St George Mining signs deal with Liaoning Fangda Group to co-develop Araxá niobium-rare earths project

St George Mining (ASX: SGQ) has secured an agreement with steelmaking giant Liaoning Fangda Group to collaborate on the development of the high-grade Araxá niobium-rare earths project in Brazil.

The agreement was signed with Liaoning subsidiary Beijing Fangda Carbon-Tech Co and will include marketing, offtake and financing opportunities with the aim of advancing the world-class asset through feasibility studies to a final investment decision.

Under the key terms, Fangda will be granted exclusive rights to acquire a minimum 20% of niobium products from the project and commit to an initial five-year offtake deal based on a market-linked reference price.

Fangda will also provide funding support for Araxá’s development through an investment in St George or a pre-payment loan facility.

The non-binding agreement will allow St George to pursue additional partnerships with other strategic investors and enter into other transactions involving the project.

Strategic importance

St George executive chairman John Prineas said the agreement with Fangda recognised Araxá’s long-term strategic importance and would help de-risk the project.

“Our ability to attract global giants like Fangda speaks volumes about the potential of this project and acknowledges the high-performance in-country management that St George has established to drive its development,” he said.

“With extensive near-surface mineralisation already confirmed by historical drilling as well as access to existing infrastructure, we are continuing to position St George to become the next global niobium player.”

Araxá acquisition

In August, St George subsidiary Niobium Dragon Pty Ltd agreed to acquire the Araxá project from US-based phosphate and specialty fertiliser company Itafos Araxá Mineracao E Fertilizantes SA.

The deal will be funded by a $20 million share placement to St George institutional and sophisticated investors for the issue of 1 billion St George shares priced at $0.02 each.

Araxá is backed by a long history of commercial niobium production in the region, as well as access to infrastructure and a local workforce, plus in-country management and government support for expedited project approvals.

Past exploration of the high-grade resource returned more than 500 intercepts grading upwards of 1% niobium pentoxide and rare earths with grades of up to 8% niobium pentoxide and 33% total rare earth oxides (TREO).

Terms of the deal

Under the terms of the acquisition, St George will make a US$10 million cash payment to Itafos at close of the transaction plus a deferred cash payment of US$6 million within the following nine months and an additional US$5 million within 18 months.

Itafos will also receive 266 million St George shares; 86 million options at an exercise price of $0.04 each and a two-year expiry; and 11 million performance rights convertible into St George shares for no additional consideration upon St George reporting a minimum inferred resource at Araxá of 25 million tonnes grading 3.5% TREO at a 2% cut-off within the first five years.

De-risked project

Mr Prineas said the capital raise recognised the de-risked nature of the Araxá project at a time when critical metals like niobium and rare earths are highly sought after worldwide by industry and governments.

Work programs have already been planned for 2025 to unlock the asset’s full potential and will commence with a drilling campaign once St George completes the transaction in early March.