Ecora Resources PLC (LSE:ECOR, TSX:ECOR, OTCQX:ECRAF) has agreed to acquire a 0.85% gross revenue royalty (GRR) over the Phalaborwa rare earth project in South Africa for a total cash consideration of US$8.5 million.
In addition, Ecora has subscribed for US$1.5 million in new shares in Rainbow Rare Earths, the project's owner
The investment represents Ecora's first rare earth exposure and is in line with a stated strategy of further diversifying and growing its portfolio of future-facing commodity royalties.
Marc Bishop Lafleche, Ecora’s chief executive, commented: "We are delighted to announce our partnership with the Rainbow Rare Earths team on the Phalaborwa project.
"This project stands out as one of the lowest-cost prospective producers of rare earths outside of China.
"Notably, production will be principally weighted to rare earth elements essential in the production of permanent magnets, key components in renewable wind power turbines and electric vehicle motors.
"The transaction provides Rainbow with a non-dilutive means of securing the funding to move the project forward towards the completion of a DFS and subsequently a final investment decision.
"It also provides Ecora with a counter-cyclical entry point to further diversify our commodity exposure to include rare earth elements whose end markets are forecast to see sustained demand growth over the coming decades."
Phalaborwa currently has a 16-year estimated mine life and is located on a brownfield site treating phosphogypsum stacks generated as a by-product of historical fertilizer production.
The product mix is heavily weighted to permanent magnet end-markets which account for over 90% of global rare earth consumption by value, Ecora added.
Rainbow is targeting its first Phalaborwa production in 2027, with Ecora receiving a royalty entitlement of 0.85%, a percentage that rises in the event of delays.