Shares in rare earths exploration company Lynas Corporation (ASX:LYC) surged over 7% on Wednesday on the news it had arranged a deal worth an initial $20.7 million deal with Forge Resources (ASX:FGE).
Lynas said it had agreed to sublease certain rare metals and phosphate deposits at Mount Weld in Western Australia to fellow exploration company Forge, in exchange for $20.7 million in cash.
Forge will also give Lynas options to acquire 7 million Forge shares, at the average issue price from Forge's $31 million capital raising scheduled for May.
Lynas will also be entitled to ongoing royalty payments equal to 1% of gross revenue after production commences. This will increase to 10% if Lynas does not exercise a right to receive delivery of Rare Earths by-products produced in the subleased areas.
The deal still requires shareholder, regulatory and independent expert approval, Forge said.
As well as the sub-lease agreement, Lynas intends to mine rare earths ore from Mount Weld, have it concentrated and shipped to its advanced materials plant in Malaysia.
Forge Resoources was founded in 2009, and is concentrating on resources and energy materials exploration.
LYC shares climbed 7.41% in Wednesday's trading to $1.885. FGE shares meanwhile grew 2.49% to $6.180.