Hochschild Mining’s Rare Earths Spin-Off Aclara Starts Trading in Toronto

Hochschild Mining's rare earths spin-off, Aclara Resources, will begin trading in Toronto under the symbol "ARA" after receiving C$123.5 million (US$96.4 million) in funding for its initial public offering.

Hochschild said Friday that the new miner will issue 35 million shares at C$1.70 each for gross proceeds of C$59.5 million. In addition to the offering, the Parent Company and Pelham Investments have agreed to invest a total of C$64 million in Aclara in exchange for 37.7 million shares at a price of C$1.70 per share.

Hochschild Mining will retain a 20% interest in Aclara, which has a portfolio of mineral concessions in Chile containing ionic clays rich in rare earth elements (REE).

Hochschild said the rare earth miner would have a market value of C$276.4 million ($216 million) based on the offering price. Aclara will first focus on developing the Penco module project, formerly known as Biosantanidos, which covers about 600 hectares and contains ionic clays rich in rare earth elements (REEs).

Hochschild said Penco is a low-cost and capital expenditure project that employs simple metallurgy and a straightforward mining process that does not require explosives or tailings dams. It also said the deposit contains virtually no radioactive material. Hochschild bought the deposit in October 2019 for $56 million in cash, saying it expects the rare earths market to grow "exponentially."

Ryan Thompson, a precious metals analyst at BMO, said the project is 'unique' because there are few like it outside of China. It contains dysprosium and terbium, key heavy rare earth elements used in high-performance magnets, which can be found in electric vehicles (EVs), wind turbines, drones, aircraft and household appliances.

Berenberg's analysts wrote: "We believe that "divestment" is the best way to achieve fair value for the rare earths business, which should trade at a higher price than the company's well-established precious metals business, however, this poses a problem for Hochschild because, in a way, Aclara is the most interesting development project in its portfolio. Aclara is, in a way, the most interesting development project in its portfolio."

Scheduled to begin production in 2024, Aclara's operations will account for approximately 2% of global dysprosium production, or 28% of supply outside of China and Myanmar. The concentrate produced will be processed by a third party, and the company has not ruled out the possibility of setting up plants in China, India or Estonia.

In the longer term, the new company will consider building its own separation plant, Hochschild said in October when it announced its decision to spin off its Chilean rare earths assets.

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