St George Mining has inked a memorandum of understanding (MoU) with China-based steelmaker Liaoning Fangda Group to work on an offtake agreement and provide funding support for its high-grade Araxá niobium-rare earth (REE) project in Brazil’s Minas Gerais region.
The company says the MoU represents the first stage of a working relationship with Fangda - one of the world's biggest steelmakers and heavy equipment manufacturers – ahead of a potentially binding agreement for St George to supply at least 20 per cent of its Araxa niobium products.
In exchange, Fangda would provide funding support for project development either through an investment in St George or a pre-payment for the offtake, or both. Fangda is positioned 16th among global steel producers and is rapidly climbing the ranks.
In addition to completing an offtake agreement, the Beijing-headquartered company would also offer out its services to provide technical advice and support for the mine development and construction.
The MoU has outlined a nine-month non-exclusive negotiation period to lock in a binding agreement, during which St George remains free to explore additional partnerships.
With no financial obligations tied to the MoU, management says the framework offers flexibility while the company pushes on with feasibility studies and mine development.
News of a potential MoU with one of the world’s biggest steelmakers has landed at a very opportune time for St George, coming only a week after the company announced it had locked in $20 million in new funds from a capital raising to complete the first stage of the Araxa project acquisition.
Under the terms of the sale agreement, St George must pay the vendor - Canadian-listed Itafos Araxá Mineracao E Fertilizantes - US$10m (A$16m) at closing in March and a further payment of US$11m (A$17.5m) in 18 months.
St George Mining’s executive chairman John Prineas said: “The relationship with Fangda through potential financial and technical support as well as mine development is another key milestone in de-risking the project. St George’s ability to attract global giants like Fangda speaks volumes to the potential of the Araxá project and also recognises the high-performance in-country management established by St George to drive project development.”
The niobium market is primarily supplied by three producers accounting for almost 90 per cent of global production, leaving the market extremely vulnerable to interruptions.
Chief amongst those is the giant 896-million-tonne, 1.49 per cent grade Araxá mine owned by global leader Companhia Brasileira de Metalurgia e Mineração, which sits immediately adjacent to the St Georges’ own named Araxá project.
St George’s project has extensive near-surface niobium mineralisation already confirmed from historical drilling, including more than 500 intercepts of more than 1 per cent niobium. It bears all the hallmarks of becoming the next cab off the rank to produce niobium, thereby reducing supply risks.
Fangda is more than doubling its annual steel production capacity from 20 million to a remarkable 50mt and stands to benefit from a deal with St George by securing a stable niobium supply for its diversified operations.
Beyond steel, the conglomerate is also a leader in mining machinery and new energy technologies.
Niobium is registered on the critical mineral lists worldwide and is essential for producing high-strength steel. It is crucial to the construction of infrastructure, bridges and vehicles, and renewable technologies such as lithium-ion batteries.
As St George prepares to complete the acquisition of the Araxá project by the end of March, its alliance with Fangda appears, on the face of it at least, to mark a significant leap forward in turning its vision of becoming a niobium producer into reality.
With the funding to settle the Araxá acquisition in the bag and strategic partnerships starting to take shape, coupled with a high-grade mine in the making, the company appears well-positioned to redefine the niobium landscape.
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By James Pearson
