Energy Fuels to acquire ASM in rare earths deal

Energy Fuels (NYSE: UUUU; TSX: EFR) is to acquire rare earth metals producer Australian Strategic Materials (ASX: ASM) in a share deal that values ASM at $299 million. Energy Fuels shares rose. 

The deal will create what Energy Fuels sees as the largest, fully integrated rare earth elements (REE) “mine-to-metal & alloy” producer outside of China and close a key strategic gap in global supply chains, Energy Fuels said this week.

Energy Fuels will gain ASM’s Korean Metals Plant (KMP) in South Korea, which is among few facilities outside China that is producing REE metals and alloys, including neodymium-praseodymium (NdPr), dysprosium (Dy), and terbium (Tb) metals. It will also receive ASM’s developing Dubbo rare earths mine and processing plant in New South Wales, Australia.

“We see metal/alloy-making capabilities as the key driver [of the deal], as the technical know-how that comes with an operating facility would be very hard to build from scratch,” SCP Equity Research analyst Justin Chan said in a note on Wednesday.

“We think this enables Energy Fuels to progress much more quickly with its plans to scale up  rare earth production and separation and provides a larger and more end-to-end solution to end users and the government, which is important as the supply chain is still in the early stages of forming.” 

Momentum

The acquisition deal follows months of positive developments for Energy Fuels, after it released a bankable feasibility study last week for its White Mesa mill in Utah showing the plant could become one of the biggest producers of separated rare earths outside China.

It also updated its Vara Mada project in Madagascar. And in September, the company announced its rare earths processed in the United States are suitable for making permanent magnets used in electric vehicles and hybrid electric vehicles.

Shares gained 7% to $33.37 apiece by mid-Thursday in Toronto, their highest level in three months, valuing the company at $7.9 billion. The stock has traded in a 12-month range of $4.59 to $38.37.

‘Largest integrated producer’

“Energy Fuels is executing our plan to create the largest fully integrated producer of REE materials outside of China, including REE oxides, metals and alloys, while supporting U.S. and allied critical mineral supply chains,” Energy Fuels CEO Mark Chalmers said in a release.

“We see an opportunity to deliver an expanded suite of REE products by combining U.S. rare earth oxide production at our White Mesa processing facility in the U.S. with downstream metal and alloy manufacturing capacity at ASM’s Korean Metals Plant.”

The proposed merger delivers a significant premium for ASM shareholders and allows them to participate in the upside of a larger and better-capitalized critical minerals firm,  ASM CEO managing director Rowena Smith said. 

“We are pleased to recommend this transaction not only for the value it delivers but it accelerates the execution of our mine to metals strategy in a way that unlocks greater scale, de-risks delivery and positions us to capture the full potential of our rare earths opportunity,” she said. 

Pending ASM shareholder and regulatory approval, Energy Fuels expects the deal to close in by the end of June.