Vital Switching Focus to Rare Earths Project Development

- June 25th, 2019

Australia-listed diversified explorer Vital Metals is switching gears to focus on rare earths exploration in Canada and Tanzania.

Capitalizing on the growing global appetite for rare earths, diversified explorer Vital Metals (ASX:VML) is switching gears to focus on rare earths exploration in Canada and Tanzania.

In order to facilitate this shift, Vital will acquire private Luxembourg-based Cheetah Resources, a rare earths company founded by ex-Lynas (ASX:LYC,OTC Pink:LYSCF) management.

Rare earths have been dominating the news cycle lately on the back of fears that China may limit exports of the technologically critical metals in response to tariff threats out of the US.

These ongoing tensions are alluded to in Vital’s reasoning for pursuing rare earths opportunities.

“Global rare earth demand has become inextricably linked to global and regional agreements, policies, regulations and initiatives,” reads the company’s announcement. “Rare earths are a cornerstone of global government macro-initiatives including electric mobility, clean power generation and the reduction of greenhouse gas emissions.”

To date, Cheetah’s business plan has been to supply a high-purity mixed rare earths feedstock to third-party rare earth oxide (REO) separation facilities and refiners, which in turn supply end users.

The model was designed to result in lower capital expenditure and reduce lead times to production, positioning the company to be ready as demand increases globally for REO, used to make high-strength permanent magnets.

“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,” Vital CEO Zane Lewis said. “This is an exciting opportunity for Vital to be exposed to rare earths at a time when demand is outstripping supply on the back of the electric vehicle market and the need for clean power generation.”

In order to meet its own business plans, Cheetah has entered into an agreement with Avalon Advanced Materials (TSX:AVL,OTCQB:AVLNF), a Canadian critical metals development company, to acquire rights to the Nechalacho rare earths project located at Thor Lake in the Northwest Territories.

The unique deal will see Cheetah pay C$5 million to take ownership of the near-surface mineral resources on the property above a depth of 150 meters. Avalon will retain the rights and ownership for the deeper resources in the Basal zone.

Avalon’s president and CEO, Don Bubar, noted that the deal is innovative and collaborative, allowing for rapid initial development at a small-scale plant with low capital requirements.

“Once established as a reliable long-term source of the magnet rare earths, the business can grow to establish a new North American supply chain of these critical materials,” said Bubar.

“With China now controlling at least 80 percent of global rare earth supply, and threatening to restrict exports, new domestic supply chains to serve the North American market must be created to reduce reliance on supplies of rare earths from China.”

In addition to the deal with Avalon, Vital will also obtain Cheetah’s project development and option agreement with Montero Mining (TSXV:MON) for the Wigu Hill project in Tanzania. The deal will see Cheetah acquire all the intellectual property rights for Wigu Hill for an estimated C$100,000 and a C$500,000 work program to commence within six months of receiving the mining license.

Shares of Vital were down 18.72 percent on Tuesday (June 25), trading at AU$0.014.

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

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