SGQ signs MOU with a major Chinese steelmaker
Today, our Investment St George Mining (ASX: SGQ) announced it has signed a Memorandum of Understanding (MoU) with Liaoning Fangda Group, a major Chinese steelmaker, for potential collaboration on the Araxa niobium-REE Project in Brazil.
We think it’s a smart move by SGQ to build out a framework for a long term partnership with a major steelmaker at this early stage, which has the following elements:
(Source)
As above, the MoU includes potential offtake of at least 20% of niobium products, funding support for project development, and technical advice for mine development.
Fangda is a global Top 20 steelmaker, with ambitious plans to eventually crack the Top 5.
By establishing a relationship with a leading global steel producer, we think this validates the project's importance in the niobium market.
Niobium market context…
The niobium market is characterized by limited supply sources, with only three primary producers globally:
The highest grade producer - CBMM’s mine - also happens to be immediately adjacent to SGQ’s project in the state of Minas Gerais, Brazil.
As a critical mineral for steel production and emerging technologies, demand for niobium is expected to grow.
Today’s partnership highlights the increasing importance of securing stable niobium supplies for major steel producers, especially as Fangda aims to significantly expand its production capacity.
How does this impact our SGQ Investment Memo?
We think SGQ is progressively de-risking the project on the development front - which reduces the following risk from our SGQ Investment Memo:
Development/delay risk
Should any or all of the above risks materialise, SGQ could wind up stuck in “development purgatory” where newsflow dries up and the project remains stagnant for a prolonged period of time, hurting the share price. Additionally, if delays occur in terms of material newsflow, the market could turn on SGQ.
Source: 6 August 2024 SGQ Investment Memo
By getting its ducks in a row early, we now look forward to deal completion at the Araxa project.
What’s next for SGQ?
The two main milestones we want to see SGQ complete over the coming months 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:
