REG - Rainbow Rare Earths - DFC to fund proposed $50M TechMet investment

Rainbow Rare EarthsAnnouncement

05/12/2023 07:15

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RNS Number : 6402V  Rainbow Rare Earths Limited  05 December 2023

 

 

5 December 2023

Rainbow Rare Earths Limited

("Rainbow" or "the Company")

LSE: RBW

 

Proposed US$50 million TechMet investment in Phalaborwa to be funded by

the U.S. International Development Finance Corporation

 

·    The TechMet Limited ("TechMet") option to invest US$50 million
directly in the Phalaborwa project in South Africa will be funded by the U.S.
International Development Finance Corporation ("DFC")

·    DFC US$50 million funding commitment announced at COP28, the United
Nation's Climate Change Conference, demonstrating the global effort to
responsibly scale production of the metals essential for clean energy
technologies

·    Phalaborwa recognised as having the potential to play a significant
role in the establishment of a more diversified Western supply chain of the
critical rare earths vital for electric vehicles and wind turbines, as well as
many other advanced technologies

·    Rainbow's innovative processing flowsheet will deliver separated rare
earth oxides, highlighting its unique position within the pipeline

NEWS RELEASE

Rainbow Rare Earths is pleased to announce that it has received confirmation
that the DFC will be the sole source of funding for the proposed US$50 million
investment by TechMet to acquire a direct equity stake in the Phalaborwa
project (the "TechMet Option", as announced on 8 November 2023).

A focus for the DFC is critical minerals, defined as those minerals that are
essential to the economic or national security of the U.S. and which have a
supply chain vulnerable to disruption. The DFC addresses critical mineral
investment for the U.S. via its strategic stake in TechMet, which aims to
assist in the development of world-class projects across the critical minerals
supply chain. The projects identified by TechMet must be operated according to
high standards of environmental, social and governance criteria, as well as
showing the potential for excellent economic returns.

The four rare earths that will be produced at Phalaborwa - neodymium,
praseodymium, dysprosium and terbium - are all designated as critical minerals
further to their important role in the transition to the green economy. As
vital components of permanent magnets, these rare earth elements are used
within electric vehicles and wind turbines, as well as many other advanced
technologies including those required for strategic defence purposes, such as
guided missiles, drones, electronic displays, sonar and jet fighter engines.

This funding agreement for Phalaborwa follows a period of extensive due
diligence by the DFC and TechMet into Rainbow and the project, including a
site visit for DFC representatives and multiple layers of approval to ensure
that the investment meets the strict criteria of a U.S. sovereign wealth fund.

Adonis Pouroulis, Chairman of Rainbow, commented: "This approval of funding
from the DFC confirms that Phalaborwa offers a strategic source of the four
most economically important rare earths that are vital to the green energy
transition. Furthermore, Phalaborwa will use our innovative processing
technique to take its material all the way through to separated rare earth
oxides, unlike most rare earth projects that produce an intermediate mixed
rare earth concentrate which is then sent to China for further refinement. By
providing an independent and reliable source of separated rare earth oxides,
Phalaborwa will help the U.S. to deliver on its goals to develop a U.S.
down-stream supply-chain including specialist alloy, REE permanent magnets,
drive trains, and ultimately EV/wind turbine manufacture."

Scott Nathan, CEO of the DFC, commented: "The Phalaborwa Rare Earths Project
being developed by Rainbow Rare Earths represents a compelling opportunity to
extract and refine four critical minerals essential to both the green energy
transition and economic security. DFC is pleased to be able to support this
project which will remediate the effects of legacy mining activities, boost
local economic growth, and diversify the critical minerals supply chain."

Brian Menell, Chairman and CEO of TechMet, said: "Rainbow's Phalaborwa Project
has an immensely exciting future and this funding gives it the potential to
become one of the world's most environmentally friendly and low-cost rare
earth projects anywhere.

"We congratulate Chairman Adonis Pouroulis and CEO George Bennett for the
fantastic progress that the Rainbow team has made. TechMet looks forward to
continuing our partnership and bringing the project to fruition. Rainbow's
proprietary separation technology provides a terrific opportunity to
fast-track production of the four most economically important rare earth
elements essential for future supply chains for electric vehicles, wind
turbines and other products vital to the energy transition."

About the Phalaborwa project

The Phalaborwa project in South Africa represents an exciting, near-term
production opportunity of all four of the permanent magnet rare earths
required for the green energy transition. The operation will involve the
processing of phosphogypsum stacks, which are the byproduct of historic
phosphoric acid production on the site, which ceased in 2014. This resource
sits at surface, thereby eliminating the cost and risk of traditional mining
projects.

Rainbow will be using proprietary separation technology developed by, and in
conjunction with, its partner K-Technologies, Inc., which will allow for the
material to be processed into separated rare earth oxides of 99.95% purity.
This separation technique replaces traditional solvent extraction technology,
which uses toxic and flammable solvents and diluents and requires many
different stages, thereby delivering a process that is safer and more
environmentally responsible, as well as reduced capital and operating costs
due to a simplified flowsheet.

The project also has exceptional sustainability related opportunities as it is
founded on the principles of circularity. Rainbow will be taking a waste
product (the existing phosphogypsum stacks), cleaning it and extracting value
from it - both via the recovery of the rare earth elements and then via the
sale of the benign gypsum that is produced as the by-product of the process.
Rainbow's operations will see the clean-up of the legacy environmental issues,
namely the acid water on site, and will fully deplete the gypsum stacks over
time, thereby allowing for a full circle environmental rehabilitation of the
site.

The Phalaborwa Preliminary Economic Assessment 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
< two years. Due to its comparatively low operating cost and high EBITDA
margin, the project is expected to be highly cash generative across the rare
earth pricing cycle.

TechMet Option - Key Terms

TechMet has been granted an option to invest US$50 million as part of the
equity funding component for the Phalaborwa capital cost, which will see
TechMet take a direct ownership stake at project level. The TechMet stake will
be dependent on the net present value set out in the definitive feasibility
study for the project. Based on the agreed formula, the equity stake will be
within a range of 15-33%, underpinning a valuation of the project equity at
between US$151.5 million and US$333.3 million.

The TechMet Option is executable for three months following receipt of a
credit approved term sheet for construction debt, which will define the total
equity requirement for the project development.

As part of the TechMet Option agreement, Rainbow has also granted TechMet a
put option to exchange the direct stake in the project for shares in the
listed entity at the fair market value of the underlying Phalaborwa stake for
a period of two years from the commercial completion of the Phalaborwa
project, or at any time in the event of a change in control of Rainbow.

 

For further information, please contact:

 

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

                                    Pete Gardner
                           IR       Cathy Malins       +44 7876 796 629

                                                       cathym@rainbowrareearths.com (mailto:cathym@rainbowrareearths.com)
 Berenberg                 Broker   Matthew Armitt     +44 (0) 20 3207 7800

                                    Jennifer Lee

                                    Detlir Elezi

 Tavistock Communications  PR/IR    Charles Vivian     +44 (0) 20 7920 3150

                                    Tara Vivian-Neal   rainbowrareearths@tavistock.co.uk (mailto:rainbowrareearths@tavistock.co.uk)

 

 

 

Notes to Editors:

About Rainbow:

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 permanent magnet rare earth elements
neodymium and praseodymium, dysprosium and terbium.

The Company is focused on the development of the Phalaborwa Rare Earths
Project in South Africa and the earlier stage Uberaba Project in Brazil. Both
projects entail the recovery of rare earths from phosphogypsum stacks that
occur as the by-product of phosphoric acid production, with the original
source rock for both deposits being a hardrock carbonatite. Rainbow intends to
use a proprietary separation technique developed by and in conjunction with
its partner K-Technologies, Inc., which simplifies the process of producing
separated rare earth oxides (versus traditional solvent extraction), leading
to cost and environmental benefits.

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 2 
(#_ftn2) , an average EBITDA operating margin of 75% and a payback period of
< two years. Pilot plant operations commenced 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 is available at www.rainbowrareearths.com
(http://www.rainbowrareearths.com/) .

About the DFC

 

The U.S. International Development Finance Corporation (DFC) is U.S.
Government's development finance institution. DFC partners with the private
sector to finance solutions to the most critical challenges facing the
developing world today. We invest across sectors including energy, healthcare,
infrastructure, agriculture, and small business, and financial services. DFC
investments adhere to high standards and respect the environment, human
rights, and worker rights.

About TechMet

TechMet Limited is a leading technology metals investment company with a
portfolio of assets that responsibly produce, process, and recycle the metals
that are critical to the global energy transition and the electric vehicle
revolution. Current assets in the TechMet portfolio include lithium extraction
from both brine and hard rock sources, nickel and cobalt hydroxide production
from laterite ores, vanadium chemical production from industrial waste
feedstocks, rare earth production and processing, tin and tungsten mining,
lithium-ion battery recycling, and high-performance cathode manufacturing.
TechMet's major shareholders include the U.S. International Development
Finance Corporation (DFC) and the global energy and commodity group Mercuria.

More information is available at www.techmet.com (http://www.techmet.com) .

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

 2  (#_ftnref2) Net present value using a 10% forward discount rate

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