Junior ASX mining stock VHM Ltd (ASX: VHM) is rocketing higher today following a long-term supply deal with S&P/ASX 200 Index (ASX: XJO) rare earths miner Iluka Resources Ltd (ASX: ILU).
Shares in the small-cap ASX mining stock closed yesterday trading for 23 cents. In earlier trade, shares jumped to 40.5 cents each, up 76.1%. After likely profit-taking, at the time of writing, VHM shares are trading at 37.5 cents apiece, up 63%.
Iluka shares aren't joining in the rally, however. Shares in the $3 billion ASX 200 rare earths miner are down 2.1% at $6.89 each.
Here's what's happening.
Iluka inks deal with junior ASX mining stock
This morning, Iluka announced that it has entered into an agreement with VHM for the long-term supply of all planned rare earth concentrate production from the Goschen deposit.
The junior ASX mining stock is currently developing the Goschen project, located in Victoria. As part of the deal, Iluka will provide a $40 million secured convertible note to support VHM's development of Goschen.
Under the agreement, which spans 18 years, the small-cap mining stock will supply Iluka with 146,000 tonnes of rare earths concentrate, containing 86,000 tonnes of rare earth oxides.
Iluka said the roughly 8,320 tonnes per year of rare earth concentrate (or around 4,900 tonnes per year of total rare earth oxides) will provide complementary feedstock for its Eneabba rare earths refinery.
Eneabba – set to be Australia's first fully integrated rare earths refinery – will produce separated light and heavy rare earth oxides. The project is more than 50% complete, with Iluka expecting commissioning to occur in mid-2027.
What did Iluka Resources and VHM management say?
Commenting on the rare earths deal with the junior ASX mining stock, Iluka Resources managing director Tom O'Leary said, "Iluka's agreement with VHM marks another step in the development of our rare earths business and Australia's rare earths industry."
O'Leary added:
In VHM, we have secured a feedstock partner in western Victoria, a province notable for large deposits and attractive assemblage of heavy rare earths…
VHM has environmental approvals for Goschen in place and has received letters of funding interest from both the Australian and US governments. Our agreement reflects Iluka's focus on securing suitable, advanced third-party feedstocks for Eneabba, in addition to progressing those in our own portfolio in parallel.
VHM's Andrew King called the partnership with Iluka that's sending the junior ASX mining stock surging today "a transformational milestone for VHM" which "materially advances the development of the Goschen Project".
The post Guess which ASX mining stock is jumping 76% today on a rare earths deal with Iluka Resources appeared first on The Motley Fool Australia.
Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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