REG - Rainbow Rare Earths - PEA Confirms Robust Economics for Phalaborwa

Rainbow Rare EarthsAnnouncement

03/10/2022 07:00

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RNS Number : 4539B  Rainbow Rare Earths Limited  03 October 2022

 

3 October 2022

Rainbow Rare Earths Limited

("Rainbow" or "the Company")

LSE: RBW

 

Preliminary Economic Assessment Confirms Robust Economics for Phalaborwa Rare
Earths Project

Rainbow Rare Earths announces the results of the Preliminary Economic
Assessment ("PEA") 1  (#_ftn1) for the Company's Phalaborwa Rare Earths
Project in South Africa, marking an important milestone in the project's
development. The PEA demonstrates a long life and financially robust
opportunity for Phalaborwa to become a significant supplier of high purity
rare earth oxides to the rapidly expanding permanent magnet market, to support
global decarbonisation and the growing demand for electric vehicles and
offshore wind turbines. The PEA was conducted by METC Engineering, the
minerals processing engineering company based in Johannesburg, with key
contributions from independent consultants as required.

Key highlights, an overview, and the executive summary are provided below,
with the report available on the Company's website at
www.rainbowrareearths.com/investors/results-reports-presentations/
(https://www.rainbowrareearths.com/investors/results-reports-presentations/) .
An investor presentation will be held on 5 October to discuss results of the
PEA, see further details below.

PEA highlights

·    Total production of 26,208 tonnes of separated magnet rare earth
oxides 2  (#_ftn2) with a weighted average sales value of US$137.92/kg 3 
(#_ftn3) generating US$3.6 billion of revenue over 14.2 years.

·    Under the base case scenario, 4  (#_ftn4) the 2.2 million tonne per
annum processing operation underscores the very robust project economics:

o  Post tax NPV(10) of US$627 million. 5  (#_ftn5)

o  Post tax IRR of 40%.

o  Average annual revenue of US$254.8 million; US$117.91 per tonne of gypsum
processed.

o  Operating costs averaging US$33.86/kg of separated magnet rare earth
oxides are expected to be one of the lowest of all Western rare-earth projects
and current producers.

o  Average EBITDA of US$192.2 million per annum, delivering an EBITDA
operating margin of 75%. 6  (#_ftn6)

o  Capital expenditure of US$295.5 million, with payback period of 2 years;
significantly below that of a traditional hard rock rare earth mining project.

·    Using 2022 year to date ("YTD") average rare earth prices (28% higher
than base case), the PEA delivers an:

o  EBITDA operating margin over 80%

o  NPV(10) of US$934 million and a payback of 1.7 years.

·    Using long-term rare earth price forecasts provided by Argus Media
Group ("Argus"), underpinned by compelling supply/demand fundamentals, the PEA
delivers an NPV(10) over US$1 billion.

·    The positive results of the PEA support the continued development of
Phalaborwa, with the next steps including the publication of a resource update
and the definition of a work programme for a feasibility study.

Rainbow Rare Earths CEO, George Bennett, commented: "Establishing 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 2 years, this PEA corroborates our
long-held view of Phalaborwa's enormous potential as a low capital intensity,
high margin, near-term rare earth development project. The base case financial
model presents a robust project with low sensitivity to costs, which is
particularly relevant in the current inflationary environment, and which can
generate strong returns in any foreseeable rare earth oxide pricing
environment.

At 2022 year-to-date average prices (which are around 28% higher than the base
case), the economics are exceptionally strong with an NPV of US$934 million
and a payback of 1.7 years.

As a brownfield site, the development of Phalaborwa provides us with a
significant opportunity to make positive environmental, social and economic
impacts.

The successful completion of this PEA represents not only a breakthrough step
in the development of Phalaborwa, demonstrating the viability of this
opportunity, but also underscores the broader potential to use our unique IP
and technology to extract separated rare earth oxides from other phosphogypsum
sources on a global scale.

Leveraging the expertise we have built up at Phalaborwa, we aim to accelerate
the shift in our business model to processing rare earths from secondary
sources. At a time when governments around the world are designating rare
earths as critical minerals, with the EU stating an anticipated fivefold
increase in demand by 2030, our strategy aims to facilitate near-term access
to these elements which are so fundamental to global decarbonisation. Our
focus on phosphogypsum as a source of magnet rare earths importantly
differentiates Rainbow from a risk perspective when compared with traditional
hard rock rare earth mining companies.

I believe Phalaborwa's PEA accurately reflects the rigour and expertise we
apply to project assessment. As we progress to a feasibility study at
Phalaborwa, I am confident that we have the right team, skills, and technology
to unlock this valuable source and contribute to a responsible, independent,
Western rare earths supply chain."

Investor presentation

Rainbow will host a live presentation via the Investor Meet Company platform
on Wednesday 5 October 2022 at 10:00am BST to discuss the PEA. The
presentation is open to all existing and potential shareholders. 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.

Rainbow's CEO, George Bennett, will also be presenting on the London South
East Investor Webinar on Tuesday 4 October 2022. The webinar will run from
18:00 - 20:00 BST. Following the presentation, attendees will have the
opportunity to ask questions. Please use the Zoom link below to register for
this webinar:

https://us02web.zoom.us/webinar/register/6316644539142/WN_RNi7eUm2SHSgYwXQ5F332g
(https://us02web.zoom.us/webinar/register/6316644539142/WN_RNi7eUm2SHSgYwXQ5F332g)

PEA overview

The PEA was based on processing 2.2 million tonnes per annum of phosphogypsum
over a 14.2-year project life to deliver 26,208 tonnes of separated magnet
rare earth oxides at an average cost of US$33.86/kg. This delivers an
exceptional 75% EBITDA operating margin at the base case basket price of
US$137.92 per kg, with first production assumed for 2026, established on near
term forecasts well below both 2022 YTD average prices and long-term market
forecasts.

Using 2022 YTD average rare earth prices or long-term rare earth price
forecasts provided by Argus delivers stronger returns.  Phalaborwa's strong
margins are underpinned by a low operating cost base, with a very low
sensitivity to changes in costs.

Rare earth price sensitivity

The sensitivity to rare earth prices has been calculated by reference to a
number of rare earth price scenarios. The key financial metrics of the
Phalaborwa Project under these different scenarios are set out below:

                                Base case  +10%    -10%     2021 average  Q3 2022 average  2022 YTD average 7  (#_ftn7)  Long term forecast 8  (#_ftn8)
 Basket price      US$/kg       137.92     151.71  124.13   122.33        144.11           175.89                        199.30
 NPV               US$ million  627.0      738.4   515.4    500.8         677.0            933.7                         1,027.6
 IRR               %            40%        44%     35%      35%           42%              51%                           44%
 Operating margin  %            75%        78%     73%      72%           77%              81%                           83%
 Payback           Years        2.0        1.9     2.3      2.3           2.0              1.7                           2.4
 Change in NPV     US$ million  -          111.4   (111.6)  (126.2)       50.0             306.7                         400.6

 

Applying the 2022 YTD average rare earth oxide prices to the project delivers
an NPV of US$933.7 million with an IRR of 51% and a payback period of 1.7
years. Long-term price forecasts received from Argus, underpinned by robust
magnet rare earths supply and demand fundamentals, suggest a higher long-term
basket price, demonstrating that the project can be expected to generate
strong returns in a market supported by strong demand growth for the separated
magnet rare earth oxides produced.

The sensitivities also show that using a lower average rare earth oxide price,
such as the average prices from 2021, deliver a robust project with solid
operating margins and a fast payback period. This demonstrates that the
Phalaborwa Project can be expected to generate strong returns in any
foreseeable rare earth oxide pricing environment.

Cost sensitivity

The sensitivity of the project economics to cost have been modelled to
understand the sensitivity of the project economics to energy costs, overall
operating costs, capital costs and the ZAR:US$ exchange rate.  The key
financial metrics of the Phalaborwa Project under these different scenarios
are set out below:

                                 +10% energy costs  +10% opex  -10% opex  -10% capex  +10% capex  ZAR: US$ FX rate 15.5  ZAR: US$ FX rate 17.5
 Basket price       US$/kg       137.92             137.92     137.92     137.92      137.92      137.92                 137.92
 NPV                US$ million  621.2              599.0      655.0      643.5       610.4       601.7                  652.2
 IRR                %            40%                39%        41%        42%         37%         38%                    42%
 Operating margin   %            75%                73%        78%        75%         75%         74%                    77%
 Payback            Years        2.1                2.1        2.0        1.9         2.2         2.2                    2.0
 Change in NPV (1)  US$ million  (5.8)              (28.0)     28.0       16.6        (16.6)      (25.3)                 25.2

1.        Compared to base case scenario set out above

With reasons detailed below, the project is less capital intensive than many
global rare earth development projects. In addition to this, the strong
margins generated by Phalaborwa are underpinned by a low operating cost base.
This is possible due to the unique nature of the project, which excludes many
of the usual energy intensive steps associated with a traditional hard rock
mining project (thereby limiting energy costs to 21% of overall operating
costs).

·    There is no requirement for hard rock mining, including waste
stripping, which usually represents a large proportion of the cost base for a
traditional hard rock mine. The cost of hydraulic reclamation of the gypsum
stacks is instead comparable to the cost of feeding a processing plant from an
ore stockpile.

·    There is no cost associated with crushing and grinding ore, which
normally forms a substantial part of the energy use and processing costs for a
traditional hard rock mine.

·    The rare earth minerals contained in the gypsum stacks have been
chemically cracked by the historic phosphoric acid production process. This
allows the Phalaborwa Project to produce separated rare earth oxides in a
single processing plant instead of producing a mineral concentrate which
requires chemical cracking in a dedicated plant before feeding into a
separation plant.

As detailed in the PEA, the phosphogypsum contained in the two stacks at
Phalaborwa can be reclaimed using conventional high-pressure monitoring
techniques as commonly used on reclamation projects in South Africa. A viable
flowsheet for economic extraction and purification with an unoptimised
recovery of 65% of the rare earth elements can be implemented.

This process flowsheet utilises a pre-treatment process to control impurities,
which can then be recovered for re-use later, recycling any dissolved rare
earths back into the process. Pre-treated phosphogypsum and solution are
forwarded to a counter-current rare earth acid leach designed to extract
maximum rare earths from the phosphogypsum solids before the residue is
thickened, filtered, and disposed of by dry stacking. The pregnant solution
from the rare earth leach is treated in a rapid consolidation process that
delivers a highly concentrated rare earth solution to the refining section,
where it is treated in a continuous, bulk rare earth ion-exchange process,
followed by the separation of target rare earth elements by continuous ion
chromatography, nanofiltration, precipitation, and calcining.

In addition to delivering a product into the increasingly important green
economy, the PEA has demonstrated the project's crucial role in environmental
remediation. It also highlights the potential for significant social and
economic benefits to the town of Phalaborwa and the surrounding communities.
Studies at Phalaborwa have highlighted the environmental advantages of the
project, which include very low levels of radioactivity (exempting Phalaborwa
from radioactivity regulation) and the ability to neutralise the existing
water from the stacks for re-use in a closed circuit as plant process water.
In processing material from the existing gypsum stacks at Phalaborwa, the aim
is to remove existing environmental liabilities and redeposit benign gypsum on
a new stack, built according to International Finance Corporation ("IFC")
Performance Standards and Equator Principles. The PEA highlights Phalaborwa's
excellent existing infrastructure, both in terms of physical facilities at
site which can be updated, but also access to power, local production of key
reagents and a skilled workforce.

Following the publication of the PEA Rainbow intends to advance the project to
feasibility study, identify all permits required for the Project to be
developed, engage with the relevant authorities to expedite permitting and
undertake further process optimisation tests culminating in an extensive
process pilot plant operation. A resource update is also expected for
Phalaborwa following drilling work undertaken in June 2022.

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.

 

 

For further information, please contact:

 

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

                                          Pete Gardner
 SP Angel Corporate Finance LLP  Broker   Ewan Leggat        +44 (0) 20 3470 0470

                                          Charlie Bouverat
 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 30.7Mt at 0.43% TREO contained within
unconsolidated gypsum stacks derived from historic phosphate hard rock mining.
High value NdPr oxide represents 29.1% 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.

 

PEA Executive Summary

1.      Introduction

The Phalaborwa Rare Earths Project (the Project) offers a long life, and
financially robust, opportunity to become a significant supplier of high
purity rare earth oxides to the rapidly expanding permanent magnet market.

Apart from delivering a product into the increasingly important green economy,
the Project has strong environmental credentials in terms of reducing legacy
risks (from previous operations on site) to an environmentally sensitive area.
The Project development will be undertaken fully in line with International
Finance Corporation Performance Standards and the Equator Principles.

The Project's rare earths resource is contained in two phosphogypsum stacks
which are the waste from historic phosphoric acid production on the site,
which ceased in 2014. The Project is located on an industrial site adjacent to
the mining town of Phalaborwa in South Africa and benefits from excellent
national, regional, local and site-specific infrastructure. The industrial
nature of the Project provides considerable advantages over similar mining
projects with the ability to produce rare earth oxides directly from the large
resource in a single process. Rainbow Rare Earths Limited (Rainbow) has
developed a process to extract the rare earths from the host phosphogypsum
through an extensive process test work program conducted at highly regarded
international laboratories, unlocking the value of the Project.

Following the publication of the Preliminary Economic Assessment (PEA) Rainbow
intends to advance the Project to feasibility study, identify all permits
required for the Project to be developed, engage with the relevant authorities
to expedite permitting and undertake further process optimisation tests
culminating in an extensive process pilot plant operation. The PEA envisages
first production in 2026.

2.      Key Economic Parameters

The key economic parameters for the Project base case are presented in Table
1.

Table 1: Summary of Base Case Project Economic Parameters

 Parameter                             Units   Value
 Treatment Rate                        Mtpa    2.2
 Production NdPr, Dy, Tb Oxides        tpa     1,848
 Life of Operation                     years   14.2
 Capital Cost                          US$M    295.5
 Operating Cost per Tonne Treated      US$/t   28.95
 Operating Cost per kg Product         US$/kg  33.86
 Revenue per Tonne Treated             US$/t   117.91
 Payback Period (post tax)             years   2.0
 NPV(10) (post tax)                    US$M    627.0
 IRR (post tax)                        %       40
 Average base-case revenue per annum   US$M    254.8
 Average EBITDA 9  (#_ftn9) per annum  US$M    192.2
 EBITDA margin                         %       75

 

The base case uses the projected rare earth oxides price for 2023, lower than
the average price for 2022 to date or long-term forecast prices received from
Argus as set out in the table below:

Table 2: Rare Earth Oxide Prices Used

                             Base case  2022 YTD 10  (#_ftn10)  Forecast 11  (#_ftn11)
 Neodymium oxide     US$/kg  110.00     146.36                  128.82
 Praseodymium oxide  US$/kg  112.50     140.25                  204.51
 Dysprosium oxide    US$/kg  340.00     403.70                  489.08
 Terbium oxide       US$/kg  1,875.00   2,117.56                4,068.07
 Basket price        US$/kg  137.92     175.89                  199.30

 

The majority of the capital and operating costs are incurred in South African
Rands (ZAR). These have been converted in the base case at an exchange rate of
US$1.00 : ZAR16.50. A corporate tax of 27% has been allowed for in the
economic analysis.

Sensitivity analyses for variations in rare earth prices have been calculated
by reference to both historical and forecast prices. The results demonstrate
that the project can be expected to generate strong returns in a market
underpinned by strong demand growth for the separated magnet rare earth oxides
that will be produced. The sensitivity of the economics to capital cost,
operating cost, and US$:ZAR exchange rate have also been modelled,
demonstrating that the Project is not sensitive to changes in costs due to the
strong EBITDA margins generated. The results of the sensitivity analysis is
set out in the table below:

Table 3: Sensitivity Analysis

                                                              Price sensitivities                 Cost sensitivities
                           Base case  2022 YTD 12  (#_ftn12)  Forecast 13  (#_ftn13)  +10% opex   +10% capex  US$1: ZAR17.5
 Basket price      US$/kg  137.92     175.89                  199.30                  137.92      137.92      137.92
 NPV               US$M    627.0      933.7                   1,027.6                 599.0       610.4       652.2
 IRR               %       40%        51%                     44%                     39%         37%         42%
 Operating margin  %       75%        81%                     83%                     73%         75%         77%
 Payback           Years   2.0        1.7                     2.4                     2.1         2.2         2.0
 Change in NPV     US$M    N/A        306.7                   400.6                   (28.0)      (16.6)      25.2

 

3.      Project Location and Infrastructure

The Phalaborwa Rare Earths Project is located within the jurisdiction of the
Ba-Phalaborwa Local Municipality in the Limpopo Province of the Republic of
South Africa. Phalaborwa is a significant mining and industrial centre located
approximately 500 km or 5 hours' drive from Johannesburg's OR Tambo airport
on high-quality bitumen roads. The location of the Project is shown in Figure
1.

Figure 1: Location of the Project

The project benefits from the advanced national infrastructure such as road,
rail and air links with two local airports. Phalaborwa town has significant
support services of use to the Project, including engineering and technical
services. The site has a full suite of infrastructure that will service the
Project including: access control, offices, stores, workshops, laboratory,
power and water supply.

4.      Mineral Resource

The phosphogypsum residue resource to be processed at the Project is contained
in two separate stacks, Stack A and Stack B as shown in Figure 2.

Figure 2: Google images of the Bosveld stacks. Right: the position of the
stacks in relation to the Phalaborwa mining complex and town. Left: close-up
of the stacks annotated as A and B

Rainbow completed a drilling program on the stacks in December 2020 consisting
of 1,056m over 72 holes which produced 702 samples that were analysed at SGS
Laboratories in Johannesburg. The results from this are the basis for the
mineral resource estimate presented in Table 4.

The mineral resource estimate for the Bosveld phosphogypsum REE Stacks A and B
is presented in Table 4. The resource has been estimated by the independent
Competent Person and is classified as an Inferred Resource based on the
guidelines defined in JORC 2012. The in-situ dry bulk density has been
re-assessed following further drilling carried out in 2022 and the overall
tonnage set out in Table 4 has been amended compared to the resource initially
reported in June 2021.

Table 4: Mineral Resource Estimate for the Bosveld Phosphogypsum Stacks

 JORC 2012 Classification  Stack Name  Tonnes (Mt)  TREO %  NdPr Prop %  Nd Prop %  Pr Prop %  Dy Prop %  Tb Prop %  LREO Prop %  HREO Prop %  CREO Prop %  Th ppm  U ppm  In Situ dry BD
 Inferred                  Stack A     21.9         0.42    29.0         23.3       5.7        1.0        0.4        92.1         7.9          27.8         49.0    1.8    1.20
                           Stack B     8.7          0.46    29.4         23.6       5.7        1.0        0.3        92.6         7.4          27.8         44.1    2.0    1.20
 Total Inferred                        30.7         0.43    29.1         23.4       5.7        1.0        0.3        92.2         7.8          27.8         47.6    1.8    1.20

Reported at 0.2% TREO cut-off grade. No constraining shell required as stacks
above ground level. Adequate processing test work completed to satisfy RPEEE.

 

5.      Process Development and Test Work

The recovery of rare earths from phosphogypsum arising as a residue from
phosphoric acid production has been the subject of international research for
many years. The extraction and recovery of rare earths (REEs) at Phalaborwa
has been investigated since the early 1980's by Fedmis, Mintek and later,
briefly, by Bosveld Phosphates.

Rainbow acquired access to the Phalaborwa phosphogypsum stacks in 2020 and
initiated a test work program to support a technically and economically
feasible flow sheet for rare earths extraction.

The test work program was established and managed by Rainbow and conducted at:
ANSTO Minerals in Sydney Australia, SGS Laboratories in Johannesburg South
Africa and K-Tech's laboratory in Florida USA.

The test program culminated in a technically and economically feasible
flowsheet which is the basis of this PEA.

6.      Reclamation, Processing and Stacking of Phosphogypsum

Phosphogypsum residue is hydraulically reclaimed from the stacks and pumped to
the process plant for trash and coarse waste removal delivering a feed to the
process plant of 2.2 Mt/a dry solids equivalent. The screened slurry is
thickened and filtered, with the reclaimed water being neutralised and
recycled as process water.

The dewatered solids are treated to remove impurities.

The phosphogypsum is then delivered to a counter current leach circuit for
extraction of rare earth elements using sulfuric acid. The filtered leach
residue is conveyed to one of two new, HDPE lined residue disposal stacks.

The pregnant leach solution for the rare earth leach is pumped to a rapid
consolidation circuit for primary rare earth concentration, prior to the
refinery section, and acid recovery to the counter-current leach circuit.

The rare earth refining circuit combines ion exchange, chromatography,
nanofiltration, precipitation and calcining to produce three saleable
separated rare earth oxide products: neodymium/praseodymium oxide, dysprosium
oxide, and terbium oxide at an average production rate of 1,848 t/a. The
remainder of the rare earth basket is stored for future consideration as an
intermediate salt.

A simplified block flow diagram (BFD) is shown in Figure 1.3.

Figure 1.3: Simplified Process Block Flow Diagram

7.      Environmental & Social Impact

The Project will be constructed on an existing industrialised site without
impacting land use. No new infrastructure is required outside of the existing
property. Rehabilitation of some previously disturbed land will be accelerated
during the project.

The Project will play a crucial role in environmental remediation and
improvement as well as providing economic and social benefits:

·    Polluted water on the existing stacks, in the existing ponds and in
the groundwater will be neutralised and used as process water.

·    Seepage of polluted water from the unlined existing stacks will be
eliminated and the residue phosphogypsum from the process will be placed on
new lined stacks.

·    It is anticipated that a significant proportion of the residual
phosphogypsum will be sold for agricultural and industrial use and removed
from site. The beneficial economic impact of this has not been included in the
PEA.

Rainbow will work closely with previous owners of the property to accelerate
the rehabilitation of unused areas in accordance with the closure plans and
funding already in place.

The project will create numerous employment opportunities during construction
and c. 300 direct job opportunities (excluding contractors, suppliers,
vendors, consultants etc.). Priority will be given to the people in the
Ba-Phalaborwa area with the requisite skills and experience for these jobs.

Rainbow will give preference to local contractors and where contractors are
imported from other areas, Rainbow will encourage the employment of local
labour.

8.      Rare Earths Market

The project will be a significant producer of separated
Neodymium/Praseodymium, Dysprosium, and Terbium oxides which are expected to
represent 98% of the total rare earth market value by 2030, up from 92% in
2020.

The demand for these four magnet rare earth metals, which are required in
electric vehicles and offshore wind turbines, is forecast to grow as global
pressure to decarbonise increases. Growth in electric vehicle demand is
expected to increase by 22.4% per annum between 2020 and 2030, from a 1.5%
passenger vehicle market penetration in 2020 to 45% by 2040. Global demand for
direct drive wind turbines is expected to grow at approximately 25% per annum
between 2020 and 2030, further driving the demand for rare earth metals.

As a result, Argus is forecasting strong compound annual growth rates for the
Magnet Rare Earth Metals over the next decade (Nd 6.4%, Pr 6.7%, Dy 7.4% and
Tb 33.4%) as shown below:

Highlighting the urgency for near-term production of rare earths from new
sources, Argus is forecasting a 25% supply deficit by 2030 from existing
projects. Analysts are forecasting that this supply deficit will drive
strengthening prices for the magnet rare earth oxides over the next decade.

Argus undertook a market review for Rainbow in January 2022 and provided price
forecasts for individual rare earth oxide products, which Rainbow has
converted into a weighted average basket price for Phalaborwa. Price forecasts
have indicated that the Phalaborwa product basket price will increase from
around US$139/kg in 2022 to US$227/kg in 2030.

 1  (#_ftnref1) Under the terms of the earn-in agreement between Bosveld
Phosphates (Pty) Ltd and Rainbow, Rainbow is earning a 70% interest in the
Phalaborwa Project by delivering a pre-feasibility study. The results of the
PEA are presented on a 100% basis assuming that the project is 100% equity
funded

 2  (#_ftnref2) Neodymium ("Nd"), Praseodymium ("Pr"), Dysprosium("Dy") and
Terbium ("Tb")

 3  (#_ftnref3) Based on near term price forecasts: Nd US$110/kg; Pr
US$112.50/kg; Dy US$340/kg; Tb US$1,875/kg

 4  (#_ftnref4) Base case financial model outputs - see PEA for details on
assumptions used

 5  (#_ftnref5) Net present value using a 10% forward discount rate

 6  (#_ftnref6) Earnings before interest, tax, depreciation and amortisation

 7  (#_ftnref7) Derived from weekly data collated by Rainbow from price
reporting agencies up to 23 September 2022

 8  (#_ftnref8) Based on the long-term price forecasts received from Argus,
with the first year of production assumed to occur in 2026 and prices assumed
to remain constant from 2031 to the end of the project life

 9  (#_ftnref9) Earnings Before Interest, Tax, Depreciation and Amortisation

 10  (#_ftnref10) Derived from weekly data collated by Rainbow from price
reporting agencies up to 23 September 2022

 11  (#_ftnref11) Based on the long-term price forecasts received from Argus,
with the first year of production assumed to occur in 2026 and prices assumed
to remain constant from 2031 to the end of the project life

 12  (#_ftnref12) Derived from weekly data collated by Rainbow from price
reporting agencies up to 23 September 2022

 13  (#_ftnref13) Based on the long-term price forecasts received from Argus,
with the first year of production assumed to occur in 2026 and prices assumed
to remain constant from 2031 to the end of the project life

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