China's CNMC agrees to work on Madagascar rare earth project

BEIJING (Reuters) - A unit of China Nonferrous Metal Mining Group (CNMC) said on Monday it had signed a non-binding memorandum with Singapore-listed ISR Capital that could see the Chinese firm work as a contractor on a rare earths project in Madagascar with rights to purchase products.

China Nonferrous Metal Industry’s Foreign Engineering and Construction Co Ltd said in a filing to the Shenzhen stock exchange it had priority rights to be the engineering, procurement and construction (EPC) contractor for ISR’s Tantalus rare earths project, the memorandum of understanding said.

No value was put on the agreement but the Chinese company will also have the right to purchase 3,000 tonnes of rare earth products from the project within three years of the start of production and the opportunity to make an equity investment in future, it added, without giving a timeframe for the launch.

A 2017 ISR filing to the Singapore Exchange said the Tantalus project, which is approximately 500 km (311 miles) north of Madagascan capital Antananarivo, contained 562,000 tonnes of rare earth oxides.

China is the world’s dominant producer of rare earths, a group of 17 chemical elements used in a wide range of consumer electronics, and is considering restricting supply in its long-running trade war with the United States.

Chinese companies have also made moves into rare earths overseas. Leshan Shenghe Rare Earth Co, a unit of Shenghe Resources, is the largest shareholder in Greenland Minerals and Energy, which is seeking to develop the Kvanefjeld rare earth project in Greenland, and has a minority stake in U.S. rare earths miner MP Materials.

State-owned CNMC, which has also been linked with Kvanefjeld, had in 2009 sought to acquire Lynas Corp, the only major rare earths producer outside China, but was unable to satisfy Australia’s foreign investment regulator.

Reporting by Tom Daly, editing by David Evans