Peak Rare Earths secures go-ahead for offtake deal with Shenghe

The Tanzanian Mining Commission has approved an offtake agreement between Peak Rare Earths (ASX:PEK) and Shenghe Resources (SSE:600392), which covers 100% of rare earths concentrate production from the Ngualla Project in Tanzania.

Under the binding offtake deal, which has an initial seven-year term, Shenghe is required to pay for — and take delivery of — all agreed products. This includes rare earths, plus at least 50% of any immediate rare earths or final separated oxides, such as a mixed rare earths carbonate. 

Peak Rare Earths, which has a market capitalisation of $57.17 million, says the market-based pricing formula is based on the value of contained rare earth oxides, while the sale of concentrate is based on cost, insurance, and freight to designated Chinese ports. 

“This marks yet another de-risking milestone and further strengthens Ngualla’s position as one of the world’s most attractive and advanced rare earth projects,” CEO Bardin Davis says.

“Our offtake agreement with Shenghe delivers a higher level of payability and is supporting our rapidly advancing debt financing process,” he says. 

After the company expanded its special mining licence area from 18km2 to 51km2, Peak Rare Earths says there is an opportunity to reconfigure the layout of the Ngualla Project. 

The company says there is potential to reduce bulk earthworks and relocate buildings, plant, and storage facilities from Ngualla Hill to flatter areas within the enlarged licence. 

Peak Rare Earths will re-scope buildings and storage facilities using lower cost local construction solutions, removing unnecessary coverings and reducing storage capacity. 

Other opportunities include optimising contract packages, which includes reducing unit rates through combining earthworks, civils, quarry, tailings storage facility construction and mining, as well as deferring a new airstrip and increasing the plant availability to 88%, based on a peer benchmarking exercise. 

The company wll also adopt more competitive tendering solutions, including reducing logistics and power costs. 

Wood Group has been engaged to review these optimisation opportunities, and to provide bankable cost and production estimates ahead of a targeted final investment decision in December 2024. 

Peak Rare Earths and Shenghe are now progressing discussions around an effective project level investment by Shenghe, to support an equity funding solution for Ngualla. 

The company says this could involve Shenghe purchasing a 50% interest in Ngualla Group, a subsidiary company through Peak’s interest in the Ngualla Project is held. 

Shenghe Resources, which has a market capitalisation of US$2.2 billion ($3.3 billion), holds 19.89% interest in Peak Rare Earths via its wholly owned subsidiary Shenghe Singapore. In 2022, Shenghe appointed a non-executive director to Peak’s board. 

Shenghe is a large importer of rare earth concentrate into China and its operations span rare earth mining, beneficiation, refining, and alloy and metals production. 

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Images: Peak Rare Earths
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Written By Aaliyah Rogan
Relocated from the East Coast in New Zealand to Queensland Australia, Aaliyah is a fervent journalist who has a passion for storytelling. When Aaliyah isn’t writing stories, she is either spending time with friends and family or down at the beach.