RareX in consortium with heavyweight Iluka for Kenyan REE project

• RareX forms consortium with Iluka Resources to apply for Mrima Hill project 
• The project is well-known for its rare earths and niobium bounty 
• If successful the project could be part of a unique and independent mine to rare earths metal solution

Special report: RareX is teaming up with mineral sands heavyweight Iluka Resources and leveraging its expertise and Australian-Government-backed Eneabba rare earth refinery in plans for a multi-commodity rare earth-phosphate-manganese project at Mrima Hill in Kenya.

The companies have entered into a consortium agreement and have made a formal application to the National Mining Corporation of Kenya (NAMICO) to secure approval for the globally significant rare earth asset. 

Mrima Hill, ranked among the top five undeveloped rare earth deposits in the world, is in Kwale County, Kenya, just 15km from the Indian Ocean coast, next to a sealed highway and close to geothermal power grids. 

Along with rare earths, the project is also prospective for phosphate, niobium and manganese. 

Formation of special purpose vehicle 

Under Kenyan law, Mrima Hill – which is owned by the country’s Ministry of Mining, Blue Economy and Maritime Affairs – may only proceed to development via a joint venture with NAMICO. 

Subject to a successful application, RareX (ASX:REE) and $1.62bn producer Iluka (ASX:ILU) will establish a special purpose vehicle (SPV) to pursue the acquisition, de-risk and develop Mrima Hill, and negotiate the terms of a formal shareholders agreement.

At this stage, ILU will hold a 25% equity stake in the SPV including the terms for rare earth and heavy minerals offtake to provide feed for the under-development Eneabba rare earth refinery in WA. 

REE will take the lead in de-risking the project, focusing on socio-environmental matters followed by metallurgical and value chain engineering studies. 

This body of work, mandatory for mining licence approval before moving into the construction and operations phase, will also involve the installation of a local laboratory and pilot plant capability in the short to medium term. 

If the consortium’s proposal is accepted, the RareX-Iluka SPV will be formed and will become the counterparty to NAMICO in the JV.

Global rare earths ambition 

In an interview with Stockhead, REE managing director James Durrant said the agreement with Iluka illustrated that RareX had significant ambition and capability in the rare earths space, which was why the company was established. 

“RareX was set up to develop large-scale rare earth projects that will participate in the global supply chain. We started that with our Cummins Range project which is Australia’s largest undeveloped rare earth project,” he said.

“This project in Kenya is one of the world’s largest known deposits, still early stage, still in need of de-risking and that speaks to how RareX fits with Iluka. 

Durrant said the project was well-known and well documented publicly as being a very large project of significance in the rare earths and niobium space. 

“It has very high grade and very large volumes of both rare earths and niobium, is a coastal facility with grid connection, which is 85% renewables in Kenya driven by geothermal production,” he said. 

“Not only is it a good project by its grade but its location is fantastic and if you tie that in with Eneabba, which is a coastal facility on the Indian Ocean as well, directly across from Kenya, you start to see a very elegant technical solution – Iluka through the Eneabba facility can handle the great complexity of the rare earths, whilst we help build out and integrate tangible domestic value chains in Kenya for manganese, niobium and Phosphate .” 

The Eneabba refinery is under construction and expected to begin production in 2026/2027, producing rare earths from Iluka’s own operations as well as from third-party sources.

“If successful, the project could become part of a unique and independent mine to rare earth metal solution, backed by allied governments, and could contribute to deeper diplomatic relations between two Commonwealth countries, both non-NATO strategic allies of the US and both members of the Indian Ocean Rim Association,” Durrant said. 

What’s next? 

REE and ILU also signed a binding offtake term sheet which sets out the terms for a long-form offtake agreement. 

The sale and purchase of material under the term sheet is subject to conditions including the grant of a mining licence, start of commercial production, Iluka board approval for the definitive agreement and regulatory and financing approvals.

If the procurement process is successfully completed and the prospecting licence is issued to the JV, RareX will focus on community engagement and environmental assessments as it is critical that before any activity is initiated, there is a social licence to operate. 

REE intends to build local teams with support from experienced companies specialising in community development, which will involve employing, where possible, relevant teams previously established to support the Kwale mineral sands operation, close to Mrima Hill, that has now entered its closure phase.

Durrant told Stockhead if all went well, Mrima Hill could be a very meaningful project for Kenya and could represent the initiation of a critical minerals hub in Mombasa. 

“The project could be used to attract and process critical minerals particularly rare earths and potentially niobium from neighbouring countries and nearby projects,” he said. 

“Base Resources titanium project was bought by Energy Fuels last year and has now shut down so we’re really looking to be able to pick up and carry the baton of good quality Australian mine development in the country.” 

REE is also in discussions with New York based GEM – Global Emerging Markets – regarding a potential facility to fund the working capital requirements of the company associated with 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.