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A worker prepares to pour the rare earth metal Lanthanum into a mould near the town of Damao in China's Inner Mongolia Autonomous Region Oct. 31, 2010. China is limiting its exports of valuable rare-earth minerals, leading technology and automotive firms to look elsewhere for the metals, which are used in hybrid vehicles, computer batteries and smartphones.DAVID GRAY/REUTERS

A Quebec junior mining exploration company has struck an exclusive agreement with a subsidiary of Japanese auto giant Toyota Motor Corp. to fast-track development of its rare-earth metals production.

Toyota Tsusho Corp., the trading unit of Asia's largest auto maker, has agreed to buy all of Montreal-based Matamec Explorations Inc.'s output from its Kipawa mine deposit in the Témiscamingue region of Quebec.

The non-binding deal between TTC and Matamec is conditional on conclusive results from a feasibility study of the economics of the Kipawa project.

Matamec explores for rare earths, base metals and precious metals.

If all goes according to plan, Matamec will own 51 per cent of the project, while TTC will have a 49-per-cent stake.

Toyota Tsusho is paying $17.5-million for its position, which will give it a supply of metals needed for its hybrid and electric vehicles.

"This is the result of dozens of meetings and hundreds of e-mails and documents being studied," Matamec president André Gauthier said in an interview Tuesday.

Japan and other countries have been scrambling to secure rare-earth supplies after China – which has cornered the market on the valuable minerals – said last year it would limit its exports.

Rare-earth metals are made up of 17 elements, including neodymium, samarium, yttrium and lanthanum.

They are used in a wide range of products, including flat-screen televisions, smartphones, guided missiles and batteries for laptop computers and cellphones.

"Everybody is searching for supply," Mr. Gauthier noted.

Discussions with TTC started almost two years ago at a trade show in Las Vegas and led to many meetings in Japan, Hong Kong, Montreal and other locations, he said.

The discussions were interrupted because of the Japanese earthquake and tsunami in March, but picked up again in August and resulted in the memorandum of understanding that has just been signed, Mr. Gauthier said.

Toyota Tsusho was very thorough in its assessment of other potential rare-earth deposits, but chose Matamec because it believes the Kipawa project offers the best potential in terms of reasonable production costs, he said.

Toyota Tsusho has obtained rare-earth rights in Vietnam and set up processing operations in India. By diversifying supplies, it aims to lower its reliance on China.

This is the second time this month an Asian company has sought a rare-earths development agreement.

On Dec. 4, Korea Resources Corp. led a group of South Korean companies in an agreement with Luxembourg-based Frontier Rare Earths to develop its South African mine.

With files from Dow Jones and Bloomberg News

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