Arafura Rare Earths (ASX:ARU) signed a binding term sheet with the National Reconstruction Fund for a AU$200 million investment commitment to support the development of its Nolans rare earth elements project in the Northern Territory, according to a Wednesday filing with the Australian bourse.

Arafura will issue unsecured convertible notes, subject to certain conditions, with a face value of AU$200 million, carrying a total tenor of 15 years and a conversion period of seven years, with a nonconvertible period of two years.

The notes will convert into fully paid ordinary shares of Arafura at a fixed conversion price, representing a 40% premium to the reference price.

The firm's shares rose over 26% in early trade Wednesday.

Price (AUD): $0.15, Change: $+0.030, Percent Change: +26.09%