China’s Shenghe throws Vital Metals a lifeline

Chinese rare earth miner Shenghe Resources is acquiring new shares in Vital Metals (ASX: VML) for an initial A$5.9 million ($3.8 million), allowing the Australian miner to move forward with development at the Nechalacho project in Canada’s Northwest Territories.

The move comes almost one month after the Australia-based junior, which is Canada’s first – and North America’s second – rare earths miner, placed its processing arm into bankruptcy, and began liquidating assets related to its partially completed $55-million plant in Saskatoon, Sask. The decision came after an operations review found the plant wasn’t economical. 

Shenghe has agreed to subscribe for 9.99% of the issued share capital in Vital at A¢1 (1¢) a share to raise A$5.9 million ($5.1 million). The company could subscribe for a further 492 million shares at A¢1.5 a share, which if exercised would raise about A$8.9 million.

As part of the agreement, Shenghe is set to acquire a 50% interest in Vital’s Wigu Hill rare earths project in Tanzania.

The investment will help Vital to set up a new leadership team and explore “the development of an integrated North American supply chain for future rare earth production at Nechalacho,” Vital said in the statement.

The news also comes almost two weeks after Vital appointed Geordie Mark as new managing director and CEO, ending a months-long search for a CEO following the departure of members of the senior management team in the spring and summer. 

Shenghe’s cash injection clashes with Vital’s initial claim of becoming a key actor in the emerging North American critical minerals supply chain to rival China.