Greenland Minerals and Energy in transformative move to 100% of world's largest rare earth project

Greenland Minerals and Energy (ASX: GGG) has completed a pivotal agreement with Westrip Holdings (and Rimbal Pty Ltd) to acquire the outstanding 39% of the exploration license 2010/02 over the northern Ilimaussaq Complex in Greenland.

The license contains the Kvanefjeld multi-element deposit (rare earth elements, uranium, zinc) and nearby satellite deposits, zone 2 and 3.

The attraction of Kvanefjeld is clear. It hosts the largest occurrence of rare earths (6.6 million tonnes total rare earth oxides (TREO)) as defined by internationally recognised standards, 350 million pounds uranium and 3 billion pounds of zinc.

And these current resources do not even include zone 2 or 3. Resource estimates for these zones are expected later this year, and are likely to lead to a further boost to total resources at Kvanefjeld. 

As consideration for moving to 100% ownership of Kvanefjeld and the cancelation of the joint venture and all cessation of all legal activity, Greenland Minerals will pay A$39 million in cash, 8,125,000 shares, and 5,000,000 options (ex $1.50) in Greenland Minerals to all shareholders of the joint venture vehicle Westrip.

In addition, Greenland Minerals has also entered into an agreement with Rimbal to provide it with off-take rights regarding lujavrite from the Greenlandic license 2010/24 immediately to the south of the northern Ilimaussaq license. Lujavrite is the rock-type that is host to REE-U-Zn mineralization at Kvanefjeld, consideration for this off take is AU$1.00.

Finally, the agreement includes the dismissal of all legal proceedings with no orders as to costs, dismissal of the UK Proceedings and the lifting of the injunction granted thereunder also with no order as to costs. The transaction is also subject to shareholder and regulatory approval.

Funding of buy out

It is understood that Greenland Minerals is currently evaluating alternative financing proposals to mop up the remaining interest in the project. There is a window of 150 days to finalise these.

It is believed that Greenland Minerals is looking at a funding option that aims to be the least dilutive method of funding with the lowest cost of capital and has mechanisms to ensure minimize dilution, maximize shareholder value, and minimize risk exposure.

Owing to current volatility on global financial markets, there exists a clause in the settlement whereby Greenland Minerals at its sole discretion has 14 days to cancel the agreement if and when key market indices fall below certain levels.

History

Since acquiring the license in 2007 the company implemented a systematic and intensive exploration program which included among other things an additional 50,000 metres of diamond core.

This work has led to the recognition that firstly mineralisation at Kvanefjeld is polymetallic in nature, being strongly enriched in rare earth elements and Zinc, and secondly, that mineralisation is far more prolific than had been previously documented and is now measure in terms of square kilometres.

As a key aspect of GMEL’s ongoing corporate development, the executive management recognised the strategic importance of securing 100% ownership of the Kvanefjeld project, at a time and manner that is value accretive for the company’s shareholders. With this aim firmly in place, GMEL’s board is confident that the terms of the settlement, outlined below, clearly serve to fulfill this agenda.

Roderick McIllree, managing director of Greenland Minerals, said “moving to 100% ownership of the Kvanefjeld project at this time is an very important value add transaction and comes at a time that makes sense with respect to the development timeline the company is maintaining.

"Continuous technical breakthroughs regarding processing and recent approvals by the Government of Greenland of environment and social impact assessments to include Uranium the management took this opportunity to further build shareholder value, and I see the settlement terms as a good outcome for all parties.”

As a representative of Westrip/Rimbal, Greg Barnes stated, “we are pleased with the outcome of the settlement process, and now as a supportive shareholder in GMEL, I believe that this corporate development will with the benefit of hindsight be the point at which the real latent value in the Kvanefjeld project is unlocked."

Rod McIllree told Proactive Investors today, "the acquisition (of the minority interest) has come at right time, a huge value add, for a company now worth $200m and is buying the other 39%."  He said the (deal) from this point allows Greenland Minerals to look truly forward for the first time, moving on from the past.

McIllree also said the company was engaged with multiple parties regarding finance from project to equity and has 5 months within which to complete the financing of this acquisition." 

"The only condition precedent to this being completed is just the financing...it is such a big value add...focusing on the least dilutive method to shareholders."


Technical Advances

Under the base-case mining parameters, the new schedule sees an increase in REO output of 21%. The company is aiming to establish an operation, which at full capacity will have an output of about 40,000 tonnes TREO.

The new mine schedule creates the opportunity to maintain a high output while reducing the mine throughput and the size of the processing plant.

Beneficiation testwork programs are now producing extremely positive results with recent tests resulting in the concentration of >85% of light REEs in <15% of the mass.

This opens the opportunity for further reductions in the capacity and cost of the REE leach circuit while maintaining a high output.

Testwork to improve REE recoveries is also yielding positive results, with an overall increase in recovery of 17% achieved so far.

All technical developments serve toward establishing an increasingly cost-effective and efficient development scenario for the Kvanefjeld multi-element project. Work programs addressing mineral beneficiation and REE recoveries are ongoing.

The company expects more results in the coming months, as it moves to firm up the optimal process flow sheet for the resource.


Analysis

The deal to take out the minority partner allows Greenland Minerals to acquire the 39% minority holding and move to 100% of Kvanefjeld for just $39 million cash. It is a signficant step for Greenland Minerals and also removes uncertainty as to whether Westrip, or Rimbal, the private company of Barnes, held the rights to the minority share of the joint venture.  It also removes legal claims from of the picture.

Strategically, it allows Greenland Minerals to own 100% of the Kvanefjeld project - unfettered - and in a way that can unlock greater value for Greenland Minerals shareholders. 

This outcome, for the entire 100% of the Kvanfeld project that has a resource of 6.6 million tonnes TREO, 350 million pounds of uranium and 3 billion pounds of zinc at a cost of $39 million, yet Greenland Minerals is itself still valued at a miserly $202 million.