MoU: St George and Shandong Xinhai Mining Technology & Equipment
Today, our niobium and rare earths Investment, St George Mining (ASX: SGQ) signed a binding Memorandum of Understanding (MoU) with Shandong Xinhai Mining Technology & Equipment for the development of SGQ’s project in Minas Gerais, Brazil.
The MoU is designed to consider the following:
Importantly, SGQ and Xinhai will establish a “mutually acceptable funding solution for the EPC contract including exclusive distribution and marketing rights for 80% of niobium offtake sold by St George into the Chinese market”.
We see this as a major step forward for the development of SGQ’s project.
Among other key parts of the deal, the binding MoU includes a direct investment by SGQ’s new partner a total of $8M of the $20M equity fund raising currently being finalised by St George to complete the acquisition of the project.
It’s hard to underestimate the importance of having a big partner like Xinhai, which is willing to commit capital expertise.
Xinhai is big - the Engineering Procurement and Contracting (EPC) company has performed at more than 2,000 mines in more than 100 countries.
SGQ Executive Chairman John Prineaus says they move quickly too - remarking on their “impressive track record of delivering high-quality processing plants in expedited timeframes and with competitive pricing.”
It’s all part of a larger trend in the last few months where SGQ has been quickly getting its ducks in a row so that once the acquisition completes, there is a pathway to a quick ramp up in development activities.
This includes a drill program to confirm historical grades of niobium and rare earths, extend the mineralisation (only 10% of the total project area has been tested), perform the scoping studies to firm up economics to secure financing, and ultimately begin construction and go into production.
Previous notable milestones that SGQ has achieved since it agreed to acquire the Araxa project in Brazil include:
- Appointment #1 - Former Brazilian Minister of Mines joins SGQ as advisor to the Board (read the Quick Take)
- Development MoU #1 - An agreement with SKI HongKong Limited (read the Quick Take)
- Science Partnership - A Technical Collaboration Agreement with Brazilian government science agencies to among other things, advance niobium and rare processing techniques for the project. (read the Quick Take)
- Development MoU #2 - An agreement with Liaoning Fangda Group, a major Chinese steelmaker to consider a 20% offtake in addition to a prepayment facility (read the Quick Take)
- Appointment #2: Ricardo Maximo Nardi, a former CBMM mineral processing head, to its Araxa Project team in Brazil (read the Quick Take)
It all adds up to a good platform from which SGQ can drive hard at becoming the next major niobium and rare earths project in a market that has been seeking good options for supply chain diversification.
How does this impact our SGQ Investment Memo?
The fact that Xinhai is stepping up to become a SGQ shareholder we think speaks to how desirable SGQ’s project is:
Money flowing into companies developing niobium projects.
Because of the importance of niobium, and its concentrated supply chain, large swathes of capital is pouring into other companies that are developing niobium projects. WA1 and Encounter Resources are two of the most successful stories on the ASX, both discovering niobium in WA.
Source: 6 August 2024 SGQ Investment Memo
What’s next for SGQ?
The two main milestones we want to see SGQ complete are:
- Complete the $20M capital raise - we want to see the cash hit SGQ’s bank account, and the new shares trading on the ASX.
- Make the initial payment to the vendors of the asset and finalise the acquisition - this one should be done before that deadline date of 15th March 2025.
Read our first note on our SGQ Investment below, which covers our Investment Thesis in detail:
