In an update yesterday, GéoMégA said its subsidiary Innord's technology had now "passed the first tests towards potential commercialisation", completing the construction and full operation of a lab-scale pilot unit for recycling and processing rare earth permanent magnets.

It believes the timing could not be better, saying China was importing more rare earths, the price of some elements was "finally on the rise" and citing last month's surprise takeover bid for Lynas Corp (ASX: LYC), the main rare earth producer outside of China.

"It has been a long time in the making but we have finally reached the stage where we could see a path toward GéoMégA becoming a rare earth producer in the foreseeable future," said Kiril Mugerman, president and CEO of both GéoMégA and Innord.

The company is now planning to build a demonstration plant with a 1 tonne per day capacity, which it expects could generate cash flow, cost between C$1-$2 million (US$0.75-$1.5 million) and have potential operating costs of $3/kg of Total Rare Earth Oxide.

"We are very excited to be nearing the day that we potentially contribute to putting Canada on the map as a rare earth producing country and doing it in a green and sustainable way by initially recycling permanent magnets," Mugerman said.

He said they were in discussions with several engineering firms to begin a front end engineering design and engineering procurement construction management contract for the demonstration plant.

Innord had signed a non-binding letter of intent in February with German-based rare earth, cobalt and minor metals recycler Rocklink GmbH to acquire up to 100t per year of feed material for extracting and refining rare earth oxides using its proprietary ISR technology.

GéoMégA said it was granted about C$640,000 (US$479,000) in government funding towards research and development last year.

It had a working capital deficiency of about $651,000 (US$487,000) at November 30 and said it was "constantly seeking financing or business opportunities".

Its shares have risen off a 52-week low of 6.5c in December and returned towards its upper range this week but fell 2.5c or about 17% yesterday to close at 12.5c.

At that price, it is valued at $11.2 million.