It’s a pity because the deal represents the unravelling of what was a confusing partnership deal between Ashton and Lynas and gives the company a clear run at potentially what could be a world-class project. Mt Weld has the potential to supply 10% of world rare earths demand (currently worth US$650 million per annum) for at least 30 years.

Last year Lynas struck a deal with Ashton which was to see it spend $3.2 million on a full feasibility study to earn 35% of Mt Weld. From here the partners were to make what they deemed “a decision to develop”. All things being equal, Lynas had the right to go to 60% by purchasing 25% off Ashton at a pre-agreed discount to the project’s net present value. Ashton then had the right sit on the side as a minority partner, vend the project balance to Lynas or vend the balance to a third party.

The deal was hardly perfect. Apart from potentially having an unfriendly minority party on the register, there was a question mark over the speed at which Ashton would pursue its financial obligations to a non-core project assuming the bankable feasibility study said the project was a goer.

Now, under the terms of the revised agreement, Lynas will acquire a 51% interest in the Mt Weld project at a cost of $3.2 million, in addition to completing the current bankable feasibility study.

On December 1, Lynas may acquire Ashton’s remaining 49% interest by making a payment of $7.5 million and issuing shares equivalent to 15% of Lynas’ issued capital to date. This is subject to shareholder approval.

Alternatively, Lynas may acquire on December 1, 2000 an additional 9% interest in the project at a cost of $2.2 million in cash and shares. In layman’s terms this means Lynas, at worst case will have 60% of Mt Weld but more likely 100% by the end of the year.

According to Lynas’ managing director, Les Emery, the deal was critical for equity markets to support the project. Complex ownership structures make it difficult to raise funds.

The key to taking control of Mt Weld will be the exercising of 46 million options on or before November 15 at 20c to raise $9.2 million. The company is currently seeking an underwriter for these options though it should be noted that Anaconda Nickel will underwrite the first $2 million worth. This side deal was made as an adjunct to Anaconda entering into an farm-in arrangement at Mt Weld to develop the large tantalum resource (105 million pounds of Ta205) that sits near the rare earths deposit.

Anaconda will earn a 49% stake in the tantalum interests by spending $500,000 on a scoping study. It can lift that equity by 31% by spending a further $1 million on a pre-feasibility study. There is also a proviso to earn another 10% by completing a definitive feasibility study. Likewise, Lynas can retain a contributing participating interest of 20% by reimbursing 20% of Anaconda’s definitive feasibility study costs. At the very least it will hold 10%.

If Lynas does raise its money, its share structure will take on a vastly new look. In round terms the company will have 117 million shares on issue, 15% which will be owned by Ashton and 8.5% which will be owned by Anaconda.

Emery says he is not worried about the subject of control given that the company has large blocks of supportive private shareholders. He says the focus has always been on the project upside.

“We’ve always told share holders that we would pursue the light rare earths potential at Mt Weld,” Emery said. “Lynas has a real opportunity in front of it.

“As far as the tantalum is concerned, we thought it better to have 20% of a banked project with enormous value rather than 100% of a resource in the ground that we didn’t have the funds for.”

Lynas currently has cash reserves of $5.5 million and is predicting it will receive more than $12 million from its 35% stake in the Paraburdoo gold project (with management fee included) in WA.

The company is also looking further ahead and is keen to buy a new gold project to satisfy its soon to be hungry gold plant. Lynas, like many other companies may also possibly spin-off some of non-core properties into a small exploration float.