22 April 2022
Canada’s first rare earths producer Vital Metals Limited (ASX: VML l OTCQB: VTMXF) (“Vital”, “Vital Metals” or “the Company”) updates the market on its offtake agreement with REEtec AS (“REEtec”) and clarifies the effect of the news article released yesterday by Reuters concerning REEtec’s supply agreement with Frankfurt-listed German auto parts supplier Schaeffler AG (“Schaeffler”) (FRA: SHA).
Vital and REEtec signed a definitive offtake agreement in February 20211 and amended the terms in October 20212, with Vital to sell REEtec a rare earth carbonate product containing a minimum of 750t Neodymium/Praseodymium (NdPr), contained within 2,000t/year total rare earth oxides (TREO).
The Company’s offtake arrangement with REEtec includes both parties’ exposure to market risk with the parties agreeing to a pricing mechanism which secures each party a guaranteed minimum payment, equal to their cost of production, plus a share of margin. REEtec’s arrangement with Schaeffler reduces the market risk and secures revenue for Vital from a share of the margin. The arrangement also confirms viability for REEtec as an offtake partner, with a condition precedent of the offtake agreement being commissioning of REEtec’s commercial plant. REEtec’s agreement with Schaeffler will enable it to build a commercial separation facility.
Schaeffler has agreed a five-year deal with REEtec, which is based in Norway, to supply rare earth oxides from 2024. The agreement is the first reported deal by a European auto sector supplier or automaker to source rare earths within the region as the demand for electric vehicle (EV) components continues to grow.
This represents a total of 75% of Vital’s Stage 1 operation at its Saskatoon rare earths extraction plant, which is due to start rare earth carbonate production in June 2022. Vital is currently completing a Stage 2 feasibility study on expanded production scenarios to capture the expected increase in demand from European and US car manufacturers and other customers as the EV revolution continues to increase.
Vital Metals Managing Director Geoff Atkins said “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.
As Canada’s first rare earths producer, we can provide a rare earth feedstock that can be traced from its source and has a strong focus on sustainable operation. With the commencement of rare earth carbonate production at Saskatoon very shortly, this is an exciting development and we look forward to working with REEtec through our agreement. Rare earth oxides are at historically high prices so this is an opportune time to be commencing down stream carbonate production”
Vital achieved customer acceptance of its rare earth product from REEtec in May 2021 in accordance with the Definitive Offtake Agreement. REEtec subsequently decided to use Vital’s product as principal feedstock for its rare earth separation facility, which called for a 50% increase in product volume. In addition, the contract volumes will now be defined by quantities of NdPr which Vital will supply to REEtec under an amended agreement.
Reflecting the planned ramp-up schedule of Vital’s Saskatoon plant over the first 12 months of operation, Vital will deliver to REEtec an initial 187.5t NdPr (contained within approximately 500t TREO) by October 2023 with the remaining product to be delivered at regular intervals over the following five years.
The amended agreement extends Vital’s product sales to REEtec to 2028 and provides the option to further expand operations during an additional 10-year long-term supply agreement to provide up to 2,500t NdPr per annum contained within ~6,800 tonnes TREO.
As a leading global supplier to the automotive and industrial sectors, the Schaeffler Group has been driving forward groundbreaking inventions and developments in the fields of motion and mobility for over 75 years. With innovative technologies, products, and services for electric mobility, CO? efficient drives, Industry 4.0, digitalization, and renewable energies, the company is a reliable partner for making motion and mobility more efficient, intelligent, and sustainable. The technology company manufactures high-precision components and systems for powertrain and chassis applications as well as rolling and plain bearing solutions for a large number of industrial applications. The Schaeffler Group generated sales of approximately EUR 13.9 billion in 2021. With around 83,000 employees, Schaeffler is one of the world’s largest family companies. With more than 1,800 patent applications in 2021, Schaeffler is Germany’s third most innovative company according to the DPMA (German Patent and Trademark Office).
https://www.schaeffler.com/en/company/company.jsp
REEtec has developed a new, unique process for the separation of high purity rare earth elements. Its patent-pending technology has been proven through successful operation of an industrial-scale demonstration plant at the Herøya Industrial Park near Porsgrunn, Norway. The process combines high efficiency and a competitive cost structure with best-in-class environmental friendliness.