Australian miner Peak Rare Earths has entered a binding offtake agreement with Shenghe Resources (Singapore), a unit of Chinese rare earth elements (REE) producer Shenghe Resources, for its Ngualla rare earth project in Tanzania.

As part of the offtake deal, a minimum of 50% of the rare earth concentrate produced at the Ngualla project will initially be supplied to Shenghe.

Subject to further binding agreements, Shenghe will be supplied with the entire production at the mine.

The initial period of the agreement has been set at seven years. With subsequent agreements, the period can be extended further.

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Shenghe is obligated to pay for and take delivery of the product.

The price will be market-driven, based on the value of the contained rare earth oxides less deductions related to value-added tax (VAT), trading fees, and refining recoveries, charges and margins. 

Besides the offtake deal, the two companies have reached a non-binding memorandum of understanding (MoU), which sets out the basis for the parties to cooperate on assessing an integrated engineering, procurement and construction (EPC) and project funding solution for the Ngualla project.

According to the MoU, Shenghe will be appointed to arrange and deliver a turnkey, fixed-price EPC solution for the project, along with a potential for Beijing General Research Institute of Mining and Metallurgy (BGRIMM) to be engaged as the EPC sub-contractor.

Peak will also appoint an owner’s team to oversee the EPC solutions’ delivery while Shenghe will provide funding for the project on mutually acceptable terms for both parties.

As part of the funding solution, they will also evaluate the potential for Shenghe to acquire a significant non-controlling interest in the project.

Peak Rare Earths executive chairman Russell Scrimshaw said: “We are delighted to be extending our strategic cooperation with Shenghe.

“The combination of a binding offtake agreement and a non-binding EPC and funding MoU differentiates Peak from its peers and supports a pathway to a successful project funding solution for the development of the Ngualla rare earths project.”