Ottawa diverts $3M rare earths sale from Chinese firm in ‘case of elevated interest for Canada’

The federal government has brokered the sale of $3 million in stockpiled rare earths mined in the Northwest Territories by Vital Metals (ASX: VML), the company said Monday, as Canada moves to keep its critical minerals out of Chinese hands.

Natural Resources Canada organized the sale of the rare earths, mined at Vital’s Nechalacho project, to the Saskatchewan Research Council (SRC), a Treasury Board Crown corporation overseen by the provincial government. It replaces a sale last December of A$2.6 million ($2.3 million) worth of stockpiled rare earths from Nechalacho to Chinese firm Shenghe Resources. Shenghe earned a 9.9% stake last October in the Australian company for A$5.9 million.

“We were presented with a case of elevated interest for Canada,” Vital managing director Geordie Mark told The Northern Miner on the phone on Monday, though he declined to discuss details of government involvement in the sale. 

“This agreement highlights the strategic value and importance of the Nechalacho rare earths project, and the prioritization of a rare earths value chain in Canada,” Mark said in a news release. “This sale is also beneficial in deriving value from our work at Nechalacho as we continue to advance the Tardiff rare earths deposit as a long-life, large scale project with a scoping study to examine potential size and scalability of Tardiff on track for delivery by the end of 2024.”

Grip on investment

The stockpile sale last December raised eyebrows, with some saying it highlights the lack of investment by Canada in critical mineral projects. 

But the stockpile had never left Saskatoon, Sask. and Vital hadn’t bought back the rare earths from Shenghe because money in the deal had not yet exchanged hands, Mark said. 

“Normally with overseas sales, you get paid once it’s on the ship,” he said, adding the transaction doesn’t change Shenghe’s 9.9% stake in Vital.  

Federal intervention in the Vital deal would follow similar efforts since October 2022, when it announced tougher foreign investment rules. A month later, it ordered three Chinese investors to divest their stakes in Canada-based battery metals companies.

This year, two Canadian companies halted Chinese investment due to regulatory reviews. In May, Solaris Resources (TSX: SLS; NYSE: SLSR) canceled a $130-million investment by China’s Zijin Mining for a 15% stake to aid the Warintza copper project in Ecuador. In March, Montreal-based SRG Mining (TSXV: SRG) broke off a $16.9-million deal with China’s Carbon ONE New Energy Group to take 19.4% of the graphite miner.

Resource update

Vital updated the Tardiff zone resource at Nechalacho in April by 79% to 31.1 measured and indicated tonnes grading 1.15% total rare earth oxides (TREO) for 358,000 contained TREO. That compared with the February 2023 resource. It also holds 181.6 million inferred tonnes at 1.17% TREO for 2.1 million contained tonnes.

Last September, Vital’s processing subsidiary Vital Metals Canada went bankrupt, following an operations review that found the half-completed, $55-million facility in Saskatoon wasn’t economical. The plant was to process rare earths mined at Nechalacho, located 110 km southeast of Yellowknife, which was briefly Canada’s only demonstration-scale rare earths production project. It was separate from the facility of the SRC which in 2020 signed a binding term sheet with Vital to negotiate deals for the construction and operation of a rare earths processing plant in Saskatoon.

Vital shares were down 25% to A0.3¢ apiece on Monday in Sydney, valuing the company at A$8.8 million. Its shares traded in a 52-week range of A0.3¢ and A1¢.