REG - Rainbow Rare Earths - Interim Results for six months to 31 December 2022
31/03/2023 07:00
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RNS Number : 8431U Rainbow Rare Earths Limited 31 March 2023
31 March 2023
Rainbow Rare Earths Limited
("Rainbow" or "the Company")
LSE: RBW
Interim Results for the six months ended 31 December 2022
Rainbow Rare Earths is pleased to announce its unaudited results for the six
months ended 31 December 2022 ("the Period").
Highlights
· Strong supply/demand fundamentals for permanent magnet rare earths
supported by projection that c. 25% of supply will need to come from new
projects by 2030 1 (#_ftn1) .
· Robust Phalaborwa project economics demonstrated by the preliminary
economic assessment ("PEA") published during the Period which presented base
case figures of:
o NPV(10) of US$627 million 2 (#_ftn2) ;
o an IRR of 40%;
o an average EBITDA operating margin of 75%; and
o a payback period of only two years.
· Using long-term rare earth price forecasts provided by Argus Media
Group, underpinned by compelling supply/demand fundamentals, the PEA delivers
an NPV(10) over US$1 billion.
· Key workstreams have commenced to advance Phalaborwa to the
definitive feasibility study ("DFS") stage, with the pilot plant due to
commence commissioning in Q2 2023. The project remains on track to reach
production in 2026 - five years after initial work commenced on site in 2021.
· The overall size of the Phalaborwa Mineral Resource Estimate is
confirmed at 30.4 Mt, comprising 0.44% total rare earth oxides ("TREO").
High-value magnet rare earths Neodymium ("Nd") and Praseodymium ("Pr")
represent 29% of the TREO in the rare earths basket, with economic quantities
of Dysprosium ("Dy") and Terbium ("Tb").
· As a brownfield site, the development of Phalaborwa provides Rainbow
with a significant opportunity to make positive environmental, social and
economic impacts.
· Leveraging our proprietary technology, we continue to explore
opportunities to deliver separated rare earth oxides from secondary
phosphogypsum sources around the world.
· Continued progress in ongoing discussions with strategic funding
partners.
· Strong technical team to drive Phalaborwa's successful development,
as well as progressing our global growth pipeline.
George Bennett, CEO, commented: "We have made very significant progress in the
Period with the successful publication of Phalaborwa's PEA, which underscores
the enormous potential of this project. We have further bolstered our team,
amassing a group of technical experts with unparalleled rare earths knowledge.
Having together completed over 100 feasibility studies (including feasibility
studies for three other rare earth projects in Africa) and designed and built
over 80 processing plants, we are now paving the way for near-term production
of separated rare earth oxides from Phalaborwa.
I am pleased by the headway we are making with plans to implement a continuous
pilot plant operation at Phalaborwa to advance the project to definitive
feasibility study stage, with key workstreams having successfully commenced.
The project remains on track to commence production in 2026 and this
fast-track development has made the Company of interest to global strategic
investors, with whom financing discussions are progressing well.
We are continuing to engage with the government of Burundi in order to come to
an agreement to restart the Gakara rare earth project, which adds geographic
and project diversification to our portfolio.
Given the team's development and operating experience, combined with our
unique rare earths phosphogypsum processing technology and diversified asset
base, I firmly believe that Rainbow is well positioned to succeed in our goal
of achieving responsible and efficient production of the magnet rare earths
required to drive the green energy transition."
Market Abuse Regulation ("MAR") Disclosure
This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law
by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is
disclosed in accordance with the Company's obligations under Article 17 of
MAR.
Rainbow H1 2023 Interim Results investor presentation
CEO, George Bennett, will host a presentation and live question and answer
session via the Investor Meet Company platform on 3 April 2023 at 11am GMT.
Questions can be submitted pre-event via your Investor Meet Company dashboard
up until 9am the day before the meeting or at any time during the live
presentation.
Investors can sign up to Investor Meet Company for free and add to meet
RAINBOW RARE EARTHS LIMITED via:
https://www.investormeetcompany.com/rainbow-rare-earths-limited/register-investor
(https://www.investormeetcompany.com/rainbow-rare-earths-limited/register-investor)
Investors who already follow RAINBOW RARE EARTHS LIMITED on the Investor Meet
Company platform will automatically be invited.
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
Berenberg Broker Matthew Armitt +44 (0) 20 3207 7800
Jennifer Lee
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:
Rainbow's strategy is to identify near-term, secondary rare earths production
opportunities. Meeting escalating demand for critical minerals needed for
global decarbonisation, we are focused on producing the magnet rare earth
metals neodymium and praseodymium ("NdPr"), dysprosium and terbium. With our
strong operating experience, proven project development experience, unique
intellectual property and diversified portfolio, Rainbow will develop a
responsible rare earths supply chain to drive the green energy transition.
The Phalaborwa Rare Earths Project, located in South Africa, comprises an
Inferred 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% 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. The rare earths are contained in
chemical form in the gypsum stacks, which allows high value separated rare
earth oxides to be produced in a single processing plant at site with lower
operating costs than a typical rare earth mineral project.
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 3
(#_ftn3) , an average EBITDA operating margin of 75% and a payback period of
only 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.
CEO Review
Market
As essential building blocks in permanent magnets, which are key components
for wind turbines and electric vehicle motors as well as vital in the defence
industry, rare earths have been designated as strategic / critical metals by
many Western governments. In light of projected demand escalation, there is an
increasing drive towards responsible and resilient critical mineral supply
chains to achieve security of supply.
According to International Renewable Energy Agency ("IRENA"), rare earth
element production will need to rise by 11 to 26 times over present levels in
order to meet the substantial increase in demand driven by the 2050 global
wind power targets. However, as noted by the International Energy Agency
("IEA"), there are several vulnerabilities associated with rare earths mining
projects such as high geographical concentration of production, long project
development lead times, declining resource quality and growing scrutiny of
environmental and social performance.
Whilst some rare earth supply increase is expected over the next decade, it is
not forecast to meet the growing demand for permanent magnet materials.
According to Argus, new projects will be required to supply c. 25% of the rare
earths market by 2030.
Operational update
Phalaborwa
Against this backdrop of mounting magnet rare earth demand, progress continues
apace at Phalaborwa, Rainbow's South African rare earths project. Unlike
traditional mining projects, which have exceptionally long lead times,
Phalaborwa presents a near-term opportunity. By extracting rare earths from
secondary sources at Phalaborwa, we are able to fast track production to
deliver rare earths in the period of forecast supply deficit in the late
2020's. Having commenced operations in 2021, this is significantly quicker
than most traditional mining projects with significantly longer lead times.
Robust economics demonstrated by PEA
Contained in phosphogypsum in two unconsolidated stacks derived from historic
phosphate hard rock mining, the rare earths are in a "cracked" chemical form
allowing separated rare earth oxides to be produced at site. With no
significant costs associated with mining, crushing and grinding ore, or with
chemical cracking of the underlying rare earth minerals, the project economics
are exceptionally strong. This has been demonstrated by the publication of the
project's PEA in October 2022 which presented a base case NPV(10) of US$627
million, an IRR of 40%, an average EBITDA operating margin of 75%, and a
payback period of only two years. The PEA envisages a 2.2 million tonne per
annum processing operation, with total production of 26,208 tonnes of
separated magnet rare earth oxides 4 (#_ftn4) , with a weighted average sales
value of US$137.92/kg 5 (#_ftn5) generating US$3.6 billion of revenue over
14.2 years.
Using long-term rare earth price forecasts provided by Argus Media Group,
underpinned by compelling supply/demand fundamentals, the PEA delivers an
NPV(10) over US$1 billion.
Pilot plant
Following the publication of the PEA, Rainbow is currently working to advance
the project to DFS and a key part of this is the implementation of a pilot
plant operation, to be undertaken at Mintek in Johannesburg and the K-Tech
facility in Lakeland, USA. This will produce sufficient quantities of
separated permanent magnet rare earth oxides for testing and marketing
purposes.
The unique and innovative rare earths processing flowsheet designed for the
Phalaborwa project, which will use CIX/CIC technology to deliver separated
magnet rare earth oxides, has been developed in collaboration with Rainbow's
partner K-Tech. This proprietary CIX/CIC process replaces traditional solvent
extraction technology for the separation of rare earth oxides, which can be a
convoluted process and also associated with environmental risks. The CIX/CIC
method is therefore safer and more environmentally responsible, as well as
coming at a significantly reduced capital and operating cost due to a
simplified flowsheet, which can be accommodated by a single hydrometallurgical
processing plant.
The key workstreams for the DFS and pilot plant have commenced and are
progressing well:
Work has started on the front end of the pilot plant, which will comprise the
main phosphogypsum handling circuit that will produce a mixed rare earth
sulphate intermediate solid material. An initial bench-scale programme is in
progress to confirm the pilot testing parameters. The front end of the plant
will be executed at Mintek in Johannesburg, which is one of the world's
leading technology organisations specialising in mineral processing and
extractive metallurgy.
The back-end CIX/CIC separation circuit, which will be piloted at the K-Tech
facility in Lakeland, will produce marketable separated rare earth oxides.
By separating the pilot process between two different centres of minerals
processing excellence, we expect to benefit from:
· cost and time efficiencies as a result of removing the logistics
involved in transporting pilot-scale equipment from the USA, where it is
designed, fabricated, and tested, to South Africa, where it would have to be
reassembled and commissioned. It will be more efficient to transport the mixed
rare earth sulphate intermediate solid material produced by the front end,
which is a low-volume but high-value product that is readily transportable;
and
· key K-Tech personnel being present throughout the running of the
pilot, with the ability to oversee and optimise the CIX/CIC process in real
time.
The metallurgical testing for the CIX/CIC processes required in the back end
of the plant has already been undertaken by K-tech and the required CIX/CIC
pilot units have been delivered to its Lakeland facility for setup and
testing.
Progress with DFS
METC Engineering, the minerals processing engineering firm and one of the key
authors of Phalaborwa's PEA, has been engaged to work alongside the Rainbow
team to fully define the required engineering scope for the DFS.
US-based global gypsum experts Ardaman and Associates, Inc., a Tetra Tech
Company ("Ardaman") have been engaged to conduct test and initial design work
for the new stacks upon which the benign gypsum will be deposited.
Resource update
The recent resource update at Phalaborwa has confirmed a total mineral
resource estimate ("MRE") of 30.4 Mt at 0.44% TREO, with the high-value,
permanent magnet elements Nd and Pr representing 29% of the TREO in the rare
earths basket, as well as economic quantities of Dy and Tb. The MRE is
reported at a 0.2% TREO cut-off grade.
Whilst the majority of the resource has been upgraded to the measured and
indicated resource categories, a portion remains in the inferred category as a
result of surface water ponds in the centre of the gypsum stacks. This
material requires a specialised drilling campaign to confirm the continuity of
the grade below the water table. This work will be completed to convert the
MRE to Reserves as part of the DFS.
The technical team is currently focused on evaluation of the density at depth
of the stacks and the Company has sought advice on this matter from Ardaman.
It is probable, based on the Ardaman techniques used to evaluate the resource
of similar phosphogypsum stacks, that the in-situ dry density for the stacks
below the water table is higher than that for the upper dry material. This may
result in an increase in the MRE.
MRE overview
Contribution of TREO by oxide Grade
% ppm
Tonnes TREO Nd Pr Dy Tb Other Th U
Mt %
Stack A 20.2 0.43 23.4 5.6 1.0 0.3 69.7 50 2
Stack B 10.2 0.45 23.3 5.8 1.0 0.3 69.6 43 2
Total 30.4 0.44 23.4 5.6 1.0 0.3 69.7 48 2
Contribution of TREO by oxide Grade
% ppm
Tonnes TREO Nd Pr Dy Tb Other Th U
Mt %
Measured 7.3 0.47 23.5 5.9 1.0 0.3 69.3 47 2
Indicated 16.1 0.44 23.5 5.6 1.0 0.3 69.6 49 2
Inferred 7.0 0.42 23.1 5.5 1.0 0.3 70.1 45 2
Total 30.4 0.44 23.4 5.6 1.0 0.3 69.7 48 2
October 2022 PEA resource 30.7 0.43 23.4 5.7 1.0 0.3 69.6 48 2
Variance % (0.3) 0.01 0.0 (0.1) 0.0 0.0 0.1 0 0
1. The MRE is reported at a 0.2% TREO cut-off grade.
2. The MRE has been estimated by independent consultant Malcolm Titley
of Maja Mining Limited.
3. Mineral resources are not mineral reserves and do not have
demonstrated economic viability.
Using our unique rare earths processing technology developed in collaboration
with K-Tech, a viable process flowsheet has been designed for economic
extraction and purification leading to an unoptimised recovery of 65% of the
rare earth elements.
Environmental
Phalaborwa is founded on the principles of circularity, reprocessing
phosphogypsum which is the by-product of historic phosphoric acid production
to produce rare earths required for global decarbonisation. With legacy
environmental issues prior to our ownership, Rainbow has the opportunity not
only to exploit a secondary source of these critical minerals, but also to
clean up the operation. This will involve neutralising the acidic solution
currently on top of the gypsum stacks for use in a closed loop process and
also redepositing benign gypsum on stacks which will be lined in accordance
with International Finance Corporation ("IFC") Standards and Equator
Principles.
As a brownfield development project on an industrial site, the majority of the
environmental permits are in place at Phalaborwa and only require updating.
Pipeline secondary rare earths projects
Leveraging our proprietary technology, we continue to explore opportunities to
deliver separated rare earth oxides from secondary phosphogypsum sources
around the world. Given the prevalence of phosphate mining, phosphogypsum is
available in large volumes and constitutes an attractive secondary source of
rare earth elements.
During H1 2023, a Master Agreement was signed with OCP, the Moroccan world
leading producer of phosphate products, and UM6P, a Moroccan university with a
strong focus on science, technology and innovation, as well as a Memorandum of
Understanding prior to this with a diversified chemicals group based in South
Africa. Test work has commenced for both these opportunities. We continue to
investigate further potential to extract rare earths from phosphogypsum on a
global scale.
Gakara
Gakara was placed on care and maintenance in June 2021 at the request of the
Government of Burundi. Although the suspension has continued for longer than
anticipated, Rainbow continues to engage constructively with all stakeholders
to resolve the issue and allow operations to recommence, with further face to
face discussions due to take place in Burundi in Q2 2023.
Corporate
The Company continues to make good progress in discussions with strategic
funding partners to finance the pilot plant operation at Phalaborwa and
further progress the feasibility study.
We have continued to build our technical team during the Period with the
appointment of Roux Wildenboer, further complementing our wide range of skills
and applicable rare earths experience. Roux joins Rainbow's Technical
Director, Dave Dodd and Lead Process Consultant, Chris le Roux. Dave has over
45 years of unrivalled extractive metallurgy experience covering research and
development, metallurgical project development and execution across the
majority of minerals and a wide range of geographies. Chris brings significant
experience and an in-depth knowledge of numerous technical processing
operations, including a number of rare earths projects.
In his previous role as Process Engineer, Roux Wildenboer gained valuable
experience across all project development phases, from scoping level studies
to definitive feasibility studies and project execution. He has worked in
various African countries, as well as on a global scale, in a wide range of
commodities including work on a recent rare earths feasibility study, along
with copper, cobalt, gold, uranium, manganese, lithium and vanadium.
Phalaborwa's successful and comprehensive PEA accurately reflects the rigour
and expertise we apply to project assessment. The expanded technical team will
be instrumental in Phalaborwa's successful development as well as providing
Rainbow with the capacity to develop our growth pipeline.
Financial Review
The six months ended 31 December 2022 saw the publication of the Phalaborwa
PEA as Rainbow advanced its flagship asset. Costs totalling US$0.8 million
were capitalised for Phalaborwa during the Period compared to a total of
US$0.8 million in the year ended 30 June 2022 ("FY22"). This acceleration of
expenditure at Phalaborwa is expected to continue as Rainbow focuses on
delivering the pilot plant and progressing towards the DFS. As at 31
December 2022, costs totalling US$2.8 million have been capitalised for
Phalaborwa.
The income statement showed a net loss of US$1.5 million for the Period, of
which US$1.2 million related to corporate overheads in line with US$2.3
million spent in FY22. During the Period, a total of US$0.3 million was
incurred to maintain the Gakara project on care and maintenance. This
represents a significant reduction of expenditure compared to US$1.4 million
spent in FY22, which included US$128k of retrenchment costs due to the
termination of employment contracts for local staff in December 2021 as a
direct result of the Burundi Government suspension. Costs in Burundi will
remain minimised whilst discussions continue with the Burundi Government to
allow operations to recommence.
At 31 December 2022, the Group had US$2.1 million of cash available. Rainbow
is currently in discussions with strategic investors to secure the funding
required to allow the next steps to be delivered at Phalaborwa.
Cautionary Statement:
The business review and certain other sections of this interim report contain
forward looking statements that have been made by the Directors in good faith
based on the information available to them up to the time of their approval of
this report. However, they should be treated with caution due to inherent
uncertainties, including both economic and business risk factors, underlying
any such forward-looking information and no statement should be construed as a
profit forecast.
Directors' Responsibility Statement
We confirm that to the best of our knowledge:
a) the Condensed set of Interim Financial Statements has been prepared
in accordance with IAS 34 'Interim Financial Reporting';
b) the interim management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events during the
first six months and description of principal risks and uncertainties for the
remaining six months of the year);
c) the interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related parties'
transactions and changes therein); and
d) the condensed set of interim financial statements, which has been
prepared in accordance with the applicable set of accounting standards, gives
a true and fair view of the assets, liabilities, financial position and profit
or loss of the issuer, or the undertakings included in the consolidation as a
whole as required by DTR 4.2.4R.
This Interim Report has been approved by the Board and signed on its behalf
by:
George Bennett
Chief Executive Officer
31 March 2023
Condensed Consolidated Statement of Comprehensive Income
For the six months ended 31 December 2022
6 months ended 6 months ended
31 December 2022
31 December 2021
Notes US$'000 US$'000
Unaudited Unaudited
Revenue - -
Production and sales costs - -
Gross loss - -
Administration expenses 3 (1,500) (1,934)
Loss from operating activities (1,500) (1,934)
Finance income 73 -
Finance costs (54) (168)
Loss before tax (1,481) (2,102)
Income tax expense - (5)
Total loss after tax and comprehensive expense for the period (1,481) (2,107)
Total loss after tax and comprehensive expense for the period is attributable
to:
Non-controlling interest (38) (56)
Owners of parent (1,443) (2,051)
(1,481) (2,107)
Loss per share (cents)
Basic 4 (0.27) (0.42)
Diluted 4 (0.27) (0.42)
The results of each period are derived from continuing operations.
Condensed Consolidated Statement of Financial Position
As at 31 December 2022
As at As at As at
31 December 2022
30 June
31 December 2021
2022
Notes US$'000 US$'000 US$'000
Unaudited Audited Unaudited
Non-current assets
Exploration and evaluation assets 5 11,405 10,588 10,045
Property, plant and equipment 6 872 1,043 1,220
Right of use assets 89 108 68
Total non-current assets 12,366 11,739 11,333
Current assets
Inventory 858 858 864
Trade and other receivables 426 401 414
Cash and cash equivalents 2,146 4,134 6,371
Total current assets 3,430 5,393 7,649
Total assets 15,796 17,132 18,982
Current liabilities
Trade and other payables 7 (879) (909) (990)
Borrowings 8 (101) (235) (178)
Lease liabilities (34) (32) (18)
Total current liabilities (1,014) (1,176) (1,186)
Non-current liabilities
Borrowings 8 (589) (518) (749)
Lease liabilities (56) (81) (52)
Provisions (61) (61) (61)
Total non-current liabilities (706) (660) (862)
Total Liabilities (1,720) (1,836) (2,048)
NET ASSETS 14,076 15,296 16,934
Equity
Share capital 9 41,552 41,442 41,345
Share based payment reserve 1,588 1,467 1,375
Other reserves - - 60
Retained loss (27,955) (26,572) (24,854)
Equity attributable to the parent 15,155 16,337 17,926
Non-controlling interest (1,079) (1,041) (992)
TOTAL EQUITY 14,076 15,296 16,934
Condensed Consolidated Cash Flow Statement
For the six months ended 31 December 2022
6 months ended 6 months ended
31 December 2022
31 December 2021
US$'000 US$'000
Unaudited Unaudited
Cash flow from operating activities
Loss from operating activities (1,500) (1,934)
Adjustments for:
Depreciation 189 187
Share-based payment charge 151 154
Operating loss before working capital changes (1,160) (1,593)
Net (increase)/decrease in inventory - (1)
Net decrease/(increase) in other receivables (25) 27
Net (decrease) in trade and other payables (30) (16)
Cash used by operations (1,215) (1,583)
Realised foreign exchange gains 73 76
Finance costs (69) (43)
Taxes paid - (2)
Net cash used in operating activities (1,211) (1,552)
Cash flow from investing activities
Purchase of property, plant & equipment (2) (44)
Exploration and evaluation costs (817) (294)
Net cash used in investing activities (819) (338)
Cash flow from financing activities
Proceeds of new borrowings - -
Repayment of borrowings - (885)
Interest payments on borrowings (47) (43)
Payment of lease liabilities (16) (17)
Proceeds from the issuance of ordinary shares 125 8,962
Transaction costs of issuing new equity (16) (257)
Net cash generated by financing activities 46 7,760
Net increase in cash and cash equivalents (1,984) 5,870
Cash & cash equivalents at the beginning of the period 4,134 573
Foreign exchange (loss)/gain on cash & cash equivalents (4) (72)
Cash & cash equivalents at the end of the period 2,146 6,371
Condensed Consolidated Statement of Changes in Equity
For the six months ended 31 December 2022
Share capital Share- based Payments Other reserves Accumulated losses Attributable Non-controlling interest Total
to the
parent
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Balance at 1 July 2021 (audited) 32,465 1,295 60 (22,878) 10,942 (936) 10,006
Total comprehensive expense
Total comprehensive loss - - - (2,051) (2,051) (56) (2,107)
Transactions with owners
Shares placed during the period for cash consideration 8,779 - - - 8,779 - 8,779
Share placing transaction costs (240) - - - (240) - (240)
Non-cash issue of shares during the period, net of costs 157 - - - 157 - 157
Fair value of employee share options in the period - 155 - - 155 - 155
Share option exercised in period, net of costs 184 (75) - 75 184 - 184
Balance at 31 December 2021 (unaudited) 41,345 1,375 60 (24,854) 17,926 (992) 16,934
Total comprehensive expense
Total comprehensive loss - - - (1,829) (1,829) (49) (1,878)
Transactions with owners
Eliminate historic discount on extinguishment of interest free bridge loan - - (60) 60 - - -
Fair value of employee share options in the period - 143 - - 143 - 143
Share option exercised in period, net of costs 97 (51) - 51 97 - 97
Balance at 30 June 2022 (audited) 41,442 1,467 - (26,572) 16,337 (1,041) 15,296
Total comprehensive expense
Total comprehensive loss - - - (1,443) (1,443) (38) (1,481)
Transactions with owners
Fair value of employee share options in the period - 151 - - 151 - 151
Share option exercised in period, net of costs 110 (60) - 60 110 - 110
Balance at 31 December 2021 (unaudited) 41,552 1,558 - (27,955) 15,155 (1,079) 14,076
Notes to the Condensed Financial Statements
For the six months ended 31 December 2022
1. General information
Rainbow Rare Earths Limited (the 'Company' or 'Rainbow', together with its
subsidiaries the 'Group'), is a company limited by shares domiciled in
Guernsey, incorporated on 5 August 2011 with company registration number
53831. The Company's registered office is Connaught House, St Julian's
Avenue, St Peter Port, Guernsey. The nature of the Group's operations and
its principal activities are set out in the CEO and Financial Reviews.
The financial information for the year ended 30 June 2022 does not constitute
the audited statutory accounts but has been extracted from those accounts.
The report of the auditors on those accounts was unqualified.
This Interim Report has not been audited or reviewed.
A copy of this Half Yearly Report has been published and may be found on the
Company's website at www.rainbowrareearths.com
(http://www.rainbowrareearths.com)
2. Basis of preparation
These condensed consolidated interim financial statements for the 6 months
ended 31 December 2022 have been prepared in accordance with IAS 34 'Interim
Financial Reporting'. They do not include disclosures that would otherwise be
required in a complete set of financial statements and should be read in
conjunction with the 2022 Annual Report and Accounts.
The same accounting policies and methods of computation are followed in the
condensed interim financial statements as were followed in the most recent
annual financial statements of the Group, which were published on 27 October
2022. There are no newly effective IFRS Standards which have had an impact
on the financial statements.
(a) Going concern
The Directors have continued to use the going concern basis in preparing these
condensed financial statements. The Group's business activities, together
with the factors likely to affect future development, performance and position
are set out in the CEO Statement. The financial position of the Group, its
cash flow and liquidity position are described in the Financial Review.
The Group's cash balance at 31 December 2022 was US$2.1 million (30 June 2022:
US$4.1 million). The Board has reviewed the Group's latest cash flow
forecasts for the period to 30 June 2024, including reasonably possible
downside scenarios. This has included the following assumptions:
· Forecast expenditure of US$2.8 million for ongoing general and
administrative costs of the Group over the 18-month period from 1 January 2023
to 30 June 2024, based on the current administrative cost base. The
reasonably possible downside scenario includes a 10% contingency for
unexpected costs.
· Estimated funding requirements of US$5.3 million for Phalaborwa,
of which US$1.0 million has been incurred to date or is committed. This
includes US$4.2 million to build and run the pilot plant, US$0.2 million
committed to critical path work for the DFS and US$0.9 million for Rainbow's
technical team and associated costs. A further US$2.9 million will be
required to complete the DFS. Due to the nature of the work, actual costs
and the timing of expenditure may differ to estimates. The budget includes a
5% contingency for increased costs. The reasonably possible downside
scenario increases this to a 10% contingency for all Phalaborwa expenditure.
· A continuation of care and maintenance for the Group's Gakara
project in Burundi at a total cost of US$0.6 million for the 18-month period
from 1 January 2023 to 30 June 2024, based on the current administrative cost
base. The reasonably possible downside scenario includes a 10% contingency for
unexpected costs. In the event that the Gakara project returns to operations,
stock of rare earth concentrates with an estimated gross sales value of US$1.5
million would be sold to provide the funds to re-commence trial mining and
processing operations. The forecasts show that, with the current productive
capacity of the trial mining operations, the Gakara project would not require
additional financial support from Rainbow Rare Earths Limited at current rare
earth prices.
Based on management's reasonably plausible downside scenario outlined above,
the Group will need to raise additional finance of at least US$7.2 million for
the period ending 30 June 2024 and a further US$3.0 million to fully complete
the Phalaborwa DFS. Based on the robust economic prospects for the
Phalaborwa project, the Board is confident that additional funding will be
secured as required. However, the Board accepts that these circumstances
indicate the existence of a material uncertainty which may cast significant
doubt about the Group's ability to continue as a going concern and therefore
it may be unable to realise its assets and discharge its liabilities in the
normal course of business. The financial statements do not include the
adjustments that would result if the Group was unable to continue as a going
concern.
(b) Dividend
The Directors do not recommend the payment of a dividend for the period (six
months ended 31 December 2021: US$Nil, six months ended 30 June 2022: US$Nil).
(c) Principal Risks and uncertainties
There are a number of potential risks and uncertainties inherent in the mining
and metals sector which could have a material impact on the long-term
performance of the Company, and which could cause the actual results to differ
materially from expected and historical results. The Company has taken
reasonable steps to mitigate these where possible. Full details are disclosed
on pages 26-27 of the Annual Report for the year ended 30 June 2022. The
risks and uncertainties are summarised below:
· Project definition risk:
- At Gakara, the Company does not currently have a code-compliant
Mineral Resource or Reserve due to the complexity of the geological
mineralisation. It is possible that the quantity of rare earths present in
the licence area is less than management expectations with resulting impacts
on plans to develop a long-term commercial operation at Gakara. Subject to
trial mining operations re-starting, the Company expects to use operating cash
flow to define further low-cost exploration techniques to improve confidence
in the Gakara mineralisation.
· Political risk in Burundi
- On 12 April 2021 the Government of Burundi temporarily suspended
the export of concentrate produced at Gakara. This was followed on 29 June
2021 with a suspension of all trial mining and exploration activity. All
operations remain on care and maintenance at March 2023. There has been no
attempt by the Government of Burundi to remove the mining licence for the
Gakara project. Whilst recognising that the situation has persisted longer
than originally anticipated, management continue to expect operations at
Gakara to be allowed to re-start.
· Civil unrest
- Burundi has experienced civil unrest, including most recently in
2015. South Africa experienced some civil unrest in 2021. Any subsequent
instances of civil unrest could impact the long-term operations of the
Company's development projects, including the ability to obtain supplies,
export production and manage administrative matters.
· Currency controls in Burundi
- The Company receives proceeds from the sale of rare earth
concentrate from the Gakara project in US dollars, which are repatriated to an
account in the Burundi Central Bank. The Company has the right, under its
Mining Convention with the Burundian Government, to unfettered access to its
foreign currencies.
- Burundi has experienced shortages of foreign currency reserves in
the past, and it is therefore possible that, in the event of operations
re-starting at Gakara, access to US dollars held in country might be
difficult. This would affect the Company's ability to meet ongoing foreign
currency obligations including international suppliers, servicing of
international debt and repatriation of profits.
· Project development risk
- At Phalaborwa, the Company announced a positive Preliminary
Economic Assessment in October 2022 which confirmed a processing flow sheet
capable of economically extracting the magnet rare earth metals from the
gypsum stacks in a low capital and low operating cost environment. Further
test work, including pilot test work to confirm the efficacy of the processing
flowsheet, will be required to provide sufficient confidence for project
development, which may not deliver results in line with the preliminary
economic assessment.
- Development of Phalaborwa will require updated permits in South
Africa to allow the gypsum stacks to be processed. Applications for the
updated permits are dependent on technical studies that will be undertaken as
part of the Phalaborwa DFS. Whilst there can be no certainty that the
required licences will be issued, management notes that the project is located
on a brownfield site already licenced for industrial use and therefore does
not anticipate any problems securing the necessary permits.
- The Phalaborwa earn-in agreement signed with Bosveld Phosphates
(Pty) Limited ("Bosveld"), under which the Company is earning a 70% interest
in the project, envisages Bosveld transferring or licensing to a dedicated
joint venture company all of their rights, title and interest in the gypsum
stacks. At present, the assets of Bosveld are secured by notarial bonds in
South Africa issued in favour of third parties, which may impact the ability
of Bosveld to transfer the rights to a new entity as envisaged. Management is
aware of a repayment plan agreement that will release these securities and is
therefore confident that this will not prevent the intended use of the gypsum
stacks and the recovery of the rare earth elements therefrom.
· Financing risk
- The Company currently forecasts that additional funding will be
required in order to deliver its project development plans at Phalaborwa as
well as for general working capital requirements. Management maintains strong
relationships with key sources of finance. Rainbow has a history of securing
funding required for the Company's growth plans, including support from its
cornerstone investors, and management expect to be able to secure additional
funding as required.
- At Phalaborwa in South Africa, additional finance is expected to
be required to deliver a DFS, including pilot test-work, ahead of a larger
fundraising for commercial scale project development.
- At Gakara in Burundi, the Company expects funds received from the
sale of the current mineral concentrate to be available to finance the
re-commencement of operations which would not be expected to require further
funding to maintain. However, additional financing would be required to fund
commercial scale development beyond the current trial mining and processing
operations.
· Rare earth prices and off-take arrangements
- Rainbow's strategy is to become a globally-significant and
responsible producer of rare earth metals from secondary sources, with a
particular focus on NdPr - the fundamental building blocks for the permanent
magnets driving the global green technology revolution.
- Whilst analysts are predicting strong growth in demand for rare
earths, prices have been volatile in the past. If the underlying rare earth
basket price of the Group's development projects fall, this reduces potential
revenue that will impact the long-term profitability of the projects and could
impact the commercial viability of any development.
- The strong returns set out in the Phalaborwa preliminary economic
assessment demonstrate that the project is expected to remain robust in a
lower rare earth price environment. The Company has not yet contracted
off-take agreements for the likely rare earth products from Phalaborwa.
- The Company currently has an off-take agreement with ThyssenKrupp
for the Gakara project trial mining activities in Burundi, selling a mixed
rare earth mineral concentrate at a discount of approximately 70% to the
quoted price of the underlying metal oxides.
3. Administrative expenses
6 months ended 6 months ended
31 December 2022
31 December 2021
US$'000 US$'000
Unaudited Unaudited
Corporate expenses 1,171 1,124
Burundi administration 329 810
1,500 1,934
Burundi administrative expenses incurred in the six months ended 31 December
2022 include all costs associated with maintaining the Gakara project on care
and maintenance.
4. Loss per ordinary share
Loss per ordinary share is calculated by dividing the net loss for the period
attributable to ordinary equity holders of the parent by the weighted average
number of ordinary shares outstanding during the period.
The Company was loss making for all periods presented, therefore the dilutive
effect of share options has not been taken account of in the calculation of
diluted earnings per share, since this would decrease the loss per share for
each of the period reported.
The calculation of the basic loss per share is based on the following data:
6 months ended 6 months ended
31 December
31 December 2021
2022
US$'000 US$'000
Unaudited Unaudited
The loss for the period attributable to ordinary equity holders of the parent (1,443) (2,051)
company
Number Number
'000 '000
Weighted average number of Ordinary shares for the purposes of basic and 524,963 493,934
diluted loss per share
Loss per Ordinary share Cents Cents
Basic and diluted (0.27) (0.42)
5. Exploration and evaluation assets
Gakara Phalaborwa Total
US$'000 US$'000 US$'000
At 1 July 2021 (audited) 8,635 1,116 9,751
Additions - 294 294
At 31 December 2021 (unaudited) 8,635 1,410 10,045
Additions - 543 543
At 30 June 2022 (audited) 8,635 1,953 10,588
Additions - 817 817
At 31 December 2022 (unaudited) 8,635 2,770 11,405
Only costs relating to the Phalaborwa project were capitalised during the
period. The Gakara project has been under care and maintenance throughout the
Period and, accordingly, none of the costs meet the requirements under the
Group's accounting policy for capitalisation.
The Phalaborwa project represents an opportunity to extract rare earth
elements from the chemical re-treatment of gypsum stacks. An updated JORC
compliant rare earth resource was published on 20 March 2023 and the costs of
establishing the commercial viability of development for the project are being
capitalised as exploration and evaluation assets under IFRS 6. Additions in
the period include costs associated the preliminary economic assessment,
published in October 2022.
The Directors note the uncertainty relating to the ongoing suspension of
activities in Burundi. Based on an assessment of both the legal and
political position in Burundi, the Directors have a reasonable expectation
that the current temporary suspension does not represent a threat to the
licence and activities will be allowed to re-start. Accordingly, the Directors
do not believe this uncertainty represents an indication of impairment of the
exploration and evaluation assets at Gakara, or the associated property, plant
and equipment or inventory within the Gakara cash generating unit. The
Directors note that the current suspension of activities could result in
future losses for the Group if it is not resolved as anticipated.
FinBank SA holds security over the fixed and floating assets of Rainbow Mining
Burundi SM ("RMB"), which include US$7.3 million of exploration and evaluation
assets associated with the Gakara mining permit in Burundi.
6. Property, plant and equipment
US$'000 Mine development costs Plant & machinery Vehicles Office equipment Total
Cost
At 1 July 2021 (audited) 183 2,847 1,582 45 4,657
Additions - 42 - - 42
At 31 December 2021 (unaudited) 183 2,889 1,582 45 4,699
Additions - - - - -
At 30 June 2022 (audited) 183 2,889 1,582 45 4,699
Additions - - - 2 2
At 31 December 2022 (unaudited) 183 2,889 1,582 47 4,701
Depreciation
At 1 July 2021 (audited) 73 2,667 539 24 3,303
Charge for period 13 1 158 4 176
At 31 December 2021 (unaudited) 86 2,668 697 28 3,479
Charge for period 13 - 158 6 177
At 30 June 2022 (audited) 99 2,668 855 34 3,656
Charge for period 13 2 158 - 173
At 31 December 2022 (unaudited) 112 2,670 1,013 34 3,829
Net Book Value at 31 December 2022 (unaudited) 71 219 569 13 872
Net Book Value at 30 June 2022 (audited) 84 221 727 11 1,043
Net Book Value at 31 December 2021 (unaudited) 97 221 885 17 1,220
FinBank SA holds security over the fixed and floating assets of RMB, which
include US$1.2 million of tangible fixed assets in Burundi.
As set out in note 5, the Directors note the uncertainty relating to the
ongoing suspension of activities in Burundi which could impact the carrying
value of the property, plant and equipment within the Gakara cash generating
unit, which comprises the entire net book value at the balance sheet date.
7. Trade and other payables
As at As at As at
31 December 2022
30 June
31 December 2021
2022
US$'000 US$'000 US$'000
Unaudited Audited Unaudited
Trade payable 43 174 142
Accrued expenses 316 255 73
Taxes and social security 361 360 364
Burundi land taxes payable 80 60 60
Amounts due to staff and management 11 - 351
Provision for employment disputes 68 60 -
Total trade and other payables 879 909 990
The Directors consider that the carrying value of trade and other payables
approximate to their fair value.
8. Borrowings
As at As at As at
31 December 2022
30 June
31 December 2021
2022
US$'000 US$'000 US$'000
Unaudited Audited Unaudited
Finbank Loan 557 557 574
Warrant liability 133 196 353
Total borrowings 690 753 927
Payable within 12 months 101 235 178
Payable after more than 12 months 589 518 749
690 753 927
FinBank Loan
The FinBank loan facility is expressed in Burundian Francs and carries an
interest rate of 15%. Interest has been paid throughout the period. Capital
repayments have been suspended since April 2021 as a result of the export ban
imposed in Burundi on the Group's rare earth concentrate from trial mining and
processing activities.
Under the terms of this loan, Finbank has security over the fixed and floating
assets of RMB (the local operating company in Burundi which owns the Gakara
project and mining permit), the shares of RMB, and the cash held in RMB's
Finbank bank accounts.
Warrant Liability
On 21 February 2020, 2,000,000 warrants were issued to Pipestone Capital Inc,
in which George Bennett, the Company's CEO, has a beneficial interest. The
warrants were issued in lieu of interest on a US$1 million bridging loan
provided to the Company, which was repaid in full in December 2021. The
warrants have a contractual life of 4 years at an exercise price of 4.55 pence
per warrant. The Pipestone warrants are recognised as a financial liability
at fair value through profit and loss with changes in value included under
finance costs/income.
9. Share capital
As at As at As at
31 December 2022
31 December 2021
30 June
2022
Unaudited Unaudited Audited
Issued share capital (nil par value) US$'000 41,551 41,345 41,442
Number of shares in issue ('000) 526,406 522,687 524,406
The table below shows a reconciliation of share capital movements:
Number of shares US$'000
At 1 July 2021 476,681,551 32,465
July 2021 - options exercised 2,500,000 182
October 2021 - share placing - cash receipts net of costs 32,900,000 6,557
November 2021 - share placing - cash receipts net of costs 10,000,000 1,982
December 2021 - shares issued as partial repayment of Pipestone loan 875,389 157
At 31 December 2021 522,686,823 41,343
April 2022 - options exercised 1,718,987 99
At 30 June 2022 524,405,810 41,442
November2022 - options exercised 2,000,000 109
At 31 December 2022 526,405,810 41,345
On 13 July 2021 Australian Special Opportunity Fund, LP exercised options over
2.5 million shares at an exercise price of 5.28p per share, raising gross cash
proceeds of US$182k.
On 13 October 2021 the Company issued 32.9 million shares at a price of 15
pence per share, raising gross cash proceeds of US$6.8 million (before costs
of $221k). No related parties were involved in the placing.
On 15 November 2021 the Company issued a further 10.0 million shares at a
price of 15 pence per share, raising gross cash proceeds of US$2.0 million
(before costs of $18k). No related parties were involved in the placing.
On 25 April 2022 Australian Special Opportunity Fund, LP exercised options
over 1,718,987 shares at an exercise price of 5.28p per share, raising gross
cash proceeds of US$116k (before costs of $17k).
On 10 November 2022 Australian Special Opportunity Fund, LP exercised options
over 2 million shares at an exercise price of 5.28p per share, raising gross
cash proceeds of US$125k (before costs of $16k).
10. Related party transactions
US$'000 Six months to 31 Dec 2022 Six months to 31 Dec 2021
Charged in period Settled in period Closing Balance Charged in period Settled in period Closing Balance
Pipestone Capital Inc(1) - - - 52 (1,061) -
MPD Consulting Limited(2) 3 (1) 2 9 (9) -
Magna Capital (Guernsey) Limited(3) 10 - 10 - - -
13 (1) 12 61 (1,070) -
The above table does not include remuneration of Directors and senior
management.
1. Pipestone Capital Inc, in which George Bennett, the Company's CEO,
has a beneficial interest, provided a US$1 million bridging loan to the Group
in February 2020 as explained in note 8, of which US$75k was settled in June
2020 and the balance settled in December 2021. In addition, in October 2020
Pipestone Capital Inc provided an additional bridging loan of US$150k in
October 2020 which was settled in cash together with US$3k interest in
December 2020.
2. MPD Consulting Limited, in which Pete Gardner, the Company's CFO,
has a beneficial interest, has recharged certain costs relating to travel to
Burundi and UK support incurred on behalf of the Group.
3. Magna Capital (Guernsey) Limited, in which Adonis Pouroulis, the
non-executive Chairman of the Board of Directors, has a beneficial interest,
was engaged in December 2022 to assist the Company with its strategy to secure
ownership of opportunities to recover rare earths from phosphogypsum.
11. Post balance sheet events
No events after the reporting date were identified that would affect the group
of companies significantly or cause its financial results to be materially
misstated.
1 (#_ftnref1) According to Argus Media group
2 (#_ftnref2) Net present value using a 10% forward discount rate
3 (#_ftnref3) Net present value using a 10% forward discount rate
4 (#_ftnref4) Neodymium ("Nd"), Praseodymium ("Pr"), Dysprosium("Dy") and
Terbium ("Tb")
5 (#_ftnref5) Based on near term price forecasts: Nd US$110/kg; Pr
US$112.50/kg; Dy US$340/kg; Tb US$1,875/kg
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