Ionic Rare Earths Ltd (ASX:IXR, OTC:IXRRF) is moving to 94% ownership of the Makuutu Rare Earths Project in Uganda after signing a conditional share purchase agreement to acquire an additional 34% interest.
The agreement has been signed with Rare Earth Elements Africa (Pty) Ltd (REEA) to acquire a further 34% interest in local Ugandan operating entity Rwenzori Rare Metals Limited (RRM), which owns the Makuutu project.
Ownership milestone
IonicRE currently holds a 60% interest in the project and this agreement signals a considerable milestone, which the company expects to be a substantial step forward in progressing financing and offtake discussions with multiple third parties.
A number of parties have expressed strong interest in partnering with IonicRE to access the heavy rare earths product to be achieved through the development of the project.
Makuutu “stands tall”
In noting the significance of the transaction, IonicRE’s managing director Tim Harrison said: “Makuutu isn't just any rare earth project; it's a strategic asset, and importantly one of the most advanced ionic adsorption clay projects globally.
"Makuutu can unlock near-term supply of heavy rare earths into the advanced manufacturing demand that far exceeds existing supply. It has immediate strategic value to these new supply chains forming.
"With a dominant 71% magnet and heavy rare earth basket content, Makuutu stands tall as one of the most advanced heavy rare earth projects globally. Positioned strategically, it's poised to fuel the emerging supply chains across Europe, the US, and Asia.
"This is an exciting time for Makuutu as we near production of first mixed rare earth carbonate from the demonstration facility in the first quarter of 2024, and the increased ownership will enable IonicRE to advance and accelerate discussions with strategic investors, offtake partners and financiers.”
Consideration
In consideration for acquiring the shares, IonicRE will issue to REEA at completion 425 million fully paid ordinary shares in IonicRE and 350 million performance rights vesting on the satisfaction of the following milestones:
- Issue of the mining licence for the Stage One development of Makuutu over Retention Licence (RL) 1693 (Mining Licence Application TN03834); and
- The volume weighted average price of IonicRE shares on the Australian Stock Exchange for a period of 30 consecutive trading days exceeding $0.05.
The performance rights vest on satisfaction of the following milestones:
- IonicRE obtaining binding funding commitments (debt and/or equity) to fully fund construction at Makuutu, and any conditions precedent to drawdown being satisfied or waived; and
- The VWAP condition being satisfied.
At completion, REEA will hold around 9% of the fully diluted share capital of IonicRE. The SPA contains restrictions preventing REEA from holding in excess of 19.99% at any time.
IonicRE will seek shareholder approval to issue the Consideration Shares and Consideration Rights for the purposes of ASX Listing Rule 7.1.