Aclara stock surges on investment from Chilean conglomerate

Aclara Resources‘ (TSX: ARA) shares shot up to a near 52-week high after the rare earth elements (REE) developer announced an investment agreement with Chilean conglomerate CAP SA, which operates iron ore mines in northern Chile, very close to Aclara’s Penco module project.

CAP will invest an initial US$29 million in Aclara’s Chilean subsidiary, REE Uno, in exchange for a 20% equity stake in the REE unit. CAP also has an option to invest an additional US$50 million in REE Uno for an additional 20% equity interest once Penco’s environmental permit is secured.

By noon in Toronto, Aclara stock was up one-third to 52¢ per share, giving it a market cap of $85 million.

CAP’s initial investment will be paid in three tranches: US$9.7 million upon closing, US$12.5 million in January 2025 and the remaining US$6.9 million in January 2026. This initial capital, according to Aclara, gives REE Uno a pre-investment valuation of US$116.5 million.

The Penco module covers a 6 sq. km. area hosting an ionic clay deposit rich in heavy rare earths, with measured and indicated resources totalling 27.5 million tonnes grading 2,292 parts per million total rare earth oxides (TREO), for 62,900 tonnes of contained TREO.

The capital injection from CAP will support the ongoing development of the Penco module throughout its permitting, community relations and feasibility study phases. It will also allow the company reallocate its current cash reserves towards advancing its other project: the Carina module in Brazil.

Drawing upon CAP’s extensive experience in environmental permitting from multiple mining projects in Chile, Aclara anticipates strengthened support for the forthcoming Penco environmental impact assessment (EIA) permit application.

CAP’s involvement includes constructive contributions to the application preparation, and support throughout the review and approval process, Aclara said.

The option for additional investment is intended to cover a significant part of the equity portion for construction of the Penco module, mitigating financing risks, the junior company said.

The Chilean group can also invest up to 19.9% in Aclara itself by participating in any private placement or public offerings that Aclara may make over the next threes years. This includes a residual top-up right to maintain its pro rata voting right in the REE miner.

50-50 JV

In addition, the companies will form of a 50/50 joint venture to develop metals and alloys for the rare earths permanent magnet industry. CAP will invest US$3 million in exchange for its 50% of the shares of the newly established JV.

The formation of a metals and alloys company represents the initial phase of Aclara’s vision to vertically integrate its rare earths concentrate production towards the manufacturing of permanent magnets.

This move aims to offer a geopolitically independent alternative supply of permanent magnets to the market, Aclara said, highlighting that the new company will harness CAP’s substantial expertise in metal refining and ferro-alloyed special steels, as well as its understanding of the rare earths and permanent magnet industry.

The transaction reflects the valuation of Aclara at the time of the company’s initial public offering in late 2021 after it spun off from Hochschild Mining (LSE: HOC), Aclara said.

“We are thrilled to partner with CAP to develop our Penco module and strategy in Chile, as well as joining efforts to start developing Aclara’s capabilities in the vertical integration of the rare earths and permanent magnets industry,” Aclara’s chairman Eduardo Hochschild commented.

“This alliance with Aclara represents a historic milestone for Grupo CAP, marking the first step in our strategy to become leaders in the production of essential materials for decarbonization and energy transition,” Juan Enrique Rassmuss, chairman of CAP, added.

Aclara stock has traded between 36¢ and 60¢ over the past 52 weeks.