Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Vital Metals (ASX: VML), the only rare earths producer in Canada, is pressing pause on construction of its half-finished Saskatoon processing facility after determining that its plans to market an intermediate product from the plant aren’t economic.
It also said the scale of mining at Vital’s North T zone at its Tardiff rare earth project in the Northwest Territories isn’t economic.
Before a trading halt on the company’s stock on Apr. 18, shares were down by more than a quarter, falling to A1.1¢ on the ASX for a market cap of A$43.8 million. The shares have traded between A1¢ and A7.2¢ over the past year.
In a release on Wednesday, the company said it wasn’t able to sell its intermediate REE product “on commercially satisfactory terms” and pinpointed both higher plant costs and lower rare earth prices as factors in its decision to pause plant construction.
“There is no economic imperative to complete this demonstration project at the current time,” said Vital’s interim chairman Richard Crookes. “However, the Saskatoon processing facility can provide valuable intermediate processing capacity for a downstream rare earth hub in Saskatchewan. North America needs independent downstream processing to further enable the transition to the green economy and Vital is looking forward to working with like-minded parties to deliver a completed project.”
The company says it’s now completing a three-month strategic review of the plant while it conserves cash and seeks out new funding sources and partnerships with third parties to “build a sustainable business model.”
The Australia-based junior had in December announced that it would slow down construction of the plant as costs to complete it had doubled to around C$55 million.
At the time, Vital said it would defer completion of the plant to the second half of 2024, when its offtake customer REEtec will be ready to receive product for further processing at its plant, now under construction in Norway.
Vital said putting on hold the hydrometallurgical leaching, purification and rare earth precipitation circuits would save it nearly C$16 million. But it said it would still finish the calcine circuit at the plant by the third quarter of 2023 in order to produce an intermediate rare earth oxide product.
Rare earths prices “plunged” in March and early April based on China’s slowing economy and modest growth forecasts, according to a recent edition of the newsletter Critical Metals for a Sustainable World. The Apr. 17 report says prices for light rare earths are the lowest they’ve been since late 2020 or early 2021.
Vital recently completed a drill program of more than 6,600 metres at its Tardiff deposit, with assay results and a resource update expected in the second half of the year.
Vital has the rights to the near-surface Tardiff zones of the Nechalacho deposit, located 110 km southeast of Yellowknife. Vital’s Yellowknife-based subsidiary Cheetah Resources began mining at the site, which is permitted for demonstration-scale production, in June 2021. Avalon Advanced Materials (TSX: AVL) holds the rights to mineralization below 150 metres at the project.
According to a February resource update, Tardiff contains 4.6 million measured tonnes at 1.6% total rare earth oxides (TREO), including 0.31% neodymium oxide and 0.08% praseodymium oxide; 6.3 million indicated tonnes at 1.5% TREO; and 108.1 million inferred tonnes at 1.4% TREO. The deposit has high grades of light rare earths neodymium and praseodymium.
