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The mining newspaper for Alaska and Canada's North
Vital Metals subsidiary developing rare earths processing plant enters bankruptcy; terminates offtake agreement with REEtec North of 60 Mining News – October 6, 2023
The rising sun shines on tents at the Thor Lake camp at the Nechalacho rare earths project during the summer of 2021.
An aerial view of the mine established at the North T rare earths deposit on Vital Metals' Nechalacho project.
Prime Minister Justin Trudeau talks about developing Canadian critical minerals during a January visit to Vital Metals' rare earths processing plant in Saskatoon, Saskatchewan.
Cheetah Resource, Vital Metals' Canadian subsidiary that operated the North T mine, will carry forward the Vital strategy of developing a larger rare earth mine at Tardiff.
Over the course of two short years, Vital Metals Ltd. has fallen from a visionary mining company pioneering a first-ever rare earth supply chain in Canada to a delisted Australian firm struggling to reclaim some of its former glory at the Nechalacho rare earths mine in Northwest Territories.
Vital Metals reached a pinnacle when its Canadian subsidiary Cheetah Resource Corp. began mining ore from the high-grade North T deposit at Nechalacho during the summer of 2021, forging the first link in a rare earth supply chain that was envisioned to include a Vital-owned and operated plant in Saskatchewan that would create a mixed rare earths product to be sent to third parties for final separation into the individual elements needed for electric vehicles, wind turbines, and a wide array of other technological and commercial applications.
While the mining of high-grade ore at Nechalacho was a success, technical and financial difficulties in forging the second link at Vital's Saskatoon, Saskatchewan processing facility, along with competing visions at the Vital board and management levels, contributed to the undoing of the company.
Two years after being hailed as a champion of Canada's burgeoning rare earths sector, including by this journalist, the Australian company has decided to no longer pursue its Saskatoon rare earths processing plant and its Canadian subsidiary operating the facility, Vital Metals Canada Ltd., has entered bankruptcy.
Vital believes this is the best move to protect the significant value of the Nechalacho project in Northwest Territories and to provide Cheetah with the best possible chance of successfully advancing its vision of mining and processing operations at the Tardiff, a deposit on the property that is much larger but lower grade than the North T deposit mined so far.
"Whilst we are disappointed with the situation at Saskatoon, Vital remains focused on creating significant value for shareholders by advancing the Tardiff project, a recognized globally significant rare earths deposits in a very favorable jurisdiction," said Richard Crookes, interim chairman of Vital Metals.
The establishment of a rare earths supply chain in Canada that began at the Nechalacho project in Northwest Territories was originally the vision of Geoff Atkins, an engineer who formerly served as the corporate planning manager for Australia-based rare earths miner and processor Lynas Corp.
Atkins' idea was to use ore sorting technology to upgrade the 101,000 metric tons of resources averaging 9% total rare earth oxides within the North T deposit at Nechalacho to a direct shipping ore that would be transported via barge and rail to a processing plant the company was developing in Saskatoon.
This strategy was built upon the premise that Cheetah could leverage the fantastically high-grade material at North T to quickly establish a Canadian rare earth mine with a small environmental footprint.
During the summer of 2021, less than three years after setting this plan into motion, Northwest Territories-based Nahanni Construction Ltd. was mining high-grade North T ore for Cheetah to sort and ship to the second link of the supply chain in Saskatchewan.
Without the need for a complex ore processing facility at Nechalacho, the mining operation at Nechalacho was something akin to a gravel quarry – simply mine and crush near surface rock and sort out the best material to be transported.
Mixed rare earth carbonate products produced at Vital's Saskatoon plant were to be forwarded to Norway-based REEtech, which had a contract to separate the intermediate product from Vital's Saskatoon plant into individual rare earths ready for market.
Technical difficulties and rising costs, however, broke the second link in the Australian company's planned rare earths supply chain and left REEtech without Vital feedstock for its separation plant.
This breach of contract has put REEtech and Vital at odds.
The first signs of trouble for Vital began to emerge following an A$45 million (US$31.6 million) financing completed in mid-2022. While such a significant infusion of cash is typically a good sign for an upstart mining company, a rift in the management and board of the rare earths mining company became immediately apparent.
Following this financing anchored by A$30 million (US$21 million) contributed by Lionhead Resources Fund, a private equity fund focused on mid-tier clean energy mineral producing companies, Atkins resigned, and Lionhead partner Russell Bradford filled the top executive position on an interim basis.
This transition in leadership ushered in a new strategy that pivoted Vital to a sharper focus on advancing the world-class Tardiff deposit at Nechalacho. Vital's new financial backers felt that moving away from Atkins' incremental approach to establishing a complete supply and focusing the company's resources on a larger mine at Tardiff was the best path to becoming "a globally significant producer of rare earth minerals."
A near-surface deposit with 95 million metric tons of resources averaging 1.46% (138,700 metric tons) total rare earth oxides, Tardiff does have all the elements of a globally significant REE mine.
While the rare earth concentrations are not as spectacular as North T, this deposit is still much higher grade than the average being mined globally. Tardiff is also enriched with neodymium and praseodymium – high-demand rare earths used in the permanent magnets for EV motors and a wide range of high-tech devices – which make up roughly 24% of the total rare earth content.
To execute the new strategy centered on establishing a larger mine at Nechalacho, former Roxgold Inc. President and CEO John Dorward was named Vital's new managing director and CEO.
As a further sign of troubles, however, only four months after accepting Vital's top position, Dorward resigned.
"John has worked with the board and management team over the past few months to develop a new strategy for the business, which the management team will continue to implement, with a stronger focus on developing the Tardiff deposit at Nechalacho," Crookes said upon the March resignation.
Vital's downward spiral continued with a delisting from the Australian Stock Exchange in July and now the filing for bankruptcy for the company's Canadian holding company advancing the Saskatoon rare earths separation plant.
As part of its new focus on developing a larger rare earth mine at Tardiff, Vital initiated a strategic review of the Saskatchewan rare earths plant in April of this year.
At the time, Vital's new leadership determined that the previous rare earths supply chain strategy anchored by the high-grade North T deposit and Saskatoon processing plant was not economically viable.
"We've demonstrated, really, that the Saskatoon facility doesn't make economic sense for us to operate," Crookes explained in a video update for shareholders.
As a result, the company halted development at Saskatoon to preserve cash and allow Vital time to seek alternative funding sources and strategic options for the struggling link in the REE supply chain.
At the same time, Vital reached out to renegotiate its contract with REEtec "to address changes in key economic and technical conditions that are beyond the control of Vital and which would cause unfair hardship" if the terms of the offtake agreement were not changed.
Hoping to leverage the work already completed, Vital also looked into the potential of repurposing the Saskatoon plant to process rare earth feedstock from other sources.
"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 Crookes.
The company's efforts on both fronts, however, were not fruitful. As a result, Vital sent REEtec a Sept. 28 notice that it is terminating the offtake agreement and Vital Metals Canada entered bankruptcy.
REEtec, which does not agree that Vital suffered unfair hardship, is considering arbitration proceedings to settle any disagreements with Vital.
Cheetah, which holds the Nechalacho project, remains unaffected by this process and will carry forward the Vital strategy of developing a larger rare earth mine at Tardiff.
"The next steps in our strategy [is] to really focus all our efforts on the Tardiff asset – Tardiff is a fantastic asset in a great jurisdiction, and we really want to create value for shareholders by advancing Tardiff," said Crookes.
To execute this strategy, Vital is working to close a financing that will allow it to relist on the ASX and plans to onboard a new executive team following the capital raise.
Over his more than 16 years of covering mining and mineral exploration, Shane has become renowned for his ability to report on the sector in a way that is technically sound enough to inform industry insiders while being easy to understand by a wider audience.
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