REG - Rainbow Rare Earths - Agreement to Allow 100% Ownership of Phalaborwa

Rainbow Rare EarthsAnnouncement

28/06/2023 07:00

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RNS Number : 1038E  Rainbow Rare Earths Limited  28 June 2023

28 June 2023

Rainbow Rare Earths Limited

("Rainbow" or "the Company")

LSE: RBW

 

Rainbow Confirms Agreement to Allow 100% Ownership of Phalaborwa Project

Rainbow Rare Earths is pleased to announce that it has signed an agreement
with Bosveld Phosphates (Pty) Limited ("Bosveld") to allow 100% ownership of
the Phalaborwa Project in South Africa.

Under the terms of the agreement, Rainbow will receive an immediate 85%
interest in the unincorporated joint venture that holds the rights to
Phalaborwa, with Bosveld holding the remaining 15%.  This updates the
original Project Co-Development Agreement, which envisaged Rainbow earning a
70% interest in Phalaborwa further to the completion of a pre-feasibility
study on the project. Under the terms of the agreement, Rainbow will pay
Bosveld US$5 million in cash in July 2023.

Under the agreement Rainbow is also being granted a call option to acquire the
remaining 15% of the joint venture owned by Bosveld, in return for US$7
million of equity in the Company, at any time from 31 October 2023 until 31
December 2025.  Rainbow shares issued pursuant to the call option will be
subject to a 24-month lock-up.

On completion of a definitive feasibility study ("DFS") the unincorporated
joint venture will be transferred into an incorporated joint venture company
and, at Rainbow's election, Bosveld will transfer all assets required for the
project into that company.

Next steps for Phalaborwa

The consolidation of project ownership has been completed as activity for
Phalaborwa is increasing to de-risk the project and deliver a DFS.

As previously announced, front end pilot plant operations have commenced in
South Africa and are on track to produce first high-value mixed rare earth
sulphate in Q3 2023.  The pilot plant back end is being constructed in
Florida, USA, and will be commissioned in good time to receive the first batch
of mixed rare earth sulphate to produce high purity separated magnet rare
earth oxides.

Other key workstreams to deliver the DFS are progressing in parallel, which
will underpin Phalaborwa as a near term solution to the need for a diversified
western supply of permanent rare earth magnets required for the energy
transition.

George Bennett, CEO, commented: "We have always wanted to consolidate our
interest in the Phalaborwa project, given the exceptional economics
highlighted by our preliminary economic assessment that confirmed an NPV(10)
of US$627m based on spot rare earth prices at the time of publication.  We
are therefore delighted to reach this agreement with Bosveld which offers a
clear path to Rainbow owning 100% of the project.

This is an exciting time for Rainbow and Phalaborwa, with the front end of the
pilot plant operational in South Africa and the back end being constructed in
USA.  I look forward to announcing the results from the front end pilot
testing, confirming we are able to extract the rare earths and produce a
saleable mixed rare earth sulphate.  The fact that we will have achieved this
within three years of signing the initial Phalaborwa earn-in agreement is
testament to the combined strength, delivery capabilities and rare earth
experience of our technical team."

Further Details of the transaction

The US$7 million equity to be issued if the Company exercises its call option
to acquire the remaining 15% of the joint venture company from Bosveld will be
priced based on the Rainbow share price in October 2023.  In addition to the
call option held by Rainbow, Bosveld have been granted a put option to sell
their 15% stake to Rainbow on the same terms, amongst other things, once the
assets required for the project have been transferred into the joint venture
company as it is the intention of both parties that Rainbow will be the 100%
owner of the project prior to construction.  The long stop date for the
exercise of the options is 31 December 2025.

In addition to the gypsum stacks, the assets to be transferred into the joint
venture company include a long-term notarial lease for the land required for
the project, which will be located away from the historic phosphoric acid
production facility located on the Bosveld site, and the rights to tie into
existing infrastructure for power and water.  On transfer, the joint venture
company will take responsibility for the day-to-day management of the leased
area including the gypsum stacks.  Bosveld will provide a contractual
indemnity against the historic environmental liabilities for the leased area,
which has an existing environmental rehabilitation fund in place that is
currently managed by Sasol Limited, the historic owner of the site, and
Bosveld.

 

For further information, please contact:

 

Rainbow Rare Earths Ltd
Company             George Bennett
                              +27 82 652 8526

Pete Gardner

 
                                   Cathy Malins (IR)
                         +44 7876 796 629

 
                                 cathym@rainbowrareearths.com
(about%3Ablank)

 

Berenberg
Broker                  Matthew Armitt

 
                                   Jennifer Lee
                               +44 20 3207 7800

 

Tavistock Communications         PR/IR                   Charles
Vivian

Tara Vivian-Neal
+44 (0) 20 7920 3150

 
 
 rainbowrareearths@tavistock.co.uk (about%3Ablank)

 

Notes to Editors:

Rainbow Rare Earths aims to be a forerunner in the establishment of an
independent and ethical supply chain of the rare earth elements that are
driving the green energy transition. It is doing this successfully via the
identification and development of secondary rare earth deposits that can be
brought into production quicker and at a lower cost than traditional hard rock
mining projects, with a focus on the magnet rare earth elements neodymium and
praseodymium ("NdPr"), dysprosium and terbium.

 

The Phalaborwa Rare Earths Project, located in South Africa, comprises a total
Mineral Resource Estimate of 30.4 Mt at 0.44% TREO contained within
unconsolidated gypsum stacks derived from historic phosphate hard rock mining.
High value NdPr oxide represents 29.0% of the total contained rare earth
oxides, with economic Dysprosium and Terbium oxide credits enhancing the
overall value of the rare earth basket in the stacks. Rainbow will use a
proprietary separation technique developed by its partner K-Technologies, Inc.
for the plant at Phalaborwa, which simplifies the process of producing
separated rare earth oxides (versus traditional solvent extraction), leading
to cost benefits, as well as being more environmentally friendly.

The Phalaborwa Preliminary Economic Assessment has confirmed strong base line
economics for the project, which has a base case NPV(10) of US$627 million 1 
(#_ftn1) , an average EBITDA operating margin of 75% and a payback period of
less than two years. Pilot plant operations will commence in 2023, with the
project expected to reach commercial production in 2026, just five years after
work began on the project by Rainbow. More information on the company is
available at www.rainbowrareearths.com (http://www.rainbowrareearths.com/) .

 

 1  (#_ftnref1) Net present value using a 10% forward discount rate

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