TORONTO (miningweekly.com) – Saskatchewan-based Great Western Minerals Group (GWMG) has reached an offtake agreement with South African partner Rare Earth Extraction (RareCo) for the Stellenbosch-based firm's Steenkampskraal mine.

The agreement covers all the rare-earth metals produced from the mine, and will be settled at market prices.

The deal is conditional on GWMG either completing a feasibility study for the mine by the end of 2011, followed by financing for the project outlined in the study two months later, or providing certain financing outlined in the agreement before the end of this year.

The financing could take the form of a loan, an equity investment in RareCo or a combination of the two, GWMG said in a statement on Tuesday.

In the case of a loan, the offtake agreement would expire once the loan has been repaid. If it is an equity investment, the agreement would end ten years after the first shipment is made.

GWMG will also have an option to negotiate the renewal of the agreement.

"This is an exceptionally important step forward for Great Western Minerals Group," said CEO Jim Engdahl.

"With the agreement in place, and as we meet its terms and conditions, GWMG will be positioned to supply its own rare earth chloride for further separation and use in its own processing, providing downstream margins,” he said in a statement.

GWMG launched the feasibility study in June, after Rare Earth was awarded a mining right for the Steenkampskraal operation.

"Supply certainty of rare earths is becoming a highly valuable commodity," Engdahl commented.

"The ability for GWMG to purchase 100% of the output of the Steenkampskraal mine at market prices, as established through independent published reports as agreed by the parties, under this ten-year renewable agreement, moves our company well down the path toward the level of supply certainty valued by the market."

GWMG owns two rare-earth processing facilities, one in the UK and one in the US.

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