Vital Metals (ASX: VML; US-OTC: VTMXF), the only rare earths producer in Canada, has declared bankruptcy for a Canadian subsidiary after a review of its half-finished $55-million processing facility in Saskatoon, Sask.
The Australian junior appointed accounting firm MNP Saskatoon as bankruptcy trustee of Vital Metals Canada, the parent company said in a news release on Friday. MNP will sell the assets and distribute proceeds to creditors. Vital’s shares last traded at A1.1¢, for a market cap of A$43.8 million ($38.2 million) before it halted trading in April.
The decision, among the results of Vital’s review that it began in April, was also made to allow the best chance of advancing the Tardiff deposit, part of its Nechalacho rare earths project in the Northwest Territories, Vital said. The company said in a July release that the review had largely been completed.
Vital’s other Canadian subsidiary, Yellowknife-based Cheetah Resources, which owns the Nechalacho properties, is unaffected by the bankruptcy.
Vital’s rare earth extraction plant in Saskatoon, Sask. Credit: Vital Metals
“While we are disappointed with the situation at Saskatoon, Vital remains focused on creating significant value for shareholders by advancing the Tardiff project,” Vital’s interim chairman Richard Crookes said in the release. He added that Vital tried to work with all parties to find an acceptable path forward for the business in Saskatoon.
In a video message posted to YouTube on Friday, Crookes said the review found the plant “doesn’t make economic sense for us to operate, so we’ve decided to terminate that facility.”
The company paused construction at the plant in April, citing higher costs and lower rare earth prices for reducing the viability of refining ore from the North T pit at Nechalacho. The company last December said it would slow down construction of the plant after costs doubled.
Vital said delaying construction of the plant’s hydrometallurgical leaching, purification and rare earth precipitation circuits would save it almost $16 million. But it said it would still finish the calcine circuit by this year’s third quarter to produce an intermediate rare earth oxide product.
Amid the review, Vital sought alternative funding for the plant, as well as potentially repurposing the facility to accept alternative feedstock. However, the company wasn’t able to conclude any agreements.
It also spoke with its Norweigan offtake customer REEtec about amending an agreement to reflect changes in economic conditions. Those negotiations weren’t successful and Vital gave notice to REEtec on Thursday that it would terminate the agreement, effective on Dec. 26.
Vital said REEtec disagrees with the company’s assessment of the situation, doesn’t consider the termination to be valid and may seek arbitration.
The bankruptcy comes just over three weeks after Vital announced it had secured a A$2 million short-term loan agreement with a syndicate of lenders to fund the continued development of Tardiff.
The loan deal, made with Malekula Projects, INVL Group and Treasury Services Group was intended to be a bridge while Vital assesses funding options and as it advances technical studies at Tardiff, Crookes said in a news release.
He added that a scoping study for Tardiff is expected to be completed early next year.
The company has experienced a difficult set of months. Chief operations officer Eben Visser resigned in July following chief financial officer Damon Colbert and CEO John Dorward in April. Vital is continuing an international search for a CEO, it said in July.
Vital holds the rights to the near-surface Tardiff zone at Nechalacho, located 110 km southeast of Yellowknife. Cheetah 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.
In May, Vital drilled 6,664 metres across 74 holes at Tardiff as part of a resource definition program, with assays from the first 17 holes returning more than 35 intervals of at least 1% total rare earth oxides (TREO).
According to a February resource update, Tardiff contains 4.6 million measured tonnes at 1.6% 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.
Sad day for all concerned.
As the plant was a demonstration/pilot plant I thought that the plant was designed to break even at worst.It was to be used as part of their BFS(bank feasibility study) for Tardiff. The original deal sounded fair and reasonable with Reetec.There seems to be a fundamental shift from the original plan for Vital.