Canadian mineral exploration and development firm Mkango Resources has signed agreements with Canada-based CoTec Holdings.

The deals are related to a £2m convertible loan, a £1.5m equity investment in Mkango’s wholly owned subsidiary Maginito, and a cooperation agreement for investments in rare-earth processing technology opportunities in the US.

Under the equity investment deal, CoTec will subscribe for Maginito shares, equivalent to a 10% equity stake, for an investment of £1.5m. It has a closing date of no later than 15 March 2023.

CoTec and Maginito would sign a shareholders agreement, whereby the former will have the right to one Maginito board seat for so long as CoTec holds at least a 5% stake in Maginito.

Furthermore, CoTec will make a £452,500 (C$744,181) additional investment into Mkango, bearing a 5% interest.

Mkango added: “Provided that the Maginito Investment Closing occurs, CoTec has the option to convert the principal amount and interest into Maginito Shares giving it an effective interest, post-conversion, of 20.6% of Maginito.”

If Maginito increases its stake in UK rare earth (NdFeB) magnet recycler HyProMag to 100% from the current 42%, CoTec has to exercise either the Mkango Conversion Right or the CoTec Maginito Conversion Right within 120 days.

Subject to the closing of the Maginito investment, Maginito will sign a cooperation agreement with CoTec pertaining to future investments in rare earth processing technology opportunities in the US.