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| Rio Tinto |
Amargosa Project gains strategic flexibility with new royalty terms amid rising global bauxite demand
Brazilian Rare Earths (ASX:BRE) has revised its agreement with Rio Tinto Brazil (ASX:RIO) to fast-track the development of the Amargosa Project, a promising bauxite and rare earths tenement in Brazil. The updated terms replace a milestone payment with a production-based royalty, enhancing BRE’s financial flexibility and positioning the company to capitalize on surging global demand for bauxite and gallium.
Under the revised deal, the original US$40 million milestone payment has been substituted with a secured, life-of-mine royalty of US$1 per wet metric tonne (wmt) of bauxite sold. This move not only reduces upfront financial pressure but also aligns future payments with actual production volumes. Additionally, Rio Tinto's right of first refusal on Amargosa’s bauxite sales has been removed, giving BRE more freedom in market engagement. However, Rio Tinto retains an option to acquire 20% of any future nickel project on the tenements — now at a reduced price of US$25 million, down from the previous US$50 million.
To accelerate progress, Brazilian Rare Earths has commissioned RPM Global to deliver a resource estimate and Scoping Study. Following this, the company will carry out bauxite washing and upgrading testwork to evaluate potential improvements in bauxite and gallium product grades.
CEO Bernardo da Veiga highlighted the significance of the restructuring: "We are focused on advancing our world-class, high-grade rare earth province — and this successful restructuring of the Rio Tinto agreement enhances our strategic flexibility."
The shift comes at a pivotal moment in the global market. Bauxite prices have climbed steadily due to supply disruptions and increased demand, particularly from China, whose domestic production has dropped by 38% since 2017. Meanwhile, exports from Guinea have faced delays due to customs disputes.
CRU Group forecasts that global bauxite demand will grow by 35 million tonnes over the next five years, reaching 413 million tonnes by 2029, driven by new alumina refinery investments across Asia.
In this context, the Amargosa Project emerges as a strategic and stable supply source for the global seaborne bauxite market. BRE is also evaluating multiple value creation pathways, including potential joint ventures, a spin-out, or an IPO.
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