Hochschild Mining (London Stock Exchange symbol: HOC) rare Earth spin-off company Aclara Resources will begin trading in Toronto this week under the symbol "ARA", with an initial public offering of C $123.5 million (US $96.4 million).
Hochschild said on Friday that the new miners would issue 3500 million shares at C $1.70 per share, resulting in a total income of C $5950 million.
In addition to the offering, the parent company and Pelham Investment Corporation have agreed to invest a total of C $6400 per Aclara in exchange for 3770 million shares at C $1.70 per share.
Hochschild Mining will retain a 20 per cent stake in Aclara, and Aclara has a package of mineral concessions in Chile that contain ionic clay rich in the rare earth element (REE).
Based on the offering price, the rare earth miner will have a market capitalization of C $276.4 million (US $216 million), Hochschild said.
Aclara will first focus on the development of the Penco Module project, formerly known as Biolantanidos, which covers an area of about 600ha and contains ionic clay rich in rare earth element (REE).
Hochschild noted that Penco is a low-cost and capital expenditure project that uses simple metallurgical and direct mining processes and does not require explosives or tailings dams. It also says the deposit is almost non-radioactive.
Hochschild bought the deposit with $56 million in cash in October 2019 and said it expected the rare earth market to grow "exponentially".
Ryan Thompson (Ryan Thompson), a precious metals analyst at BMO, said the project was "unique" because there were few such projects outside China. It contains dysprosium and terbium, a key heavy rare earth element used in high-performance magnets and can be used in electric cars (EV), wind turbines, drones, aircraft and household appliances.
"We believe that divestiture is the best way to achieve the fair value of the rare earth business, which should be traded at a higher price than the company's mature precious metals business," Bellenberg analysts wrote. "however, this poses a problem for Hochschild because Aclara is the most interesting development project in its portfolio."
Production is scheduled to start in 2024 and Aclara's business will account for about 2 per cent of global dysprosium production or 28 per cent of supply outside China and Myanmar.
The concentrate produced will be handled by a third party and the company does not rule out the use of factories in China, India or Estonia.
In announcing its decision to divest its Chilean rare earth assets in October, Hochschild said the new company would consider building its own separation plant in the long run.
