Hochschild Mining to Separate Chilean Rare Earth Project

Hochschild Mining plc, a leading underground precious metals producer focusing on high grade silver and gold deposits, with over 50 years’ operating experience in the Americas is splitting its Chilean rare earth elements (REEs) project Aclara to focus on its core precious metals business, while continuing to hold a 20% stake in the new Toronto-listed company.

The company said it expects this move to occur before the end of the year to enable Aclara to obtain the funds needed to become a supplier to the clean energy industry. The new rare earth company will raise funds through an IPO, the scale has not yet been determined.

"This is a reasonable next step for our REEs business," Hochschild chairman Eduardo Hochschild said in the statement. "We believe that as two independent companies, both Hochschild and Aclara will have the greatest potential for long-term value creation."

Hochschild Mining purchased the deposit for US$56 million in cash in October 2019, stating that it expects the REE market to'exponentially grow.' "We are not surprised that Hochschild seeks to spin off Aclara," wrote BMO's precious metals analyst Ryan Thompson. "We are currently acquiring Aclara for $160 million in our model, which is consistent with the value announced in the September PEA."

According to the expert, Aclara is a unique heavy REE project because there are few such projects outside of China. It contains dysprosium and terbium, the key heavy REEs used in high-performance magnets, and can be found in electric vehicles (EVs), wind turbines, drones, airplanes, and household appliances.

"Berenberg analysts said: "We think this is the best way to realize the fair value of the rare earth business, and the transaction price of this business should be higher than the company's mature precious metals business. However, this poses a problem for Hochschild, because to some extent, Aclara is the most interesting development project in its portfolio."

Hochschild said its chief financial officer Ramon Barua will step down to lead the new business. Peruvian businessman Eduardo Hochschild will serve as chairman of Aclara, and current Hochschild CEO Ignacio Bustamante will serve on the board of directors.

Aclara is launching the resource development of the Penco module. The project was previously called Biolantanidos. It covers an area of approximately 600 hectares and contains ionic clay rich in REEs. Hochschild said Penco aims to produce rare earth concentrates through a processing plant that will use clay from nearby deposits as raw materials.

The company also pointed out that Penco is a low-cost and capital expenditure project that uses simple metallurgy and direct mining techniques without the need for explosives or tailings dams. Hochschild Mining said the deposit contains almost no radioactive material.

Scheduled to start production in 2024, Aclara's business will account for approximately 2% of global dysprosium production, or 28% of the supply outside of China and Myanmar. The produced concentrate will need to be processed by a third party, and the company does not rule out the possibility of using factories in China, India or Estonia. In the long term, the new company will consider establishing its own separate factory.

• < Prev
• Next >