Explorer and developer of rare earths Tantalus Rare Earths (TRE) has signed a commercial purchasing agreement with Chinese rare earths company Shenghe Resources, which could serve to promote the development of the African rare earths industry.

TRE CEO Thomas Hoyer says the securing of Shenghe as the first high profile customer for the TRE product is a major breakthrough for the company.

“In the rare earths value chain, separation is one of the most important stages of production, and to secure an existing global leader in separation as partner and customer, is a strong signal for the rare earths industry of the viability of our TRE project in Madagascar,” he said, adding that it also demonstrates that there is strong demand in the market for TRE’s planned product.

Shenghe, with a market capitalisation of US$ 1.7 billion, operates the third largest light rare earths mine in China and has a rare earths separation capacity of 5.500 t of rare earth oxides per annum, with plans to expand its capacity further.

Shenghe also further processes separated rare earths oxides at its rare earths alloys plant.

In an announcement on Monday, Shanghai Stock Exchange-listed Shenghe agreed to purchase an annual 30% of output or 3 000 t of mixed rare earths oxide from TRE project in Northern Madagascar, which expects first production in 2016.

The initial duration of the contract is three years from the start of commercial production at the project.

Shenghe has an option to extend the contract by an additional seven years by providing Tantalus debt funding, amounting to 30% of the planned total investment required to reach commercial production of rare earths at the project.

TRE will start commercial production as soon as it receives an exploitation license, currently expected in the second half of 2016. The deal is structured in such a way that Shenghe must exercise its option before Tantalus receives its exploitation license and provide funding before any investments into commercial production are made.

The mixed rare earths oxide produced by Tantalus in Madagascar will be shipped to Shenghe’s plants in China for further processing, from where the material will be delivered to Shenghe’s Chinese and international customers.

The pricing of the mixed rare earths oxide is linked to the content of various rare earths oxides present in the Tantalus product as well as to independently quoted market prices of such oxides.

Rare earth elements identified in the Tantalus ionic clay deposit include Praseodymium, Neodymium, Terbium and Dysprosium, all in high demand for fast-growing magnet applications.

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