Northern Minerals negotiates offtake agreement for Browns Plains project

By Trevor Hoey. Published at Apr 6, 2017, in Small Caps

Heavy rare earths developer, Northern Minerals (ASX:NTU) has negotiated an important offtake agreement with a vertically integrated Chinese rare earths business, Lianyugang Zeyu New Materials Sales Co Ltd (JFMAG), a 51% owned subsidiary of Guangdong Rare Earths Group.

As the company progresses to a Final Investment Decision at its Browns Range project, located in Western Australia/Northern Territory, having a visible income stream will be important in terms of presenting a financial model and should a decision be made to go ahead, obtaining funding.

It should be noted here that this development is in its early stages and investors should seek professional financial advice for further information if considering this stock for their portfolio.

The sales agreement covers all plant production from the Browns Range pilot plant with pricing referenced from a two month average of quoted prices on Asian Metals and Beijing Ruidow Information Technology.

Prior to the first shipment of rare earth carbonates, JFMAG will make a prepayment to NTU of $10 million which will cover approximately 15% of the expected value of production during the pilot plant phase. The remaining 85% is to be paid to NTU over the course of the agreement based on volumes delivered.

Under the terms of the agreement, JFMAG will also be issued 40 million unlisted options at an exercise price of 25 cents which can be converted to ordinary shares to offset the pre-payment of $10 million.

Following execution of the sales agreement, NTU will issue 14 million ordinary shares to JFMAG or its nominated beneficiary.

Commenting on this development, NTU’s Managing Director, George Bauk said, “This milestone sales agreement underpins the Browns Range pilot plant development, and the excellent terms we have agreed provide us with a transparent pricing mechanism and guaranteed demand for our products”.

Bauk said the company expected to announce the determination of its Final Investment Decision shortly.

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