Chilean project could make the country a serious supplier of rare earths

RIO DE JANEIRO, BRAZIL – Penco, in the Bíobío region, could be home to one of the world’s few rare earth processing plants. Peruvian mining company Hochschild, which controls a deposit of these strategic minerals in the area, announced last week in a prospectus filed with the Toronto Stock Exchange that it is studying this possibility to make the project it developed in Chile even more profitable.

The company, which specializes in precious metals, decided to list its rare earths unit, whose only project is Penco, in Canada, where the mining market is more developed.

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The new company will be called Aclara Resources and is expected to become one of the few global suppliers of rare earths, a group of 17 minerals essential to the manufacture of smartphones, electric motors and wind turbines, according to the prospectus filed with the Canadian regulator.

Demand for rare earths is growing in parallel with technological progress, driven by the climate crisis and the boom in electric mobility. China is the main producer of rare earths and is driving the market. Therefore, the prospectus repeatedly emphasizes that this project is independent of strategic or geopolitical constraints.

“Aclara Resources is committed to creating a sustainable and geopolitically independent supply chain for critical sectors of the growing green economy and energy,” reads one of the first paragraphs of the document.

So far, the Toronto Stock Exchange has not approved the listing application. Hochschild’s plan is to raise about US$119 million to advance the exploration and development of these valuable clays. Prices have doubled in the last two years due to export restrictions in several producing countries.

RADIOACTIVITY

Formerly known as Biolantanidos, the rare earth project is in its infancy. Biobío’s Environmental Impact Assessment Authority (SEA) is currently reviewing the company’s application, which is opposed by the municipality and some local authorities.

The Canadian prospectus picks up on these differences, arguing that “the company has experienced some local opposition to the development of the Penco module from some groups and social organizations and cannot rule out the possibility that local and national opposition may increase in the future.”

The mayor of the municipality himself does not even see direct benefits for Penco. Victor Hugo Figueroa argues that they are more concerned about the environment and health, and says that is why they oppose it, as do some regional deputies.

Social pressure has been intense. Villagers fear for their own health because they fear radioactivity. Normally, rare earth mining contains radioactive elements such as thorium or uranium, but in this case the company claims in Aclara’s prospectus that the levels are “insignificant”.

The process consists of mining the earth, washing the ore and processing it abroad, where it is processed in only a handful of countries. But they are not willing to do this in Chile.

“We intend to explore options for vertical integration, including the possibility of building our own separation plant, which offers a compelling opportunity for Aclara to extract additional value from our geopolitically independent, high-quality and sustainable product.”

The company notes that no blasting or stockpiling of tailings will be required in the extraction process, although water consumption is expected to be minimal. “Aclara’s production is expected to be in demand from customers seeking traceable, environmentally sustainable production outside of China,” it says.

28% OF THE DYSPROSIUM MARKET

90% of total rare earth production comes from China. If built, the Penco project would reduce that dependence, as it could supply about 28% of demand for some elements such as dysprosium (used in screens), if China and Myanmar are excluded, the prospectus says.

To date, Hochschilld has invested more than US$100 million in exploration, research and contract work. The plan is to begin selling rare earths in 2024. The mine will initially be open for 12 years.

In total, Aclara has 451,585 hectares of mining concessions (743 exploration concessions and 50 mining concessions) spread across the Maule, Ñuble, Biobío and Araucanía regions. Several of these have been obtained in recent months, according to judicial data. In 2020, the company paid concession fees totaling approximately US$343,000.

For the same reason, the company announces that it will conduct further exploration in the area to determine if there are additional deposits. “We believe our deposit will produce one of the most valuable rare earth oxide concentrates per kilogram in the world,” the company said in Toronto.