Hochschild’s rare earths spin-off Aclara to start trading in Toronto

Hochschild Mining’s (LSE: HOC) rare earths spin-off Aclara Resources is set to begin trading in Toronto next week under the ticker “ARA” after securing $123.5 million (US$96.4 million) for its initial public offering.

The new miner will issue 35 million shares at $1.70 each for gross proceeds of $59.5 million, Hochschild said today.

In addition to the offering, the parent company and Pelham Investment Corp. have agreed to invest an aggregate $64­­­­­­ million in Aclara, in exchange for 37.7 million shares at a price of $1.70 each.

Hochschild Mining will retain a 20% interest in Aclara, which owns a land package of mineral concessions in Chile. The property contains ionic clays that are rich in rare earth elements (REE). 

Based on the issue price, the rare earths miner will have a market capitalization of $276.4 million (US$216 million), Hochschild said.

Aclara will focus on developing first the Penco Module project, formerly known as Biolantanidos, which covers a surface area of roughly 600 hectares and contains ionic clays that are rich in REEs. 

Penco, a low cost and capex project, employs simple metallurgy and a straightforward mining process that does not require explosives or tailings dams, Hochschild said. It added that the deposit contains little to no radioactivity.

Competing with China and Myanmar

Hochschild bought the deposit for US$56 million in cash in October 2019, saying it expected the rare earths market to grow “exponentially.” 

Ryan Thompson, precious metals analyst at BMO, said the project was “unique” as there are very few of its kind outside China. It contains dysprosium and terbium, key heavy rare earth elements used in high performance magnets, which are found in electric vehicles (EVs), wind turbines, drones, planes, and home appliances. 

Analysts at Berenberg said they viewed the divestment “as the best way to achieve fair value for the rare earths business that should trade at a premium to the company’s mature precious metals business,” adding that “this, however, creates an issue for Hochschild as Aclara was, by a margin, the most interesting development project in its portfolio.” 

Set to begin production in 2024, Aclara’s operations would account for about 2% of global dysprosium production, or 28% of supply outside of China and Myanmar. 

The concentrates produced will be processed by third parties and the company has not ruled out the use of a plant in China, India or Estonia.

Longer-term, the new company would look at building its own separation plant, Hochschild said in October, when announcing its decision to spin off its Chilean rare earth assets.