Aug 12 2010
Great Western Minerals Group Ltd. ("GWMG") or the ("Company"), (TSX VENTURE:GWG) (OTCQX:GWMGF) (PINK SHEETS:GWMGF) is very pleased to announce that it has signed an off-take agreement (the "Agreement") with Rare Earth Extraction Co. Limited ("RareCo") of Stellenbosch, South Africa.
Under the terms of the Agreement, RareCo has agreed to sell and deliver, and GWMG has agreed to purchase, 100% (one hundred percent) of the Rare Earth Products produced by RareCo and its subsidiaries (the "RareCo Group") from ore mined at RareCo's Steenkampskraal Mine.
In addition, GWMG can purchase 100% of Rare Earths mined or obtained by the RareCo Group from any other source of Rare Earth products that is owned, controlled and/or acquired by the RareCo Group, subject to the terms and conditions set out in the Agreement.
"This is an exceptionally important step forward for Great Western Minerals Group," stated GWMG President and CEO Jim Engdahl. "The Agreement propels our company toward becoming the first fully integrated Rare Earths producer outside of China, just as our corporate strategy envisages. With the Agreement in place, and as we meet its terms and conditions, GWMG will be positioned to supply its own Rare Earth chloride for further separation and use in its own processing, providing downstream margins. Moreover, the Agreement creates the potential for GWMG to expand production beyond its own processing requirements."
"Supply certainty of Rare Earths is becoming a highly valuable commodity," added Jim Engdahl. "The ability for GWMG to purchase 100% of the output of the Steenkampskraal mine at market prices, as established through independent published reports as agreed by the parties, under this 10-year, renewable agreement moves our company well down the path toward the level of supply certainty valued by the market."
Conditions of the Agreement include: (i) GWMG completing a feasibility study (the "BFS") by December 31, 2011, and providing financing in relation to the results of the BFS within two months of its completion, or (ii) GWMG providing certain financing specified in the Agreement by December 31, 2010 (the "Financing"). In each case, GWMG must commence certain pre-production activities specified by local regulation with regard to the project and mine site by June 2, 2011. The Financing may take the form of a loan to RareCo, an equity investment in RareCo or a combination thereof, in each case on such terms as RareCo and GWMG may agree.
Either party may terminate the Agreement if the conditions precedent are not completed within three months of the date of completion of the BFS. After satisfaction of the conditions precedent, the term of the Agreement will be determined by the nature of the Financing. If the Financing takes the form of a loan to RareCo or its subsidiaries, the Agreement will expire on the date that all amounts payable to GWMG under the loan have been repaid in full. If the Financing takes the form of an equity investment in RareCo or its subsidiaries, the Agreement will expire on the date that is 10 (ten) years after the date of the first shipment of Rare Earth Products pursuant to the Agreement, or 10 (ten) years after the expiry of RareCo's mining right with respect to the Steenkampskraal mine, whichever is earlier. On expiry of the Agreement, GWMG will acquire a right to negotiate a renewal of the Agreement. If the parties are unable to negotiate a renewal, GWMG has been granted a right of first refusal with respect to any agreements made by RareCo for the sale of Rare Earth Products.