Vital eyes more advances at Nechalacho

Though the 2022 field season is scarcely underway, Vital Metals Ltd., Canada's first rare earths producer, is already eyeing a second banner year at its Nechalacho REE mining operation in Northwest Territories – with recent progress in virtually every aspect of the Australia-based company's Canadian project, from exploration to marketing.

Vital's offtake partner, Norway-based REEtec AS, signed a purchase agreement in April to supply rare metals for magnets used in electric motors to German auto parts supplier Schaeffler AG. The Schaeffler Group, one of the world's largest family companies with 83,000 employees, reported sales of roughly 13.9 billion euros (US$14.6 million) in 2021. Schaeffler is Germany's third-most innovative company, according to the DPMA (German Patent and Trademark Office).

Schaeffler, a world leader in supplying electric drivetrains to hybrid and electric vehicles, has agreed to a five-year deal to buy rare earth oxides from REEtec starting in 2024. The agreement represents 75% of Vital's stage-one operation at its rare earths processing plant in Saskatchewan, which is due to start rare earth carbonate production in June.

The rare earths miner is currently completing a stage-two feasibility study on expanded production scenarios to capture the expected increase in demand from European and U. S. car manufacturers and other customers as the momentum of the EV revolution continues to increase.

Vital said the agreement marks the first time in the rare earth industry that a binding agreement has covered the entire REE supply chain from raw materials to electric motors.

Vital had inked the offtake deal with REEtec in February 2021 to sell 2,000 metric tons of rare earth carbonate, containing 750 metric tons of neodymium-praseodymium per year, beginning in 2023. The parties also agreed to a pricing mechanism, which secures a guaranteed minimum payment to Vital, equal to its cost of production, plus a share of the product margin.

Vital expects to begin producing a mixed rare earth carbonate in June at its extraction facility, currently under construction in Saskatoon, Sask., from material mined last year at Nechalacho.

"REEtec's agreement with Schaeffler has validated the quality of Vital's product and demonstrated the need for EV makers and parts suppliers to have access to a transparent rare earth supply chain that a company such as Vital could provide," Vital Metals Managing Director Geoff Atkins said April 22. "We have always been confident that our product would be in demand, and this agreement secured by REEtec demonstrates the appetite for our product in Europe. The agreement between REEtec and Schaeffler is the first of its kind, but we expect many similar announcements to follow."

Successful maiden season

Vital completed its first mining campaign at Nechalacho last year with activity centered in the North T zone, which had an estimated 101,000 metric tons of mineral resource at 9.01% light rare earth oxides, comprising a measured resource of 68,000 metric tons at 9.6% LREO and an indicated resource of 33,000 metric tons at 7.8% LREO.

Stage 1 mining at North T began in April and extended through October.

During the six-month field season, 408,000 metric tons of the planned 599,000 metric tons of material mined yielded about 58,000 metric tons of ore. Roughly 82% of the mined ore had been classified as waste (below the cut-off grade) in the resource – including material from within five meters of the surface – but ended up being processed after the company's ore sorter was commissioned in July.

The custom-built X-ray transmission, sensor-based ore sorter uses differences in the atomic densities of ore and gangue, or waste rock, to sort particles. The Canadian Northern Economic Development Agency funded up to half of the innovative sorter's cost of procurement and material-handling equipment through an interest-free repayable loan.

Vital said the sorter outperformed expectations based on onsite visual estimates of the relative proportions of the brick-red bastnaesite ore and white quartz gangue in the concentrate and waste streams.

The company produced more than 1,000 bags of separated product, each weighing about 1,000 kilograms, during the stage 1 mining process.

In addition, some 11,000 cubic meters of crushed material, comprising 1,630 cubic meters of high-grade, 4,240 cubic meters of low-grade, and 4,770 cubic meters of fines are stockpiled at Nechalacho to be processed during this summer and the summer of 2023.

Vital said it shipped enough concentrate to Saskatoon to commission and operate the extraction plant ahead of additional deliveries anticipated this summer.

Another unexpected source of ore was material taken from a zone of high-grade rare earths mineralization called the Dragon's Tail. At the northern edge of the North T pit wall and outside the existing mineral resource, the Dragon's Tail area produced high-grade ore that was crushed and bagged for shipping without additional upgrading through the ore sorter.

Discovery of the Dragon's Tail and the ability of the ore sorter to process lower-grade material enabled Vital to redesign and expand the North T pit beyond the company's former mine plan.

Ambitious 2022 program

Vital recently reported the start of resource definition drilling this spring at Nechalacho's Tardiff deposit. With 48 drill holes planned for this year to follow up on results from the 2021 program, the miner aims to extend known high-grade rare earth oxide mineralization along the trends.

Vital envisions mining at Tardiff as part of a stage-two growth plan as it builds a large-scale, long-life rare earths operation at Nechalacho in a three-stage development strategy – foundation, targeting customer acceptance of product from mining North T; growth, expansion into a 1 million metric-ton resource at Tardiff; and heavy rare earths.

The company intends to use results from 2022 drilling to update the current mineral resource estimate for Tardiff Zone 1, aiming to convert existing inferred resources to the measured and indicated categories, with potential to be converted into reserves. Previous drilling identified high-grade zones, opening the possibility for the contained tonnage to increase.

Vital's Atkins said successful drilling this year could define a reserve to support the first five to 10 years of operation at Tardiff, dependent on customer demand.

With the resource containing more than 300,000 metric tons of rare earth oxides, Atkins said the potential is enormous.

"Following our previous drilling program, the initial focus of our first operations module will be the Tardiff Zone 1 resource area, which contains 4 million metric tons grading 1.95% TREO (or 79,000t of contained rare earths)," he observed. "However, with our drilling campaign at Tardiff last year exceeding our expectations, achieving grades up to 13.78% TREO and consistently returning results above 2% TREO, with all our holes at Tardiff Zone 1 intersecting mineralization, we see significant opportunities for improvement. We are currently completing follow-up drilling to define an initial reserve at Tardiff Zone 1."

During development and operation of module 1, Vital aims to continue to expand its reserve drilling throughout the property's defined 16.3 million metric tons of 1.85% (303,000 metric tons) TREO resource to service continued and expanded operations.

"This is part of our three-stage strategy of development, in which we initially build the foundations at North T, then grow through expanded operations at Tardiff in Stage 2 and commence production of heavy rare earths in Stage 3, which would make us the only rare earths producer to achieve that," Atkins added.

Funding for extraction plant

Vital Metals also entered a funding agreement in April with PrairiesCan (formerly Western Economic Diversification Canada), under which it received a zero-interest repayable contribution of C$5 million. The money, which came from Canada's Jobs and Growth Fund, will assist with working capital during ramp-up of Vital's operations, including establishing the Saskatoon rare earth extraction facility.

Activities associated with the new plant include engineering and design, equipment purchase and installation, commissioning, and optimization to finalize establishment of the new processing facilities.

The funding would reimburse 32% of eligible spending incurred by the rare earth miner related to the Saskatoon plant. The repayable contribution requires Vital to make monthly payments over five years beginning April 1, 2024, with no security and zero penalties for past due payments and zero security associated with the repayable contribution.