Vital Metals’ [ASX:VML] shares are rising on Friday after VML’s offtake partner signed a purchase agreement to supply rare metals.
In a topsy-turvy year, VML shares traded as low as 4 cents in February before rising more than 50% to trade at 6.9 cents at time of writing.
Source: Tradingview.com
VML announces REEtec-Schaeffler agreement
Vital Metals — dubbing itself as Canada’s first rare earths producer — updated the market on its offtake agreement with REEtec AS.
VML also sought to clarify media reporting from Reuters concerning REEtec’s supply agreement with German auto-parts supplier Schaeffler.
VML confirmed that its Norwegian-based offtake partner REEtec has signed a five-year purchase agreement with Schaeffler.
The agreement details Schaeffler purchasing rare metals from VML to produce magnets found in electric motors.
VML say this binding agreement is said to be the first in the rare earth industry, paving the way for raw metals to enter the electric motor market.
In February last year, Vital signed its offtake agreement with REEtec, a move which saw an offtake of 2,000 tonnes a year of Vital’s rare earth oxides.
As a result of the new REEtec-Schaeffler partnership, from next year, Vital will provide REEtec 2,000 tonnes of rare earth carbonate a year and pocket a share of product margins on top of sales.
To this end, rare earth carbonate mined from Vital’s Canadian Nechalacho Project shall begin extraction in the Saskatoon facility in June, taking up 75% of Vital’s Stage 1 operations.
Why is this important for VML?
Why did VML choose to update the market about a deal its offtake partner signed with someone else?
What is the import REEtec’s deal with Schaeffler for Vital Metals?
VML Managing Director Geoff Atkins offered his thoughts:
‘REEtec’s agreement with Schaeffler has validated the quality of Vital’s product and demonstrated the need for EV makers and parts suppliers to have access to a transparent rare earth supply chain that a company such as Vital could provide.
‘We have always been confident that our product would be in demand and this agreement secured by REEtec demonstrates the appetite for our product in Europe. The agreement between REEtec and Schaeffler is the first of its kind but we expect many similar announcements to follow.’
Atkins concluded by noting that rare earth oxides trade at ‘historically high prices’ currently.
In his view, therefore, VML’s operations are coinciding with an ‘an opportune time to be commencing downstream carbonate production.’
In 2019, the rare earth metals market value reached US$13.2 billion, with a forecast growth rate of more than 10.7% between 2020 and 2026.
The EV boom is having a large impact on commodities, from copper, nickel, cobalt, rare earths, and, of course, lithium.
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Regards,
Kiryll Prakapenka,
For Money Morning
