August 10, 2010 / 6:38 PM / in 9 years

UPDATE 1-Great Western Minerals shrs up on rare earth deal

* Great Western shrs up 9.3 pct at C$0.235

* To buy 100 pct of rare earth output at S. African mine

TORONTO, Aug 10 (Reuters) - Shares in Great Western Minerals Group GWG.V rose more than 9 percent on Tuesday after the junior Canadian minerals explorer said it has signed an agreement to purchase 100 percent of the rare earth metals production at a mine in South Africa.

The Steenkampslraal mine, a former thorium mine owned by Rare Earth Extraction Co, contains 30,000 tonnes of total rare earth oxide at a concentration of 17 percent, Great Western said.

Rare earth metals are used in hundreds of technologies, from cellphones to batteries for hybrid cars.

The 10-year agreement is conditional on Great Western completing a feasibility study by end of year, and providing financing. Financing may be a loan, an equity investment or any combination the two companies agree on, Great Western said.

“The agreement propels our company toward becoming the first fully integrated rare earths producer outside China,” Great Western Chief Executive Jim Engdahl said in a press release.

China currently produces about 90 percent of the world’s rare earth metals. Last month, Chinese media reported the government planned to fix monthly prices and impose export controls, prompting long-term supply concerns.

Great Western shares were up 9.3 percent at C$0.235 in afternoon trade on the TSX Venture Exchange after peaking at C$0.24 soon after the deal was announced.

$1=$1.03 Canadian Reporting by Julie Gordon; editing by Peter Galloway

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