Aclara Resources Inc (TSX:ARA, OTC:ARAAF) announced a strategic investment of up to US$80 million by Chilean firm CAP SA in Aclara’s Chilean subsidiary, along with an option for an equity investment of up to 19.9%.
Under the terms of the agreement, CAP will inject US$29 million into REE Uno SpA, which oversees Aclara’s Penco Module rare earths project, in exchange for a strategic 20% equity stake.
CAP boasts over 77 years of industry experience and a sterling track record in iron ore mining.
The conglomerate's diversified operations span across Chile, Peru, and Argentina, with a robust presence in steelmaking and port infrastructure.
The agreement extends beyond the initial investment, encompassing an option for CAP to inject an additional US$50 million into REE Uno, potentially securing a 40% equity stake, pending the acquisition of requisite environmental permits for the Penco Module. Moreover, CAP has secured a three-year window to invest up to 19.9% in Aclara, coupled with a board nomination right.
The deal values REE Uno at US$116.5 million before any additional investments. Additionally, Aclara will possess half of the newly formed joint venture, valued at US$3 million. Consequently, the overall transaction assigns a total value of US$119.5 million to Aclara, mirroring its pre-money valuation at the initial public offering.
Aclara noted that its Brazilian subsidiary, Aclara Mineracao, which manages the Carina Module and all mining concessions in Brazil, is not part of this transaction nor included in the valuation of REE Uno.
Integral to the collaboration is the establishment of a joint venture aimed at developing metals and alloys tailored for the rare earths permanent magnet industry.
Eduardo Hochschild, Chairman of Aclara, told investors that the company was “thrilled” to partner with CAP to develop the Penco Module and advance Aclara’s strategy in Chile.
“Aclara now combines its innovative attributes with the proven execution capabilities of two major players in the Latin-American natural resources space, Hochschild Mining and CAP,” Hochschild said in a statement.
The chairman noted CAP’s sustainability practices and longstanding relationship with local communities, as well as the group’s metallurgical knowledge and expertise to produce metals and alloys.
“CAP has been producing high performance alloys for decades and can apply this experience to the emerging rare earths sector. The creation of a company to fund R&D efforts towards producing higher value products is a necessary step and both parties will decidedly support its development.”
Hochschild told shareholders that the financial commitment from CAP “reflects the shared view by both companies of the promising future that rare earths have.”
“We both agree that rare earths extracted by methods that prioritize the protection of the environment will own a special niche of the market, one that will be highly priced by companies with outstanding corporate government.”
Juan Enrique Rassmuss, Chairman of CAP, echoed Hochschild's sentiments.
“The partnership with an innovative company like Aclara, in sustainable projects and with enormous growth potential, opens a new stage for us in which we have great expectations. We will contribute resources and our experience to accelerate the impact of Aclara as a significant player in the fight against climate change and the care of the environment.”