REG - Rainbow Rare Earths - LOI for offtake of Phalaborwa gypsum by-product

Rainbow Rare EarthsAnnouncement

04/10/2023 07:15

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RNS Number : 5858O  Rainbow Rare Earths Limited  04 October 2023

4 October 2023

Rainbow Rare Earths Limited

("Rainbow" or "the Company")

LSE: RBW

 

Rainbow enters into a Letter of Intent for an offtake agreement

for Phalaborwa gypsum by-product

 

·    Phalaborwa project is founded on principles of circularity via the
extraction of value from 'waste' products

·    Green gypsum will be available for sale to both domestic and
international customers in neighbouring countries

·    Demand estimated at ca. 400 to 600 kt per annum, providing additional
revenue stream to Rainbow

·    Sale of gypsum will allow for complete environmental rehabilitation of
site

NEWS RELEASE

Rainbow Rare Earths is pleased to announce that it has signed a Letter of
Intent to enter into an offtake agreement with NEXUS Intertrade (Pty) Ltd
("NEXUS"), under which NEXUS will acquire gypsum from the Phalaborwa project
in South Africa and sell it to end users.

The Phalaborwa project is due to commence production in 2026 and operations
will involve processing the existing unlined gypsum stacks in order to extract
the rare earth elements. These gypsum stacks have accumulated acid water over
time and Rainbow's process will neutralise the acid, rendering the water
suitable for use in the process plant.

The by-product of Rainbow's process will be a cleaner, 'benign' gypsum which
no longer contains any acid water residue. The benign gypsum will be stored on
new stacks lined according to International Finance Corporation standards and
Equator Principles.

NEXUS will work with Rainbow to establish the grade and quality of the benign
gypsum at Phalaborwa, which will in turn determine the blended average sales
price per tonne, as well as the available markets for its use, both in South
Africa and neighbouring countries.

NEXUS currently anticipates demand from the domestic cement manufacturing
industry, the domestic gypsum board and plaster manufacturing industry, the
domestic agricultural industry, and from certain international export markets
to which it also has access, estimated at 400 - 600 kt per annum.

An exclusive five-year offtake agreement will be concluded once Rainbow and
NEXUS have agreed upon the annual tonnage of gypsum to be supplied and the
market related price per annum, with the option for renewal for a further two
five-year periods.

The Phalaborwa project currently has a mineral resource estimate of 30.4
million tonnes and a mine life of at least 14 years; however, the benign
gypsum sales are expected to be a much longer-life operation, thereby having a
positive socio-economic effect on local industry.

Furthermore, the act of selling the benign gypsum by-product will see the
stacks at Phalaborwa eventually fully depleted, which will allow for a
complete environmental rehabilitation of the site.

George Bennett, CEO of Rainbow, commented: "This agreement is a real win-win
for Rainbow, NEXUS and our stakeholders. The Phalaborwa process is founded on
the principles of circularity as we are taking a waste product, 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. This will also have a positive impact on our
project economics with a lower level of long-term gypsum deposition from the
project than anticipated in the PEA.

It also highlights the very strong environmental credentials of this project:
not only will we be neutralising the acid water currently impacting the
unlined gypsum stacks and then depositing our waste material onto new lined
stacks, but we will eventually be fully depleting these stacks via the sale of
the benign gypsum. This will allow for a full-circle environmental
rehabilitation of the site whilst delivering a 'green gypsum' product to
NEXUS' domestic and international customer base.  This offtake agreement will
be helpful to bolster local industry, as well as providing an additional
revenue stream to Rainbow, demonstrating the benefits to all parties."

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

 Berenberg                 Broker   Matthew Armitt     +44 20 3207 7800
                                    Jennifer Lee

 Tavistock Communications  PR/IR    Charles Vivian     +44 (0) 20 7920 3150
                                    Tara Vivian-Neal   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 will 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 1 
(#_ftn1) , 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 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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