The "binding" agreement sees Vital and Saskatchewan Research Council agreeing to "negotiate definitive agreements for the construction and operation of a rare earth extraction plant to produce a mixed rare earth carbonate product".

That capital cost of the plant has been put at A$5.25 million.

Last month SRC and the government of Saskatchewan announced a C$31 million funding package for the construction of Canada's first rare earth processing and separating facility.

SRC's separation plant will convert mixed rare earth carbonate to commercial grade separated rare earth oxides

Vital aims to produce mixed rare earth carbonate, with its planned plant targeted to be located next door to SRC's.

"Subject to execution of definitive agreements, processing operations are scheduled to commence in quarter three, 2021," Vital said.

SRC's plant is targeting production about 12 months later.

Vital has a potential rare earth mines in Canada's Northwest Territories.

Vital had cash at the start of the current quarter of $1.8 million.

Shares in Vital were up 14% to 24c in late trade Tuesday, capitalising the company at $52 million.

The stock is up from levels around 6c six months ago.