ASX-listed RareX has entered into a consortium agreement with Australian miner Iluka Resources to apply for the Mrima Hill rare earth/niobium/phosphate/manganese project licence, in Kenya.

RareX notes that the consortium has made a formal application to the National Mining Corporation of Kenya (Namico).

Under the terms of the consortium agreement, the parties agree to establish a special purpose vehicle (SPV) to pursue the acquisition, de-risking and development of the Mrima Hill project and to negotiate the terms of a formal shareholders agreement.

The consortium agreement sets out that Iluka will hold a 25% equity stake in the SPV, as well as the terms for rare earth offtake to potentially provide feed to Iluka’s Eneabba rare earth refinery, and heavy mineral offtake.

The consortium agreement intends for RareX to take the lead in de-risking the project with a strong initial focus on socio-environmental matters followed by metallurgical and value chain engineering studies, including the installation of local laboratory and pilot plant capability in the short to medium term.

APPLICATION AND PROPOSAL

The Mrima Hill project is currently owned by the Ministry of Mining, Blue Economy and Maritime Affairs and, under Kenyan law, its de-risking and future development will require a joint venture (JV) with Namico.

RareX says an application has been made by the consortium to Namico, with the aim of securing approval to form a strategic partnership with Namico through a JV (JVco), into which the prospecting licence will transfer.

The company notes that Namico has confirmed receipt of the application and is currently reviewing the proposal in parallel with the State Department for Mining.

RareX notes, however, that at present, there are no guarantees that the consortium’s application will be accepted and that the consortium will be invited to negotiate with Namico and the State Department for Mining the terms on which the proposed prospecting licence will be granted.

“The grant of the prospecting licence remains subject to discretion of Namico and the Cabinet secretary and, therefore, investors are cautioned not to rely on the grant of the prospecting licence,” the company says.

If the consortium’s proposal is accepted, the RareX-Iluka SPV will be formed and will become the counterparty to Namico in the JVco. This process is in accordance with the Kenya Mining Act.

If successful and the project licence is granted to the JVco, RareX will lead the necessary socio-environmental, resource definition and engineering study work.

This body of work is the prerequisite for a mining licence under which the project would be licensed to move into construction and operation.

RareX and Iluka have signed a binding offtake term sheet which sets out the terms for a long-form offtake agreement.

The commencement of sale and purchase of material under the term sheet – but not the term sheet itself – is subject to conditions precedent including the grant of a mining licence, the start of commercial production, Iluka board approval for the definitive agreement and regulatory and financing approvals.

If the procurement process is successfully completed and the prospecting licence is issued to the JVco, RareX will focus on community engagement and environmental assessments as a priority.

It is critical that before any activity is initiated on the project, there is a social licence to operate.

To achieve a social licence to operate, RareX says it intends to build local teams with support from experienced companies that specialise in community development.

This includes employing, where possible, relevant teams previously established to support the Kwale Mineral Sands Operation which has entered its closure phase.

Kwale Mineral Sands Operation, previously owned by Australian company, Base Resources, is close to the Mrima Hill project.

RareX says its vision, as the intended future operator, is to work with Iluka to enable the rare earths to be processed at Iluka’s Eneabba facility, while building out local value chains for manganese, phosphate and niobium, which are important to Kenya’s domestic industries.

Meanwhile, RareX is in preliminary discussions with Global Emerging Markets regarding a potential facility to fund the working capital requirements of the company associated with the project.

The terms of the facility, including the quantum of the facility, are not yet in agreed form and there are no guarantees that the potential facility will become available to RareX.

The company says it may also consider other options for funding.

“We are delighted to welcome Iluka as a strategic partner for the application and potential development of the Mrima project. Their commitment, through a 25% ownership in the SPV, reflects the significant potential of this world-class deposit.

“This partnership will enable RareX to leverage Iluka’s expertise and resources as we work toward creating a major, multi-commodity project in Kenya, where the rare earths components are integrated with an Australian government-backed value chain,” says RareX MD James Durrant.

If successful, he says the project could become part of a unique and independent mine-to-rare earth metal solution, backed by allied governments, and could contribute to deeper diplomatic relations between two Commonwealth countries, both non-North Atlantic Treaty Organisation (Nato) strategic allies of the US and both members of the Indian Ocean Rim Association.

“Our proposal would allow Australia to provide the complex rare earth value-add in a critical metals value chain, whilst providing Kenya with a major mining project and a domestic supply of manganese, niobium and phosphate for the local steel and agricultural sectors.

“We are excited about the next steps and are confident that this collaboration will drive the successful development of Mrima Hill for the benefit of all stakeholders,” says Durrant.