By Rajasik Mukherjee

Jan 15 (Reuters) - Shares of Australia's Arafura Rare Earths hit a more than two-month high on Wednesday, after the miner received A$200 million ($123.72 million) funding from the country's government, taking its total investment in Arafura to over A$1 billion.

The stock gained as much as 30.4% to A$0.150, its highest level since Nov. 6, and was set for its best trading session since March 14, if current gains hold.

The investment from the incumbent government's National Reconstruction Fund Corporation (NRFC) is aimed at aiding Arafura in commencing the development of a new mine and processing facility at its Nolans project, located at the north of Alice Springs in central Australia, the company said.

The industry and science minister, Ed Husic, said the proposed new facility would create 600 jobs during the construction phase and 350 ongoing jobs once mining and refining operations are running.

The investment comes as Australia and its allies diversify the global supply chain for rare earths after COVID-19-related snarls highlighted supply risks in China, which produces more than 80% of the world's rare earths.

Rare earths are used to make powerful magnets and are essential for renewable energy and defence technologies. Electric vehicle motors, wind turbines, robotics and mobile phones all rely on rare earths.

"Many nations restrict the sale of these commodities (rare earths), providing both strategic and commercial drivers for the Australian government's investment in Arafura," said Michael McCarthy, chief commercial officer at online trading firm Moomoo Australia.

Early last year, the Anthony Albanese government announced its plan to provide Arafura with A$840 million of funding to build the country's first combined rare-earths mine and refinery.

Mining magnate and Australia's richest person Gina Rinehart is Arafura's controlling shareholder, with an 8.6% stake, LSEG data showed.

($1 = 1.6166 Australian dollars)

(Reporting by Rajasik Mukherjee in Bengaluru; Editing by Rashmi Aich)

((Rajasik.Mukherjee@thomsonreuters.com;))