Itafos finalises $10m Araxá divestment, secures 10% stake in St George Mining

Itafos Inc. has officially completed the sale of its Araxá project in Brazil to St George Mining Limited, a transaction designed to streamline its operations and strengthen its core phosphate business. Initially announced in August 2024, the deal allows Itafos to monetise a non-core asset while retaining an indirect economic stake in its future potential. This move aligns with the company’s long-term shareholder value strategy by securing both immediate financial gains and continued exposure to the rare-earth mining sector.

The agreement transfers 100% ownership of Itafos Araxá Mineração e Fertilizantes S.A. to St George Mining. In return, Itafos has received an upfront cash payment of USD$10 million, subject to withholding tax, as well as an equity stake in St George Mining, along with additional financial instruments linked to the asset’s performance. This structure enables Itafos to maintain a financial interest in the Araxá project while focusing on its phosphate and specialty fertiliser business.

What Are the Key Terms of the Transaction?

The completion of the Araxá sale provides Itafos with significant immediate financial benefits and future revenue streams. The company has received an upfront payment of USD$10 million while securing 266.78 million shares in St George Mining, representing a 10% ownership stake. Additionally, Itafos has acquired 86.11 million options to purchase further shares at an exercise price of AUD$0.04 per share, with a two-year expiration period. These options give Itafos the potential to increase its holdings if the value of St George Mining rises.

As part of the agreement, Itafos has also been granted 11.11 million performance rights, which are convertible into St George shares upon the confirmation of a JORC-compliant inferred resource of at least 25 million tonnes at 3.5% total rare earth oxide (TREO) within five years. This ensures that Itafos will benefit from any significant exploration success or resource upgrades.

The deal includes two additional deferred cash payments from St George Mining to Itafos, with USD$6 million due nine months after completion and a further USD$5 million payable 18 months after completion. These payments are secured against St George’s assets in Australia and Brazil, providing Itafos with financial protection and ensuring a structured revenue flow from the transaction.

What Is the Significance of the Araxá Project?

The Araxá project, located in Minas Gerais, Brazil, holds a substantial deposit of rare-earth elements and niobium, both of which are critical to the high-tech and clean energy industries. As the demand for rare-earth minerals continues to grow, particularly in sectors such as electric vehicles, renewable energy, and defence technologies, securing reliable sources of supply outside of China has become a strategic priority for many global industries.

St George Mining intends to develop Araxá into a vertically integrated mining and processing operation capable of producing both rare earth oxides and niobium oxide for international markets. Given the increasing importance of these materials in the global economy, the successful development of the project could elevate St George Mining’s position in the rare-earth sector. If the company meets its planned resource milestones, the project could emerge as a key supplier in the growing rare-earth mining sector.

How Does the Sale Align with Itafos’ Strategic Goals?

Itafos has been actively restructuring its portfolio to focus on its core phosphate and specialty fertiliser businesses. The sale of Araxá allows the company to strengthen its balance sheet while dedicating its resources to high-growth segments where it has a strong operational footprint. With key assets in North and South America, including its Conda facility in Idaho, Arraias in Brazil, Farim in Guinea-Bissau, and Santana in Pará, Brazil, Itafos is reinforcing its position as a leader in phosphate production and fertiliser solutions.

By divesting Araxá, Itafos ensures that its capital and expertise remain directed towards enhancing its phosphate operations. At the same time, its 10% stake in St George Mining provides an opportunity for future gains should the Araxá project prove successful. The agreement’s structured nature, including deferred cash payments and performance-based shares, mitigates financial risk while ensuring potential upside from the transaction.

What Are the Financial and Market Implications?

The completion of the transaction carries significant implications for both companies and the broader rare-earth mining industry. For Itafos, the immediate infusion of USD$10 million strengthens its financial position, providing flexibility to invest in core operations or pursue new growth opportunities. The retained equity stake in St George Mining ensures that Itafos remains financially connected to the Araxá project without assuming direct operational risks.

For St George Mining, the acquisition significantly expands its mineral portfolio and positions the company as a major player in the rare-earth mining sector. Given the increasing global demand for rare-earth elements, the successful development of the Araxá project could lead to substantial growth in the company’s market value. Investors will closely watch how St George navigates the exploration, permitting, and development phases to unlock the asset’s full potential.

The sale also highlights the broader trend of companies diversifying their mineral supply chains. As governments and industries seek to reduce reliance on Chinese rare-earth supplies, projects like Araxá are becoming increasingly valuable. The transaction reflects the ongoing shift toward securing long-term access to strategic minerals that are essential for future technologies.

What’s Next for Itafos and St George Mining?

With the completion of the Araxá sale, Itafos can now concentrate on optimising its phosphate operations and expanding its market reach in the fertiliser industry. The company’s ability to reinvest proceeds from the transaction into its core business will be a key factor in its long-term growth strategy. Investors and analysts will be monitoring Itafos’ next moves, particularly any further acquisitions or operational improvements within its phosphate portfolio.

For St George Mining, the focus shifts to developing the Araxá project and achieving the necessary milestones to unlock its full value. Securing financing for exploration and infrastructure development will be crucial, as will meeting the JORC-compliant resource targets that trigger additional performance-based share conversions for Itafos. If the company successfully executes its development plans, it could establish itself as a leading player in the rare-earth sector, capitalising on rising global demand for these critical minerals.