Gold explorer Vital Metals (ASX: VML) will shift its focus to rare earth oxides (REO) after announcing it is purchasing an unlisted entity Cheetah Resources which is run by ex-management from rare earth producer Lynas.
Private company Cheetah Resources is in the process of securing the Thor Lake REO project in Canada and the Wigu Hill asset in Tanzania.
“This acquisition is a game-changer for Vital and forms a major part of our goal of delivering significant value to shareholders,” Vital executive director Zane Lewis said.
Under the all scrip deal, Vital will issue 400 million ordinary shares to acquire Cheetah. This will be followed by the issue of a further 800 million in performance shares via two tranches and upon completion of various milestones.
Former Lynas corporate planning manager, and the man behind Cheetah, Geoff Atkins will be joining Vitals’ board as managing director.
Mr Atkins has five years’ experience in reviewing and assessing REO projects around the world and developing criteria and strategies for developing the projects.
“In addition to Geoff Atkins, Cheetah’s team includes ex-managers from rare earth miner Lynas who have an in-depth knowledge of rare earth ore bodies, markets and project development requirements,” Mr Lewis said.
“In essence, our vision is to become the next Lynas.”
Thor Lake rare earth project
Cheetah has an agreement in place to secure 100% of Thor Lake, which is part of TSX-listed Avalon Advanced Materials’ Nechalacho property, near Yellowknife in Canada.
Thor Lake has an existing foreign resource (NI 43-101) of 149.03 million tonnes at 1.42% REO and Cheetah will pay Avalon $5.4 million for the Thor Lake project.
The project also has mining leases and water approvals with an environmental permit and water licence progressing.
Under the agreement, Cheetah, and subsequently Vital, will hold mineral rights to the upper zone, which includes all mineralisation between the surface and a depth of 150m above sea level.
Avalon will retain ownership of the resources in the Basal zone, where it spent more than C$100 million on a feasibility study and obtaining permitting.
Vital will initially focus on the identified high-grade core North T zone at the project, with the company also noting the project has exploration upside with the Upper Lake zone known to host high-grade mineralisation at surface.
Wigu Hill rare earth project
Over at the Wigu Hill project in Tanzania, Cheetah has an option to acquire up to 74% of the asset from TSXV-listed Montero Mining & Exploration by funding the project to mining stage.
The agreement allows from Cheetah to purchase the rare earths rights for C$100,000 (A$109,000) and fund a C$500,000 (A$545,000) work program within six months of receiving a mining licence.
Cheetah also has an option to secure the remaining rights in Wigu Hill for C$1.1 million (A$1.2 million).
Wigu Hill covers 142 square kilometres and similar to Thor Lake, Wigu Hill has a NI 43-101 resource, which totals 3.3Mt at 2.6% REO.
Mining and prospecting licence applications have been submitted for the project.
Advancing rare earth strategy
Vital’s strategy behind the acquisition is to take advantage of the growing demand for rare earths which are needed in electric vehicles and new sustainable energies.
To meet the increasing demand, its predicted new mines will be needed with current production unable to meet projected global consumption.
The company plans to simplify the development process by mining and producing a high purity mixed REO product and avoid the high capital expenditure requirements associated with rare earth separation facilities.
“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,” Mr Lewis explained.
Vital had $14.6 million in cash at the end of the March quarter, which will be used to advance the projects.
“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.”
Shares in Vital were up almost 8% at $0.014 by mid-afternoon trade.