Hochschild Mining Plc (LON:HOC) said it expects to become one of the “lowest cost rare earth producers” in the world following the acquisition of the BioLantanidos deposit in Chile for $56mln.
Historically a precious metals miner, the FTSE 250 company’s move into rare earths involved acquiring the 93.8% of the Chilean ionic clay deposit it did not already own, having purchased an initial stake earlier this year.
READ: Hochschild Mining shares slide as profits drop on lower silver prices
The BioLantanidos ionic clay deposits, located across 72,000 hectares near Concepción, contain a “high concentration” of rare earth elements including Terbium, Dysprosium, Praseodymium and Neodymium which are essential for the manufacture of permanent magnets for electric vehicles, wind turbines and drone motors.
Lima-headquartered Hochschild said the mine will be cheap and environmentally friendly as the firm will not need to use explosives or build a tailings dam since rare earth mineralisation occurs from the surface to only 20-30 metres deep, and once mined the clay will be washed to desorb the rare earth elements without using “potentially harmful chemicals” and then returned to the pits.
Over the next 18 months Hochschild said it will revise a feasibility study completed by the Chilean company as well as appoint a dedicated management team to oversee the project.
China currently dominates global rare earth production, accounting for at least 71% of mined output last year.
The investment only represents 5% of Hochschild's market capitalisation but after the precious metals miner’s profits were dented by recent sluggish silver prices, the venture into rare earths territory will allow it to diversify into a market being electrocharged by interest in electrification.
Its chief executive Ignacio Bustamante said the acquisition came after an “extensive long-term project” to find commodities with “very strong growth characteristics”.
The company “remains focused on precious metals”, said Bustmante but is excited to enter “a key industry with expected exponential growth and in a low risk jurisdiction” which “could see the Company become a relevant player in the global rare earth market”.