Brazilian Rare Earths Ltd (ASX: BRE) plans to demerge its Amargosa bauxite and gallium project into a new company, which will launch after an initial public offer worth up to $50 million.
Shareholders to share the wealth
The new company will be known as Alurion Resources Ltd, and Brazilian Rare Earths shareholders on the register on an as-yet unannounced record date will be given 0.5607 shares in Alurion for each share they own.
Brazilian Rare Earths shareholders will also be given priority for new shares under the initial public offer.
The company’s board said in a statement to the ASX on Monday that separating the Amargosa project into a new company with its own focused management team made sense.
The company said:
The proposed demerger affords Amargosa the focus and flexibility it needs to be progressed rapidly, and reflects a disciplined portfolio strategy that separates two large-scale, strategically important mineral platforms with different development pathways.
The company added that bauxite was in high demand, with new sources needed globally.
Bauxite is the primary raw material used to make alumina, which is then used to produce aluminium. The world’s seaborne bauxite supply chain has become increasingly concentrated, with Guinea now supplying approximately 70% of China’s imported bauxite feedstock. This supply concentration highlights the strategic importance for new, high-quality bauxite supply from reliable mining jurisdictions.
Advanced project status
Brazilian Rare Earths said Amargosa was not an early-stage project, with exploration work by Rio Tinto Ltd (ASX: RIO) and, more recently, by Brazilian Rare Earths itself, having defined a 568 million tonne resource, including 98 million tonnes of direct-ship bauxite at a grade of 41.9%.
The company added:
The scale and quality of the resource provide the foundation for a low-complexity initial development pathway and potential longer-term expansion opportunities. The first-stage Scoping Study development plan is simple by design: mine and ship bauxite directly, without building a beneficiation plant, tailings facility or major fixed infrastructure. This development pathway is designed to minimise upfront capital intensity, reduce time to market and position Amargosa in the first quartile of the global cost curve.
Brazilian Rare Earths said the scoping study envisaged a 1.2 year payback period and a development cost of just US$119 million.
Brazilian Rare Earths Managing Director Bernardo de Veiga said regarding the plan:
The proposed demerger and public listing of Alurion Resources is a disciplined value-unlocking transaction for BRE shareholders and the right structure for the leading Amargosa Bauxite-Gallium Project. Amargosa is a large-scale bauxite-gallium province, with the resource base, grade, logistics and low-capex first-stage development pathway to support a compelling standalone investment proposition. Establishing Alurion as a dedicated company gives Amargosa the capital focus, specialist leadership and strategic mandate to advance its development pathway. For BRE, the demerger also sharpens our corporate focus. It allows Alurion to advance Amargosa as a leading bauxite and critical minerals development company, while BRE concentrates its development and execution capabilities on advancing one of the world’s most important rare earth and critical minerals provinces.
Brazilian Rare Earths shares were 4.9% higher on Monday at $5.60.
Canaccord Genuity recently issued a share price target for the company of $8.
The post Which ASX rare earths company is spinning out a new aluminium company? appeared first on The Motley Fool Australia.
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Motley Fool contributor Cameron England has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.