EDITOR: | January 29th, 2021 | 11 Comments

Beating the path down to become a “Vital” rare earths producer in 2021

| January 29, 2021 | 11 Comments
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Vital Metals Ltd. (ASX: VML) targeting to be the largest independent supplier of clean mixed rare earth feedstock outside of China. That’s a lofty goal, but absolutely necessary because China still counts for about 80% of the world’s rare earths production while only sourcing about 30% of their rare earths domestically. While the initial impact from Vital’s rare earths production may be small in the future supply-chain for rare earths, they are an important part of the global movement for the diversification of rare earths production and are an early entrant into a new supply chain. This has already been recognized with the contract that the company announced in late December 2020 for a binding term sheet signed with REEtec AS, (a Norwegian rare earths separation company) for supply of 1,000 tonnes rare earths oxide (ex-Cerium) per year for a period of 5 years. The supply can be increased up to 5,000 tonnes per year for a period of 10 years.

Vital Metals is on track to produce rare earth oxide in 2021.

That is the first thing you will read when you go to the company website and it is real and it is happening. The production will come from the company’s Canadian Nechalacho project in the Northwest Territories on Thor Lake, close to Yellowknife and near the edge of Great Slave Lake.

In fact, preparations are currently underway at the Nechalachco rare earths project to commence the production of rare earth oxide sometime around May 2021. Everything is on track to meet this production schedule as a result of years of previous work on the project (and previous owner’s expenditures of more than $100 million) and the design of the project parameters ensure early cash flow (and low capital costs) of a production stream that is highly desirable to end users.

The company has two shallow zones on the Nechalacho asset – the T Zone and the Tardiff Zone(s) as shown in the map below:

Vital is employing a very smart strategy – instead of developing the whole project all at once, they are going to first develop the smaller T Zone which will generate cash flow for further exploration and future development of the Tardiff Zones. Their strategy to develop the first mine in northern Canada requires less than A$20 million total capital cost for this first project (North-T, 100% interest), some of which can also be funded by future generated cash flow.

The company has been working towards 2021 production on the T Zone. Last year and into this year, the mining area saw site clearing above the planned pit, dewatering and geotechnical work to confirm the pit design and infrastructure construction for mining and production. Construction of the ice road to bring in the drilling rig and mining equipment has also commenced. We anticipate news in the near-term to confirm the timing of the arrival of mining fleet and delivery of the ore sorter at site. As reported today, at December 31, 2020 the company had approximately $6.1 million of cash and cash equivalents, so they should be well-funded through first production from Nechalacho.

Looking ahead, recall that on September 22, 2020, Vital announced a binding term sheet for the construction and operation of a rare earth extraction plant to produce a mixed rare earth carbonate product. The plant will be located adjacent to the Saskatchewan Research Council’s (SRC) planned separation plant which will be able to convert rare earth carbonate mixes to commercial grade rare earth oxides. Vital’s plant is expected to be operational in Q3-2021 and will use feedstock from Nechalachco– a second “customer” for the mining output. Most people do not know that the SRC has almost a decade of expertise in rare earths (associated with uranium mining in Saskatchewan) and recently announced the construction of a rare earth processing facility in Saskatchewan, the first of its kind in Canada.  The SRC facility is expected to be operational in late 2022.

The team at Vital are world experts in the global rare earth element arena including all necessary elements of mining, processing, geology and marketing and are recognized for this expertise. The devil really is in the details and Vital’s team has a cost and time effective strategy to deliver early production and cash flow. Remote locations require extensive planning and timing is everything as mining and processing equipment can only be delivered and setup during certain weather windows. Things can go wrong, but it appears that most contingencies have been accounted for. This is a key success factor

The global movement to diversification away from China as the global source of rare earth elements has been underway for a number of years. The world always knew that as technology developed, the rare earths would become more and more important, but it has become abundantly apparent that the development of electric vehicles in particular demands more rare earths and from more secure and friendly sources. Vital Minerals’ aim is to become a global player in the production of rare earths. Their expertise, projects and potential have put them squarely on this path and they will become a producer in 2021.


Editor:

Frederick Kozak is a Professional Engineer with extensive oil and gas, and international business experience and has more than 25 years involved in capital markets ... <Read more about Frederick Kozak>


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Comments

  • Rare Earths Investor

    I agree that Vital is an interesting niche RE company for investors (I hold). It is one of the few potential ROW miners with an actual contract (outside Lynas, MP, Northern, Rainbow + some small Asian). In a RE sector investment world presently dominated by traders, searching out actual data based contracts is one way to try and hone in on those very few companies with some real long term investor potential. Thanks for the outline. GLTA – DyoDD

    January 29, 2021 - 12:29 PM

  • Murray MacLeod

    Correct if I am wrong, but Vital’s offtake is for 1,000 tonnes/yr of REO ‘concentrate’…..right? Containing approx 40% Rare Earth Oxides…..correct? REEtec is the separator….correct?

    January 29, 2021 - 2:47 PM

    • ashley bale

      QUARTERLY REPORT
      FOR THE PERIOD ENDED 31 DECEMBER 2020
      Highlights
      • Binding term sheet for offtake agreement executed with Norwegian REE separation
      company REEtec for a base of 1,000 tonnes REO (ex-cerium) per year for five years
      • REEtec has developed a proprietary and sustainable process for the manufacture of rare
      earth elements
      • Term sheet includes option to increase offtake volumes up to 5,000 tonnes REO (ex-
      Cerium) per annum for a 10-year long-term supply agreement
      • $8M Placement completed

      January 31, 2021 - 3:58 PM

  • David Richardson

    Nice

    January 30, 2021 - 7:22 AM

  • William Trevor Villers

    Interesting.

    January 30, 2021 - 8:09 AM

  • Roland

    Very informative

    January 30, 2021 - 9:08 AM

  • Murray MacLeod

    I’m just trying to understand the excitement of 1,000 tonnes of REO concentrate/carbonate per year. 40-45% REO concentrate would sell for approx $500-600/tonne…..giving Vital a revenue stream of $600k/yr. Working up to $3M in sales in five years time based on their projected 5,000 tonnes/yr. That’s not much…..what am I missing here? Vital is already trading with a $133M Market Cap.

    January 30, 2021 - 10:04 AM

  • Tom

    You will want to look at Appia Energy, the ore grades are multiples of peers and the
    Alces Lake deposit is only 25km from the SRC plant

    January 30, 2021 - 7:21 PM

    • Malcolm Lang

      Murray, you are right, but it’s VML’s FIRST agreement/deal. First of hopefully many. Every company has to start with their first deal, even Lynas…yeah??

      February 2, 2021 - 11:41 PM

      • Murray MacLeod

        Ok, but Vital has targeted their Extraction Plant to produce 1,000 tonnes/annum in the first year, and gearing up to 5,000 tonnes/annum in the fifth year. Just REEtec’s offtake fulfills their five year production goals and I assume the capacity of the Plant their are planning on building in the near future. Do you see the problem I’m having in justifying their current valuation? The pieces have to fit. Ref: pages 8 and 18 of Vital’s Corporate Presentation.

        February 3, 2021 - 7:54 AM

        • Frederick Kozak

          Murray/Malcolm – you are both right. Keep in mind their agreement as well with the Saskatchewan Research Council – exporting, to Norway, a second customer on their back doorstep….The market is very much paying attention!

          February 16, 2021 - 10:59 AM

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