Arafura Resources says a scientific breakthrough could enable it to break a stranglehold on technology to treat rare earths, and help it become the world's major supplier of the products.

The Perth-based rare earths company says that research it commissioned at the Australian Nuclear Science and Technology Organisation has successfully separated middle rare earth oxides and heavy rare earth oxides.

The company's shares jumped 11 per cent to an eight month high on the announcement.

Arafura chief executive Steve Ward said the scientific breakthrough was a major step forward for his company.

"Technology exists around the world to separate rare earth oxides, but it is held very tightly by relatively few numbers of people, mostly in China," Dr Ward said.

"If you are able to produce the oxides, you can unlock a lot of value," he told AAP.

"We had a plan this year to develop that technology, and here it is."

Shares in the company closed up 10 cents, or 11.24 per cent, at 99 cents, the highest since January 14.

Arafura operates the Nolans rare earths project in the Northern Territory and has targeted eventual production of 20,000 tonnes per year of rare earth oxides after operations begin in 2013.

Rare earths are used in consumer goods such as iPods and flatscreen televisions and are also used in hybrid cars and energy efficient light bulbs.

Dr Ward said being able to produce rare earth oxides would unlock a lot of value for his company, because it would not be reliant on third parties to on-sell the produce to end-users.

"This is a very substantial milestone on our company's path to becoming the pre-eminent supplier of rare earth oxides to the world from operations wholly within Australia," Dr Ward said.

The vast bulk of the world's rare earths are produced by China, but other nations including Australia have good resources of the elements.