Cashed-up Vital Metals (ASX: VML) has set its sights on becoming the next global producer of highly sought-after rare earth metals with investors welcoming the news.
The ASX-listed junior soared as much as 23% today after flagging the purchase of private Australian rare earth vehicle Cheetah Resources.
Cheetah’s plan is to identify, acquire and bring to production rare earths projects. What separates it from others in the rare earth pack is that rather than spend significant amounts of money to build a refinery and export of product to end users, the company will supply a high purity mixed rare earth feedstock to third-party rare-earth oxide (REO) separation facilities and refiners.
The result is lower Capex and shortened lead time to production to capture the expected increase in demand for REOs, critical in the production of Electric Vehicles and clean power generation.
Vital – which is fully funding the transaction from its cash reserves of $14.6 million at 31st March 2019 – will also be bolstered by Cheetah’s management experience with ex-Manager at Lynas Corporation Geoff Atkins and New Century Resources boss Evan Cranston to join the board.
After 5 years of reviewing and assessing REO projects globally with his ex-colleagues at Lynas, Mr Atkins and his team have assembled a pipeline of projects with significant REO resources and potential.
One project is the Thor Lake project in Canada where Cheetah is purchasing 100% of mineral rights to all mineralisation between surface and 150m depth from TSX-listed Avalon Advanced Materials.
Avalon has poured over $100 million into the Nechalacho Property, of which the Thor Lake Project is a part, and will retain ownership of mineral rights to all mineralisation below 150m.
The project already has mining leases, environmental and water approvals granted. It hosts a NI 43-101 indicated resource of 47.21Mt grading at 1.52% REO and inferred resource of 102Mt grading at 1.38% for a combined Mineral Resource estimate of 149.30Mt grading at 1.42% REO.
For Cheetah, Thor represents a start-up operation consisting of high-grade, easily accessible near surface mineralisation. The company will also focus on exploration to increase resource size.
Another project in Cheetah’s sights is the Wigu Hill project in Tanzania which is owned by Montero Mining & Exploration Ltd, a TSXV listed entity.
Cheetah will purchase the rare earths Intellectual Property rights and acquire up to 74% by funding to mining stage. Cheetah will also have an option to acquire Montero’s remaining interests in Wigu Hill.
The project is a light rare earth element deposit and consists of a large carbonite complex with bastnaesite mineralisation. Application for a Mining and Prospecting Licence over the area has been made by a local Tanzanian company.
Montero released an initial NI 43-101 Inferred resource estimate of 3.3Mt at 2.6% LREO5 including 510,000t at 4.4% LREO5 on 2 of 10 possible drill targets.
“This acquisition is a game-changer for Vital and forms a major part of our goal of delivering significant value to shareholders,” Vital Metals Executive Director Zane Lewis said.
“Our development strategy is not to compete with existing rare earth refiners but rather keep capital and operating costs as low as possible by feeding their facilities, thereby helping them expand with the growing market for rare earths.”
The acquisition is taking place during a time of heightened global demand for rare earths thanks to growing market for Electric Vehicles and green power generation.
However, existing developers of rare earth projects appear unable to meet the insatiable demand for rare earth materials with new annual development of rare earth mines required to meet the shortfall which spells good news for Vital.
Shares in Vital was trading at 1.6c on Tuesday, valuing the company at ~$28 million.