ASX-listed Peak Rare Earths lands US$18M for Tanzania project

Australian junior Peak Rare Earths (ASX: PEK) said on Monday it has locked A$27.5 million (US$18 million) in funding from high net worth and offshore institutional investors to advance its Ngualla project in Tanzania.

The company said about 55 million new shares would be offered at a price of A50¢ each, in a two-tranche institutional placement.

The first tranche of the placement will raise A$14.3 million, with shares to be allotted on May 5.

Peak’s largest shareholder, Shenghe Resources, has committed to increase its shareholding from 19.8% to 19.9% via the placement.

Given Shenghe currently holds more than 10% of the company’s issued share capital and has a nominee director on the Peak board, its participation will be in tranche two and subject to shareholder approval.

The placement marks another step towards the development of the Ngualla rare earths project and follows the signing of a binding framework agreement with the government of Tanzania last month, after a five-year wait. The company expects to make an investment decision on the project by the end of September.

A recently updated feasibility study estimates that Ngualla requires a capital investment of US$321 million to produce 16,200 tonnes of concentrates per year to be sold to third party processors.

The mine’s productive life has been pegged at 24 years with annual operating costs at US$93 million a year or US$5.8 per kg total rare earth oxides. The project contains proven and probable reserves of 18.5 million tonnes grading 4.8% rare earth oxides for 887,000 REO. The reserves are dominated by cerium (45%), lanthanum (30%), with higher value neodymium and praseodymium making up 22% and heavy rare earths 3%.

Breaking away from China

Rare earths, a group of 17 minerals, and other critical minerals including lithium, copper, cobalt and nickel are used in the manufacturing of a wide range of products which are crucial for national security and the fight against climate change, including solar panels, electric vehicles, consumer electronics and military equipment.

China is not only the world’s largest rare earths producer but also the main user.

It’s an opaque market with supply determined by government production quotas and internal dynamics characterized by frequent mismatches with demand.

There is also the lingering threat that China could weaponize its rare earths supply if relations with the West deteriorate.

It did so in 2010 by cutting off exports to Japan in a dispute over the status of the islands in the East China Sea called Senkaku by the Japanese and Diaoyu by the Chinese.

Western companies have been trying to reduce their dependence on Chinese rare earth ever since with both miners and governments looking for deposits to develop elsewhere.

According to the International Energy Agency, the country accounted for roughly 60% of the world’s lithium chemical supply in 2022, as well as producing three-quarters of all lithium-ion batteries.

It also has a tight grip over the world’s supply of cobalt through its mining operations in the Democratic Republic of the Congo. Over the next two years, China’s share of cobalt production is expected to reach half of global output, up from 44% at present, according to U.K.-based cobalt trader Darton Commodities.