Aclara Announces up to US$80M Strategic Investment BY Cap IN Its Chilean Subsidiary and an Option FOR an Equity Investment of up to 19.9%
ACLARA ANNOUNCES UP TO US$80M STRATEGIC INVESTMENT BY CAP IN ITS
CHILEAN SUBSIDIARY AND AN OPTION FOR AN EQUITY INVESTMENT OF UP TO
19.9%
TORONTO, ON, March 13, 2024 – Aclara Resources Inc. (“Aclara” or the “Company”) (TSX: ARA) is pleased
to announce that it has entered into an investment agreement with CAP S.A. (“CAP”) , a publicly listed
company on the Chilean Stock Exchange, pursuant to which, amongst other things, CAP will make a US$29
million strategic investment in REE Uno SpA (“REE Uno”), Aclara´s Chilean subsidiary, which owns the Penco
Module (the “Investment Agreement”). Under the terms of the Investment Agreement, CAP also has a n
option to invest an additional US$50 million in REE Uno and a three-year option to subscribe a 19.9% interest
in Aclara, and the parties have also agreed to form a joint venture company to develop metals and alloys
for the rare earths permanent magnet industry (the “Transaction”). The Transaction reflects the parties’
shared view that the future will require innovative mineral extraction methods, a strong focus on
environmental and social sustainability, and the understanding that our planet requires cleanly produced
rare earths metals in its urgent fight against climate change.
CAP S.A., a company with more than 77 years of history and listed in the Chilean Stock Exchange since
1987, is the parent company of the CAP Group, a Chilean conglomerate operating in various industries
including iron ore mining (CMP), with mines and industrial operations in the north of the country, as well as
steelmaking operations in Concepcion (Huachipato), very close to the Penco Module. CAP is one of the
leading high-grade iron ore producers in the world with four operating mines in Chile. In addition , CAP has
several steel product manufacturing plants in Chile, Peru and Argentina . It operates five ports, a seawater
desalination plant and has vast industrial infrastructure in the Biobio region. Huachipato has been operating
since 1950, and together with SMS Group is developing a project for sustainable steel using green hydrogen
for the direct reduction of iron. CAP has a strong connection with the people of the Biob ío region, where it
has been a major employer for several decades, contributing directly to the development of the south of
Chile.
Transaction Summary
• A US$29. 1 million capital contribution by CAP into REE Uno, Aclara´s Chilean subsidiary wh ich
owns the Penco Module and all of Aclara´s mining concessions in Chile, in exchange for a 20%
equity participation in REE Uno. Payments will be made in three tranches with the initial tranche of
US$9.7 million to be made upon closing of the Transaction, the second payment of US$12.5 million
in January 2025 and the remaining balance of US$ 6.9 million to be made in January 2026. This
initial investment represents a pre-money valuation of REE Uno of US$116.5 million.
• An option to invest an additional US$50 million in REE Uno for an additional 20% equity interest in
REE Uno once the requisite environmental permit is secured for the Penco Module. Upon
completion, this additional investment would allow CAP to attain a 40% equity interest in REE Uno.
This second investment represents a pre-money valuation of REE Uno of US$150 million.
• A three-year option to invest up to 19.9% in Aclara by participating in any private placement or
public offering of shares that Aclara may make during the next 36 months, including a residual top-
up right to maintain pro rata voting rights . Any subscription to such private placement or public
offering will be made on the same terms offered by Aclara to other investors . CAP will have the
right to nominate one board member upon attaining and for so long as its equity interest in Aclara
amount to at least 15% of the issued and outstanding common shares of Aclara. In addition, CAP
holds a one -time demand subscription right to invest up to an aggregate of 19.9% in Aclara,
exercisable upon the satisfaction of certain conditions and continuing for a maximum period of 18
months counted from the end of the initial 3-year option.
• The formation of a 50/50 joint venture to develop metals and alloys for the rare earths permanent
magnet industry. CAP will invest US$3.0 million in exchange for its 50% of the shares of the newly
established joint venture company. Aclara will own the other 50% of the shares.
Closing of the Transaction is subject to the performance of certain customary closing conditions, which
the parties expect to complete within the next 30 days.
Aclara Corporate Structure after the Completion of the Transaction with CAP
Transaction Benefits to Aclara
The US$29.1 million initial capital injection from CAP into REE Uno will support the ongoing development
of the Penco Module throughout its permitting , community relations , and feasibility study phases. This
allocation will allow Aclara Resources to reallocate its current cash reserves towards advancing its Carina
Module project in Brazil.
The option for an additional US$50 million investment post-receipt of the environmental permit is intended
to cover a significant part of the equity portion associated with the construction of the Penco Module. This
provision mitigates financing risks linked to the module's construction for Aclara.
Drawing upon CAP's extensive experience in environmental permitting from multiple mining projects in
Chile, Aclara anticipates strengthened support for the forthcoming Penco Module Environmental Impact
Assessment (“EIA”) permit application. CAP's involvement includes a thorough review and constructive
contributions to the application preparation, as well as accompanying Aclara throughout the review and
approval process by Chilean environmental agencies.
Furthermore, the establishment of a metals and alloys company represents the initial phase of Aclara's
strategic vision to vertically integrate its rare earths concentrate production towards the manufacturing of
permanent magnets. This move aims to offer a geopolitically independent alternative supply of permanent
magnets to the market . The new company will harness CAP's substantial expertise in metal refining and
ferro-alloyed special steels , synergizing with Aclara's thorough understanding of the rare ear ths and
permanent magnet industry.
Valuation
The Transaction reflects the valuation of Aclara at the time of the Company’s initial public offering (the
“IPO”) and is indicative of the belief both parties have in establishing Aclara as a leading producer of clean
rare earths.
Upon closing, REE Uno will be valued at US$116.5 million on a pre-money valuation. In addition, Aclara will
own 50% of the newly established joint venture company, which has a valuation of US$3.0 million. In total,
the Transaction represents a value for Aclara of US$119.5 million, which reflects Aclara’s pre-money
valuation at the IPO.
It's noteworthy that Aclara's Brazilian subsidiary, Aclara Mineracao, which oversees the Carina Module and
all mining concessions in Brazil, is not part of this transaction nor included in the valuation mentioned
above. This aspect adds further value to Aclara Resources and its shareholders.
Eduardo Hochschild, Chairman of Aclara, quoted:
“We are thrilled to partner with CAP to develop our Penco Module and strategy in Chile, as well as joining
efforts to start developing Aclara’s capabilities in the vertical integration of the rare earths and permanent
magnets industry. Aclara now combines its innovative attributes with the proven execution capabilities of two
major players in the Latin-American natural resources space, Hochschild Mining and CAP .
CAP is a company already committed to improving our planet via innovative and sustainable practices, such
as its commitment to produce sustainable steel leveraging Chile ’s green hydrogen potential. Also, its
longstanding relationship with local communities, as well as the Chilean corporate and governmental network,
provides an added support to Aclara’s initiatives in-country.
CAP brings significant metallurgical knowledge and expertise to produce metals and alloys, specifically
through Huachipato and its leading special steels capability. CAP has been producing high performance alloys
for decades and can apply this experience to the emerging rare earths sector. The creation of a company to
fund R&D efforts towards producing higher value products is a necessary step and both parties will decidedly
support its development.
Finally, the financial commitment that CAP is showing by investing in Aclara at its different levels reflects the
shared view by both companies of the promising future that rare earths have. We both agree that rare earths
extracted by methods that prioritize the protection of the environment will own a special niche of the market,
one that will be highly priced by companies with outstanding corporate government. We welcome CAP to
Aclara and look forward to making an impact together in Penco, in Chile and in our planet.”
Juan Enrique Rassmuss, Chairman of CAP S.A. commented:
“This alliance with Aclara represents a historic milestone for Grupo CAP , marking the first step in our strategy
to become leaders in the production of essential materials for decarbonization and energy transition. We hope
to contribute our knowledge in mining and metallurgy, to generate value-added products based on new alloys
and products.
The partnership with an innovative company like Aclara, in sustainable projects and with enormous growth
potential, opens a new stage for us in which we have great expectations. We will contribute resources and our
experience to accelerate the impact of Aclara as a significant player in the fight against climate change and
the care of the environment”.
About CAP
CAP Group has mining and industrial operations in Chile, Peru and Argentina, and has global presence
through its diversity of products. In commercial terms, it sells to countries located in America, Asia and
Oceania. In addition, it has operations in the port industry, water desalination services and energy
transmission. CAP Group is the main producer of iron ore and pellets on the American Pacific coast; the
largest steel producer and the most important steel processor in Chile. Additionally, it is the third port
operator in the country. The purpose of the company is "We generate wellbeing and shared progress,
transforming resources with Chile and the world".
About Aclara
Aclara Resources Inc. (TSX: ARA) is a development -stage company that focuses on heavy rare earth
mineral resources hosted in Ion-Adsorption Clay deposits. The Company currently has two projects under
development: the Penco Module in the Bio-Bio Region of Chile, and the Carina Project in the State of Goiás,
Brazil.
Aclara's rare earth extraction process offers several environmentally attractive features. It does not involve
blasting, crushing, or milling, and therefore does not generate tailings, thus eliminating the need for a
tailings storage facility. The extraction process developed by Aclara minimizes water consumption through
high levels of water recirculation m ade possible by the inclusion of a water treatment facility within its
patented process design. The ionic clay feedstock is amenable to leaching with a common fertilizer,
ammonium sulfate. Further, harmful levels of radionuclides, typical of hard rock rare earth deposits, are not
concentrated within the Aclara flowsheet.
Simultaneously, alongside the development of the Carina and Penco projects, the Company intends to
identify and evaluate further opportunities to increase future production of heavy rare earths. This will
involve greenfield exploration programs and the dev elopment of additional projects within the Company's
concessions in Brazil, Chile, and Peru.
Forward-Looking Statements
This press release contains “forward-looking information” within the meaning of applicable securities
legislation, which reflects the Company’s current expectations regarding future events, including statements
with regard to: the Company’s strategic investments and partnerships, the current and future valuation of the
Company and its subsidiary, the economic effect of the Investment Agreement, the closing of the strategic
investment and other transactions contemplated thereby, and the Company’s expectations as to the
partnership and future financings by investors and the achievement of certain environmental and permitting
milestones, and other transactions contemplated thereby. Forward-looking information is based on a number
of assumptions and is subject to a number of risks and uncertainties, many of which are beyond the Company’s
control. Such risks and uncertainties include, but are not limited to risks related to operating in a foreign
jurisdiction, including political and economic problems in Chile and Brazil; risks related to changes to mining
laws and regulations and the termination or non -renewal of mining rights by governmental authorities; risks
related to failure to comply with the law or obtain necessary permits and licenses or renew them; compliance
with environmental regulations can be costly; actual production, capital and operating costs may be different
than those anticipated; the Company may be not able to successfully complete the development, construction
and start-up of mines and new development projects; risks related to mining operations; and dependence on
the Penco Module and/or the Carina Module. Aclara cautions that the foregoing list of factors is not
exhaustive. For a detailed discussion of the foregoi ng factors, among others, please refer to the risk factors
discussed under “Risk Factors” in the Company’s annual information form dated as of March 28, 2023, filed on
the Company’s SEDAR+ profile. Actual results and timing could differ materially from those projected herein.
Unless otherwise noted or the context otherwise indicates, the forward-looking information contained in this
press release is provided as of the date of this press release and the Company does not undertake any
obligation to update such forward-looking information, whether as a result of new information, future events
or otherwise, except as expressly required under applicable securities laws.
For further information, please contact:
Ramon Barua
Chief Executive Officer