announced Tuesday it has completed and signed an agreement with China's Ganzhou Qiandong Rare Earth Group (GQD)

2012-01-17

   Great Western Minerals Group (CVE:GWG) announced Tuesday it has completed and signed an agreement with China's Ganzhou Qiandong Rare Earth Group (GQD) for the construction of a rare earth separation plant in South Africa.

    Under the terms of the agreement, Great Western and Ganzhou have formed a joint venture company, Great Western GQD Rare Earth Materials Proprietary Ltd (GWGQD).

The new company will finalize the preliminary work on the process design and environmental components of the plant, which are already underway, moving toward the construction of the facility.

Investors welcomed the news, as on the TSX-Venture Exchange, Great Western shares rose 7.55 percent to $0.57, as of 1:58 pm EDT.

   A wholly owned subsidiary of Great Western will own mixed rare earth chlorides, which GWGQD will process under a tolling agreement. The agreement will see GWGQD separate the mixed rare earths into products usable by Less Common Metals, Great Western's rare earths alloy processing subsidiary, as well as third party customers.

    China's GQD will own 25 percent of the shares of the new joint venture company.

Over three years, $7.5 million worth of Great Western shares will be paid to GQD, based on the facility being fully commissioned and operating effectively, as well as fees and dividends for long-term management support.

   Great Western president and CEO, Jim Engdahl, said: "This agreement represents one of the single most significant milestones in the history of [Great Western].

   "Our agreement with GQD, with its two decades of rare earth processing experience, means that we have successfully engaged a rare earth industry leader as a joint venture partner to execute the separation component of our company's plan to be the most fully integrated rare earth processing company outside of China."

   GQD CEO, Bin Gong, added: "The signing of this joint venture agreement between GQD and GWMG represents a landmark development in the rare earth industry.

   "This agreement sets the foundation for our two companies to proceed to full development of a separation facility within our joint venture.

    "While it may have taken us longer than expected to get to this point, the complexities of such a groundbreaking agreement should not be underestimated. However, we are now in a position to allow the joint venture to proceed with all haste."

    The separation plant will be constructed nearby to Great Western's former-producing Steenkampskraal rare earth mine in South Africa.

    Demand for rare earths is booming, and despite being used in relatively small amounts, the metals are necessary to the growing production of energy-efficient green products, mobile electronics and electric vehicles.

    Deposits of the metals are not actually rare, but high capital costs, difficult metallurgy, marginal ‘heavy’ rare earths grades, and a lack of people with significant rare earths processing experience are major hurdles to bringing new mines to production, bringing Great Western's advanced Steenkampskraal mine to investors' attention.

   China currently produces around 97 percent of global rare earths, but in July of 2010, the country announced significant reductions to rare earths export quotas, claiming protection of a strategic and dwindling resource. Since 2006, rare earths prices have increased between 1,000 and 10,000 percent.

    In addition to its Steenkampskraal property, Great Western also owns four rare earth exploration projects throughout North America, and two rare earth processing plants through its subsidiaries Less Common Metals in Birkenhead, U.K., and Great Western Technologies in Troy, Michigan, where it makes rare earth element-based specialty alloys.

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