Mkango Resources Ltd said its subsidiary Maginito is to take 100% control of rare earths recycling specialist HyPromag for an initial consideration of £2mln and up to a further £3mln dependent on performance.

Currently 42% owned by Maginito, HyPromag has pioneered a way to produce rare earths from the hydrogen processing of magnet scrap (HPMS).

Production is scheduled in the UK this year followed by Germany and the US in 2024.

In a statement, William Dawes, Mkango chief executive, commented: "Since acquiring our initial interest in HyProMag in 2020, we have seen the company go from strength to strength, de-risking and further scaling up the patented HPMS rare earth magnet recycling technology.”

Maginito is 90% owned by Mkango and 10% by CoTec, which invested £1.5mln into the business in March,

Cotec will take a 10% direct stake in HyPromag Germany as well as through Maginito, while the US rollout will be a 50/50 joint venture.

Julian Treger, CoTec’s chief executive, said: "This transaction is a major step forward for Maginito as it seeks to move into production over the short to medium term in the United Kingdom, Germany and the United States."

Mkango added: "Rare earth magnets play a key role in clean energy technologies including electric vehicles and wind turbine generators, and they are also a key component in electronic devices including mobile phones, hard disk drives and loudspeakers"

Broker SP Angel notes that HyProMag is currently developing a £4.3m short-loop recycling facility with an initial capacity of 100tpa NdFeB at Tyseley Energy Park in Birmingham with first production planned for 2023.

"The deal secures access to the patented HPMS technology and technical expertise of the team with the consideration structured to match derisking of the HPMS process and delivery of production targets valuing HyProMag in the range between £6m (assuming 50% of contingent consideration coming through) and £9m."

Mkango shares rose 6% to 11.25p.