Special Report: RareX has taken a great leap forward, signing an agreement with global rare earths producer Shenghe Resources that opens up growth opportunities.

The non-binding memorandum of understanding with the $US4.6bn ($6 billion) company establishes the framework for the formation of a jointly-owned rare earths trading company sourcing for rare earths globally outside of China.

Importantly, it could lead to Shanghai-listed Shenghe investing in RareX’s (ASX:REE) flagship Cummins Range rare earths project in Western Australia, which has a current resource of 13Mt grading 1.13 per cent total rare earth oxides (TREO) with valuable neodymium and praseodymium (NdPR) making up 22 per cent of the rare earth content.

This is a significant breakthrough as Shenghe is a leading producer of rare earths, zirconium and titanium with interests stretching across the entire value chain from mining through to the production of downstream rare earths products.

Shenghe also has am 8 per cent interest in MP Materials Corp, the $US4.8bn operator of the Mountain Pass rare earths mine in California and the only producer of rare earths in the US.

There is also potential for the two companies to jointly invest in existing or proposed rare earth refineries located outside of China.

“We are absolutely delighted to be moving towards securing an alliance with a company of the size and quality of Shenghe in the global rare earths industry,” RareX managing director Jeremy Robinson said.

“This is an exciting development for RareX and our shareholders which opens up a number of significant growth pathways.”

MoU terms

Under the MoU, the initial equity ownership of the proposed trading company will see Shenghe hold 51 per cent while RareX will have the remaining 49 per cent interest.

Both companies will support the company in its activities, namely sourcing rare earths concentrates outside of China to supply Shenghe’s existing and proposed rare earth refining operations globally.

Commercial discussions will also be carried out towards the Chinese rare earths producer investing in Cummins Range and the trading company being offered exclusive marketing rights, on commercial terms, to any rare earths concentrates produced at the project.

This article was developed in collaboration with RareX, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.