Great Western Minerals (CVE:GWG) said Monday that it has negotiated fundamental points of an agreement with China-based Ganzhou Qiandong Rare Earth Group (GQD) to build a rare earth separation plant in South Africa.
The heads-of-terms deal, which will see a plant established nearby Great Western's Steenkampskraal rare earth project, will form the basis of the project, Great Western said in a statement.
Signing the heads-of-terms agreement positions Great Western to work toward a final deal by the end of August, it added.
A new joint venture company, to be called Great Western GQD Rare Earth Materials Co., will be created. Great Western will own 75%, while Chinese rare earths processor Ganzhou Qiandong will hold the remaining 25%.
The new entity will be responsible for the design, manufacture, construction, commissioning and operation of the planned separation facility.
It is expected the separation plant will be fed with rare earth chloride that Great Western produces at its South African Steenkampskraal mine, and possibly with feedstock from other sources in the region.
The company's Chinese partner on the project has supplied metals and oxides to Great Western's subsidiary, Less Common Metals, for over 15 years. Birkenhead, UK-based Less Common Metals is where Great Western produces specialty alloys, which are used in the battery, magnet and aerospace industries, and contain aluminum, nickel, cobalt and rare earth elements.
"Our agreement with GQD marks one of the most significant developments so far in the delivery of our fully integrated rare earth business model,” said Great Western CEO, Jim Engdahl.
"GQD's experience in the rare earth industry will ensure our new facility will be at the cutting edge of solvent extraction processing."
Great Western's team of metallurgists will work alongside with GQD to finish process and plant design in order to start construction of the facility early next year, Great Western said.
“This agreement is a major step in our plans to deliver separated rare earth oxides and metals to the world market by the beginning of 2013," added Engdahl.
In addition to its stake in Steenkampskraal, which Great Western holds through its 100% interest in Rare Earth Extraction Co., the company also holds interests in six rare earth exploration and development properties in North America.