A consortium of South Korean investors has signed an agreement with Australian Strategic Materials (ASM) to acquire a 20% stake in Dubbo rare earths project in Australia for $250m.

Under the terms of the agreement, the consortium will purchase the stake in  Australian Strategic Materials Holdings (ASMH), a wholly owned subsidiary of ASM.

ASMH is the holding company for ASM’s Dubbo project, which is a long-term polymetallic resource development containing rare earths, zirconium, niobium, and hafnium, which are all critical metals used in clean technologies.

The company intends to use the proceeds, in combination with other funding sources, to advance the development of the project, which is located in central-western New South Wales.

An optimisation study for the Dubbo project is expected to be completed by the end of the third quarter of this year.

ASM managing director David Woodall said: “In opening a financing pathway for the Dubbo Project, this Agreement heralds an exciting new phase in ASM’s growth and puts us one step closer to executing our ‘mine to metal’ strategy.

“We are delighted our new South Korean partners have recognised the mutual value of the strategic investment opportunity represented by our integrated manufacturing capability that offers a new, cleaner source of critical metals and alloys to a rapidly expanding market.

“Cementing our ties with South Korea’s advanced manufacturing sector represents an incredible opportunity to create value from our Dubbo Project.”

The South Korean investing partnership comprising private equity funds Cerritos, Kamur Partners and ACE Equity Partners, intends to establish a consortium fund to support the acquisition of equity interest in ASMH.

The agreement signed by consortium also includes an offtake agreement for up to 2,800tpa neodymium-iron-boron (NdFeB) alloy from ASM’s Korean Metals Plant (KMP), for a period of ten years.

KMP is currently under construction in Ochang, South Korea.

Based on the volumes outlined in the offtake agreement, all of the neodymium oxide to be produced at the Dubbo project is expected be used of feed the KMP, once it is built.

The acquisition and offtake transactions are expected to be completed by the end of this year.