Lynas Rare Earths has agreed to buy Meteoric Resources in a deal that values the Australia-listed explorer at around $672 million and gives Lynas a foothold in Brazil's growing rare-earths industry.
The deal comes amid a race to rebuild rare-earths production outside China, which dominates processing of the critical minerals used in electric vehicles and consumer electronics as well as jet fighters and missile systems.
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That effort has led Western companies to pour money into Brazil, which has the world's second-largest reserves of rare earths, after China. The country holds an estimated 11 million metric tons of rare earths, roughly 15% of global reserves, according to the U.S. Geological Survey.
Meteoric owns the Caldeira rare-earths project in the southwest region of Brazil's Minas Gerais state. In a joint statement, Lynas and Meteoric said the project is "the world's largest known ionic clay rare-earth mineral resource outside China" reported in accordance with the JORC code, the Australasian professional code for reporting exploration results, mineral resources and ore reserves.
Many of Brazil's rare-earth projects seek to tap reserves found in clay, which are typically expected to be cheaper and easier to process than those found in the hard-rock deposits common in Australia and elsewhere.
Today, Lynas runs a hard-rock mine in Australia, and processing operations that span Australia and Malaysia.
"Expanding our operations into a new country will help Lynas maintain its leading position in the global rare-earths supply chain and meet increased customer demand for rare-earth materials," said Lynas Chair John Humphrey. He said Brazil is a well-established and supportive mining jurisdiction.
The companies said that the deal "demonstrates the importance of Brazil's rare-earth industry to domestic and global rare-earth supply chains."
The country's ambitions extend beyond digging up ore. Government officials there want companies to build processing plants that can separate rare earths, produce metals and eventually manufacture magnets.
Lynas will study the potential for additional downstream processing in Brazil, in line with the country's economic and sustainability goals, it said in the joint statement.
Lynas, which has a market value of roughly $9 billion, is the biggest producer of separated rare earths outside China. It is the only non-Chinese commercial producer of so-called heavy rare earths, such as dysprosium and terbium, which are added to magnets to help them run more efficiently at higher temperatures.
The company, which is backed by Australia's richest person, Gina Rinehart, has been expanding its business to capitalize on rising demand for outside-China supply.
In March, it announced a preliminary $96 million supply deal with the Pentagon. Lynas at the time said its agreement with the Defense Department would help "support U.S. national security and supply-chain resilience objectives."
Lynas has been producing so-called light rare earths—including neodymium and praseodymium—in Malaysia for more than 13 years. Last year, it produced the first dysprosium and terbium available commercially outside China in decades. Earlier this year, it began producing samarium oxide, a rare earth in high military demand that had also been refined almost exclusively in China.
The acquisition of Meteoric adds to and diversifies its resources. Meteoric Executive Chair Andrew Tunks said Caldeira is "an orebody that is high-grade, highly recoverable, low in capital intensity, low in operating cost, and highly scalable."
Under the all-share deal, Meteoric shareholders will get 0.0207 Lynas share for each Meteoric share they hold, the companies said in the statement Thursday. The deal represents a 68% premium to Meteoric's last close.
Shares in Lynas were down by 6.6% early afternoon in Sydney, while shares in Meteoric were more than 47% higher.
Lynas said the all-share structure of the deal ensures the company will be well-placed to fund Caldeira and other growth projects. It expects the Caldeira project to cost more than $500 million to develop.
The Meteoric board unanimously recommended shareholders vote in favor of the takeover. Its directors, who together hold 2.6% of the company's stock, intend to vote for the deal, as does Meteoric's largest shareholder, investor Tolga Kumova, who has a roughly 6.7% stake, the companies said.
They said Meteoric shareholders will own roughly 5.9% of Lynas once the deal is completed.
Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com
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