Arafura Resources has struck a deal with a mystery South Korean conglomerate potentially to co-develop its Australian rare earths project, as the north Asian country tries to reduce its dependence on China.

Arafura's shares ended the day flat at 25 cents.

Rare earths are a combination of key minerals needed in high-tech products from smartphones to missile guidance systems. China accounted for almost 80 per cent of South Korean's rare earths imports last year, according to Korean Customs Service data.

In recent years China has imposed supply limits, which a foreign ministry spokesman earlier this year blamed on environmental concerns and a need to preserve limited resources.

Arafura did not disclose the name of the "Korean multinational organisation" in its announcement to the Australian Securities Exchange today, although the company did say it had signed a memorandum of understanding with the partner.

The MOU includes a sale and purchase agreement over Arafura's Nolans Project rare earths products, funding arrangements to get the project into production, and plans to co-develop rare earths separation facilities in Australia and Korea.

The Nolans Project includes a mine site in the Northern Territory, and a processing plant in Whyalla, South Australia.

A possible sales agreement with the Korean company would involve some 3,000 tonnes per annum of Arafura's output from the Nolans Project.

The parties have also agreed to explore Korean financing options for the project, according to Arafura.