BTG Pactual assesses that the letter of intent signed between the Australian company Viridis Mining and Minerals and Solvay could pave the way for new forms of European financing for the Colossus project, in Poços de Caldas (MG), one of the main rare earths projects under development in Brazil.
In a report, the bank states that the preliminary agreement with Solvay represents an important step towards reducing project risks, especially on the demand side. The partnership provides for the possible supply of mixed rare earth carbonate produced at Colossus to the European company.
For BTG, Solvay “is not just another potential buyer”. The company operates one of the most relevant platforms in Europe for separating rare earths, in La Rochelle, France, and has a public goal of meeting around 30% of European demand for rare earths used in permanent magnets by 2030.
The point considered most relevant by the bank is that, even though it is not yet binding, the offtake agreement with Solvay meets one of the main requirements of the support mechanism of Bpifrance, France’s public development bank. Viridis had already received a letter of intent from the institution for potential financial support for Colossus.
In BTG’s assessment, this could pave the way for new forms of European strategic support for the project, including price floor mechanisms and other financing structures.
The reading is that the presence of a relevant, non-Chinese downstream partner increases Colossus’ commercial visibility and reinforces the project’s attractiveness for international financiers.
BTG’s assessment reinforces Viridis’ attempt to position Colossus within a western chain of rare earths, amid efforts by Europe, the United States and allies to reduce dependence on China in processing these minerals.
Today, the separation and refining stage is considered one of the main bottlenecks in the global rare earth chain. Therefore, the possible connection between a Brazilian ionic clays project and a European separation platform is seen as relevant to the supply diversification strategy.
Despite the positive tone of the assessment, the agreement between Viridis and Solvay is still in a preliminary phase. The letter of intent is non-binding, the commercial terms have not been disclosed and the eventual conversion into a definitive contract still depends on new negotiations between the parties.
Colossus also needs to advance in other points considered decisive to get off the ground, such as completing the definitive feasibility study, updating resources and reserves, advancing financing, obtaining the Installation License and final investment decision.
The Colossus project is presented by Viridis as a rare earth asset in ionic clays, a type of deposit considered less complex to process than traditional hard rock projects.
