Arafura Resources expects to convert a rare earths sales deal with Germany's ThyssenKrupp into a formal agreement and expand the intended customer base in Europe.

Arafura Resources expects to convert a rare earths sales deal with Germany's ThyssenKrupp into a formal agreement and expand the intended customer base in Europe.

Arafura on Monday said the materials and technology giant had agreed to progress a letter of intent (LOI), inked in August, for the purchase of rare earth oxides from the Perth-based company's Nolans project in the Northern Territory to a "more formal commercial off-take arrangement".

"The companies are also in discussions to broaden the existing LOI to include additional European countries," Arafura said in a statement.

Under the agreement in August, the rare earth oxides were only to be sold in Germany.

Arafura in January produced its first rare earth oxide samples that ThyssenKrupp is currently evaluating, but is struggling to secure enough funds for the Nolans development.

A $74 million rights issue priced at 60 cents per share was abandoned in November when the company's share price fell below the offer price.

A share purchase plan completed last week priced at 29.4 cents per share raised $8.2 million.

Arafura shares closed up 1.5 cents, or 5.08 per cent, at 31 cents on Monday.

"Discussions have also progressed in regards to pursuing possible sources of funding for the Nolans project," Arafura said in a statement on Monday.

The company last month blamed a deliberate slow-down of its development programs for Nolans and a reduction in the size of its board and management on challenging global capital markets.

However, it is still ironing out technical aspects of the project, with an independent assessment and construction of an integrated pilot plant slated for later this year.