Lindian Resources Ltd (ASX:LIN) is set to acquire Rift Valley Resource Developments Limited, which owns the coveted Kangankunde Rare Earths Project in Malawi, for US$30 million.
The markets reacted strongly to the news, with shares in the Australian explorer up as much as 44.5% intra-day to A$0.195, a new 12-month high.
“Globally significant deposit”
The Kangankunde Project is a carbonatite-hosted system and a “globally significant deposit” with major potential in size and grade, on a granted mining licence and in close proximity to infrastructure.
The ratio of neodymium and praseodymium (NdPr) in concentrate at the deposit is estimated at about 19%.
Project economics have not been independently updated since 2011 but in the intervening decade, NdPr has become increasingly valuable and important in permanent magnets for electric vehicles.
Previous metallurgical test work supports the deposit being amenable to a low-cost gravity separation concentration producing a 60% rare earths oxide (REO) concentrate.
Access to port and infrastructure
It will be easy to shift resources from the site, with the Nacala corridor railway line just 9 kilometres to the east, providing access to the deep-water Port of Nacala.
In addition, the M1 highway and main power transmission line are only 4 kilometres to the west of the project.
Lindian will immediately get started on community engagement, redeveloping access for planned drill programs and sampling to update metallurgical test work in advance of engineering works programs.
The purchase price is payable in four tranches, including a non-refundable deposit of US$2.5 million, and a further US$27.5 million payable in three tranches within 48 months from signature date of the share purchase agreement.
The board will also need to garner the approval of Lindian shareholders, to be sought at a general meeting expected to be held in September.
Lindian chairman Asimwe Kabunga said: “This is, without doubt, an outstanding development for Lindian that delivers a huge value opportunity for shareholders.
“Highly sought after”
“The potential of the Kangankunde Rare Earths Project is indeed significant and it has been highly sought after by many parties over a number of decades.
“Lindian is committed to its development and we will work constructively with the Malawian government to seek to bring this project into production and deliver meaningful benefits to Malawi.
“If shareholder approval is obtained, we intend to hit the ground running and activate multiple project development initiatives to unlock Kangankunde’s value as quickly as possible.
“As this is already a granted mining concession, the scope of works can be much broader and the development timeline shorter."
Acceleration in rare earth demand
“This binding transaction gives Lindian control of one of the world’s premier undeveloped rare earths deposits, at a time when global demand is universally forecast to accelerate materially in the years ahead," Kabunga said.
"I’d like to take this opportunity to thank all stakeholders involved in the negotiation process, and look forward to providing investors with ongoing updates as the Company executes its plans to advance the Kangankunde project towards commercial development.”
Funds for first downpayment
To help fund this venture, the company has confirmed receipt of a binding commitment from a single investor to subscribe for 15 million fully paid ordinary shares at $0.20 per share, which will raise $3 million.
The share price represents a 48.1% premium on the last closing price of LIN shares on the trading day prior to the announcement of the capital raise.
Under the arrangement, for every two shares there will be an attached unlisted option exercisable at 25 cents and expiring three years from the date of issue.
The injection of funds ensures Lindian can immediately complete the first tranche payment of US$2.5 million to acquire Rift Valley Resources Developments and its Kangankunde Rare Earths Project in Malawi and fund first-stage project development works.
“This $3 million placement at a significant premium again reinforces that investors recognise the value and considerable potential of our world-class Kangankunde rare earths deposit,” Kabunga said.
“With this added financial flexibility, we plan to shortly complete the first tranche payment for Kangankunde and commence an initial works program which marks the next step in bringing this project into production. We expect a steady stream of updates once work gets underway.”