanese said in a statement: “This will create local jobs and economic opportunities, helping Australian and Territory companies and workers capture more value from the game-changing critical minerals deposits we have here.”

Arafura’s shares were up by 59% to A$0.235 following the news on Thursday, having been in a trading halt since Wednesday pending news of debt financing. The company’s largest shareholder is Gina Rhinehart, the Australian mining magnate.

The project in the Northern Territory will be Australia’s third rare earths processing plant after Lynas Rare Earths’ Kalgoorlie operations and Iluka Resources' Eneabba rare earths plant, which is under development, both in Western Australia.

Rare earths are vital in the production of wind turbines, electric vehicle motors, robotics and mobile phones.

The prices of rare earths neodymium and praseodymium have slumped as China has sharply increased supply levels.

Daniel Morgan, analyst at Barrenjoey, told Reuters: “A lot of these projects face economic challenges… Getting private money is very difficult.”

He added that it was important that the government incentivises companies to enter production given the strategic nature of the industry.

In 2021, the government set up the Critical Minerals Facility to support investment in the sector. Arufa has already received a $325m loan for its operations through the facility.