American Rare Earths Ltd. rejected a special purpose acquisition company's offer to buy a Wyoming asset despite a share consideration offer of nearly four times the Australian miner's current market capitalization.
American Rare Earths, with a market cap of about $103.0 million on the OTC market as of midday April 26, is developing rare earth mining projects in the US. The company touts the acquisition target, the Halleck Creek project in Wyoming, as having the potential to be among the largest rare earth deposits in the country.
The interested Nasdaq-listed SPAC is sponsored by Papaya Growth Opportunity I Sponsor LLC, American Rare Earths said in an April 26 news release. The miner said the SPAC offered $400 million in share consideration for Halleck Creek.
"The inbound interest received in American Rare Earths underscores the immense value and strategic significance of our Halleck Creek Rare Earth Project," Richard Hudson, American Rare Earth's chairman, said in the release. "[W]e remain committed to maximizing returns for our shareholders while advancing our mission of sustainable resource development."
Rare earth materials are vital across various technologies, including those used in the energy transition, technology and defense sectors. The US depends on imports of rare earths, mainly from China.
American Rare Earths has four projects in Nevada, Arizona and Wyoming, according to its website. The company released a scoping study in March finding that Halleck Creek has an estimated mineral resource of 2.34 billion metric tons of rare earth materials, an increase of 64% compared to its maiden resource estimate a year ago.
In an April 1 SEC filing, the SPAC said it offers a faster and cheaper path to becoming a public company alongside access to growth capital. MP Materials Corp., a rare earth mining company that owns the Mountain Pass project in California, went public in 2020 through a SPAC known as Fortress Value Acquisition Corp.
Clay Whitehead, CEO and founder of Papaya Growth Opportunity Corp. I, said the company could not comment directly on American Rare Earths or any other company, while adding that all Americans should care about the lack of domestic rare earth supplies and processing capability.
"Our national defense, green energy, electronic vehicle, and technology industries cannot function without free access to these critical minerals, yet China controls virtually all of the global supply chain at every level," Whitehead said April 29 in an emailed statement. "So, the opportunity to fund great projects run by top-rate management teams here in America is clear, pressing, and immense."
American Rare Earths said in its statement that it recognizes the potential benefits but still declined the offer.
"[T]he board is mindful of the significant potential of Halleck Creek and the need to maximize returns to shareholders while minimizing dilution and has declined to advance at this time," the company said in its statement.
The sponsor of the blank-check company seeking the Halleck Creek asset is associated with Launchpad Capital. The April 1 SEC filing from Papaya Growth Opportunity Corp. I boasts a team that has collectively raised seven SPACs totaling $2.2 billion in trust capital and has made "extensive private market investments" in technology, such as Square creator Block Inc., Eventbrite Inc., DigitalOcean LLC, Calm.com Inc. and GitLab Inc.
The SPAC commenced an initial public offering generating $287.5 million on Jan. 18, 2022. The SPAC had a deadline of consummating an initial business transaction by April 19, 2023, but through a series of extensions, it now has until January 19, 2025.
Launchpad did not immediately respond to a request for information.