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Vital's Canadian refining dreams falter

3rd October 2023

By: Esmarie Iannucci

Creamer Media Senior Deputy Editor: Australasia

     

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PERTH (miningweekly.com) – Dual-listed Vital Metals’ wholly owned subsidiary Vital Metals Canada has filed for bankruptcy after failing to amend an offtake agreement with Norway’s REEtec, and failing to repurpose its halted Saskatoon rare earths processing facility.

Vital in December of last year announced plans to defer the completion of the Saskatoon facility’s rare earth hydro metallurgical leaching, purification and rare earth precipitation circuits until the second half of 2024 to delay the associated cost to complete until 2024, better aligning capital expenditure with the anticipated timing of revenues from offtake partners.

Instead, the company elected to complete the calcine circuit by the third quarter 2023 to enable it to process materials from the Nechalacho project, in the Northwest Territories, to produce an intermediate rare earth oxide product to be sold to third parties, prior to commencing deliveries of final rare earth carbonate under the offtake agreement with REEtec.

However, Vital was unable to secure sales of the intermediate product on commercially satisfactory terms, and the plans to produce an intermediate product were found not to be economic.

In April this year, Vital initiated a strategic review following an assessment of the economic viability of mining and beneficiating ore from the North T pit at Nechalacho. At the time, it was concluded that operating North T and the Saskatoon facility as originally envisaged was not economically viable under the existing business model. Construction at Saskatoon was halted in April to preserve cash and to allow Vital time to seek alternative funding sources and strategic options to potentially build a sustainable business model for the Saskatoon business.

The company also evaluated alternative strategies for its Vital Metals Canada subsidiary to deliver a sustainable business model, and engaged in dialogue with REEtec to amend the offtake agreement to address changes in key economic and technical conditions that Vital said were beyond the control of the company and which would cause unfair hardship to Vital if the offtake agreement continued in force on its existing terms, as well as discussing other alternative options with REEtec.

As part of its contingency plans in the event that negotiations with REEtec faltered, Vital also investigated the potential repurposing of the Saskatoon facility to enable it to accept alternative feedstock on the basis that the Saskatoon facility is well located with respect to transport infrastructure, and its potential for intermediate processing of rare earth material could fulfill an important role within the expanding North American market. However, Vital told shareholders that while preliminary discussions with various third parties were positive, the company was unable to conclude any agreements for an alternative solution.

Additionally, the company was unable to reach a resolution with REEtec on the proposed terms of an amended offtake agreement, and issued the offtake partner a notice of termination under the offtake agreement, which was delivered late in September.

The offtake agreement will terminate on December 26.

However, REEtec has indicated that it does not agree with Vital’s assessment that it had suffered unfair hardship, and did not consider the notice of termination to be valid. The company has reserved its rights and could initiate arbitration proceedings.

Vital told shareholders that in an effort to protect the company’s mineral tenements in Canada, and to provide the best possible chance of advancing to successful mining and processing operations at the Tardiff project, the Vital Metals Canada subsidiary has been assigned into bankruptcy, and all property, assets and undertakings of the subsidiary have been vested in a trustee which will liquidate the assets and distribute the proceeds to proven creditors.

Vital’s other Canadian subsidiary, Cheetah Resources Corporation, which owns the mineral properties in the Northwest Territories, will remain unaffected by the process.

“Vital has endeavored to work with all parties to find an acceptable and workable path forward and has been very focused on delivering an outcome for the establishment of a viable intermediate processing business in Saskatoon on alternate terms,” said interim chairperson Richard Crookes.

“Whilst we are disappointed with the situation at Saskatoon, Vital remains focused on creating significant value for shareholders by advancing the Tardiff project, a recognised, globally significant rare earths deposit in a very favorable jurisdiction.”

Edited by Creamer Media Reporter

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