China strengthens grip on world supply with offtake deal at Peak Rare Earths’ emerging Tanzania mine

Fifteen years after acquiring what is now the Ngualla rare earths project in Tanzania, Peak Rare Earths (ASX: PEK) has signed a binding agreement whereby 100% of concentrate will be shipped to China.

A Singapore subsidiary of China’s global rare earths company, Shenghe Resources Holding, will, for a seven-year term, have the right to all concentrate produced at Ngualla and a minimum of 50% of intermediate and final rare earth products.

Separately, the two companies have inked a non-binding memorandum of understanding covering Shenghe considering supplying a fixed price engineering, procurement and construction (EPC) solution as well as organising the financing of development.

Peak says it is also possible for Shenghe to take a non-controlling equity share in the project.

Will strengthen China’s grip on supply of rare earths

Shenghe also has a stake in the US’s only operating rare earths mine, the Mountain Pass mine which sends all its concentrate output to China for processing.

In the California-based Mountain Pass case, Shenghe has also entered long-term offtake agreements as well as providing technical and financing support.

Shenghe is listed on the Shanghai Stock Exchange where its market capitalisation is about US$3.1 billion.

Its Singapore subsidiary already holds a 19.8% stake in Peak.

The parent company is the largest importer of rare earth concentrates into China.

But its operations are much wider than that: it mines rare earths oxides, as well as beneficiation and refining, trading and alloy and metals production.

In today’s announcement, Shenghe’s Deputy Executive Chairman, Huang Ping, made no secret of the importance of this deal with Peak.

“Shenghe regards the Ngualla project as the premier undeveloped rare earth projects in the world.”

Mr Ping also suggested that Shenghe will provide the technical and financial support, saying the Chinese company would be involved with the project’s “offtake, technical and funding support”.

Deal for Australia’s rare earths

Last November the Federal government approved a deal between Shenghe and VHM Limited (ASX: VHM) whereby the Chinese company will get a majority of the latter’s output.

VHM owns the Goschen project in Victoria which has a contained 413,107 tonnes of total rare earth oxides.

In its agreement with Shenghe, VHM will send at least 60% of its rare earth oxides to China.

Long and winding road

It has taken Peak 15 years to get to the point where it can ease into the development stage of the project.

In 2008 it became a joint venture partner with an Indian company in what was then the Ngualla phosphate project.

But that was soon transformed into a rare earths target.

There have been plenty of stops and starts along the way.

It was 10 years ago, in September 2013, that Peak Resources (as it was then called) announced a non-binding memorandum of agreement with an unnamed Chinese company to buy the output of the proposed mine.

A decade on, that is now a reality.