Rare Earth Elements (REEs) have been the backbone of the modern tech revolution, powering everything from our smartphones to electric cars and renewable energy technologies. Appia Rare Earths & Uranium Corp. (CSE: API | OTCQX: APAAF), a leading player in the exploration and mining of REEs, has recently made a groundbreaking discovery that could have significant global implications.

A Remarkable Achievement in Rare Earth Exploration

Appia has announced an extraordinary high-grade Total Rare Earth Oxides (TREO) intersection at its PCH Ionic Clay Project in Brazil. Spanning 24 meters from top to bottom, this discovery is unique in its depth of mineralization and the grade of rare earth oxides it contains. According to recent reports, the hole returned 27,188 ppm or 2.72% TREO over 24 metres, including 6,293 ppm or 0.63% Magnet Rare Earth Oxides (MREO) and 1,369 ppm or 0.14% Heavy Rare Earths Oxides (HREO). Tom Drivas, CEO of Appia, stated, “The data released today reveals an unprecedented concentration of TREO over the entire hole.”

In an interview with Stephen Burega, President of Appia, he emphasized the strategic importance of this discovery. “The results show we’re tapping into a new potential for ionic clays,” he remarked. Given the impressive outcomes from other ionic clay structures in South America, especially Brazil, the data from the PCH project stands out as a monumental development for Appia and the global REE industry.

Unraveling the Potential of a High-Grade Mineralized Zone

There is growing optimism about the potential of discovering a larger high-grade mineralized zone. Stephen Burega elaborated on the importance of expanding the exploration in the southwest quadrant of Target 4. With consistent results and multiple holes left to explore, there are high expectations for further discoveries.

Addressing the depth limitations encountered at the water table in hole 63, Burega said, “The mineralization remained consistent throughout. Our next steps involve completing the remaining holes in this area.”

Aligning Global Projects for Strategic Advantage

When asked about the alignment between Appia’s various global projects, Burega emphasized the company’s unique position, with both high-grade hard rock and ionic clay assets. The PCH project in Brazil is complemented by projects in Saskatchewan and Elliot Lake, Ontario. “Each site has its dedicated team – the Brazilian team for the PCH project and the Canadian team for the uranium and rare earth endeavors in Saskatchewan. Both teams are incredibly competent, positioning us favorably in the market,” Burega added.

A Pleasant Surprise and Anticipated Analysis

Reflecting on the recent results, Burega admitted that while the team always believed in the asset’s potential, the magnitude of its success came as a pleasant surprise. The focus is now on metallurgy and mineralogy, with expectations of consistent results across the site.

As for the comprehensive analysis of the rare earths, Appia has commissioned a detailed study at SGS Labs in Brazil. With some elements exceeding the detection limit, a re-assay of the samples is underway. Burega informed that the turnaround is typically four to five weeks, and they have over 230 more holes from various drilling methods to report.

Conclusion

The recent discoveries at Appia’s PCH project are not just significant for the company but have broader implications for the rare earth industry and global technology sectors dependent on these elements. With a robust exploration strategy and dedicated teams working across different geographies, Appia is poised to lead in the exploration and extraction of these critical minerals. As we await further updates, the current findings underscore the immense potential of the PCH project in reshaping the REE landscape.

“Overall Vital appears well on the way to producing commercial quantities of rare earth concentrate, a first in Canada.” — Alastair Neill, President, Critical Minerals Institute

Vital Metals Limited (ASX: VML | OTCQB: VTMXF) is an Australian listed company whose subsidiary, Cheetah Resources, is developing the Nechalacho project in the Northwest Territories of Canada. The deposit was previously owned by Avalon Advanced Materials Inc. (TSX: AVL | OTCQB: AVLNF), and they sold the rights in 2019 to Cheetah for the material 150 meters above sea level. Avalon retained the rights to the basal zone deposit which is underground. The deposit is reported to have 94.7 million tonnes at 1.46% REO (0.1% Nd/Pr cutoff). The mineral hosting the rare earths is bastnaesite, which is good as this mineral has been processing successfully for many years.

Vital raised A$45 million recently through a targeted share placement at A$0.04 per share. According to their press release the funds will be used for:

• Finalisation of construction activities and undertake commissioning, ramp-up and operations at its Rare Earth Extraction Facility in Saskatoon, which will produce a rare earth carbonate product
• Accelerated development of Tardiff deposit at Nechalacho, Canada, including mining studies

A strong balance sheet for ongoing working capital requirements

This project is the most advanced rare earth project currently in Canada. The initial focus is the North T zone which has a resource of 101,000 metric tonnes at 9.01% contained Total Rare Earth Oxides (TREO). Based on tests run at their Saskatoon rare earth extraction plant they can get a 75% recovery to produce a 43.7% concentrate. Based on this, the deposit would produce 6,825 metric tonnes of TREO which would contain 1,600 tonnes of Neodymium (Nd) and Praseodymium (Pr).  Tests have been done using X-ray Transmission (XRT) to sort the ore as the ore is hosted in quartz, which is white, and the rare earth mineral which is red. This is a simple way to upgrade the TREO content at site.

There is an offtake agreement with REEtec, a Norwegian company that is developing a new rare earth separation process. The agreement is for Vital to deliver 1,000 tonnes per year (TPY) of TREO (excluding Cerium (Ce)). Based on that Ce will be eliminated before shipping the concentrate to Norway. This is a step that has been done before by Molycorp in the 1980s. It reduces the material handling by 50% and obviously the size of downstream processing equipment. The North T zone will provide 3,400 of the 5,000 tonnes which means Cheetah will have to open the Basal zone to meet the balance of the supply contract.

Looking at today’s prices on Shanghai Metal Market (SMM) the separated value of this contract is over US$286 million. Assuming Vital gets 1/3 of the value for the concentrate this would produce revenues of over US$95 million of which US$92 million would come from Nd/Pr. Details of the agreement are not revealed so REEtec may be a toll arrangement which could produce more revenue for Vital though I expect the initial target would be to sell La, Nd and Pr in Europe as there are customers in Europe.

Interestingly the extraction plant is located beside the Saskatchewan Research Council (SRC) which has announced that they will be building a rare earth separation facility to process monazite by 2024. SRC has two rare earth experts from China on staff. SRC is also putting in an Nd/Pr metal facility which takes the oxide to the next level in the supply chain.

In addition to the Nechalacho project, Vital has a project in Tanzania called Wigu Hill. Vital has signed a project development and option agreement with Montero Mining & Exploration Ltd. (TSXV: MON), to acquire and develop the Wigu Hill project. The Wigu Hill project is a light rare earth element deposit and consists of a large carbonite complex with bastnaesite mineralization with a NI 43-101 Inferred resource estimate of 3.3Mt at 2.6% light REOs. This is also a bastnaesite mineral.

Overall Vital appears well on the way to producing commercial quantities of rare earth concentrate, a first in Canada. Questions that do need to be answered are what are the costs of operating an open pit mine in Northern Canada and the costs to transport material to Saskatoon.

In the rare earths’ business junior miners need to work with off-take partners to find and meet very strict product qualification requirements. These are specialty products, especially when it comes to the high value magnet rare earths used in electric motors for electric vehicles (EV). All of this takes time.

What this means for investors is that it is wise to first check a rare earths junior’s partnerships and off-take relationships before investing. This is because the off-take partners will be very selective as they need a high spec product (low impurity, etc) and those juniors that have succeeded in securing off-take agreements are well on their way to success. The juniors still have to successfully ramp up their production of the ‘at spec material’, but if successful can then fully qualify their product and hence stand the best chance at progressing to larger scale production. The process can take years not months.

One company doing the above is Vital Metals Limited (ASX: VML) (Vital). Vital has an off-take agreement with REEtec in Norway and another with Ucore in the USA. In both cases, Vital is working with them to develop a qualified end product at commercial scale that can then be sold to end-use customers.

Rare earths ore production continues to ramp up at Vital’s Nechalacho Mine

Vital is already mining (lifting, crushing and sorting ore are performing well) at its Nechalacho’ Mine in Canada’s Northwest Territories (NWT). The Nechalacho Mine is a high grade, light rare earth (bastnaesite) project with a world class resource of 94.7Mt at 1.46% REO (M& I, and Inferred). Nechalacho’s North T Zone hosts a high-grade resource of 101,000 tons at 9.01% LREO (2.2% NdPr) and is where mining from a starter pit began in 2021 (Stage 1). Stage 2 will involve the development of the much larger Tardiff deposit.

Further ore processing is to be done at Vital’s, under construction, Saskatoon cracking and leaching facility once completed, with first product expected by June 2022. Vital aims to produce a minimum of 5,000 tons of contained REO by 2025 from the Nechalacho Mine.

Construction is underway on Vital’s rare earth extraction facility in Saskatoon. Dense Media Separator (right) to be used in the extraction process

Source: Vital Metals September 2021 Quarterly Report

Vital states: “More than $120 million has been spent by previous owners on drilling, permitting and project development at Nechalacho, which includes a 40-person camp and airstrip. Vital aims to be the largest independent supplier of clean mixed rare earth feedstock outside China.”

Vital’s off-take agreements

• Vital has a binding off-take agreement with Norwegian company REEtec for Stage 1 production with the supply of 1,000t REO (ex-Cerium)/yr for an initial five-year period. This was later increased to rare earth carbonate product containing a minimum of 750t NdPr, contained within 2,000t/year total rare earth oxides (TREO) with a maximum of 25% cerium. The amended agreement extends Vital’s product sales to REEtec to 2028 and provides the option to further expand operations during an additional 10 year long term supply agreement to provide up to 2,500t NdPr per annum contained within ~6,800 tonnes TREO (containing a maximum 25% cerium). It also means that the increase to 2,000t/year equates to 75% of Vital’s expanded Saskatoon plant capacity.
• Non-binding MOU with Ucore Rare Metals Inc. (TSXV: UCU | OTCQX: UURAF) to sell to Ucore a minimum of 500t REO (ex-cerium)/year, commencing H1 2024. Vital to expand production to support a minimum of 50% of Ucore’s envisioned 5,000t TREO/yr processing capability (ie: 2,500t TREO/yr) by 2026. Customer acceptance protocols will include the supply of a sample (1-2kg) in Q4 2021 and with a 1t sample supplied in H2 2022.

The reason for the small initial volumes is that it allows both parties to scale together. As I discussed in the opening paragraphs, it takes time for miners to scale production of a high spec qualified rare earths product and for off-takers to go through their acceptance testing. The positive for Vital is that the process has begun with their two off-take partners, and a pathway towards full production and sale has been mapped out.

Vital Metal’s other projects

Vital is acquiring the Zeus heavy rare earth project and 68% of the Kipawa Project in Canada, from Quebec Precious Metals Corporation, for C$8 million, payable over 4 years. Vital also owns a second light rare earths project in Tanzania.

Vital states: “These projects have the potential to complement our light rare earths operations at Nechalacho and transform Vital into the only North American producer of both light and heavy rare earths.”

Closing remarks

Vital Metals is the first commercial scale rare earths producer in Canada and only the second in North America, since rare earth mining was revived earlier in this century. Production began on a small scale in mid 2021 with ore crushing and sorting at the Nechalacho’ Mine in NWT, Canada. Further ore processing will begin to produce product from June 2022 from Vital’s Saskatoon cracking and leaching facility.

Off-take qualification of a scaled up rare earths’ product is ongoing with REEtec in Norway and with Ucore in the USA, but it can take up to 2 years. Vital will grow its production as its customers accept more qualified product. In other words, scale production with your customer, thereby being capital efficient in terms of Vital’s capital outlay.

The pieces of the puzzle are all in place for Vital Metals to build a significant rare earths operation. Investors with a little patience should potentially be well rewarded this decade as demand for rare earths takes off.

Vital Metals trades on a market cap of A$204 million.