We got another mention today regarding Shenge on it's current...

We got another mention today regarding Shenge on it's current buying spree


SOURCE: AFR 31/10/22

China strikes supply deal with Australian rare earths hopeful

By Peter Ker Resources reporter

Oct 31, 2022 – 3.13pm An aspiring Australian rare earths miner will sell the majority of its product to China under an early stage agreement struck barely seven months after it joined other critical minerals producers on a trade mission to Washington DC.

VHM Limited announced that it had struck a memorandum of understanding to sell most of its future product to China’s biggest importer of rare earths concentrate, Shenghe, which this year acquired 19 per cent of ASX rare earths developer Peak Resources.

China supplies about 80 per cent of the world’s separated rare earth elements giving it a stranglehold on an industry that is essential for defence applications like drones and decarbonisation equipment like wind turbines.China’s dominance of the rare earths industry has concerned governments in Australia, the US, Japan and other developed economies and triggered big hand outs of taxpayer funds to help stoke new rare earths mines and refineries in Australia and North America.

That geopolitical context prompted VHM managing director Graham Howard to join former trade minister Dan Tehan on a mission to Washington in March, but on Monday VHM signalled that its Victorian project was likely to send most of its product to China.

VHM plans to build a rare earths mine at the Goschen deposit near Swan Hill in Victoria and the company said Shenghe had tested samples from the region before striking Monday’s agreement.Shenghe would take about 60 per cent of the mine’s output if it is built to the proposed size of 5 million tonnes per year and Mr Howard said the three-year supply deal was the start of a “long term strategic relationship”.

“Finalisation of the offtake agreement will occur within four months of signing,” said VHM in a statement.

The deal with VHM is the second Shenghe has struck with an ASX listed rare earths aspirant within the past fortnight.The Chinese company struck a memorandum of understand with Peak on October 19 which would see Shenghe buy between 75 per cent and 100 per cent of the rare earths produced at Peak’s Tanzanian mine for seven years.That offtake agreement is one of several examples of how the geopolitical aspects of Peak’s corporate strategy have changed since Shenghe acquired 19 per cent of the company in February.

Shortly after Shenghe bought the stake, Peak issued a market filing on February 28 saying it was committed to its strategy of becoming a “non-Chinese aligned” producer focused on Japanese, Korean and European rare earths customers.Peak was at that time committed to mining in Tanzania and processing the ore near Middlesbrough in the United Kingdom.

The United Kingdom has close defence ties with the US and Australia through the AUKUS pact.In that same February statement, Peak said it would produce neodymium and praseodymium in oxide form - the product category that China dominates - and would not be switching to sell the rare earths in a concentrate or rare earth carbonate product.

But Peak seems to be less committed to that strategy based on market filings published in October.Aside from the fact Japanese, Korean and European customers may get none of Peak’s rare earths if Shenghe goes ahead with a plan to buy up to 100 per cent of the offtake, Peak said the product may be sold as a rare earth carbonate or concentrate.Peak also appears to be wavering on the notion of building a rare earths refinery in the UK, saying in October that it was now studying the potential to build one in Tanzania.

Shenghe’s buying spree comes after Iluka Resources announced last week that it would help fund development of a new mine in WA being proposed by rare earths junior Northern Minerals.Iluka is building a rare earths refinery in WA with the help of a taxpayer funded loan worth more than $1 billion and Northern Minerals looms as a likely supplier of feedstock into that refinery.Northern Minerals had originally struck a deal to sell its rare earths to a Chinese company, but earned praise from a federal minister when it cancelled that deal in 2019.