TSX-V-listed Namibia Critical Metals has found a strong technical and financial partner to advance its Lofdal heavy rare earth project in an agreement that is nondilutive to its shareholders.

The company signed an agreement with Japan Oil, Gas & Metals National Corporation (Jogmec) to jointly explore, develop, exploit, refine and/or distribute mineral products from Lofdal, in the Kunene region of north-western Namibia.

The agreement provides Jogmec with the right to earn a 50% interest in the project by funding C$20-million in exploration and development expenditure. Once Jogmec has completed and exercised its 50% earn-in and a feasibility study has been completed on the project, the Japanese conglomerate has the right to acquire an additional 1% interest in the project for C$5-million. Thereafter, it has to exclusively provide funding to develop the asset, subject to Namibia Critical Metals’ interest not being diluted below 26%.

Namibia Critical Metals CEO Pine van Wyk commented last month that the agreement with Jogmec provided alignment with, and access to, industrial groups in Japan looking to secure long-term supplies of dysprosium, terbium and other heavy rare earths.

Japan is the most important consumer of dysprosium outside China. Adamas Intelligence estimates that, from 2013 to 2017, China produced 98% of the global supply of dysprosium and was responsible for about 90% of global dysprosium oxide (or oxide equivalent) consumption each year. Japan was responsible for 9% of global consumption and other nations 1%. With 2017 dysprosium production estimated at 1 500 t, Japanese consumption is therefore estimated at 135 t/y.

A 2014 preliminary economic assessment on the Lofdal project concluded that the project had the potential to produce an average of 1 500 t/y of separated rare-earth oxides (REOs), which would generate an after-tax cumulative cash flow of $259-million, with a net present value, using a 10% discount rate, of $148-million and an internal rate of return of 42%, based on projected REO prices at the time.

Shares in the Halifax-based company rose sharply last week, closing 19% higher at C$0.16 a share, giving the company a market capitalisation of C$28.85-million.