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Polymetal closes deal for 9.1% stake in Russia's Tomtor rare earths project

Russian precious metals group Polymetal International PLC closed a deal for a 9.1% interest in the owner of one of Russia's largest known deposits of rare earth metals, Tomtor, Interfax reported April 8, with Polymetal providing confirmation to S&P Global Market Intelligence.

The US$20 million investment from Russia's second-largest gold producer will fund a pre-feasibility study and initial JORC-compliant ore reserve and mineral resource estimate for the remote site in northwestern Yakutia.

The rare earths industry has been significantly disrupted in recent months due to the coronavirus pandemic that has closed Chinese facilities, which dominate the market, Roskill's manager of battery and electric vehicle materials, David Merriman, told Market Intelligence on April 9.

Russia accounted for only around 2% of global output of rare earth metals in 2018, while China dominates the vast majority of supply.

Polymetal will consider taking further steps with the Tomtor project once the initial JORC estimate is complete, CEO Vitaly Nesis said in March.

Tomtor's owner, ThreeArc Mining Ltd., was established in 2013 by ICT Group, which is controlled by Polymetal's top shareholder, Alexander Nesis, Vitaly's brother.

Developing Tomtor is the only way to sharply increase Russia's extraction of rare earths and production of collective concentrates, the Ministry of Industry and Trade told Market Intelligence in June 2019, also highlighting Zashikhinskoye in southeastern Siberia as among "several large-scale projects."

"Russia is an alternative source of rare earths, though much of the production coming from Solikamsk Magnesium Works currently is already destined for Silmet in Estonia or India for further separation," Merriman said. "The Russian [rare earth element] projects under development are still years away from commissioning and are investigating supply of materials to the domestic market and China, so are unlikely to provide any short term assistance to the rest of the world."

Siemens AG is unable to complete ventilators due to a lack of permanent rare earth magnets needed to power their motors, brokerage SP Angel Corporate Finance LLP analyst John Meyer wrote in an April 9 note, citing an internal source.

"The west is now beginning to understand why it is critical to develop [rare earth element] processing and permanent magnet manufacturing closer to home," Meyer wrote.