Vital Secures Cornerstone Investment

27 October 2023

ASX / Media Announcement, 27 October 2023

Vital Metals Limited (ASX: VML) (“Vital”, “Vital Metals” or “the Company”) is pleased to announce Shenghe’s cornerstone investment that will allow the Company to establish a new leadership team, and to progress development of the large-scale Tardiff deposit at its Nechalacho Project in Northwest Territories, Canada. In addition the Company is partnering with Shenghe to accelerate studies on the Wigu Hill Project in Tanzania which will concurrently provide a second rare earth development project.

Highlights:

  • Vital Metals Limited (Vital or Company) has entered into a subscription agreement (Subscription Agreement) with Shenghe Resources (Singapore) Pte Ltd, a wholly-owned subsidiary of Shenghe Resources Holding Co., Ltd. (Shenghe), a global leader in the rare earth sector with experience across the entire value chain. Subject to the satisfaction of conditions precedent, Shenghe has agreed to subscribe for:
    • 9.99% of the issued share capital in Vital (post-deal) at a subscription price of A$0.01 per share to raise a minimum of approximately A$5.9 million (Tranche 1 Subscription); and
    • at its election and subject to Vital shareholder approval, up to a further approximately 592 million shares (equivalent to an additional 8.2% of the issued share capital in Vital following completion of Tranche 1 and 2 Subscription) at a subscription price of A$0.015 per share which, if exercised, would raise approximately A$8.9 million (Tranche 2 Subscription1).
  • Tranche 1 Subscription shares to be issued utilising the Company’s available placement capacity under ASX Listing Rules 7.1 and 7.1A to provide immediate funding. The Tranche 2 Subscription shares will be issued subject to Shenghe exercising its option to complete the Tranche 2 Subscription and the Company’s shareholders approving the issuance of shares under the Tranche 2 Subscription1.
  • Shenghe and Vital have agreed, subject to grant of a mining licence to Vital (or its controlled entity) and satisfaction of other conditions precedent, that Shenghe will acquire an initial 50%2 interest in the Wigu Hill Project, Tanzania.
  • Shenghe will acquire 50% of the issued share capital of Kisaki Mining Ltd, which is the applicant for the mining licence, thereby acquiring an indirect 50% interest in the Wigu Hill Project.
  • Consideration for initial 50% interest equal to 50% of the total costs, expenses and liabilities incurred by or on behalf of Vital in relation to the Wigu Hill Project (capped at US$1.5 million).
  • Shenghe can earn up to a 75%2 ownership interest upon sole funding completion of a preliminary feasibility study and definitive feasibility study on the Wigu Hill Project.
  • Repay existing debt and creditors (approximately A$3.0 million);
  • Progress development of the Company’s Nechalacho Project, including completion of a scoping study expected to be delivered Q1 2024 (approximately A$1.5 million); and
  • General working capital (approximately A$1.4 million).
  • Tranche 1 Subscription to provide sufficient funding for Vital to:
  • Vital to explore the development of an integrated North American supply chain for future rare earth production at Nechalacho, Canada.

Vital Interim Chairman Richard Crookes said: “We are pleased to secure this partnership with Shenghe via this strategic investment that will allow us to progress our development plans for the world-class Tardiff rare earth deposit at Nechalacho with a refreshed management team that is focused on this goal. In addition, we have secured a partner in the Wigu Hill Project in Tanzania which also has potential to be an important rare earth deposit with further exploration and development.”

The CEO of Shenghe, Wang Xiaohui, commented: “Shenghe recognises the potential of the Tardiff deposit to be a world-class large-scale and long life rare earths project, and is excited by the work completed to date by Vital Metals to progress the asset. Our investment also allows Shenghe to gain exposure to the Wigu Hill Project, which is also a promising but earlier stage rare earths deposit. We look forward to working collaboratively with the Vital team to assist with development of these important assets.”

Overview of Shenghe

Shenghe Resources Holding Co Ltd (Shenghe’s parent company) is a large Chinese rare earth group with operations spanning mining and beneficiation, refining and separation, alloy and metals production, and marketing. Shenghe Resources has an extensive financial investment background and significant balance sheet strength. Its international interests include an approximate 7.7% holding in MP Materials Corp (NYSE:MP) which is the largest rare earth producer in North America with a market capitalisation of approximately US$3.5 billion, a 19.8% holding in Peak Rare Earths Limited (ASX:PEK), a 100% holding in Vietnam Rare Earth Company Limited, and a 9.2% holding in Energy Transition Minerals Limited (ASX:ETM).

Shenghe Resources is listed on the Shanghai Stock Exchange (SSE: 600392.SS) and has a market capitalisation of approximately US$2.6 billion.

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