Hochschild Diversifies with Rare Earths Project Acquisition

Precious metals producer Hochschild Mining (LSE:HOC,OTC Pink:HCHDF) is diversifying its portfolio with the acquisition of the BioLantanidos ionic clay rare earths deposit in Chile.

Hochschild is hoping to capitalize on the growing interest in rare earths, which took center stage earlier this year when it was rumored they could be used as a retaliatory tool in the China-US trade war.

The gold- and silver-focused miner, which already had a small stake in the project, will obtain the remaining 93.8 percent of the BioLantanidos deposit for US$56.3 million.

Prior to the new deal, Hochschild invested US$2.5 million in the project in late 2018 and early 2019 for a 6.2 percent equity stake with an option to increase ownership.

“We believe that consolidating 100 percent of this early-stage rare earth deposit in Chile represents a unique opportunity for our shareholders and is the direct result of Hochschild’s deep understanding of the region,” Hochschild CEO Ignacio Bustamante said in an announcement.

“The investment is also the result of an extensive long-term project to identify commodities with very strong growth characteristics as well as our ability to discover regional investment options that might not otherwise be available.”

The bulk of Hochschild’s precious metals portfolio lies within South America, with five projects in Peru, one in Argentina and one in Chile.

Last year, the gold and silver miner produced 19.7 million attributable ounces of silver and 260,000 attributable ounces of gold. While the bulk of its resources will be concentrated on advancing its precious metals business, Hochschild is optimistic about the potential BioLantanidos offers.

“The company remains focused on precious metals and on our successful exploration-based strategy, but this diversification gives us the potential to acquire a unique deposit in a key industry with expected exponential growth and in a low risk jurisdiction,” Bustamante noted.

“We are also excited by the strong geological upside potential which could see the company become a relevant player in the global rare earth market.”

According to the company, the rare earths deposit in Chile is comprised of a high concentration of key rare earth minerals — terbium, dysprosium, praseodymium and neodymium — that are specifically used in high-strength permanent magnets for wind turbines and electric vehicle engines.

Moving forward, Hochschild plans to build on some of the existing infrastructure and study work conducted by the former owner of BioLantanidos and will appoint a dedicated management team for the project.

Shares of Hochschild edged slightly higher on Tuesday (October 2), trading at GBX 199.

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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.