Peak Rare Earths has signed a non-binding term sheet with Chinese miner Shenghe Resources, which will see the latter invest in Peak's Ngualla rare earth element (REE) project in Tanzania.
Shenghe Resources, through its subsidiary Shenghe Resources (Singapore), already holds a 19.9% stake in Peak and has been involved in the company's governance since December 2022.
The announcement of the term sheet follows the execution of a binding offtake deal with Shenghe Singapore for rare earths that secured the clearance of Peak shareholders last month.
This term sheet outlines Shenghe's acquisition of a 50% stake in Ngualla Group UK, which owns 84% of the Ngualla Project.
Shenghe's investment will cover new shares amounting to approximately A$96m ($63.57m).
Notably, Peak will not need to provide additional equity funding for the project's development.
Shenghe's investment and debt facility will cover the total development costs of the Ngualla Project.
The Chinese company will also share in the profits and losses post commercial production.
Completion of the investment is subject to several conditions including Shenghe being awarded a contract for the project's development, arranging a feasible funding solution, and obtaining necessary approvals from Chinese regulators and shareholders of both companies.
The timeline set by Peak and Shenghe aims for the finalisation of transaction documentation by September 2024, shareholder approval in October 2024 and a final investment decision by 31 December 2024.
Peak executive chairman Russell Scrimshaw said: “This marks another major milestone for Peak, Mamba Minerals and the Ngualla Project. With the benefit of strong support from our partners, Shenghe and the Government of Tanzania, the Ngualla Project is positioned to become the world’s next rare earth operation.
"Importantly, the Ngualla Project will benefit from a fully funded solution, which will avoid the need for further equity funding from Peak shareholders.”
Shenghe deputy executive chairman Huang Ping stated: “We continue to believe that the Ngualla Project is the premier undeveloped rare earth project in the world.
“This term sheet demonstrates our commitment to work with Peak and Mamba Minerals to further optimise the Ngualla Project and to expedite its development and funding.”
