ARAFURA Resources has struck an agreement with a Korean company to look at jointly developing its rare earths projects in SA and the NT.

The Nolans project involves a rare earths mine in the NT and a $1 billion processing plant at Whyalla, producing 20,000 tones of product per year.

Arafura told the Australian Securities Exchange it had signed a non-binding memorandum of understanding with an un-named Korean group to look at progressing the project.

The Korean group will consider buying at least 3000 tonnes of rare earths per year, share technology and co-develop rare earth separation facilities in Australia and Korea.

The parties have also agreed to examine Korean funding options for the development of the Nolans project.

China has been curtailing supply of the minerals, forcing up world prices and making some users jittery about security of supply.

Korea has virtually no rare earths supplies of its own.

"We are now importing rare earth materials from 18 countries, up 3 countries from before but our dependence on China has been increasing," the South Korean customs agency was reported as saying.

"High reliance on a single country leaves us vulnerable to possible price hikes caused by market monopoly."

Arafura recently hosted a delegation from the korean company at its rare earths separation demonstration facilities at the Australian Nuclear Science and Technology Organisation (ANSTO) near Sydney and at the Nolans Bore site in the NT.

The group has also been supplied with product samples for evaluation. 

Arafura chairman Ian Kowalick said the agreement was an important endorsement of the Nolans project.

 "This highly successful group brings substantial experience in major construction projects, and its associated organisations have vast exposure to both the chemicals industry and rare earth end users in a key, globally significant market in Asia," he said.

"Furthermore, the group has agreed to work with Arafura to pursue project funding which will be a key component of our overall project financing plan."

South Korean customs figures released in January show the country was largely reliant on China for its rare earths imports, which are used in high-tech applications such as hybrid vehicles and liquid crystal displays.