Vital Metals boss says taking China cash was a necessary step

Vital Metals’ boss says an injection of cash from a Chinese firm was “a necessity” that allows the company to get back on its feet after failure.

Geordie Mark, who took the job late last year, said Vital’s former management created a “failed mining enterprise” that needed money to leave behind “the losses of the past” and take a new approach to developing the Nechalacho rare earths mine, east of Yellowknife.

Last fall’s sale of a 9.9-percent stake in Vital to China’s Shenghe Resources, which also bought all of the material produced at Nechalacho to date, was labelled a national security concern by some MPs and “a betrayal” by some northerners who’d worked for the company.

They argue the involvement of a Chinese company runs counter to Vital’s years-long promise to bolster North America’s supply chain for rare earths, which are used in various forms of advanced technology, including electric vehicles. China is currently the dominant player in the market.

Mark told Cabin Radio his company doesn’t intend to send any future production at Nechalacho to China, and plans instead to “feed the North American market.”

“I think that’s wholly and utterly the most practical means to feed into,” he said, asked if future mining would be for North America’s benefit.

“That’s where our back-end refining capacity is growing and that’s where our supply is, and that’s probably the most economic mechanism by which to run things. That makes the most sense.”

Mark said Shenghe had more of an interest in a Tanzanian property Vital owns than in Nechalacho.

He spoke shortly after Vital published its strategy for 2024, which focuses on what he called a longer-term approach at Nechalacho compared to previous management – essentially taking more time to create a larger eventual mine.

Where Vital previously focused on a small mine at Nechalacho’s North T rare earths deposit, the company will now spend time doing more exploration of the much larger but yet-to-be-mined Tardiff deposit nearby.

“Tardiff, to me, represents one of the best undeveloped rare earth stories in North America to feed a North American supply chain. That’s the exciting component,” Mark said.

Asked if he regretted the company’s handling of the Shenghe transaction, during which there was virtually no communication to NWT residents or Indigenous groups about Vital’s plans or its reasons for accepting Chinese investment, Mark said the material sold to Shenghe “had to go somewhere” and Vital was now in a stronger position to support a North American supply chain.

Pressed on the company’s lack of communication with northerners, he said: “It has taken us longer than we would like over the last few months to look into the details for Tardiff and develop a plan around that, and get ready to communicate that message to our stakeholders.”

In the absence of a message from Vital until now, NWT politicians have expressed concern that Shenghe’s initial investment could ultimately allow the Nechalacho mine to be used as part of China’s strategy to pursue rare earths dominance, with one possible outcome being the mine’s closure to preserve China’s superior supply lines.

“China has used rare earths and critical minerals as part of their national strategy to maintain dominance over that market and, if things continue, we won’t have a Nechalacho mine in the Northwest Territories,” said Range Lake MLA Kieron Testart in the legislature this month, airing that fear.

But new industry minister Caitlin Cleveland said “foreign investment is not all bad [and] something that our critical mineral mining absolutely relies on right now.”

Mark said Vital expects to have an updated economic picture – and to have done more work to communicate its vision locally – by the end of the year.

“That’s kind-of the plan – very conventional, very consistent with the larger operations that are in production currently,” he said.

“There’s no need to run into something very fast. We need to take a measured approach to what we’re doing so we can undertake every step consciously and tick the boxes that we need to tick.

“No surprises is where we want to be.”

This interview was recorded on February 8, 2024. The transcript has been lightly edited for clarity.

Ollie Williams: What made you want to join Vital Metals and lead this project?

Geordie Mark: Principally, I liked the asset. Tardiff, to me, looks like a very large-scale, differential asset with good grades at surface.

I’ve had good experiences in the Northwest Territories when I used to visit the diamond mines with what they were doing, getting into development, Gahcho Kue in particular. So I like the area, I like the asset, and I knew the chairman from 25 years ago – I used to work with him and he was a very good boss. We have a similar belief in terms of how to act in the industry.

I thought there was an opportunity to get into the weeds and look at developing an action plan around the value of Upper Tardiff, to bring something in that I think can potentially be there for decades.

I also am a great believer in what and where rare earths can be for critical minerals and the demand for that, not only in EV but also other AI-assisted virtual living. I think we’re going to have a very interesting, paradigm-changing couple of decades ahead for us, in terms of how people live.

Not long after you took charge, there was a fairly significant Chinese investment in Vital Metals. That made headlines in the Northwest Territories and also nationally in Canada. Talk me through that investment, in terms of how important that is and why it needed to come from the source it came from.

Before my time, I know my predecessors did look at a range of potential options for partners. We were in, let’s call it a little financial distress there, with accumulated debts because of the sort-of failed mining enterprise at North T.

Ultimately, the markets are what they are. Shenghe offered an equity-level investment. They had an interest in the Tanzanian asset potential, because they have another asset nearby. So there’s a multitude of components there, but no project-level interest or obligations in Canada or any production off-takes.

This is kind-of a necessity. Certainly, it enables us to move forward, expunge the financial past – the losses of the past – and move forward with our new strategy to advance Tardiff. We’re doing that now, as stated in our 2024 strategic plan.

To be honest, it took quite a few months to develop a strategic plan, to understand the roots of the value at Tardiff and to develop a plan around that. Effectively, let’s revert back to a standard, conventional approach to assessing what the economic potential of the mineral deposits are, very much akin to the diamond mines and how they went through a process to understand what the potential scale of an operation could be, how it impacts and relates to stakeholders in the environment, and undergo an engagement plan with stakeholders.

There’s now a new base setting for the company and the asset in question in terms of a conventional approach to advancing Tardiff. We’re able to actually start talking about tangible things and before, I guess, earlier in the year, we were still dealing with the aftermath of North T mining. That’s where we are, that equity-level investment enabled us to actually move forward.

You talk about a change in approach. We’re used to Nechalacho being talked about as a small-scale, demonstration mine. The North T section you’re talking about is small fry compared to the Tardiff deposit that the company has always talked about as being world-class in terms of the potential that lies there. Why is the approach you’re talking about now a better approach than the one being taken before?

I like taking an approach where you can take your time – measure what you’re planning to do, what the outcomes can be – so you’re less exposed to exogenous outside factors, commodity price inflation. You can understand your asset and have more time to understand your asset.

When you’re dealing with something of scale – and we have more than 100 million tonnes in the Tardiff resource – you need to deploy a fair bit of capital for that. You need to measure quite acutely the work that you need to do, what it’s going to cost, and how to advance something in a very practical way. It’s certainly a different approach to what has been done before.

North T has very handsome grades but the size and potential duration of North T is a different scenario to Tardiff. Tardiff, to me, represents one of the best undeveloped rare earth stories in North America to feed a North American supply chain. That’s the exciting component to that. Domiciling rare earth production capacity in North America is, I think, a differential component for Tardiff and its value to the Northwest Territories.

We’ve heard before from Vital Metals the storyline of supporting a North American supply chain. But then a Chinese company invested in the company and took the production that had already come out of Nechalacho. That, clearly, to a lot of people in the Northwest Territories, undermined that narrative of national security and a North American supply chain. Do you regret the way that rolled out over the past few months and the way it was interpreted in the NWT?

That’s a good question. We’re still very much in line with the North Americans supply chain component. The material [sold to Shenghe]? The scale of what was done was effectively a bulk sample. So the bulk sample material is not very large and it has to go somewhere.

The other component there is we are now in a pretty different position over the last few years where we have government-supported separation plants being built, particularly in the US with three plants there in California and in Texas, where we can be fully vertically integrated. There are some other Canadian government-supported production plans, from various operators, to look at new ways to process rare earths and rare earth minerals.

We’re now in a stronger position than we’ve ever been to domicile rare earth production in a fully integrated manner. I think the language around the North American supply chain is actually even stronger because of the actual production capacity being brought on at the separation plants, particularly in the US. I think that’s the real advantage that the Northwest Territories has. Particularly if there’s available infrastructure coming out of Hay River, we can naturally supply material into other parts of North America. I think that works particularly well for our project, to feed that North American market.

To be clear, then, as far as you’re concerned, anything mined in future at Nechalacho goes into that North American supply chain?

I think that’s wholly and utterly the most practical means to feed into. That’s where our back-end refining capacity is growing and that’s where our supply is, and that’s probably the most economic mechanism by which to run things. That makes the most sense.

When we look at global back-end separation plant capacity growth, the main problem over the next few decades will be supply from front-end mining operations. That’s where I see this opportunity there, to feed into a long-term supply chain in North America. That’s a differential component for us.

Over the past few months, we didn’t really hear much, if anything from Vital Metals while this Chinese investment was being announced. There were some other changes at the same time. That clearly unnerved a few people up here. There are some Indigenous leaders who feel as though they weren’t consulted, there are former employees who’ve talked about betrayal. Do you think you’ve got some trust to restore?

I think we have a stage to take as a team. Over the last few months, we’ve added new people to the management team. Basically, all senior managers are in-country now.

It has taken us longer than we would like over the last few months to look into the details for Tardiff and develop a plan around that, and get ready to communicate that message to our stakeholders. But we certainly wanted to take more time than less to be able to talk around a strategy that we’ve actually created with what we believe is a real base, with a real plan. It did take a while to do that. There was just a bit more time required to deal with the past than we necessarily would have liked.

What conversations have you now had with the Indigenous leaders who have an interest in Nechalacho and the land that it’s on?

Yeah, we’re certainly looking to reach out to leaders. We’ve made a few introductions to various representatives of the Indigenous groups, and we’re looking to continue that engagement and increase that engagement over the very near term.

You’ve talked about the new and a different approach. In practical terms, what are we going to see over the next year, over the next two years at Nechalacho? How does this plan roll out?

We’ve basically rebased the company into an exploration development-stage company, and really trying to put dollars in the ground for exploration and exploration development in the Northwest Territories. That is particularly looking to assess Tardiff. We see some opportunities there to extend high-grade zones for Tardiff at the surface. And that for us adds two components: a value component to the material, but also a de-risking component to look at trade-offs on economics.

We’ll look to get out there and undertake more drilling over time but also, during that process, complete various environmental, economic and other trade-off studies to deliver an initial scoping study on Tardiff by the end of the year. This is kind-of an introduction into disseminating a publicly distributed economic study later in the year.

Thereafter, we’d look to advance that in terms of understanding the asset more. I expect that drilling will continue because there’s a fair bit of potential that still hasn’t been fully targeted for our geological team. We’d like to engage with our stakeholders through that process to let them know what we’re doing, and then put out a plan in terms of what the project could look like in the future, and then start to assess what the feelings are around it, but also engage in terms of environmental baseline work.

So a few components: re-engage investment in drilling and drilling exploration on a seasonal basis, undertake an economic study at the end of the year, engage with our stakeholders certainly more to translate what the actual longer-term conservative plan is to engage in the project, to look at the potential to move this into production over the longer term.

That’s kind-of the plan – very conventional, very consistent with the larger operations that are in production currently. There’s no need to run into something very fast. We need to take a measured approach to what we’re doing so we can undertake every step consciously and tick the boxes that we need to tick. No surprises is where we want to be.

When you talk about a measured approach, what does that mean in terms of timeframe, when you set expectations for your average Northwest Territories resident about when this might be a mine?

This would be several years from now, for sure. Mining, as we’ve seen as the recent past, is not easy. There are lots of factors that come into play that are also outside the mining industry in terms of commodity price, price inflation.

Our aim is to first, in a measured approach, determine what we have, how best to mine it, process it and where to process it, and how the trade-offs work in terms of where those components are examined within the Territories. This may take a bit of time and we want to be able to do it well.

Doing it well is a measure to de-risk the outcome, and de-risking the outcome is the main thing – control what you can control in a mining sense. This is a multi-year phase, we’re several years out and we have to undertake each step in a measured way, particularly on all the facets: community engagement, project economics and characterization, environmental concurrent work. All of these components are consistent with conservative, measured approaches for moving projects through the development stages into production.