Tasman Metals (CVE:TSM)(NYSE MKT:TAS) says it has initiated preliminary negotiations to potentially acquire Flinders Resources (CVE:FDR) in an all-share deal, with the exchange ratio yet to be determined.
Shares of Tasman declined by over 3% in early deals, while Flinders's stock was unchanged at 36 Canadian cents.
The companies, in a joint statement, said they believe their project portfolios will complement each other, with both focused on the supply of critical metals to the high growth sectors of the European industry. The deal is a stepping stone to Tasman becoming the "supplier of choice" for critical materials in Europe, it said, giving it a larger market presence and greater liquidity.
Tasman has claims to the Norra Karr rare earth project in Sweden, one of the world's largest known heavy rare earth element projects. It also has additional work underway on the nearby Yxsjöberg tungsten project, historically northern Europe's largest tungsten producer.
Flinders, meanwhile, is developing the Woxna flake graphite deposit in central Sweden, which is on target to be one of the first projects in the junior graphite industry to begin production, scheduled for the third quarter of next year.
The companies said that there is a substantial degree of overlap between industrial consumers of rare earths, tungsten and graphite in Europe, and all three materials are labelled "critical"by the European Commission, under the Department of Enterprise and Industry's "Raw Materials Initiative".
"The contemplated merger of Tasman and Flinders would bring together a portfolio of assets that fits very well with the needs of European industry," said Tasman president and CEO, Mark Saxon, in the release.
"We believe the unique nature and excellent potential of the Nordic REE, tungsten and graphite assets speak for themselves. We are confident that Tasman will benefit from the skills the Flinders' team is gaining in the development of a mining asset in Sweden and through the negotiation of sales contracts for its flake graphite."
The potential merger is subject to a range of conditions, including a definitive agreement between the two parties, shareholder and regulatory approvals.
"This contemplated business combination of Swedish assets will create a significant critical minerals company,"added Flinders chief, Blair Way.
"The proposed combined company has the opportunity to become a sector leader, with potential to grow by adding aligned assets to this larger critical metal business."