ASX-listed Oro Verde will acquire up to a 60% stake in the Makuutu rare earths project, in Uganda.

The project is owned by Rwenzori Rare Metals (RRM), which is, in turn, 85%-owned by South Africa’s Rare Earth Elements Africa.

Oro Verde has entered into a binding option agreement with both companies to enable it to acquire up to a 60% direct interest in RRM and, thereby, up to a 60% indirect interest in the project.

The agreement calls for the payment of $10 000 for a 30-day exclusive option period; and upon exercise of the option, the payment of $100 000 in cash, as well as the issue of $150 000 worth of Oro shares at a 30-day volume weighted average price, in return for an immediate 20% interest in RRM.

Oro will contribute a further $1.7-million in expenditure for the project by October 1, 2020, to earn up to a 51% interest in RRM. The company must also fund to completion a bankable feasibility study to earn an additional 9% interest for a cumulative 60% interest in RRM.

The Makuutu project comprises three licences covering about 132 km², located about 40 km east of Jinja and 120 km east of Kampala.

“We have searched extensively and very selectively for the company’s next project and are very excited by this new acquisition. Makuutu has the potential to be a substantive and significant project with a favourable rare earth element mix, that is located strategically outside of China in a mining-friendly jurisdiction,” Oro director Dr Marc Steffens said on Friday.

The Makuutu project geology is similar to that of the southern China ionic clay-type deposits, which are the cheapest and most readily accessible source of heavy rare earth oxides that are extracted through rudimentary mining and processing methods.

Preliminary metallurgical work has been undertaken on Makuutu mineralisation that culminated in an 8.5 t bulk sample being tested at Mintek’s laboratories in South Africa, which has confirmed favourable metallurgy and extraction characteristics typical of ionic clay mineralisation.

Oro will use the 30-day due diligence period to verify the previous exploration and testing results generated by the current owners, including ground gravity and radiometric surveys, pitting for metallurgical testwork samples, more than 100 drill holes totalilng more than 2 000 m of drilling and sample assays, preliminary metallurgical testing, geological modelling, and a non-Joint Ore Reserves Committee-compliant mineral resource estimate.