Alliance between Aclara Resources and CAP SA boosts rare earth mining in Chile for energy transition

The alliance between Aclara Resources and CAP SA boosts rare earth mining in Chile for the energy transition.

The Penco project, located near CAP's iron ore operations in northern Chile, covers an area of 6 km² with a deposit of heavy rare earth-rich ionic clay. With measured and indicated resources totaling 27.5 million tons with a grade of 2,292 parts per million of total rare earth oxides (TREO), the deposit promises to be a significant source of these critical elements, amounting to a total of 62,900 tons of contained TREO. 

Under the investment agreement, CAP will make a strategic investment in REE Uno, Aclara's Chilean subsidiary that owns the Penco module, in exchange for a 20% stake in the rare earth unit. This initial capital injection, valued at a pre-money valuation of $116.5 million, will be disbursed in three tranches and is intended to support the ongoing development of the Penco project through its permitting, community relations, and feasibility study phases.

The partnership with CAP not only provides Aclara with the necessary capital to advance its Penco project but also allows it to reallocate its cash reserves towards the advancement of another key project, the Carina module in Brazil. CAP's experience in obtaining environmental permits in Chile is a valuable asset for Aclara, strengthening the preparation and review process of the environmental impact assessment (EIA) application for the Penco project.

Furthermore, CAP has the option to invest an additional $50 million in REE Uno for an additional 20% equity interest once the necessary environmental permit for the Penco module is secured. This secondary investment underscores the commitment to mitigate financing risks associated with project construction and reflects a pre-investment valuation of $150 million for REE Uno.

The agreement also includes the formation of a 50/50 joint venture between Aclara and CAP to develop metals and alloys for the rare earth permanent magnet industry. With a $3 million investment from CAP, this venture aims to vertically integrate Aclara's rare earth concentrate production towards the manufacturing of permanent magnets, offering a geopolitically independent alternative to the supply of these critical components in the market.

This agreement not only reflects Aclara's valuation at the time of its initial public offering in 2021 but also demonstrates mutual confidence in establishing Aclara as a leading producer of clean rare earths. The initial investment and 50% interest in the new joint venture represent a total value of $119.5 million, matching Aclara's pre-IPO valuation. 

The alliance between Aclara and CAP marks a historic milestone for the CAP Group, symbolizing the first step in its strategy to lead the production of materials essential for decarbonization and energy transition. The market response has been overwhelmingly positive, with Aclara Resources' shares experiencing a 30.1% increase to C$0.51, reflecting shared optimism towards the potential of this collaboration to positively impact the rare earth industry and more.