Hello. Welcome everyone to the Aclara Investor Day here in New York City. My name is Ramón Barúa. Very happy to be here with you today. We have a great attendance to this event. We have approximately 20, 25 people who have confirmed to be here in person, but we have more than 200 people on the line. Welcome everyone joining us through the internet as well. We wanted to have the opportunity to share with you our journey. We've been having a lot of investor meetings recently, and the reality is that with the usual 45 minutes to an hour is never enough to tell the full story of Aclara.
Working with our partners here at Skadden Arps, and the bankers who are supporting us, we decided to put together a presentation that is a little bit longer than usual, but it will give us the opportunity to go into all the details of the activities that we have been developing recently at Aclara. I'm pretty sure that you will enjoy the presentation. There's a lot that we have to say around rare earths and about Aclara specifically. We would like to start the presentation with a short video of introduction. Let me put play to that. Thank you.
[Presentation]
Thank you. Thank you very much. This is a very small glimpse of what has happened during the last eight years since we started investing in Aclara. Very briefly, I would like to introduce the team, but I would like to ask them to please come and introduce yourselves personally. We have together today with us, Francois. I think you can
All right. Hi. Thank you. My name is Francois Motte. I am the CFO of Aclara. I actually come from the Hochschild Group . I used to work there for 10 years in finance positions. I was very happy to start to work at Aclara since 2019, since we actually made the investment, since we actually created the company. I am focused on the commercial front, on the finance front, on the strategy front. Very happy to be here and to present you our story.
Thank you, Francois.
Thank you.
Hugh, please.
Good morning, everybody. My name's Hugh Broadhurst. I'm the COO of Aclara. I'm a chemical engineer by training. Started in unit support with Rohm and Haas, that's now part of Dow Chemical. About a year and a half ago, I joined Aclara from Lithium Americas, where I was the general manager for the Thacker Pass Project, in charge of technology development and a lot of the project development. So very happy to share with you our progress today.
Thank you, Hugh. José Augusto, please.
Good morning, everyone. Happy to be here. José Palma. I'm the Executive Vice President of Aclara. I have been with the company since 2024 formally, but I actually started back with Ramón in 2018 in this adventure, acquiring the Penco Project, and ever since then have been connected to the story. I was at Hochschild for 18 years as General Counsel and VP of Corporate Affairs, and before that, I practiced law in the U.S. for 11 years, World Bank, and also a brief stint in the government of Peru. So, happy to be here. Thanks.
Thank you, José Augusto. Mauricio.
Thank you, Ramón . Hi, everyone. I am Mauricio Carrasco. I am the Head of Technologies and AI Projects here at Aclara, and I am a mathematician by profession. I lead the data science team here at Aclara.
Thank you, Mauricio. Myself, Ramón Barúa. Many of you already know me. I have lived, studied, and worked here in New York City for seven years before I joined the Hochschild Group in 2005. I have worked in many of the different companies of the group. Started in Cementos Pacasmayo, and then for 11 years I was the CFO at Hochschild Mining. A very particular CFO because I started also leading the innovation and diversification efforts of the group that led us to investing first in the Penco deposit in 2018.
I have been working in developing Aclara for the last eight years. Very proud to be here and be leading this fantastic and amazing team. Of course, this is just the senior leadership that accompanies today, but you will see later in the presentation, we are putting together a very comprehensive team to address this rather complex supply chain going forward.
This is a small summary of the agenda for today. I am going to talk a little bit about the market. I will emphasize a lot the importance of heavy rare earths , and how strategic and scarce they are in the market. I will make a quick introduction about why we believe Aclara is a different proposition to all other rare earth companies that you see out there. Then I will pass the presentation onto Hugh, who will go into the details of the projects and how they are being developed. You will see how methodologically stringent we have been in developing all of our assets. Mauricio will talk about how we are implementing artificial intelligence to try to apply as much computing power as possible in order to make our processes efficient.
Primarily, the big question is how can we ramp up as quickly as possible once we have built the facilities. José Augusto will talk about ESG. We have a fantastic track record on that front. We are very proud about what we do with our local communities and how we treat the environment. It will be a very interesting part of the presentation. Francois will bring it all together, to try to understand how all of this looks with financial numbers. How do we compare to other assets also that are out there, which are relatively comparable to what Aclara is doing, and I will close the presentation. The first slide is a big summary of what we want to present. The first question that investors ask is, how is Aclara different? What are the competitive advantages?
If we can summarize those advantages in three different pillars, well, these are them. The first is there is enormous value in having ionic clay deposits. They are the biggest source of heavy rare earths in the world. Given that this business is about reliability, we are trying to secure contracts with very sophisticated OEMs that are wanting to replace the current situation, which is basically having one supplier for these heavy rare earths . So having more than one country or more than one deposit in different countries, feeding the material to the separation facilities is something that is quite unique, and I do not think that there is any other company in the world that has two ionic clay deposits being developed right now. The second advantage is our vertical integration.
When we started this journey, of course, we come from a mining origin, and we thought that producing a carbonate was going to be enough. Well, clearly it is not. Sophisticated customers, they do not want to buy a carbonate, they want to buy a magnet. It is very important that we develop that technology that can bring what we mine into an actual commercial product. That vertical integration effort distinguishes us as Aclara because we are developing a technology that is very specific to these two ionic clay deposits that I described at the beginning. Last but not least, is our shareholders. I mentioned that this is a journey that has taken already eight years. We have invested a little bit more than $300 million to develop these assets.
Think about this, the last two capital raises that we did last year, 100% of those placements were purchased by our shareholders. These are not only financial shareholders. They contribute significantly their vision, their governance, and also their technical capabilities. Remember that Hochschild is a company that in Peru has 110 years of history doing mining and doing industry in the region, operating in several countries at the same time. CAP is also an 80-year-old company. They operate five mines in Chile, iron ore mines. They operate ports, they operate water plants, and for close to 80 years, they also operated a steel mill that becomes very relevant when we want to do metals as we are doing in Aclara. So having these shareholders is also quite unique.
More than 70% of the shares of the company are in the hands of these shareholders, and they share a vision of becoming the long-term suppliers of heavy rare earths in the Western world. That long-term vision, I believe, is unique in the market. Let us talk a little bit about rare earths, and I really want to focus on highlighting how important and how different are heavy rare earths from other rare earths. We named this section of the presentation the heavy rare earths dilemma because something that people who are not too familiar with the industry keep asking. If rare earths are not rare, then why are there critical elements? That seems to be a very difficult question to answer. The reality is that you can find rare earths everywhere in the world.
Probably if you grab a little bit of. You take a scoop of ground from Central Park, you will find that there are rare earths there. The relative abundance is not the question. The big question is can you find economic deposits? We see almost every week in the press, there is a new discovery in Afghanistan. We talked about rare earths in Ukraine, in Greenland, in many places in the world. If there are so many rare earths, then again, why the prices keep going up and why are they so important? Finding economic deposits is incredibly hard, and finding heavy rare earths deposits is even harder. There is also a lot of news in the press about separation, and people say, "No, the feed is not the important part, it is the separation." The short answer to that is, it is both.
But you will find that separation for heavy rare earths is significantly harder to do than separation of light rare earths. So we have another differentiation there. Then we have the concentration issue. We all know that China is the sole supplier of heavy rare earths. Significant supplier of light rare earths as well, but the dominance, and we will see it in a later slide on heavy rare earths, is even stronger. Then we have the question now that everybody is asking, can the rare earths be substituted by other products? The answer is, of course, yes. There are other ways of doing magnets, and there are other ways of achieving the performance of these magnets. However, the cost is really insurmountable to those options. Same as with copper, that I think the world agrees that is the best electricity conductor relative to its price in the world.
Here we have the same thing with magnetics. The most powerful magnet in the world relative to its weight and size is a neodymium magnet. There is just no doubt about that. So can you do it in different ways? Of course you can. But how are you going to cool that system? What is the weight of the magnet that you need to put into the application in order to make it work? Think of an electric vehicle, where if you put bigger magnets to try to replicate the performance of the neodymium magnet, you have to build a bigger battery. So you will be consuming more lithium, more nickel, more cobalt, very expensive elements as well. Then if you do not have heavy rare earths, you will need cooling systems. So imagine adding to the very simple engineering of an electric vehicle, a rather complex cooling system.
Impossible for drones, for example. The drone will spend all of its energy trying to pull up the cooling system. So yes, there are ways out. You will read about that, people saying we have developed a new solution. But relative to, again, to the weight and size of the application and to the cost, really, when we think about the fact that there are only $25 of these praseodymium and neodymium in an electric vehicle, going through that cumbersome effort of trying to replace them, just for the sake of cost is rather irrelevant. Here, the big question is something different. How can we find an alternative solution, an alternative supplier to the only commercial available heavy rare earths in the world? And I think that is where Aclara exactly comes in.
We're developing a supply chain that is, again, vertically integrated, that will be a complete and an alternative that is fully developed under one roof, fully competing with China. Here in this chart, you can see it very clearly. All rare earths have not been created equal. There are some that are much more scarce than others, you can see there by the current spot price of the rare earths, that the heavy rare earths are by far the most valuable ones. This is crucial to understand because when people say we have discovered a new rare earths deposit, that whole piece of information is not enough. That deposit could be just a deposit of light rare earths, highly concentrated on light rare earths, and the value of that deposit is going to be very limited. You need to find deposits that contain the most precious elements.
Where do you find them? Precisely in ionic clays, which is what we're going to see in the following slides. This is a slide that people also talk a lot about, but they typically stay on the left part of the chart, talk about light rare earths. You probably read recurrently in the press that China controls around 60% of rare earths. That is true for light rare earths. But when you look on the column on the right, what is happening with heavy rare earths , you'll see that the concentration is much, much higher. The same thing happens for separation and then for metals and alloys. When we look at the rare earths from the angle of just the heavy rare earths , we will notice that China's dominance is even stronger. How is the West trying to address this? There are different strategies.
For example, you can have different companies partner together to come up with a solution to China. You can have companies that are specializing in the upstream mines, of course. You can have others that are doing separation and others that are doing metals and alloys. What we understood very early when we entered this market is that those conversations are very hard to come to good port, for several reasons. First, for economic reasons, it's very hard to figure out who is going to charge what, where is the value being created. Second, there are commercial reasons. Who owns the client? Then there are strategic reasons, because once you commit to one supplier or one separator, you are fully developing technology, you're putting your company in the hands of another company.
Another solution could be that a separation or a metals and alloys company decides to vertically integrate and go upstream. But we find that has been incredibly difficult because the knowledge and capabilities of these companies are not suited for going, for example, to countries like Brazil or Chile or Africa or Asia in order to find mines and find their own feed and be able to control that feed. We're approaching this, probably we're one of the few companies in the world that is approaching this from the bottom up. We started with the mines, we have ventured ourselves into the separation and metals and alloys technology. We've made a lot of progress, we'll be happy to share that knowledge with you today. China knows this very well.
That is why also in April of last year, when they issued their restrictions, they did not restrict access to rare earths. As a matter of fact, they restricted access to seven very specific elements. All of them happen to be heavy rare earths . Why? Because these are the ones that they very strongly control. Those restrictions have had already a quite significant impact on the Western world. You see Suzuki, Ford, and many European companies had to stop either full plants or several lines of operation due to lack of access to these important minerals. If there is restricted supply, of course, and demand continues to grow, the natural effect is that prices are going to go up. That is what we see in the right side of the chart. Look at the prices of dysprosium, terbium, and yttrium.
In the light blue bar, you see the prices of these elements in China. On the darker blue bars, you see the current spot price of those elements. You can see that people are paying multiples of times higher prices to have access to those elements. When you look at these prices, let us go back again and look at supply-demand dynamics. The supply is rather limited. This supply in the Western world is not coming from mines. It is coming from stockpiles that were built before the restrictions took effect, and those stockpiles are running out. There is less and less material. So we are feeling the impact of the Chinese restrictions. From the side of demand, this is really relevant, we can see that users are willing to pay very high prices in order to maintain their operations running.
This is a really key data point for us because it shows that the virtues, the benefits that these rare earths bring to the applications that use them is incredibly valuable, and people are willing to pay a lot of money for them. There is a quote down there from the International Energy Agency that we wanted to bring to your attention because remember, this is a very, very powerful number. Think about $6.5 trillion. That is an enormous number of GDP in the Western world that depends on access to rare earths. Imagine if these restrictions do come in full effect and the Western world does not have access to these elements, the impact on GDP can be quite relevant. This slide is probably one of the most complicated ones that we have in the presentation, but it has incredibly valuable information.
You will not be able to find it anywhere else other than in this Aclara presentation. This is the supply-demand dynamics for dysprosium and terbium. If we start on reading this chart from the left, you will see that there is the official Chinese production of dysprosium and terbium, and most of it is accounted for from production coming from their ionic clay mines. China reports this number through a quota system, but we know that China processes material that is coming primarily from Myanmar, also in their factories in mainland China. We know that number from the information coming from customs. Notably, that production is also coming 100% from ionic clay deposits. So you can see there that most of the production in the world today is coming from ionic clay deposits.
When we look at two very large companies in the Western world, like MP Materials and Lynas, those are monazite deposits, and they contain very, very small amounts of heavy rare earths. You can see there the numbers that they are currently producing. When we look at the overall production, there are lots of conclusions. One of the most important ones, of course, is that China controls, and it controls because it has ionic clays. Notably, also, since 2018, the quotas have virtually not moved for heavy rare earths. The production in China is relatively stable. That also tells us a lot because China discovered these ionic clay deposits in the 1970s, and they've been mining them for more than 50 years now. That is quite relevant. If we know something as miners, is that mines get depleted.
A sign of that depletion is also the fact that they are going to Myanmar and other countries to look for the heavy rare earths. What we see on the green bars is demand. Demand estimated not by us, but by Argus Media, an independent supplier of rare earth estimations. You can see there that by 2030, and then by 2035, the demand of dysprosium and terbium is really going to go through the roof. This is explained not only now by electric vehicles, probably also by the arrival of robotics. AI is making possible a very rapid development, not only in humanoids but also in industrial robots that are going to change the way in which the West manufactures its products. If these projections are true, you see that we need an enormous amount of dysprosium and terbium, and there are virtually no sources.
You see there that the biggest mines in existence will not contribute much, and we've put to the right what Aclara can contribute to the market. Although the number is pretty significant in terms of supply of dysprosium and terbium, it is going to have a very limited impact, in trying to feed a market that is going to be very aggressively looking for these elements. Again, the expectation that we have long-term, or medium-term really, is that the prices will continue to go up as this situation exacerbates. If we're looking for mines that have a large concentration of heavy rare earths, here we present you how we see the world. This is a brief summary. We have studied. Francois, as a matter of fact, is an expert in every single rare earth project in the world. We have a lot of information.
We know exactly what they can produce, at what cost, et cetera. But this is a brief summary. You need to look for which are the companies that have assets that contain the highest concentrations of heavy rare earths. The reality is that in the world today, there are three. It's two owned by Aclara, Penco and Carina, and one owned by Serra Verde, the Pela Ema deposit. Important to remind you that Serra Verde was sold a couple of months ago for $3 billion. That gives you an idea of how valuable and how strategic these elements are going to be. Note that Penco has an amazing concentration. Smaller project in terms of size, but it has an amazing concentration of dysprosium, terbium, and yttrium. With that, we close the section talking about the rare earth markets.
Hopefully, we've made a very strong case that what we really need is not rare earths, but we need heavy rare earths, specifically. They are very hard to find. Not a lot of companies in the world have them, and Aclara is in a quite unique position in that concern. Why Aclara? This slide, I like it a lot because in one picture, you can see the whole strategy and the whole history of Aclara. We started, as I mentioned, with upstream. Our first investment was made in 2018. We invested a little bit of money in this ionic-clay deposit in Penco. You'll remember that at the beginning, Andrew remembers that our story didn't start quite as we expected, with difficulties in permitting in Chile. But in the end, that ended up being a very good thing because it pushed us to think outside of the box.
We went to Brazil, and we found, I would say very luckily, very quickly, the Carina deposit, which is orders of magnitude bigger than Penco. With that, we have been developing, following a very stringent methodology for project development. We have focused on doing a lot of drilling, converting our resources into measure indicated and then into reserves in the case of Brazil. We've done a lot of metallurgical testing. Francois will highlight that. But that distinguishes significantly Aclara from its competitors. We've built pilot plants, pretty serious pilot plants because you will see that our systems are rather complex. They have never been done in the world, and before embarking on building quite expensive facilities, we wanted to make sure that the technology completely worked. We have been fine-tuning that process and have been able to come up with a product that we have named SPREC.
It's something that no one in the world has. It's a very high-purity carbonate. We'll talk a lot about that. In 2024, we figured that selling carbonate was not going to be enough. We needed to vertically integrate, and we started investing in developing the technology to separate the rare earths. Hugh will go into a lot of detail of that, on how we're developing that technology. But with that, we can produce oxides, and that's a second product that we can sell in the market. Finally, in partnership with CAP, we were highly encouraged by their ability to work with very high-temperature applications. As I mentioned, they operated the Huachipato steel mill for 80 years. So there is a lot of knowledge there in producing ferroalloys. Permanent magnets are no other thing than ferroalloys themselves.
We asked ourselves, how can we lever that knowledge and combine it with rare earths and have something also that is quite unique in the Western world? You can see there a bar that was produced a couple of weeks ago, is the first bar of NdPr metal with a purity of 99% or above. That is also quite an accomplishment. Commercially, this is incredible because we can sell carbonate if someone is still looking for that. We can sell oxides or we can sell metals for alloys. That also gives us enormous flexibility, something that I don't think many rare earth companies in the world can claim. Also going back in our journey, when we started at Aclara, and we started only with Penco, I like to tell the team that we didn't have a rare earth company, but we had a dysprosium and terbium company.
This is because dysprosium and terbium were the biggest contributors of revenue in our financial models. With the discovery of Carina, we added NdPr, and we always figured that we were selling to the thematic of electro-mobility. Electro-mobility seems to be at the sweet spot for these permanent magnets, electric vehicles, you have drones, and you have other electro-mobility applications. Then something happened, which is robotics arrived in a quite aggressive way. Probably thanks to Elon Musk, that started showing off the humanoids that Tesla is going to produce. Then we see China following up, and we're seeing a race right now in trying to develop commercial humanoid robots. That robotics thematic has also brought to Aclara a very high expectation of potential future demand.
More recently, in the past six to nine months, we started to see a new thematic arriving, which is associated to the development of artificial intelligence. We all know that artificial intelligence needs data centers, and those data centers are very hungry in terms of energy. Energy is being produced in the world today, primarily from gas sources. That gas needs to go through gas turbines, and those gas turbines need to work at around 3,000 degrees Celsius. In order to do that, the blades of the turbines need to be coated with a combination of zirconia and yttrium. Yttrium is one element where China controls, I would say, virtually at 100%. So you have enormous companies, like GE Vernova, Siemens, that have publicly stated that they need sources of yttrium in order to build these blades.
These blades also have a usage factor, so it's not like you do it one time. You need to recurrently recoat the turbine. These turbines are also exactly the same used by the aerospace industry. So all of a sudden, we have a second business. Yttrium, that was a rather worthless byproduct if you look at our original disclosure, right now has become a second source of income, a very important source of income for Aclara as well. This helps us approach also the Chinese model because in China, when you produce the 17 different elements, you have industrial applications that use all of them. So they can split the financial responsibility of the investment in 17 different products. When we started, we had to put all the weight of our financial revenue in only two or three elements.
Now with these new products, we are able to split that responsibility. So we're quite excited about that. A byproduct that had virtually a value of zero now has become a large contributor of value to our model. At Aclara, it's not only important what we do, but how we do it. When we started investing in 2018, we really wanted to look in how the mining of the future looks like. Rare earths was not it, to be honest. The metallurgy of processing rare earths involves a lot of water, a lot of acid, a lot of energy. Most likely, you have a radioactive waste, and we thought, well, that is not the future. Until we find these ionic clay deposits. Not only do they have the heavy rare earths, but also the metallurgy here is incredibly simple. Why?
Because the rare earths are not inside the mineral, they are outside the mineral. These are clays that have been weathered for millions of years, and extracting those rare earth atoms is really simple. The chemical bonding is very weak. We were able to develop very early on with the help of the University of Concepción, the University of Toronto, we developed a process that I like to say there is no other mining company in the world that can claim what we are about to say. That is a pretty strong statement, but we can back it up. We do not use explosives. The clays are very superficial, very friable. We do not do crushing, and we do not do milling, which are the two stages in traditional mining that use most of the energy, and hence they generate most of the CO₂ footprint.
We use ammonium sulfate, which is a common fertilizer, as our main reagent, and we fully recycle it. We fully recycle it with 99% efficiency. We fully recycle water in our system, so our water consumption is incredibly low. Very importantly, given that we did not crush or mill the material, and we did not put it in contact with hazardous materials, we do not have a tailings dam. We can handle the material, we can return it as much as possible to the site from where we took it, or we can have deposition zones that are pretty inert in nature. So we have baptized this system the circular mineral harvesting. It has a connotation with agriculture because really, we are using very soft techniques in order to extract the elements. When we started, we built the pilot plants.
You can see there the product on the right, it was called an MREC. An MREC is a mixed rare earth carbonate. But we were not satisfied. Hugh will tell the whole story about that. But the big summary is that we have been able, through different iterations, to convert that MREC into a SPREC. SPREC is a name also that we invented because we had discovered a product that did not exist in the world. This is a very high purity concentrate with 99% of purity. This is really relevant because as we were saying that the separation stage is also rather complicated for heavy rare earths, the complications emerge also primarily from the impurities that enter the system. So if we are bringing from Brazil and Chile a product that is already 99% pure, we are making the separation stage much easier, much simpler, and much cleaner.
It also gives us the possibility to facilitate the blending between Penco and Carina. If you have two completely different sources with different impurities and you try to mix them, you are going to have exponential problems. But if you blend two products that already have 99% purity, your life is going to be made much easier. This brings us to the separation. Here, the key was developing the technology, and we decided to go for solvent extraction. It is 50-year-old chemistry. All over the world, people know how to do it, but applying it to rare earths is particularly complicated. We started working with L3. L3 is an engineering firm that we are very proudly have partnered with. Tommy Larochelle has been an amazing partner to Aclara since day one. With him, we decided to bring the technology to Virginia Tech University. Why Virginia Tech?
First, we wanted to partner with a top engineering school that had experience not only in mining but also in rare separation. Virginia Tech had already an impressive curriculum in doing that. Here, the pilot plant was not only about demonstrating the technology. There is a big question out there. With Nancy, we receive a lot of calls from journalists asking who is going to operate those mines. It is a very valid question because in the Western world, there is no one who is operating separation facilities for rare earths. What we are doing at Virginia Tech is also training the workforce of the future here in the U.S.
We have students from Virginia Tech, but we have also hired technicians, we have hired chemical engineers who are working together with us there 24/7 in a circuit that is a full replica of what we are going to be building in Louisiana. Demonstrating the technology, training the workforce that is going to operate that facility going forward, and finally generating data. The only way in which we are going to be able to really overcome the decades of experience that China has is by applying maximum computing power. Mauricio will talk about that, but we are building digital twin models. We have partnered with the Argonne National Laboratory, funded by the Department of Energy and the Genesis Mission to build digital twins so that we can apply again as much computing power to this process in order to reduce ramp-up times and optimize production going forward.
All of this, of course, has attracted a lot the attention of the U.S. government. Almost one year ago, the DFC has invested already in Carina. It is a rather small amount. It is $5 million. It is not about that first investment. It is about the fact that we granted them a right to have the opportunity to have priority in the investment of the development of the Carina deposit. Next, very recently, we shared with you a letter of interest published by EXIM Bank of $750 million in the form of debt, 15-year debt to develop our industrial facilities in Louisiana. I already mentioned about the Department of Energy and Argonne. The State of Louisiana themselves, Governor Jeff Landry, has been incredibly receptive to the idea. The town of Port of Vinton are incredible partners to Aclara.
We are very happy to be there and make this investment together. Being in that part of Louisiana, close to Lake Charles, gives us a lot of advantages. I do not want to steal the thunder off you, but we are quite happy to be in that part of America. The story does not end there. I mentioned we have two deposits, but this is just a beginning. There is going to be much more. We have more than 150,000 hectares of very prospective land property, both in Chile and Brazil, to continue to do exploration. We have a team on the ground, but Mauricio will also talk about how we are applying technology to understand the hyperspectral images of the deposits that we are looking for using technology, using AI.
We have partnered with Stanford University and their Mineral-X program, which is, if you know Mineral-X, they are applying AI to mining in a way that we haven't seen in any other place in the world. We are very proud to be their partners and developing cutting-edge technology to find more deposits. Someone who has noticed about the efforts that we're making is the Japanese government. We also announced very recently a joint venture with JOGMEC. JOGMEC is the institution in Japan in charge of securing critical minerals for the island. Incredibly technical people. We've been showing them what we're doing for around five years now. They came to Chile very early on. They know a lot about rare earths, and the fact that they have decided to partner with us is an honor. They asked something very interestingly.
When we did the joint venture, they would like to have priority for 40% of the product that we generate from this new asset. Having a greenfield project that is already born with a path to offtake, I think is particularly attractive for a company like Aclara. Highlighting our partners again. Hochschild again, I'm very proud to say that I've worked there for more than 21 years. Eduardo Hochschild, our Chairman, is really the person guiding us going forward. He has a very strong vision about what he expects from Aclara. Needless to say, the financial support of $300 million, which have come primarily from himself and from Hochschild Mining, is a very strong testament of his devotion to this project. CAP has also been a great partner.
As you can see, we're looking for partners that not only can contribute the financial aspect, but that can bring their technology, their vision, their corporate governance. In Chile, there is a before and after of Aclara since we partnered with CAP. You know that, as I mentioned earlier, permits at the beginning were not easy, but we've been able to obtain our environmental license earlier this year in no little measure due to the help that we have received from CAP. Trying to develop four projects in three different countries at the same time is incredibly hard. But we believe that the value of Aclara resides precisely on that, on the integration. Unfortunately, trying to develop these projects individually will likely fail. We need to do everything in parallel, and that demands a company that is much more sophisticated than your typical startup.
I don't want to go through all these charts, but I want you to know that at Aclara, we're thinking very seriously about how we organize the company that is going to build these projects, and how the company looks like that is going to operate these projects. We believe that there is a combination of professionals at a corporate level that can oversee several functions like finance, ESG, et cetera. You see most of them here sitting today. But you also have local teams in Chile, in Brazil, and in the U.S. that we expect they will be filled with very highly competent professionals. In Brazil, we have already decided to bring a new CEO. He will be joining shortly.
I cannot disclose the name right now, but I think you will be excited to know that he comes from a very solid and very highly reputable company in Brazil. I think that the team will be highly strengthened with his presence. Then you see there in the middle also, we have a policy advisor. Look, rare earths is not like other mining or industrial project. You have seen President Trump talking about rare earths, President Xi Jinping talking about rare earths, Lula, the president of Chile. This sector will have a lot of political relevance and we have that very clear, so we are considering also bringing someone who can help us navigate the more political waters while we focus a lot on deploying the technical and financial aspects of the business. This is the end of the presentation.
Again, if there is a takeout of all the things that I have said, there are a couple of things. The first one is we really want to be the long-term suppliers of the industry. We are not here to try to promote a company and try to find a buyer for Aclara of one or other of our businesses. We want to be here for many decades making sure that we supply the materials that the industry needs. That concept in itself makes us incredibly focused on the things that really need to happen so that we can have a viable product and a commercial product. This is crucial because rare earths are not commodities. They need to find a home.
You need to find very sophisticated OEMs, and you need to go through the certification processes if you are to capture the prices that we saw earlier on the presentation. That attitude, that vision, it really makes a complete difference. Finally, you have seen also, and you will see even more during the presentation, that although when we started in 2021, we were perceived as a junior mining company listed in the Toronto Stock Exchange, we have become right now much more of a technology company that happens to have two sources of feed in Latin America, in Chile and Brazil, that will come into a separation facility that is incredibly complex and technically advanced. Thank you very much for the first part of the introduction. I will pass now the presentation to Hugh to tell us about our portfolio and how we are doing with execution. Thank you.
Great. Good morning, everyone. What I am going to show you today is just the tremendous amount of advancement that Aclara has done on our project development. We have been focused on very rapidly, but very rigorously developing our vertically integrated supply chain so that we can meet the world's demands. Just in a little bit more detail about the vertical integration that we are doing. Two mines, as Ramón mentioned, in Carina and Penco, both producing our SPREC product that we are very proud of and that is a game changer in the industry. Both ship to Louisiana, where they are separated into oxides, and then at a co-located facility, we will produce metals and alloys. As you can see from the slide, we are demonstrating at each step we are working to de-risk our supply chain.
We de-risk each project, but we're also de-risking overall as a whole, and that's one of the huge beauties of this vertical integration strategy. Back to the circular mineral harvesting that Ramón mentioned. This really is the foundation of our technology and where Aclara, not just from the deposit, but where we started to differentiate ourselves in terms of technology. It's a very elegant process. The mining itself is very simple, as Ramón mentioned. We don't have to do any blasting, and we can just use basic hydraulic excavators and trucks to bring our raw material to the plant. We then take that clay and we wash it with a very dilute solution of ammonium sulfate fertilizer. This is the same fertilizer that you use in the garden, and we're only using it at about 30 grams per liter, so very dilute.
We wash the clay, and on the surface of the clay, the rare earths, it's called adsorbed for the technical people, but just think of it as stuck to the surface. The ammonium from the ammonium sulfate replaces it, and the rare earths are released into solution. The huge thing here is this is a very mild condition. We don't have to use very acidic solutions, and this enables the whole downstream to keep it circular and sustainable. The solution that we get, we do some purification by precipitating impurities, and then we use ammonium bicarbonate to precipitate an MREC that you've heard Ramón talk of. This is where the industry normally stops. However, Aclara has been really focusing on taking it that much further to a super pure rare earth carbonate or SPREC product. This is absolutely key. Both mines will be producing this one-of-a-kind material.
The solution that's left over from that precipitation of our product then gets recycled. We do that, you can think of it as a desalination plant, except instead of seawater, we're using our ammonium sulfate solution. This uses nanofiltration and reverse osmosis, the same technique you do for desalination. The ammonium sulfate goes back to that ion exchange operation, enabling the 99% recovery. We also produce fresh water here. This purified water, and we use this purified water to wash the clays to remove any traces of leftover rare earths that we'd dissolved and ammonium sulfate. Those also go back to the ion exchange, so we recover it. These washed clays then can be deposited on-site, and then we'll do concurrent reclamation and revegetation of our impacted areas.
This is incredible, this recirculation, as Ramón mentioned, because of the fresh water that's coming into the plant, 97% of it is recycled, which is just an incredible metric and a testament to Aclara's motto of doing things right. We'll go through each project and I'll give you some of the latest updates. I'm sure a lot of you have noticed that just this week we released a new PEA, preliminary economic assessment, according to NI 43-101, the Canadian standard for Penco. You can see some of the stats there on the left, 17-year life of mine at really, really good grades. This really helps Penco. The story in getting there, the last PEA was released in 2022, and right now we're working on our basic engineering and our feasibility study.
We released this PEA as a way as a refresh as we go down that process to producing our feasibility study. For the feasibility study, we have completed rigorous piloting. This is a full demonstration of every step of the circular mineral harvesting process, 2023 and 2024. We now have our permit for the site that was recently granted. Penco is ready to go. We just need to finish our feasibility study, and we are doing that in partnership with Hatch. Something to really think about, and Ramón mentioned this, at Penco alone, we have completed over 17,000 meters of drilling and over 9,000 samples that have been sent for metallurgical testing.
I want to discuss that a little more because it is Aclara's commitment to not just we spoke about the environment and doing things right, but also technically, we are very technical, and we need to develop our processes properly. These 9,000 samples, we did not just analyze them to see how much rare earth we got from them. We actually did a whole round of testing on these 9,000 samples using ammonium sulfate solution to see how much rare earth is actually released so that we can be very, very confident in our resource predictions and our production that we are predicting from our mine plans. The next step, as I mentioned, for Penco, our feasibility study that is coming up in Q1. Then in parallel, we are preparing for early work.
Since we have our permit, we are looking at Q1 to being into actual work on-site on the ground to bring Penco to production in late 2028. I also want to highlight, Penco, we have a partnership with CAP. It is just very valuable to have that resource within Chile with a lot of mining experience which we can leverage. Just a little bit more detail on the schedule, as I mentioned. Feasibility study and early works. Those are the next steps. But in parallel, we will be doing tendering and contract award. Through the whole period as we go into construction and even all the way through commissioning, you can see the bar at the top there on permitting. Chile requires sectorial permits that you need to get as you go along, and we are following that normal process.
Construction will be finishing around Q3 2028 as we get into commissioning and first production from the mine. A couple of things, as I mentioned before, to remember when you think of Chile, we have our permit. We have demonstrated it in our pilot plant. We have got very, very strong government support and a great partner in country.
Moving to Carina. When you think of Carina, we have just done a tremendous amount of rigorous sound technical work, and I think that is really highlighted when you look at some of the stats on the slide. Over 30,000 meters of drilling, over 19,000 samples that we have done this metallurgical testing. It is an immense amount of work and immense amount of data. But as technical people, this data is what we need to be confident when we say we know this is going to be an 18-year life of mine.
We know this is what the production is going to be. Very, very important. We have completed that. We completed in November a preliminary feasibility study or PFS, and then also together with Hatch, a feasibility study that we released in April. That is our basic engineering. On terms of technical development, Carina is very, very well advanced and as soon as we have our licensing to be able to start construction, we are ready to go. Very exciting the amount of work, and I really want to congratulate the team on all the efforts there. The next steps in terms of Carina, I mentioned licensing. We are currently preparing for early works, and also we are in a selection process for the engineering firm that is going to take us through construction and startup of the site. Early works we are predicting right now Q2 2027.
In terms of partners for Carina, I cannot emphasize more the work we have done with Hatch. It has just been a fantastic experience. Circular mineral harvesting, this is new technology. We have partnered with the best in the world to help us bring it to reality. We have got great backing from DFC, as Ramón mentioned. We also have a lot of partnerships for research. We have within Brazil also great support from the state of Goiás, where we are located. Doing a little bit of a deep dive in terms of the timeline. You can see the permitting timeline then to get our licença prévia and licença de instalação , and then the final license you need before operations. Detailed engineering about to start. As I mentioned, we are selecting the engineering firm, getting ready to start that tendering process.
Lots of conversations about early works preparation, and then we will be into construction, commissioning, and first production there in mid-2029. Key things, rigorous process, huge amount of work completed, and we are ready to go as soon as that license becomes available. I do want to stop and touch, we have heard a lot today about SPREC, and this is something that we are tremendously proud of and is really a key enabling technology for Aclara.
I want to give you a little bit of a history about how we got there. What you can see on this slide, we have done a lot of piloting campaigns where it started all the way back in 2023 when we were doing the piloting for Penco. You can see we were producing MREC back then and just over 90% purity. But our culture as engineers is continuous improvement. We are never happy.
It can always be better. We would go to the next iteration in 2024 when we did the next round. We were getting up in that 94% MREC purity. Then in 2025, we actually moved our pilot plant from Chile to Brazil, reassembled it, and we ran the Carina ores. By then, we had really optimized things. We were really proud. We were starting to get 97%. But at the same time, we were developing our pilot plant and learning a lot about separation. We recognized that one of the issues you have is, okay, I have 97% purity, but I have 3% of other material I need to do something with. We looked at it and for so many reasons, that 3% is a headache. We said, "What can we do?" We challenged our technical team.
What can we do to increase that purity even more? That was the genesis of SPREC. We are now up to 99% and I just cannot say enough as a technical person how big a de-risking this is for our operations and we are very, very proud of it. It is way more than just the 99% has a nice ring to it. It sounds great, but it is so much more than that. It really is a key risk reduction for our technology. As Ramón mentioned, we are very, very proud of our site in Louisiana and our plans to develop it. This slide is just a little bit of intro about what we are going to talk about. We have already finished basic engineering. We have the key permit that we need for construction. The Louisiana government has just been so supportive through the whole way.
The town of Vinton itself, the Port of Vinton, where we are located, everyone is so excited about Aclara and Rare Earths coming to Louisiana. It has just been an absolute pleasure to work within the state in Calcasieu Parish. We have a financing pathway identified with EXIM Bank. This site itself, it is just really strategic. It is a Louisiana Economic Development site because a lot of people have asked us, "How are you able to go so fast on this site?" A lot of the pre-work was actually done by the state to certify it before it got there. It was ready and waiting for a project exactly like this. We have our SPREC and we have a clear pathway to execution. You can see in those green boxes the products that we are focused on today, so all the ones Ramón was talking about.
But we have opportunity at this site to take it even further in the future in a second phase. Again, to do a project of this magnitude, we cannot do it all by ourselves, and definitely we are most grateful for the support we get from our partners, L3 Process Development, Hatch, as I mentioned, the State of Louisiana, U.S. Department of Energy. We have Argonne National Laboratory. You are going to hear more about the work they are doing with us. Even for permitting, our permitting support company Onterris. Taking a step back, Aclara stepped into this world. We started with coming out of Hochschild Mining and understanding mining well and what we need to do, then we started looking at separation. This truly is now you are getting out of mining world, and this is into the chemical process development.
The big questions to ask when we got started initially, what technology do we use? How do people separate rare earths? We ran a screening process looking at the different technologies, and we settled on solvent extraction. Why solvent extraction? Because it is commercially demonstrated. That is what all the commercial operations are using. There are some other emerging technologies that show some benefits, but when you are trying to develop a project at this pace, we want to know that our technology works. We do not want to have that hanging risk on does it work out there. That is why we settled on solvent extraction. Your second decision you have to make is how do you apply solvent extraction? What equipment am I going to use?
Again, we went through a selection process of looking at all the different equipment that are out there, and there are some emerging technologies coming out there. But we said 99% of heavy rare earths in the world today are separated in standard mixer-settler technology. Why would we do something different? Perhaps there are some benefits, but the risks far outweigh any potential rewards. Our job as the technical team is to deliver a process that we know will work. That is why we settled on mixer-settlers. In terms of throughput, very high throughput, very well understood how to scale up. Proven selectivity. We know what tools are out there. These are the specialty extractants. I will tell you a little bit more about those in a minute. Those are our tools to do the extraction, and they are cost-effective and predictable.
The keyword there is predictable. We are trying to put together, or we are putting together this vertically integrated supply chain. Like I said, we did all that drilling and all that metallurgical testing is for predictability. We need that at every step so that we can de-risk the supply chain as a whole. Our development process, we did not just jump to doing a demonstration plan. We said we want to separate heavy rare earths, let us build a pilot plant. It starts way before that. This is where L3 Process Development came in. They did a lot of modeling and bench work at their facility in Canada, understanding our deposit. One of the challenges that you have when trying to develop a supply chain like this, every deposit is different. We have 15 different rare earths.
All the ratios of them are different to each other. That really matters, is the people who have to design the process. You have to tune your separation plant to your deposit. That is a very important step, and folks tend to not put enough emphasis on that. That is what L3 started looking at. We then did some concept validation with them as a second stage, more testing in their pilot facility. Back to the model, optimizing, then to a full pilot scale run, and we did this in Canada. This was doing parts of the process. The reason why they were doing that was to validate their model so that they knew that they could deliver this full process. I am going to show the whole process to you in a minute, and you will see why this was so important.
We got that validation, and then now we are in the stage at the Virginia Tech Corporate Research Center, where we have our full separation process end-to-end. SPREC coming in, oxides coming out on the end. We will show you some more about that in a second. This is our process that I promised to show you. I am not going to go through the entire thing, but we have this mixed material coming in, and we have to separate it. How you do it is you use these specialty extractants that slowly pull apart this mixture. It is slow, and you have different extractants depending on what separation you want to make. Our key way we control it is the pH. We use a little bit of acid or a little bit of base, and you can slowly start making the separation.
If you look at it, we don't have to dive into the details. You can see it's like a separation tree. I bring in a loaf of bread at the beginning, and then I chop it in two and I separate the lights. I have a middle cut and a super heavy cut. Then I take the yttrium off to one side, then I take the lights off, so our NdPr. Then in the middle, I have to do a lot of work to separate the dysprosium and terbium. As I said, it's slow. It takes a lot of mixer settlers. It's an equilibrium reaction. To the chemical engineers listening, we know we have to do a stage-wise approach. We have eight total solvent extraction trains or circuits and 500 mixer settler stages. It's a substantial investment that Aclara has made.
We have this replicated in Virginia Tech. Every single stage, if you come to visit, you will see banks of these mixer settlers up and running, separating rare earths. That then goes to our six final product oxides. Then you heard me mention a phase II. Right now we have some by-product streams that we're not separating. If the market demands it, we can take those by-products and think of that as the leftovers that we're not separating and selling today, but that's the opportunity for the future. At the Virginia Tech pilot plant, we have already successfully produced NdPr at market grade, and now we're working on terbium and dysprosium, and you can see the timelines there. Terbium in particular is a particular focus because we have to look at what the purity is the market needs. These are not commodities.
It really reminds me of the specialty chemical industry, like when I was in agrochemicals at Syngenta or Rohm and Haas, but also lithium where each customer has their own spec and, at Thacker Pass and Lithium Americas, we were really, really having to focus on quality, and that's the same thing that we do here. You can see our target specs and our timeline. We have the full flow sheet. You can see some pictures there, representative feed. I'm just going to give a little shout-out to Mauricio, who's coming later. A huge part of this pilot plant is to generate data for a full AI digital twin, and that's something we'll talk more about in a minute. It's going to enable faster ramp-up, so very excited about that.
Expectations for us in Q4 is to have our dysprosium and terbium samples at target specification and we're getting very, very close on terbium. Back to our site in Louisiana. As Ramón mentioned, we have our state air permit. This is a small source air permit that went through very simply. We don't have a lot of air emissions, so a simple permit. That's the key one that enables you to start construction on-site after you do some customary building permits with the parish. We already have $46 million of potential incentives from the state. So tremendous support in terms of that. We have the letter of interest from EXIM for $750 million. We have that pathway to financing. Now is really where I actually want to give kudos to Hatch. Hatch is actually attending. Andrew's here in the room today.
The partnership has just been fantastic. When we look at this, it is very tempting to just look at each project individually, but each of them influences each other. What we learn at one influences another, be it from Carina to Penco or the mine sites to the separation plant. We have really got this portfolio approach where, yes, we are doing individual projects, but we are looking at it overall. We have one portfolio director at Hatch that is overseeing everything to make sure that we have the same standards, we are doing it the same way, and leveraging every opportunity, and especially the lessons learned. It has just been a fantastic experience, and it has really been the enabler.
I am not sure of other companies able to turn out a feasibility study so fast after a pre-feasibility study like we did for Carina, and I just want to shout out Hatch and their commitment to Aclara and the project. We also have, I mentioned the state, and then our big catalysts here coming up is we are getting ready for early works. We need to order the long-lead equipment, and really it is about financing, getting through that EXIM process. We are ready to go to build this site. So super exciting.
The site itself, just a little bit more details. As I said, we are very, very proud of it. You can see on the map there where it is located in southwestern Louisiana. It is a great location because you have the containers coming in of SPREC. You can either go into Houston or into New Orleans.
It is an 82-acre site, and I want to talk a little bit more about the LED certification, Louisiana Economic Development. This is a certified site program. When you take on a certified site, you get a huge packet of due diligence that is already done for you. This site came with, we understood all the wetlands, we understood all the fauna and flora. We even had clearance from the state's historic preservation office that it had cultural clearance. So literally this site is ready to go, and that is why we were able to get through some of the permitting steps so quickly. Not just from the environmental side, it was already zoned heavy industrial. We had no public processes we needed to go through too, because often it is in the zoning where projects can get delayed. We had the correct zoning right from the start.
That has been an enabler for our pace. We have close proximity to our key reagent supplier. As I mentioned, we do a lot of acid-base changes. We need some acid and we need some caustic soda to change those pHs to control our process. We actually use more of these materials than we do the SPREC. Our location choice is very important to reduce logistics. We have also signed an energy service agreement with Entergy for 6 MW. We have all the power secured we need for separation. Even as we grow, we have water access, we have got barge access. Everything you need in the chemical industry is located right there in Southwest Louisiana. From personal experience, I have worked at, as I mentioned, at Rohm and Haas, I am an operations person at heart.
I started at a chemical plant in Louisiana, and the workforce for doing what we are trying to do or are going to do is just fantastic. They know how to run chemical processes. What we are doing, it requires attention, but it is no more complicated than the industries that are already in the area. Very exciting, and we really view this as an enabler for Aclara. This is a slide that we only generated very recently with the PEA coming out from Penco, and I was incredibly proud when we saw it. It looks like just numbers, and at Aclara, we are developing a vertically integrated supply chain, and we have heard this again and again. Two mines, one separation plant. It is complicated because we have these different steps. However, the huge advantage we have is the two mines.
Because this is a natural material that we are mining. There is variability, and what the mine engineers have to do, they develop what is called a mine plan, which is the sequencing of what order am I going to mine the deposit. What we have at Aclara is we have two levers, because we are able to, instead of optimizing just one asset, we can use these two mines, these two assets, to work together to optimize the whole supply chain overall. The mine planner, instead of looking at mine output, is looking at the separation plant output. Something about these separation systems, I told you they are slow and there are many stages. They do not really like variability. You want to try to manage them as much as you can to keep that feed as constant as possible.
When I saw this chart, I was just thrilled because you can see how even that production is over the years coming out of the mines, because the gray block is coming from the Penco PEA, and the blue is the spec coming from the Carina mine plan from the feasibility study. This is really, for me, was just some reinforcement of what we have always believed, that to do this, having those two mines is a tremendous strategic advantage for Aclara. But we are not finished yet. As Ramón said, we want to get to magnets. That means coming out of the separation plant, we have oxides. We now need to make these into metals and alloys that can actually be used in the magnets. Aclara Metals, that is our subsidiary for the metals project. It is a joint venture with CAP in Chile.
As Ramón mentioned, decades of experience in ferroalloys. This has been just tremendous because there are things that come naturally to them that is not natural to the miners or the chemical engineers like myself. So it has just been tremendous to get that experience. But we started off researching, looked all over the world. Where is the best technology that we can access to help us in metals and alloys? We went to South Africa to look at fluorination testing. We were in the U.S. in Phoenix looking at vacuum induction melting. Strip casting training at the prestigious Fraunhofer Institute in Germany. We took all this information and came up with a flow sheet that you see on the left. So we have to take 100% of the terbium, 10% of the NdPr, take that through fluorination. Then we have an electrolysis step in the middle.
That's where you're actually removing the oxide from the rare earth to get it to metal to go into a strip caster, where you're going to make the flakes that are needed for the magnets producer. But there's a step missing in this. You can see on the left I've got my fluorination covered, vacuum induction melting covered, strip casting. Electrolysis was a bit of a problem because if you go on the market today and say, "I want to buy an electrolysis cell to convert my rare earth oxides to metals," you can't buy it. Doesn't exist. So what we have done is we have been developing a prototype standard that everyone does it. Everyone knows the basics, but there's no equipment manufacturer available. So we have a demo plant running right now in Chile on the Huachipato site.
That's the steel mill that Ramón mentioned of CAP, running on their site, producing NdPr metal. So you can see another picture of that ingot that's been produced just a few weeks ago. So our cell that we have, that we were targeting 175 kg a day, we've already achieved capacity. So we're up and running well, and we've produced 500 kg already. This is taking oxides, converting it to NdPr metal. So this was the key de-risking step that we needed to achieve for metals and alloys, and we've successfully done that. So things we are looking at here, I mentioned about the equipment and validating the prototype, but also looking at operating parameters. Optimization, we think, in capacity, we can push things along a little bit more. And then our next step is to focus on quality and the purity of the material that we're producing.
But again, Mauricio will get to this, I'll give him a little shout-out. We're also looking at how can we use AI to help us optimize this quite manual process. So we believe there's a lot of opportunity there. Just think of Aclara. Every single step, we're de-risking, and then we're looking overall at the whole supply chain and de-risking the overall. So this will be co-located in Louisiana at our site. We've already completed an FEL 2 or conceptual engineering, and we are right in the basic engineering on FEL 3 that's targeted for the end of the year. So really moving along well. Key step for us here was to get through that piloting so that our technology was secured, and we've almost done that. We know we're going to be successful. So progressing almost in parallel with the separation plan now. Start up again, Q4 2028.
Metals, essentially the same timeline as separation. So this is the two of them overlaid. We only have to work on operating permits now. We're getting into detailed design procurement, looking to break ground in early 2027. Construction will last about two years, then we get into commissioning operations and start up of separation late 2028. And once we're through that, get into the metals early 2029. I mentioned we have individual projects we're developing in the countries, but then as a corporate team, as you could see on the organization chart Ramón presented, we have very strong country teams to drive progress in country, and then we have overlaid a corporate team to make sure it all comes together. This is the overlay of all four projects. What you can see, we're going to get Penco, it's the smaller project, up and running first.
At the same time, Carina will be in construction. Dynamo will finish a little bit before Carina, and that feed from Penco is going to enable those early operations, getting through the teething problems and up and running. Then once we are through that, we will have Carina coming online to fulfill the need for SPREC for sustained production. So we are monitoring very closely. We are monitoring, obviously, as I mentioned already, technology, but also our schedules. We have to manage it very carefully, and we have got a fantastic team that is working between the different countries, making sure this comes together as a whole. With that, I am going to hand it to Mauricio Carrasco. I just want to shout out about what him and his team are doing. You have probably read, there has been a lot of news articles about the art of separation.
Well, in today's world, we always knew the science. We just did not have the computing power to do it. Now we do. On top of the computing power, we have AI to help us use it and implement it on our process. So hand it over to Mauricio Carrasco, who is going to tell you all about it.
Okay. Thank you so much, Hugh Broadhurst. Okay. Today, I am going to talk about a little bit how Aclara is using data, new technologies, the artificial intelligence, and also the computer power to build a real competitive advantage. One of the key technologies behind this strategy is something that we call digital twin. So first, what is exactly a digital twin? In simple terms, a digital twin is a virtual version of a real process. Think of it as a virtual environment of code and equations where we can experiment, test thousand of scenarios on a computer and see what will happen in reality. All of that without touching a real plant. So why is this so important and relevant to us? Because a digital twin help us predict operational problems before they happen.
It also, the digital twin help us to understand how complex process behave under different operating conditions. With that understanding, we can make better decisions, optimize the process, and improve the efficiency. This is exactly what we want to achieve in our two key process, the separation and the metallization. The challenges are different in each one, but as Ramón Barúa said, the objective is the same, a faster ramp-up. In separation, the digital twin help us to adjust the process when the composition of the feed change, while keeping always the efficiency and the product purity. In metallization, it help us decide when is the ideal moment to feed the cell and also when is the ideal moment to remove the final product. All of these allow us to reach a stable operation condition faster, reduce the operational risk, and finally, a shorter ramp-up.
Let's talk a little bit about how we build the digital twin for the separation. Here, first, we sign a partnership agreement with Argonne National Laboratory from the DOE, because the idea was to adapt one of their most advanced and accurate simulator to the rare earth chemistry. Then use that simulator to generate a large amount of synthetic data, and then use that data to train our model. Finally, we validate the model accuracy using the real data from our pilot plant at Virginia Tech. What's come next? Today, we have a steady-state model, our next steps is to build a more complex dynamic simulator. To that, we secure funding to allow us to keep improving our digital twin and also improve its accuracy. Also more important, this funding give us the full access to the computing power from the DOE.
This will be essential for the future because as we continue refining the model, we are going to need more computing power. Finally, we are applying for the phase II of the Genesis Mission. The role there is to connect the digital twin directly to the industrial plant so it can adapt automatically to changing conditions. For the metallization, we are following a very similar strategy, but here we change just one part. Here we connect a neural network directly to the cell. The idea was determine when is the ideal time to feed it and when is the ideal time to harvest the product. This is especially important here in the electrolysis because making this decision at the right moment improves the energy efficiency and also the product quality. Here with the AI, we can make decisions based on real data at the real time.
What's come next? Our next step is to add the robotics in order to automate both the feeding and the harvesting. The goal is a process that is more efficient, more precise, and over the time, more autonomous. Finally, let's talk about the exploration. One important characteristic of our ionic clay deposits is that they sit very close to the surface. That create a great opportunity to use spectral images from satellites. In collaboration with Stanford University through the Mineral-X initiative, we developed AI models to combine these type of images from satellite with the geological data. These type of technologies can allow us to analyze large areas of land and identify the most promising zones. In the future, these type of images will become cheaper and more accessible.
Developing these capabilities today put us one step ahead, ready to turn into a real competitive advantage for Aclara. What have we achieved so far? The results have been very promising. We have already identified several new potential mineralization zones, and we are preparing to send our teams to the field and validate them. That is exactly what we want. Use the AI to help our geologists explore faster, reduce uncertainty, and make better decisions. Thank you so much.
Yeah. Let me highlight one thing. One thing that I just wanted to jump in and highlight, because I want to show off a little bit what Mauricio and his team done, because I am so excited about it. I will jump back a slide in a second. When we go to start up a new circuit in the pilot plant right now, we have a starting operating condition. How we do it is we set the condition and we say, "Let's run for two or three days and let's come back and see how it's doing, and then we will think about making another decision." Look at this slide here in the middle with the AI agent. What he's able to do with that dynamic model with an AI agent is to literally produce operating instructions.
If you look at the timing on the left, we are talking hours instead of days or weeks. Just the capability of making successive decisions, because right now, because it's just our mind and our feel of the process, this is the art that you hear talked about from the processes in China that have been run. This takes the art out of it. This is all mathematical. It has sound basis. Now we have operating instructions to be able to greatly speed the ramp up. This is why it works. Because today it's feel of a human being and we are risk adverse. We do not want to be too aggressive and then we have the process go unstable. The beauty here is now we have a very fast operating instruction that's vetted by science and will just save a tremendous amount of time.
I just wanted to jump in because it's not a buzzword, it's real. Congrats, Mauricio.
What, it's me. There we go. I am not the technology guy, by the way. All right. To talk about ESG, I first need to go back to talking about our shareholders.
Because I believe that's where it all comes from. When we talk about sustainability after being in Hochschild for 20 years, it's at the core of everything the group does, whether it's in cement, whether it's in mining, whether it's in education. Really for us, it's part of our DNA. I believe also CAP shares those values, and that's why they are such great partners for us. They really have come to work very closely with us in terms of our sustainability strategy, in terms of moving it forward, and in terms of implementing it in Chile. Going back to the beginning, when we started this, we said, "How do we make rare earths? How do we produce heavy rare earths in the most sustainable fashion?" As Ramón pointed out, we started with the process. The process here is key, and it goes to environmental stewardship.
It goes to protecting the environment. It goes towards using the least amount of water possible. It goes to recycling the reagents so that we have the lowest impact. In general terms, when we talk about environmental stewardship, we start with the technology. We start with the technology that we developed and that we are implementing in our process. It also has to go to the studies that have to be grounded on technical and environmental basis. Our EIAs, whether they are in Chile, in the U.S., or in Brazil, are grounded on these very solid studies that not only comply with local regulations but also go beyond that. We are seeking to be IFC compliant and also be aligned with the Equator Principles in everything we do. We are going beyond what is required of us. We are doing critical habitat assessments. We are doing biodiversity action plans.
We are making sure that our social engagement strategies are aligned with IFC standards, and so forth. Really, for us, it is not only just about doing what is expected of us, but also going beyond that. Also, we talked a little bit about it in terms of the process. The way it is designed, progressive reclamation and revegetation are part of what we are going to be doing. I want to emphasize the word progressive, because it is very important for the mining industry in general to do closure of mines the right way. The right way to do it, not only from an environmental standpoint but also from a financial standpoint, is to do it progressively as you advance in terms of your mining. The first pillar of our four-pronged strategy is environmental stewardship. The second one is safety and people.
We are dedicated to the safety and health not only of our employees but also of our contractors and obviously of our communities as well. Our process here, again, helps us with that because we do not have any blasting. We use a common fertilizer as a key reagent. We do not have tailings, and all of that makes for a safer working environment. People are going to be exposed to less risks than you would normally have. We are also, again, going back to our past and our shareholders. We come from a very strong corporate culture focused not only on safety but also on what we consider our core values. Hard work, responsibility, teamwork, diversity, and inclusion.
All of that is part of our day-to-day, making sure that as a young company, because we are relatively young, we have been around since 2021 formally, we make sure that we continuously strengthen the culture of the company to make sure that we are responsible, that we care for people, and we care for communities, and we do things the right way. The third pillar, social commitment. I have been around in mining for almost 20 years. I can tell you that this is absolutely critical. We are working with our communities to make sure that they become our long-term partners. In that sense, our commitment is to generate long-term value with them. That starts by early, open, transparent communication, and a small example that I listed there in the presentation is our Ac lara in Penco.
Even in the most difficult times of the project when our acceptance rate was very low, we decided to put a house right in the middle of the town so that it could open its doors to the community so that people could come get to know us. We could have day-to-day conversations with them, build trust over time, and that is just part of what we do. We have to make sure that we are always communicating in a transparent, simple, and open way with our communities to generate the trust that we need to make sure that we have long-term relationships. Investment. Obviously, communicating is not the only thing you need to do. You also need to invest in the communities. We invest both in Penco and in Nova Roma in Brazil.
In Nova Roma, we have made some very strong commitments to invest both in infrastructure but also in services to the communities. It is a very tiny town in the northeast of Goiás, and we are there long-term to make sure that they have a sustainable development and that we can together generate value for them.
Finally, local hiring, training, and supplier development. It is part of our commitment. It makes all the sense in the world. It is the most basic thing that we can do for them is to generate jobs and opportunities for local suppliers. To do that, we need to train them. We are working with them very closely, both in Penco and in Nova Roma, to make sure that the workforce is ready so that when we begin to scale up, both in terms of construction and in terms of operation, we can prioritize local employment.
We can prioritize local suppliers and create these value chains that will be part of the ecosystem that we will generate. Finally, governance. Again, going back to our shareholders. Very strong culture of strong governance. It starts with an independent board. We have a sustainability committee that oversees the implementation of our ESG strategy. They are very actively involved in everything we do. We really value their participation, and they help us become better every time. Part of that is having a responsible business culture, solid framework of policies and procedures that allow us to, again, strengthen our culture, but also ensure that we have the adequate controls to make sure that everything is done according to our practices. Obviously, whistleblowing. It is part of our governance structure. We have had it since day one.
We have it at the corporate level, but we always also have it at the community level, so we can understand any grievances or any concerns that happen from the beginning so that they do not become conflicts. All part of our governance structure. Now, how does that all work in practice? Well, very happy to say that in Chile, as our colleagues have said, we have received our EIA, but it was a process. It went from a very difficult situation where we did not have much approval to now where the EIA has been approved by unanimity by the Council of Ministers. We have gone from, let us say, from a relationship where we were trying to generate trust to now talking about long-term value. How do we work together to make this a success for everybody?
In terms of the U.S., Hugh explained that the permitting has been a bit simpler for all the positive reasons that Louisiana offers. Being active in the community is also important. As you can see in the pictures there, we regularly participate in town hall meetings. We are engaged with the local parish in Port of Vinton. We are also working with the state authorities to ensure that we can work together and make sure that we develop the area according to our plans.
Finally, Brazil. Brazil, we are working towards the licença prévia. It has been a longer road than we had expected, but we are very confident that we are advancing steadily but surely in the right direction. Let me take a moment to talk about the state of Goiás, which is critical. The state of Goiás is a mining-friendly jurisdiction. It is a state that already knows rare earths. Serra Verde operates there.
They already know the Hochschild Group also because they have an operation in the state, the Mina de Mara Rosa. The Governor, who appears in the picture, a very young, charismatic political leader, Daniel Vilela, is also a very strong supporter. He believes in critical minerals. He believes in rare earths. He has already announced that he is creating a Secretary of Mining during his term, which starts in January. He was just elected for Governor. We are very encouraged by all those signs and believe that the license will be forthcoming towards the end of the first quarter as has been said. We did sign an MOU with the state of Goiás back in 2024 to work together to make this the Carina project a reality as quickly as possible.
Finally, just some more pictures of Brazil and the engagement with stakeholders, whether it is at the state level, whether it is at the local level, whether it is at the federal level. We work very closely with all the stakeholders to ensure that we generate the right atmosphere, we generate the right conditions for the project to be successful long-term. Thank you.
Short and sweet. Thank you. Now we are going to talk about results. How all of this that we have spoken so far really translate. This is a business ultimately. We are not doing this for a caritative reason, though, we are obviously putting a lot of effort in our community and our environment, but we are doing this to have very good results as well. What we have spoken, we have consolidated everything in a single financial model. That is not easy to say because we have four different business units that obviously have its own financials independently. Now we have to merge them all together because they are integrated. In this integrated model, we have considered and we show how we convert a ton of clays to a kilo of SPREC.
A kilo of SPREC, how we convert it in a kilo of separated oxide, high purity, and how we convert a kilo of high purity oxides into the metals. All of the different efficiencies in the mine, in the process, everything is consumable in the model. All the working capital we need, all the investment that we do to protect our environment, we want to leave the site better than when we receive it, and all the investment we put to create value for our communities, everything has been considered in this financial model. I am very proud of that because it has not been easy to put it together. How much it is going to cost? This is going to cost $1.7 billion to construct this supply chain. This number, we need to contextualize it. It sounds a lot, yes, but let us put it in context.
We will be able to supply approximately 15% of the official production of China for dysprosium and terbium. Production of that scale can literally change the geopolitical landscape that we see today. We go beyond the dysprosium and terbium. We will produce yttrium as well. We have spoken a lot. We will be able to produce approximately 1,300 tons per year, which is approximately 10% of the global supply. We are also looking to produce important quantities of samarium and gadolinium. These two elements are very constrained these days. We complement all of that with our NdPr production, which while it is not so constrained these days, is very important for us because when we want to manufacture the iron boron alloys, we will require this NdPr as a base. In context, now the investment actually does not sound that big now.
Now, we want to go back to the upstream and look at our assets. The largest investment we have is in Carina, $780 million. It offers also the most compelling economics. This is a very low-cost asset and provides a very significant value for the company. It is very well complemented with Penco, a much smaller asset and in terms of investment, but very rich in heavy rare earths. While there we do not benefit of economies of scale as we do in Carina, we more than offset the higher cost with a much richer product on heavy rare earths, and we can see it on the basket price. We also bring very compelling economics on the NPV on Penco. Then, talking about Project Dynamo, which is where we consolidate all of this production.
Initially, we presented a smaller investment because we were only looking at the magnetic elements. Last week we announced our basic engineering. We have grown the project significantly. Now we have grown it to receive the Penco module material, and we have also expanded the capacity to process and to produce yttrium, gadolinium, and samarium. Now we have a $494 million investment, and this economy of scale has allowed us to reduce the cost on almost 40% to $26 per oxide produced in the facility. This is fantastic news. Then on the metals and alloys, while it is a much more investment and it provides a much smaller contribution to our value, from a strategic standpoint, it is incredibly strategic. It is one of the parts of the supply chain which is most constrained. When we present our products to the customers, they all want the alloy. Because?
Because they do not have where to metalize the oxides today, and they do not want to carry that risk themselves. So we are solving that problem for them. How does that look in terms of economics? We will have a value of approximately $3 billion, and you can see that the IRR is well distributed among the price. We want to be profitable in all the steps, in all the projects of our supply chain. Obviously, prices are important, and we have used Argus Media ex-China prices, and we want to show how do they compare actually with the spot prices that we are seeing today. They are much lower than the current prices. This is okay. Now we are taking a more conservative stance. The praseodymium and terbium for us represent approximately 40% of our value. Yttrium represents approximately 30% of our value.
As an yttrium, it has been a kind of a new product that we are aiming to produce. We wanted to be a little bit conservative there. So we received an Argus price of $500 per kilo, which would have made our economics seem much, much nicer. But we decided to cap it in half, just to be conservative for now. The same case with gadolinium. We received a forecast average price of $1,000 per kilo of gadolinium. We decided to cap that in only $350 just to take a conservative stance. Look at where the spot prices are. These are order of magnitudes, from two times to even five times of the prices we are considering. Then we have NdPr. NdPr is not so constrained, and today we see a smaller price than what we are projecting.
But there is a reason behind that, and the reason is the adoption of robotics. If we really believe Elon Musk, and I think the market believes him, or why he would have such a big market cap in his companies, this is a reflection of that. Once the robotics is adopted, the NdPr industry will have a boost, and obviously the prices we will see that they are going to come up. So we want to show how also our EBITDA is reflected across the different units. Here the biggest contribution again is in Carina and in the upstream considering Penco as well. Also we have value now coming from the downstream. Important, Project Dynamo.
These are attributable numbers of EBITDA, which means that in the case of Penco, we have 80% ownership, 20% is owned by CAP, and in the case of metals and alloys, this is only the 50% of the EBITDA because the 50% is attributed all to CAP. This number reflects what we will be able to generate once we put all our assets in production. But there is more upside. This is not all. Where is the upside? Obviously, we see that the prices will continue to be high because the dynamics of supply-demand that Ramón already explained are really a basis now to assume that.
The other thing important is we are exploring for new deposits, so more resources will become available. We can process more rare earths. We are only attacking seven products or basket price. The super heavies, we still can go there and that can command also value.
We can also increase the purity further of the separated oxides. We are normally targeting around three nines, which is 99.9% or four nines, which is 99.99% purity. But if we go beyond, that will command a higher price. Finally, something that we've now received a lot this question is, are you going to process third-party material? We are considering it. It's not our first part of the strategy, but we have space in Port of Vinton to allow to expand the facility and to bring third-party materials to be processed by Aclara. So there is significant upside beyond this number. How we're going to finance this supply chain, this $1.7 billion. The financial strategy that we have created is looking to mitigate the financial risk as much as possible. We start with the largest asset, Carina module, Carina project.
In Carina, we have received already $5 million investment from the DFC. They see this project as very strategic, and they don't see this project only as an N-break project. They see this project as an integrated project that will produce final products. Now they have a financing preferential option to put additional financing in Aclara in Carina. The next asset, which is the second largest in size, is going to be obviously Louisiana facility. For that, we've talked extensively. EXIM Bank issued a non-binding letter of interest of up to $750 million, which is more than what we need for the debt portion of this project. This has a 10 or 15 years, which allows us to have very good flexibility on the repayment of this facility. So that already contains from the $1.6 billion, the majority of investment.
Penco, it's a more manageable asset from our side. We have CAP invested at the subsidiary level. CAP has an option to increase their percentage ownership from 20% to 40% by investing $50 million, which would be the equity, and we are already structuring project finance with private banks, with multilaterals to complete the funding for Penco. Once we have secured these funds, we want to raise money through the capital markets for the remaining portion of the investment that we need to build. This is a staged approach. We are working together with the U.S. government. Why? Because all of that we have talked today needs to go very fast. We cannot wait until we get the funding from private institutions, it would take a lot of time to get.
We need to really start very soon, and the U.S. government provide us that path. This is very related to the offtake strategy because obviously we need to sell our rare earths, and we need to have the binding agreements today. The U.S. government provides a path where we can already start with the funding process while we are closing this contract. Passing to the next slide, we're going to talk a little bit about that offtake strategy. We have already signed three non-binding MOUs with end customers. These are not only an MOU that is simple. This is private, we have not announced it, we don't plan to announce it.
This is an MOU that has a path to become a binding agreement by qualifying our products through our pilot facilities, both oxides and metals, by getting the permits, by completing the engineering, and by getting the finance. We are dealing with end customers, and we are dealing with electric vehicle manufacturers, but the customer base has grown and has diversified, which is amazing. While it is more work from a commercial standpoint, it also provides robustness to economics. We are now dealing with companies that will probably use robotics, aerospace, and power generation equipment that really need these rare earths. How do we face these commercial negotiations? This is very important, and we have guiding principles that are key for us. During the first years when we have to repay the investment, and this is a large investment, we want to secure a minimum income.
This is an insurance for us, but it is an insurance for the customer as well because they want reliability, and if the prices would go down, they do not want to be hanged without the product. We do not need this for the full life of mine, we just need this for the initial payback period that you have seen is around three-five years. The customers understand the situation. They are willing to support us, but we need to adapt to their needs. We need to adapt to their needs, which means that they also want to protect themselves. So while we consider a minimum income, they might consider a maximum income. Some of them will like fixed prices, some of them will like a cost-plus basis.
The important thing is that we protect the minimum income during the reliability. Then we want to be exposed to prices.
Once we repay our CapEx and when we repay our facilities that we will receive, we want to be exposed to these prices because we think there is a lot of upsides on that side. These next two slides are mostly for investors. This is a comparison of Aclara to some of our peers. You will be seeing there Lynas and MP as very strong names, USA Rare Earth, and there are other ionic clay deposits that have sounded in Brazil. But I want to focus on three specific aspects in this comparison. First, the shareholders. I am not going to get tired to mention that because the shareholders, again, provide long-term vision, provide operational experience. We are seeing this with eyes of operation, not project eyes, and this is completely different to other projects. They also bring financial backing, important, and they bring very important corporate governance and order.
If we want to invest $2 billion, we want to invest it with a very strong structure from a corporate governance perspective. The other point that was mentioned by Hugh that I would like to mention is metallurgical tests, because we have heard sometimes, yes, your project has lower grades than these other ionic clays.
The amount of metallurgical tests that we have done in our two deposits is incomparable to our peers. So we have done around almost 30,000 or 20,000, sorry, in Carina, metallurgical test in Penco, around 10,000. That allows us to predict exactly how much are we going to recover of this praseodymium-terbium-yttrium in each specific part of the deposit. So we are not here to play and to see what would happen in the future when we start to mine. We know exactly what will happen, and this is important. Again, it reinforces the point of reliability.
And finally, is the heavy rare earth aspect of our assets. If we compare them, Penco, it's a jewel in the heavy rare earths. We haven't seen an ionic clay producing more heavies than Penco in terms of kilo per product. Carina is also very strong. All of that combined with vertical integration. That's what we see how we compare actually with our peers. Just to finalize, and this is also very important for investors, is what is the value proposition of Aclara? We like to compare with two very known companies, MP Materials and Lynas. Both of them are light rare earth producers, both of them integrated. MP Materials listed in the United States, Lynas listed in Australia.
Today they are receiving a very high enterprise value compared to the EBIT that they will generate. Why? Because of everything we spoke, how strategic is this? How strategic is this to power trillions of dollars in industries that are today dominating the global markets. In Aclara, we believe we bring a new and a different value proposition. We're going to produce the heavy rare earths in an integrated fashion. We believe that there's significant value to unlock in the next years to come once we execute the projects. Thank you.
This is the end of the presentation. Thank you very much for attending. Clearly, the Western world has a weakness. We have the solution. We're working towards that end. I think that we are progressing at a pace that virtually no other company in the rare earths space has.
I think that although we started as a mining project in Chile, we've become now a technology company. Technology is such an important part of what we're doing. We're validating all the developments that we are pursuing via piloting. We're doing this very seriously, as Francois and the rest of the team mentioned. We know exactly what's happening on the mines that will tell us what the intermediate products that we have will do. That adds, again, re-emphasizing what Francois mentioned, reliability. We are here because the current supplier, it's concentrated and it's unreliable. We have a solution for that. We're here to stay. We're here to be here for the long term. Thank you very much. Happy to take questions. Thank you. If there are questions from the room, happy to take them, and then Gustavo.
No, let's start with Andrew, and then Gustavo is taking the questions that are coming through the webcast. Let's start here first with the room. We can go to the webcast, and then eventually we can come back to the room also, no problem.
Thank you. Thanks for that presentation. Andrew Wong from RBC Capital Markets. A lot of interest from the U.S. government for funding. Can you just talk about the unlocking and the milestones to get the actual funding from U.S. EXIM and also from the DFC?
Absolutely. Look, I think from a political standpoint, from a decision standpoint, I think that we're in very good shape as per the documents that we have already disclosed to the market. Both in the case of the DFC and the case of EXIM Bank, there is a willingness to support an effort like the one that we are pursuing. The steps start with a technical due diligence, which they have been conducting, and we have been sharing all of our information with them. There is also very, I would say, sophisticated standards in terms of ESG. José Augusto has been leading. They have their own processes. But I can report that we're working closely with them in order to get to that stage. It becomes a bottleneck.
Because probably you saw that many of the commitments that we have made in terms of dates and starting dates in our presentation have always a qualifier subject to financing. That is going to be sort of the bottleneck that we need to go through in order to secure the funding and start building more aggressively. In the meantime, we are focused on developing the technology and further de-risking all the different aspects of the supply chain.
Okay. Thank you. For each stream, obviously, that's a pretty big differentiator for your projects. Prices have gone up pretty significantly. When you talk to your potential offtakers, how do you come up with the price given that we've seen prices at $5 and then now it's $1,000, and it's obviously critical for what they need?
Look, that is certainly a very interesting discussion. Prices, because the first thing that we try to negotiate is if there is an indicator, an index that we can refer to regularly. I think that the market has already fully agreed that the Chinese prices are not the reference. Then we need to start looking for other Western sources of pricing. We have some. We use a lot Argus Media, for example, which is, I would say, a very serious supplier of prices. There is strong variability around them. What we are trying to fix is floors and caps to those levels. For us, of course, the most important part is to negotiate the floor. Because as Francois Motte mentioned, we need to ensure that at a floor price, we are still profitable. That is a big discussion. The way in which we approach it is very transparently.
We open our books, we tell them what our costs are, how much money do we need to make in order to support the financing associated with that production. That's how we are trying to reach agreements. Importantly, we have a limited amount of contracts. We call them the premium contracts that we want to negotiate because after that, after those are gone, as Francois Motte mentioned, we love the exposure. We have studied this market upside down. We don't see supply coming in in the short term. Of course, in the long term, many things can change, but in the next 5- 10 years, there's going to be very limited supply and demand we see it rising. From a business standpoint, we like the exposure.
Maybe just one more here. In terms of Brazil, obviously the permitting is taking a little bit longer than you anticipated. How much of that had to do with the elections? Also just in terms of your expectations on when you can go through the various stages. Just what does it mean with the different stages of licensing? What can you do at the different preliminary and then installation? What are you allowed to do?
Yes. Look, that's a great question. First of all, as José Augusto Palma mentioned, the relationship with the state of Goiás. By the way, our permit is not approved by the federal government, it's approved by the state of Goiás. Our relationship there has been fantastic since day one. We started with working with Governor Ronaldo Caiado, who recently left office, and the Vice Governor Daniel Vilela assumed. Now Daniel Vilela has been elected as Governor with a very strong majority, fully supported. We've met with him several times. But of course, that is a political support. We need to go through a very stringent process of evaluation by the SEMAD, which is the environmental agency. We've gone already through two rounds of questions that we have responded.
The last filing we did, José Augusto remind me, please, it was early October, on October 4th, if I am not mistaken, where we have submitted our responses. The state of Goiás has already permitted Serra Verde, has permitted Hochschild's operations there. In Brazil, good references are Meteoric and Viridis, who have also received their, the first license. We are very optimistic. Of course, we are proposing to do something that is rather innovative, especially on the front, for example, of the deposition zones, without tailings dam, et cetera. We need to go through the motions of demonstrating that what we are doing is inside the rules and regulations. We are quite optimistic about the work. We have also adapted two requirements in the state of Goiás to use a new software that they call the IP system.
That when fully implemented, we believe it is a great tool for permitting, but we are the first ones to go through. So there have now been lack of instances where the software was not working very well, et cetera. Fundamentally, I would say we are in a very strong position. We just need to go through the motions. Next step is to go through the audiência pública or public communication. Follow us closely. That is the next announcement that we will do, and that is going to be the, a very relevant next stage in the permitting process.
The permitting stages.
The permitting stages. The licença prévia is the hardest to get, is the EIA. Then the licença de instalação has further commitments, but we believe that once we have the LP, the other ones will tend to follow. Not easily. Of course, we need to pay a lot of attention. This has become, for José Augusto, almost a full-time job. I see the. I do not know if, José Augusto, if you want to comment anything different, but the licença prévia seems to be the single most important license throughout the process.
Yeah.
Do you have a timeline for any of them?
Yes. As Ramón explained, in Brazil you have a three-phase licensing process. The most important being the licença prévia or preliminary license, as we call it. That determines the environmental and social viability of the project. Then comes the licença de instalação. And then finally, the operation license that is basically once you're in commercial production. So that's really at the end of the process. In terms of the LP, what we're estimating based on the information that we have today is that we believe and are optimistic that we can achieve that by the end of the first quarter. Okay. Then in terms of the LI, we want to differentiate between what we call early works, which are some work streams that do not necessarily require a permit. And then also one of the key items that we would like to start doing is building the access road.
For that, we believe we can get a specific license, which is separate from the LI, that we aim to obtain during the second quarter of next year. The LI will take a bit longer because you have to meet a series of what they call conditions that come attached to it, or requirements. So we're forecasting that for the end of next year or early 2027, in time to begin constructing after the rainy season, which ends in March. So the rainy season, which goes from, let's say November to March, is a less productive time to build. So ideally, we should have our LI or our installation license to be able to begin constructing right after the rainy season ends in 2027. Right? I'm sorry, 2028 .
2028.
2028, I'm sorry. 2028.
Sorry. By the way, it's in the screen.
Screen.
The top line.
The difference in what you can do with the two licenses, like the preliminary allows you to do early works?
No, the preliminary doesn't really allow you to do much. It just declares your environmental and social viability.
All around the world, it is the most difficult license to get your EIA approved, whether it is in the U.S., whether it is in Chile or anywhere else. It is really the gating and most difficult item. Once you have that, your project is viable, then it is a matter of getting the construction license to actually implement it.
José, on the EIA, in Brazil, is there a very large component of public participation when you are going through these rounds? I know that while rare earth mining is not seen in the same light as, say, extractive industries like oil and gas, what is the view on the ground specifically towards rare earth mining in Brazil?
Well, critical minerals and rare earths in particular have become, I would say, a day-to-day topic in Brazil. They have been part of the national discussion, including during the presidential election, if I may add. So it is a very hot topic in general. I think Brazil recognizes that it has a historic opportunity to become a real player worldwide in terms of the supply of critical minerals, whether it is rare earth, niobium, and other minerals. In terms of public participation, yes, the EIA process does account for a public participation process. The culmination of which is what Ramón Barúa mentioned, which is, the translation would be like a town hall meeting, "audiência pública" public audience, that is held in the municipality where the project is located.
You can participate virtually, physically, and everyone goes, and basically, this is an opportunity for the company to present the project along with the authorities and answer any questions that may come up from the community. Obviously, that is not the only time. We have been working on this for the last two years to explain the different aspects of the project. How it is going to be built, how long it is going to operate, the jobs that are going to be generated, the impacts, both positive and negative, because every project has a negative impact. The key is how do you mitigate that impact so that the residual impact is very manageable.
Yes. Let me add to that. It is very interesting what you are asking because the focus of attention of the communities, for example, in the case of Chile and Brazil, have been completely different. In the case of Chile, they were almost 100% focused on the environmental impact of our activity. How would the flora and fauna of the region would have been impacted? We have been able to obtain that license, but not without an enormous amount of work, scientific work primarily with universities and with independent consultants to try to understand what is the proper environmental impact in the area. In Brazil, in the area where we are, it is completely different. I would say that by large, the main focus of attention is how Aclara can impact the economic development of the town of Nova Roma.
In the northeast of Goiás, we are in an area that is called the poverty belt of the state of Goiás. The town of Nova Roma is an area where there is a lot of still developmental deficiencies. Most of the work that we are doing there has to do with identifying those necessities that have to do primarily with access to water, access to employment, access to education, and access to health. How we as a company can mitigate those impacts. At the beginning, we started working under a concept that we were responsible only for a certain part of those impacts. Another part was responsibility of the government. Soon we realized that we have to take care of 100% of the responsibility.
In the $780 million of CapEx that you see there, for a starting stage, there is $20 million that are not going into equipment, but are going into development of the community of Nova Roma, starting with access to water. The water quality can be significantly improved in the short term, and we are focusing on that as a short-term goal. Doing that even before the licença prévia is even considered. Then, during the licença prévia and the licença de instalação, once we obtain the licença prévia, we are committed to start doing a significant amount of work. We are prepared as Aclara not to make the mistakes of the past of offering things and then not being able to deliver.
On the contrary, we are putting together a specialized team within Aclara of engineers that are not going to be focused on building the asset, but are going to be focused on building the infrastructure that we have committed to develop. The focus, again, is completely different, and in Brazil, we are going to be measured against the development that we bring into town. We signed an MOU with the government, with Governor Caiado. They offered us to expedite the permitting process as much as possible within the law, of course. What they asked in exchange from us was to prioritize work opportunities to the local people from Nova Roma, something that we have been doing. In many cases, they have not been prepared to do those jobs, so we are training them. The second part is local suppliers.
We have also been working and doing workshops with the local suppliers in order to improve. We are users now of the restaurants, of the hotels, et cetera. So the training is also beneficial to us when we go and visit the site. Of course, there is also an immediate impact of having a big company like ours arrive in a small town. Immediately the dynamics and the economics of the town start changing. You start creating friends, you start creating foes also at the same time. It is a process that we need to go through, but at Aclara, again, you have heard a lot of emphasis on sustainability, on reliability, and if the town of Nova Roma and the town of Penco are not very successful at the same time that we are, we are not going to be sustainable. So we have that very clear.
We are partnering with the U.S. government. We think that also, it is a great opportunity. It is also an honor and a great responsibility because if we are asking for taxpayer money, we need to be incredibly responsible in the way in which we spend that money. But I can tell you upfront that a part of that is going to go to make sure that we co-develop our local communities together with us. That is a very strong part of our vision.
If I may, one more question. Thanks. Francois, this one is for you. Obviously without breaking the bounds of non-confidential information, but in the presentation, you have got some IRRs in here, project IRRs of between 26% and 27%. I recall seeing those in the project reports on Penco that were released earlier. I am assuming that given that these are typical project reports, that IRR is on a project basis, so it is ungeared. Do you have any view on what geared IRRs look like?
Yes.
What the impact, which you can share with us and what impact the price of neodymium would have on your IRRs in general, given the fact that you are predicting higher pricing than is currently available in spot. Thank you.
Absolutely. The IRRs, as you mentioned, are unlevered. Once we lever the company and we put all the debt in front, those IRRs obviously will go high, and it will become a much stronger story because now we are not putting all the investment at the top front of the model. That for sure, and it increases significantly now to 40%-45% IRR once we lever there. In relation to your question of NdPr, something important is that the diversification of our product is very good. NdPr, as I mentioned, accounts more or less for 20% of our value. If the price does not get to those levels, and let's say, we don't see the robotics pulling this because maybe a lot of supply comes available and the dynamics don't get there, the heat is not going to be relevant for us.
I mean that probably if we're talking about 25%-27% IRR, we're going to be still between 20% and 25% IRR. Again, our story is in these heavy rare earths, but now it's diversified because it's not only dysprosium and terbium, that's 40% approximately. It's also yttrium. And then gadolinium and samarium. Samarium is zero today, and there's no clear even price of what is the price outside of China of samarium. Today, we've used $3 in our model because there's no other data available. But the things what we're hearing is that probably that will go in the hundreds of dollars per kilo. That's not even accounted in the model. Your point is on the aluminum front, that's also a material. Yes, there could be some downsides, but probably they will be balanced with some upsides on the heavy rare earth front.
That's how we see it.
Let me add something that is really important. One thing that is important to us is that we are not looking at the individual prices. It's not like we are going to do very well in dysprosium and terbium and doing very badly in neodymium and praseodymium, where there is more market supply. Because in the way in which negotiate our contracts, and it's happening to us.
For example, we have customers that come to us and say, "Okay, I want to buy all of your terbium." We say, "Well, if you want to buy the terbium, you have to buy the NdPr as well." Because they say, "No, we have other sources, of cheaper NdPr." If you just want to buy the terbium, then you have to pay higher prices, a higher price for terbium, because then how do we find another customer that just wants to buy the NdPr, which is much harder. I think what I'm trying to say is that having the heavy rare earth also give us a lever to negotiate our product as a basket. That is also happening positively. Because prices is a big issue in the market. Customers are very demanding in terms of the prices that they want to negotiate for.
Having yttrium, for example, has also allowed us to have another contributor. In the end, we need to sell a basket, either through one client or through various clients at the same time. Of course, if we are able to negotiate all of these prices individually, we could also have fantastic returns, but the reality is that we need to start by existing first as a company by having revenue. These first contracts, we are willing to figure out how to balance the different prices. What we tell customers is the more rare earths you purchase from us, the lower the price that we can give you for your contract.
Guys, Tyler Bisset, Goldman Sachs. Thank you guys for this presentation. It's been super helpful. Can you talk about the flexibility and potential contingencies you guys are building into your plans here? If Penco or Carina are delayed, could you supplement with third-party feed until those are both online? If so, how easy would that be to do since you're looking to process this higher purity material and maybe vice versa, if Dynamo is delayed, are you able to just sell your SPREC? Is that part of your tendering discussions at all?
Yes.
Excellent question. What I can tell you bottom line is that we have enormous flexibility in the system that we have developed. The first important concept to understand, which is that, for example, although the separation, we are designing the throughput capacity to be able to address Carina and Penco. It could work alone just with Penco, for example. Has an impact in the way in which we operate it. Probably will cost a little bit more, but technically is absolutely feasible. We can start the separation just with Penco while we wait for Carina or vice versa, or we could have the two products coming in at the same time. We have that flexibility. That's the first point. The second point is about flexibility to process third-party material. The easy answer is yes, but it has lots of constraints.
The first one is, I think it will be much easier for us to process material coming from other ionic clays. For us, for example, when we look at what's available in the market, the most probable is Serra Verde material could come in. But we have not seen their product. And what we would need to ensure is that there is absolutely no radioactivity in the product. We are incredibly careful throughout our design. Not only that the SPREC has no radioactivity, but throughout the process, there is no single point at which there is radioactivity in the process, and there is no radioactive waste also throughout what we're doing. We do not deal at all with radioactivity in our facilities.
Any product that comes to Louisiana needs to be absolutely radioactive free, because otherwise, when you separate it, you are creating a radioactive waste and who's responsible for that? Clearly not us. The way in which we're exploring opportunities with third parties is we would need to eventually intervene in the operation of how the MREC is produced, converted to SPREC in the mine. But that is not a cleaning process. It's a full intervention of the process. It's not too easy. Right now, I would say for us, probably the biggest opportunity is to have more mines owned by Aclara to add to the process. I'm not saying no, it's impossible. But look at the amount of effort that we're putting in designing the separation specifically for our very clean SPREC.
We would have to start by doing a pilot plant for a new feed in order to make sure that we understand fully the parameters before putting it in the system. The answer is yes, and probably we'll get there. It's a project for the future. Right now, we are fully dedicated to make sure that we can separate our own feed.
Then you talked about securing offtakes to cover the minimum income to repay your initial investment. What portion of your total output does that represent? And is that all you would need to secure to move forward towards full construction, or would you need to secure more than that to move forward? I guess how much of your output are you looking-
Yes
to secure before advancing to construction? Are any of your discussions considering price floors?
Yes. Probably around 50% of the production during the first five, maybe seven years would be enough to cover for the repayment of the construction. Of course, it depends highly on the prices that we are able to achieve. In terms of price floors, absolutely. As I was saying, that is probably the single most important thing that we're trying to negotiate in our contracts today. Even at the risk of leaving upside on the table, those floors are important because, again, we need to exist first. The other part that is interesting is our strategy to fund first with U.S. government money. Of course, we're fully aligned in the objective of having heavy rare earths secured for the U.S. and its allies as quickly as possible, produced in country. Going forward, the exposure to prices is a really important feature for us and for our equity shareholders.
We like the exposure. We believe that there is going to be a major undersupply of these elements going forward. We like it. Gustavo.
Yeah. If there's no other questions, we have received many questions online. I just want to state that we will reply to all of them. I'll bring up two main topics or two recurring topics. First one is the new critical minerals law that was recently issued in Brazil. People are concerned or asking how could that impact Aclara and what we're doing to mitigate it.
Absolutely. That is also a great question. The short answer is we do not know yet. The law was approved. It gives powers to a new commission that is yet to be fully defined in Brazil. The regulation that will tell us exactly what will happen is still yet to be published. Important to mention that that new law has been created with the intent of supporting or subsidizing the environment for doing what they call value-added value-added processes in Brazil. As you saw in the EBITDA slide, already all the value or most of the value is being generated in Brazil, and the stages of separation and of metallization have a lower impact in the value creation. First of all, we are really very pleased with the value that we are creating in Brazil. But we hear the message also loud and clear.
I mentioned that, for example, we are exploring for a new development, a joint venture with the Japanese government. In the future, why not we could consider doing separation for that project in Brazil rather than bringing it to Louisiana.
There are lots of things to evaluate, the access to financing, the cost of the financing, customers in Brazil, customers who are interested in purchasing separated material from Brazil. There is a lot of work to be done, but we are not closed at all. On the contrary, we are open. We have had already internal discussions, and some papers internally are being prepared to try to understand the feasibility of following that strategy. But we want to work together with the government of Brazil. We believe that the geological potential in country is enormous. As I mentioned, this is just the beginning. This is the first mine. We need to exist.
We need to acquire the technology first. That is something that we are doing at Virginia Tech, and we are going to do in Louisiana as well once we have it, so that we can bring it here to Brazil. Chile is also interested also in value-added processes. The reality is that many other countries as well. We hear the same needs from the European Union. We hear similar things from Japan and other countries as well. These are going to be highly demanded, not only products, but industries. The different political blocks in the world are really looking to become independent in terms of accessing these materials. I think that we are developing the right technology. We have the right mineral resources to become a solution for that problem. We are going to be ready to work with any country that is looking very seriously at this.
Absolutely, happy to consider it, and we are considering it already.
Yeah. If I may just add to what Ramón has said. We believe we're fully aligned with the objectives of the new critical minerals law in Brazil. First of all, and you can give more detail, but SPREC is in a way an initial separation. We are already going to be conducting the initial separation in Brazil, which is part of the process that ultimately the law seeks to achieve. In addition, we are working very closely with Brazilian universities already in terms of how to develop the supply chain going forward, and we continue to plan to expand that role. We have a history of working with universities, as we've mentioned, in Concepción, with the University of Toronto, UTEC in Peru, and this is just part of the process. I think everyone understands in Brazil that this is not something that happens overnight.
We ourselves are developing the technology in Virginia Tech, but our plan is to, once we develop that technology and we have it, to also potentially take it to Brazil for the future projects that we may have, either through JOGMEC or other exploration projects that we're currently developing. We believe we're fully aligned.
Thank you.
Excellent. Thank you. The vast majority of the questions, they were actually related to milestones. We received a few questions asking, when will Penco start construction? Or when will we get the EXIM financing? Maybe, Ramón, if you could wrap up potential or upcoming catalysts, if we could say. Of course, not giving any guidance, but what would be the next deliverables?
Sure. Look, I think that I see three very distinctive stages in the life of Aclara. We are just finishing the first one. The first one was to focus 100% in securing the assets. We have converted the resources into reserves. We have done a lot of metallurgical testing, piloting, acquiring the technology for separation, and completing the engineering. A lot of work with Hatch. Hatch has been helping us in Chile, in Brazil, in the U.S. We are developing all the technology under one roof, and I think that puts us in a great position. That stage is about to be over. We are getting ready for construction. I showed you also an org chart on how we are trying to beef up the organization, because one thing is to do studies and obtain the permits, and another completely different is to start building, again, four projects in parallel.
After construction, of course, the third stage will be operation, which is also a completely different situation. Now, what do we need to go to construction directly? Again, from a technical standpoint, we are ready. We are ready to jump the gun in Penco. We could even start doing early works at the end of this year. The parts that are missing are offtake and financing, and they are related. They are like the chicken and the egg because when we talk about financing, people ask us, "Okay, do you have the offtake?" When we go to ask for the offtake, people say, "Do you have the product today?" "No." "When will you have it?" "At the end of 2028." "Well, I need the product today. Can you send me a sample of your magnet?" We say, "We don't have a magnet." So it's a circular reference.
How do we break that cycle? First is talking to the government because the government funding is more flexible in terms of requirements of offtake. That's the first approach. The second approach is it's almost impossible to go, in this case, directly from A to B. Show me the offtake, and here's the offtake. What we think and our strategy is to approach this in what we call in concentric circles. What we have done is we have started, instead of asking for offtake, is asking for MOUs. Francois mentioned we have signed three. There are three more that are in the pipeline that are going to be signed, I would think in the very short term, including one that looks much more like an offtake.
We go with those MOUs back to the government and say, "Look, here's the interest." If we add all the interest that we have received, I can tell you it's very substantial, and it goes beyond what we can produce. So the demand is there. The demand is clearly there. When we go to the government, we ask the government exactly for the same thing, and you have seen the letter of interest coming from EXIM Bank, and that is also a signal for customers saying, "Look, here, there is a path to financing if we are able to progress." With that, we are returning to the customers and trying to commit to certain amounts, start negotiating floors and ceilings, which is the index. But the contracts are going to be subject to financing.
So again, it is not going to be a very solid off-take agreement, but we go back to the government with that. Right now, all of our dates are, this is what we can do. Technically, we are ready to go, we are ready to start running, but we always say it is subject to financing. We are in this process. What I can tell you is that where we were, I do not know, a year ago compared to where we were six months ago, it is exponentially different. Where we are today is exponentially different as well. When we see these prices of heavy rare earths going up in the market, that is a very strong signal to the customers that we are running out of these materials, and that we need a solution.
Although we solved the geopolitical problem for them because this is non-Chinese material, technically, again, they cannot see the magnet. From China, they are receiving today a magnet that they can plug into their technologies today. Now they are asking for samples. For example, something that we are working on and delivering samples. They want samples of SPREC, some of them. Others want samples of oxides. Others want samples of the metals. The samples also do not come out very quickly from the pilot plants. From separation, we already have the sample of NdPr, which is the first step, but people are asking, "Where are your samples from dysprosium and terbium?" We show you in the presentation. They should be coming in December. We initially hoped to have them in August, but the machine does not work that easy, and it is a learning process.
We are approaching there, and in December, we will have the samples. What I am trying to say is that, again, you cannot go directly from A to B in a system like this. You need all this information. Despite the difficulty, I think that there is no other company probably in the world that is doing what Aclara is doing. We are no doubt going to be the first ones who have samples of all of these, and we are in pole position to capturing those off-takes. The off-takes are also not something like you go there and they say, "Okay, I want this process." You have to go through the certification of becoming a supplier for these very sophisticated companies. How do you do that? It is not easy at all.
But once you are in, and once we go through those processes and secure those off-takes, we are not going away anytime soon. It will become a very strong competitive advantage. We are, I think, in a great position to become that supplier for them.
Excellent. Thank you.
Excellent. Well, thank you very much for attending. I am really impressed by the work that the team has done. That presentation that you have seen was said to be the best presentation of Aclara ever, and it has been that. We have gone a long way. There is a lot of work ahead of us, but we are incredibly motivated. We have an amazing project. Also wish to emphasize the sustainability of the process. The products that we are making viable also will have an impact in the decarbonization of the world and in the new technologies that will make this planet a better world. That motivation, we feel it every day, and we are quite excited of what the future has to bring for us. Thank you for being here today with us. Thank you.