Cadence Mineral Regulatory News (KDNC)

28 August 2015

Rare Earth Minerals Plc.

("Rare Earth Minerals", "REM" or "the Company")

Sonora Lithium Project Signs Lithium Supply Contract

Rare Earth Minerals and (LSE AIM: REM) and Bacanora Minerals Ltd. (TSX-V: BCN and LSE AIM: BCN), the joint venture partners of the Sonora Lithium Project1 in Northern Mexico (Bacanora and REM are collectively referred to as the "Sonora Lithium Project Partners"), have finalised a conditional long-term lithium hydroxide supply agreement with Tesla Motors, Inc. ("Tesla"), the maker of electric vehicles and energy storage solutions ("The Supply Agreement").

The Sonora Lithium Project Partners are working to develop a mineral-rich, lithium-bearing clay deposit into a planned low-cost sustainable and environmentally conscious mining operation. It is estimated that the mine and processing facility will have an initial production capacity of approximately 35,000 tonnes of lithium compounds, with scaling potential of up to 50,000 tonnes per annum. To achieve this, the Sonora Lithium Project Partners will need to raise finances to design and construct a mine and processing facility. It is currently anticipated that lithium hydroxide and lithium carbonate would be among the materials produced by the mine. Lithium hydroxide is a key feedstock material in the manufacture of certain kinds of lithium-ion battery cells.

On the condition that, over the next two years, the Sonora Lithium Project reaches certain performance milestones and successfully passes product specification qualifications, Tesla - or its authorised purchasers - will buy lithium hydroxide to feed the manufacturing of batteries at Tesla's Gigafactory in Nevada. One of the key milestones will be the confirmation that the Sonora Lithium Project will be able to supply lithium hydroxide in accordance with volumes and timeframes to be established by Tesla. The Supply Agreement has an initial five year term commencing from the date of the first order by Tesla, with an option to extend for a further five years.

During the initial five years, and subject to certain terms and conditions in relation to project execution, product quality, pricing and timing of delivery, Tesla will purchase agreed minimum tonnages, with estimated forecasted maximum deliveries to be determined following delivery of future production orders from Tesla. Tesla will purchase minimum quantities in accordance with an agreed upon pricing formula, below current market prices, with actual prices and volumes that can only be finalized during the development phase in due course. The forecast tonnages and delivery dates are structured to coincide with Tesla's forecasted Gigafactory production. This agreement will form a portion of Tesla's anticipated lithium-based feedstock needs; the remainder of which is expected to come from other lithium peers.

To meet both Tesla's minimum and forecasted tonnages and timelines and any other potential market demands, the Sonora Lithium Project Partners will need to design and construct a suitable mining and processing operation. This will require the Sonora Lithium Project Partners to secure significant financing through debt and/or equity. Tesla has the right to participate in any such financing or other capital transactions. Bacanora and REM will be pursuing next steps to raise finances in order to achieve this goal. There can be no assurance that the conditions to supply product under the supply agreement will be met or that the agreement will prove to be economic.

Development work to be used for the pre-feasibility study ("PFS") for the Sonora Lithium Project is currently being carried out. The PFS alongside additional studies will establish a revised estimate of capital and operating costs, taking into account the new product mix that will be required to service Tesla's anticipated demands plus those of any additional potential customers.

Details of REM's ownership of the Sonora Lithium Project:

REM owns a direct interest of 16.4% in Bacanora, and through that holds an indirect interest in the La Ventana asset of 16.4%. In addition to the 16.4% in Bacanora, when aggregated with REM's 30% direct interest in Megalit S.A de CV (the company holding the Buenavista, Megalit and San Gabriel concessions) and the 30% direct interest in Mexalit S.A de CV (the company holding El Sauz, El Sauz 1, El Sauz 2, Fleur and Fleur 1 concessions), results in a total economic interest in each of these companies of Megalit S.A. de CV and Mexalit S.A. de CV of 41.47%.

The Company's Executive Chairman, David Lenigas, commented:

"The selection of the Sonora Lithium Project as one of the lithium suppliers to the Tesla Gigafactory is a landmark transaction that will support the development and commercialisation of the Sonora Lithium Project. This key supply agreement with Tesla will hopefully be the first of a number of potential lithium off-take partners for the Sonora Lithium Project as we move towards the next stages of project development."

Qualified Person:

Kiran Morzaria B.Eng. (ACSM), MBA, has reviewed and approved the information contained in this announcement. Kiran holds a Bachelor of Engineering (Industrial Geology) from the Camborne School of Mines and an MBA (Finance) from CASS Business School.

Ends

For further information please contact: 

Rare Earth Minerals plc +44 (0) 207 440 0647

David Lenigas

Kiran Morzaria

WH Ireland Limited (NOMAD & Broker) +44 (0) 207 220 1666

James Joyce

Mark Leonard

Square1 Consulting

David Bick +44 (0) 207 929 5599

Mark Longson

Notes to Editors:

About Rare Earth Minerals Plc:

Rare Earth Minerals Plc is a London listed company (LSE AIM: REM) with significant interest in the Sonora Lithium Project in northern Mexico, and in the Yangibana Rare Earths Element Project in Western Australia and a new Rare Earths Element early stage exploration project in Greenland.

About the Sonora Lithium Project:

The Sonora Lithium Project, which consists of ten mining concession areas covering approximately 100 thousand hectares, is located in the northeast of Sonora State 105 miles from the USA border. Sonora Lithium Project, through drilling and exploration work to date, has established an NI 43-101 compliant Indicated Mineral Resource of 1.14 million tonnes LCE contained in 95 million tonnes of clay at a lithium grade of 2,200 parts per million and an Inferred Mineral Resource of 6.3 million tonnes LCE2 contained in 500 million tonnes of clay at a lithium grade of 2,300 parts per million. The operational base of the Sonora Lithium Project is in Hermosillo in northern Mexico where it has built and operates a lithium pilot processing plant.

1The Sonora Lithium Project is comprised of the following lithium properties: La Ventana lithium concession, which is 100 percent owned by Bacanora; El Sauz and Fleur concessions, which are held by Mexilit S.A. de C.V. ("Mexilit"); and the Megalit concession, which is held by Megalit S.A de C.V ("Megalit"). Mexilit and Megalit are owned 70 percent by Bacanora and 30 percent by REM.

2LCE = lithium carbonate (Li2CO3) equivalent; determined by multiplying Li value in percent by 5.324 to get an equivalent Li2CO3value in percent. Use of LCE is to provide data comparable with industry reports and assumes complete conversion of lithium in clays with no recovery or process losses.