East Star Resources Plc (LSE:EST) announced a farm-in to the Talairyk Ionic Adsorption Clay (IAC) Heavy Rare Earth Element (HREE) project in Kazakhstan.
The gold, copper and rare earths explorer can own up to 90% of the project and its associated joint venture company through a combination of exploration spending and share-based payments.
The project contains 19,962 tonnes of Total Rare Earth Oxides (TREO), including 4,300 tonnes of yttrium oxide at average depth of 7.5 metres from surface, according to a 1994 resource model.
"The Talairyk project represents the exact reason East Star is focussed on Kazakhstan,” said chief executive Alex Walker. “There are very few places in the world where a company can find a project of this quality and potential and with this amount of data that has not undergone any work since 1994.”
East Star said its joint venture partner is Phoenix, whose principal shareholders include a highly experienced mining executive with existing gold production and several other exploration licences in Kazakhstan, and the Head of Natural Resources for a global law firm.
East Star’s holding will initially rise to 51% after spending US$500,000 on the project, including planned drilling and initial metallurgical test work, and this will increase to 75% after it spends an additional US$500,000, which will include a scoping study level feasibility assessment.
On completion of each stage and after East Star receives its shares in the joint venture, East Star will pay Phoenix US$250,000 in shares.
“The deal structure presents very little risk to East Star given no share-based payments are made until a significant amount of work is done,” said Walker. “This will include re-drilling much of the existing deposit, extensional exploration and conducting initial leach test work.”
East Star will continue to sole-fund all expenditure until the completion of a definitive feasibility or bankable feasibility study to earn up to 90% of the project, although Phoenix may decide to make a contribution to maintain its share.
“We have already begun the process to get all approvals for drilling and are very excited to start work to quickly advance this asset in the critical mineral space,” said Walker. “The market dynamics for rare earths are extremely compelling, driven by the green energy transition and a desire to reduce dependence on China for supply.”
Potentially economically extractible IACs are rarely found outside of South China with only a few in South East Asia currently in production and exploration/development projects in Australia, Brazil, Chile and Uganda. IAC deposits are comparatively rich in HREEs and are a primary source of China's and therefore the world's HREE production, East Star noted.
IACs generally have lower capital expenditure and operating expenditure than hard rock rare earth projects and can achieve a higher average price.
East Star said it is fully funded from existing cash reserves to complete the earn-in and its current exploration programme across all its projects.