By Joe Hoppe

Capital Metals PLC shares soared Tuesday after it said it has signed an offtake agreement with LB Group Co., forming a 50/50 joint venture to develop and operate the Eastern Minerals project in Sri Lanka.

Shares at 0724 GMT were up 2.0 pence, or 73%, at 4.75 pence.

The AIM-listed mining company said it has signed a memorandum of understanding with LB, which is seeking ilmenite feedstock for its pigment and sponge operations in China.

Under the agreement, LB will fund the project's initial costs of $81 million. The joint venture will then fund any additional expansion on a 50/50 basis.

Capital Metals said it will start earning its share of joint-venture profits as soon as shipments begin, which could be within a year of construction start.

LB will guarantee 100% of the offtake of heavy mineral concentrate and ilmenite for the entire project life at prevailing international prices at the time of sale.

The memorandum is nonbinding, though LB has exclusivity until July 31 to negotiate a definitive agreement, and is subject to Capital shareholder approval.

Write to Joe Hoppe at

(END) Dow Jones Newswires

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