TIDMREM
RNS Number : 3829X
Rare Earth Minerals PLC
28 August 2015
28 August 2015
Rare Earth Minerals Plc.
("Rare Earth Minerals", "REM" or "the Company")
Sonora Lithium Project Signs Lithium Supply Contract
Rare Earth Minerals and (LSE AIM: REM) and Bacanora Minerals
Ltd. (TSX-V: BCN and LSE AIM: BCN), the joint venture partners of
the Sonora Lithium Project(1) in Northern Mexico (Bacanora and REM
are collectively referred to as the "Sonora Lithium Project
Partners"), have finalised a conditional long-term lithium
hydroxide supply agreement with Tesla Motors, Inc. ("Tesla"), the
maker of electric vehicles and energy storage solutions ("The
Supply Agreement").
The Sonora Lithium Project Partners are working to develop a
mineral-rich, lithium-bearing clay deposit into a planned low-cost
sustainable and environmentally conscious mining operation. It is
estimated that the mine and processing facility will have an
initial production capacity of approximately 35,000 tonnes of
lithium compounds, with scaling potential of up to 50,000 tonnes
per annum. To achieve this, the Sonora Lithium Project Partners
will need to raise finances to design and construct a mine and
processing facility. It is currently anticipated that lithium
hydroxide and lithium carbonate would be among the materials
produced by the mine. Lithium hydroxide is a key feedstock material
in the manufacture of certain kinds of lithium-ion battery
cells.
On the condition that, over the next two years, the Sonora
Lithium Project reaches certain performance milestones and
successfully passes product specification qualifications, Tesla -
or its authorised purchasers - will buy lithium hydroxide to feed
the manufacturing of batteries at Tesla's Gigafactory in Nevada.
One of the key milestones will be the confirmation that the Sonora
Lithium Project will be able to supply lithium hydroxide in
accordance with volumes and timeframes to be established by Tesla.
The Supply Agreement has an initial five year term commencing from
the date of the first order by Tesla, with an option to extend for
a further five years.
During the initial five years, and subject to certain terms and
conditions in relation to project execution, product quality,
pricing and timing of delivery, Tesla will purchase agreed minimum
tonnages, with estimated forecasted maximum deliveries to be
determined following delivery of future production orders from
Tesla. Tesla will purchase minimum quantities in accordance with an
agreed upon pricing formula, below current market prices, with
actual prices and volumes that can only be finalized during the
development phase in due course. The forecast tonnages and delivery
dates are structured to coincide with Tesla's forecasted
Gigafactory production. This agreement will form a portion of
Tesla's anticipated lithium-based feedstock needs; the remainder of
which is expected to come from other lithium peers.
To meet both Tesla's minimum and forecasted tonnages and
timelines and any other potential market demands, the Sonora
Lithium Project Partners will need to design and construct a
suitable mining and processing operation. This will require the
Sonora Lithium Project Partners to secure significant financing
through debt and/or equity. Tesla has the right to participate in
any such financing or other capital transactions. Bacanora and REM
will be pursuing next steps to raise finances in order to achieve
this goal. There can be no assurance that the conditions to supply
product under the supply agreement will be met or that the
agreement will prove to be economic.
Development work to be used for the pre-feasibility study
("PFS") for the Sonora Lithium Project is currently being carried
out. The PFS alongside additional studies will establish a revised
estimate of capital and operating costs, taking into account the
new product mix that will be required to service Tesla's
anticipated demands plus those of any additional potential
customers.
Details of REM's ownership of the Sonora Lithium Project:
REM owns a direct interest of 16.4% in Bacanora, and through
that holds an indirect interest in the La Ventana asset of 16.4%.
In addition to the 16.4% in Bacanora, when aggregated with REM's
30% direct interest in Megalit S.A de CV (the company holding the
Buenavista, Megalit and San Gabriel concessions) and the 30% direct
interest in Mexalit S.A de CV (the company holding El Sauz, El Sauz
1, El Sauz 2, Fleur and Fleur 1 concessions), results in a total
economic interest in each of these companies of Megalit S.A. de CV
and Mexalit S.A. de CV of 41.47%.
The Company's Executive Chairman, David Lenigas, commented:
"The selection of the Sonora Lithium Project as one of the
lithium suppliers to the Tesla Gigafactory is a landmark
transaction that will support the development and commercialisation
of the Sonora Lithium Project. This key supply agreement with Tesla
will hopefully be the first of a number of potential lithium
off-take partners for the Sonora Lithium Project as we move towards
the next stages of project development."
Qualified Person:
Kiran Morzaria B.Eng. (ACSM), MBA, has reviewed and approved the
information contained in this announcement. Kiran holds a Bachelor
of Engineering (Industrial Geology) from the Camborne School of
Mines and an MBA (Finance) from CASS Business School.
Ends
For further information please contact:
Rare Earth Minerals plc +44 (0) 207 440 0647
David Lenigas
Kiran Morzaria
WH Ireland Limited (NOMAD & Broker) +44 (0) 207 220 1666
James Joyce
Mark Leonard
Square1 Consulting
David Bick +44 (0) 207 929 5599
Mark Longson
Notes to Editors:
About Rare Earth Minerals Plc:
Rare Earth Minerals Plc is a London listed company (LSE AIM:
REM) with significant interest in the Sonora Lithium Project in
northern Mexico, and in the Yangibana Rare Earths Element Project
in Western Australia and a new Rare Earths Element early stage
exploration project in Greenland.
About the Sonora Lithium Project:
The Sonora Lithium Project, which consists of ten mining
concession areas covering approximately 100 thousand hectares, is
located in the northeast of Sonora State 105 miles from the USA
border. Sonora Lithium Project, through drilling and exploration
work to date, has established an NI 43-101 compliant Indicated
Mineral Resource of 1.14 million tonnes LCE contained in 95 million
tonnes of clay at a lithium grade of 2,200 parts per million and an
Inferred Mineral Resource of 6.3 million tonnes LCE(2) contained in
500 million tonnes of clay at a lithium grade of 2,300 parts per
million. The operational base of the Sonora Lithium Project is in
Hermosillo in northern Mexico where it has built and operates a
lithium pilot processing plant.
(1) The Sonora Lithium Project is comprised of the following
lithium properties: La Ventana lithium concession, which is 100
percent owned by Bacanora; El Sauz and Fleur concessions, which are
held by Mexilit S.A. de C.V. ("Mexilit"); and the Megalit
concession, which is held by Megalit S.A de C.V ("Megalit").
Mexilit and Megalit are owned 70 percent by Bacanora and 30 percent
by REM.
(2) LCE = lithium carbonate (Li(2) CO(3) ) equivalent;
determined by multiplying Li value in percent by 5.324 to get an
equivalent Li(2) CO(3) value in percent. Use of LCE is to provide
data comparable with industry reports and assumes complete
conversion of lithium in clays with no recovery or process
losses.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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