REG - Rainbow Rare Earths - Preliminary results for year-end 30 June 2022
24/10/2022 07:00
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RNS Number : 7912D Rainbow Rare Earths Limited 24 October 2022
24 October 2022
Rainbow Rare Earths Limited
("Rainbow" or "the Company")
LSE: RBW
Preliminary results for the year ended 30 June 2022
Rainbow Rare Earths is pleased to announce its preliminary results for the
year ended 30 June 2022 ("FY 2022").
The financial information in this release does not constitute the Financial
Statements. The Group's Annual Report, which includes the audit report and
audited Financial Statements for the year ended 30 June 2022, will be
available on the Company's website at www.rainbowrareearths.com
(http://www.rainbowrareearths.com) .
Highlights
· Increasing demand for magnet rare earths underpinned by rising
electric vehicle sales forecasts and mounting capacity acceleration in the
offshore wind market.
· A major shortage of neodymium and praseodymium is predicted by
2035 1 (#_ftn1) due to a lack of rare earths sources and the inability of
existing producers to increase their output.
· Rare earth prices rose substantially in FY 2022, with Phalaborwa's
basket price up 82%, and long-term supply demand fundamentals support
significant increases towards the second half of this decade.
· Progress made at Phalaborwa during FY 2022, culminating in the recent
publication of Phalaborwa's PEA highlighting its robust economics and the
significant opportunity provided by this project to provide near-term
production of rare earth oxides:
o Base case scenario establishes an NPV(10) of US$627 million, an IRR of
40%, an average operating margin of 75% and a two-year payback period.
o Using 2022 year to date average rare earth prices or long term forecast
rare earth prices, the PEA delivers an NPV(10) of c. US$1 billion, an average
operating margin over 80%, an IRR of 51% and a payback of 1.7 years.
· By collaborating with third parties, Rainbow is working to harness
value from rare earths contained within other secondary phosphogypsum sources.
· Rainbow became a member of the European Raw Material Alliance
("ERMA") in FY 2022 - an essential alliance working to accelerate the green
and digital transition through securing and reinforcing rare earths supply
chains.
· Continued constructive engagement with all stakeholders at Gakara in
Burundi, with confidence in the Company's ability to find a resolution to
allow operations to recommence.
Certain information contained in this announcement would have been deemed
inside information for the purposes of Article 7 of Market Abuse Regulation
(EU) No 596/2014 ("MAR") which has been incorporated into UK law by the
European Union (Withdrawal) Act 2018 until the release of this announcement.
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.
Chairman's statement
From wind turbines to EVs, clean energy is dependent on unlocking increased
supplies of critical minerals, including rare earths such as neodymium,
praseodymium, dysprosium and terbium which are fundamental components in
permanent magnets.
Current geopolitical tensions and energy security risks serve to further
highlight the urgency of the clean energy transition, which will not be
possible without a reliable supply of minerals. According to the IEA, demand
for rare earth elements by 2040 may rise between three and seven times from
today's levels.
China currently dominates the global production of rare earth magnets;
however, many major governments have now implemented critical and strategic
materials policies, with a focus on creating independent rare earth supply.
Rainbow has recently become a member of the European Raw Material Alliance
("ERMA") - an essential alliance which is working to accelerate the green and
digital transition through securing and reinforcing rare earths supply chains.
Aiming to make Europe economically more resilient, ERMA's goal is to diversify
supply chains, promote innovation, create jobs, and attract investment.
With our near-term development opportunity at Phalaborwa, alongside our unique
and innovative technologies and processes, we believe Rainbow is well
positioned to contribute to a responsible, independent supply chain, unlocking
sources of critical permanent magnet rare earths which are required to drive
global decarbonisation.
According to Adamus Intelligence, a major shortage of NdPr is predicted by
2035 due to a lack of rare earths sources in the market and the inability of
existing producers to increase their output. This underscores the compelling
opportunity presented to Rainbow, both at Phalaborwa and from the wider
application of our proprietary technology, to achieve near-term, responsible
and efficient rare earths production from secondary sources.
Rare earth prices rose substantially in FY 2022, with Phalaborwa's basket
price up 82% to US$173.91 per kg of magnet rare earth oxides. Whilst prices
fell back after the end of the financial year, they have since moved upwards
again and the long-term supply demand fundamentals support significant
increases towards the second half of this decade.
We have made significant strides forward in 2022 with a number of interesting
collaborations and opportunities which we believe will be central to
harnessing value from rare earths contained within secondary sources. Rainbow
continues to work closely with K-Technologies Inc. ("K-Tech") and is planning
on jointly patenting the rare earths extraction technology we have together
developed. We are also collaborating with OCP S.A. ("OCP"), the Moroccan world
leading producer of phosphate products, and Mohammed VI Polytechnic University
("UM6P"), a Moroccan university, by signing a Master Agreement in August 2022
on rare earths extraction from phosphogypsum. In addition to this, we signed a
Memorandum of Understanding with a major chemicals company in South Africa in
June, as part of which we are investigating the opportunity to extract rare
earth elements from a nitro phosphate process stream and identifying further
global opportunities for our unique rare earth extraction technology.
At our Gakara project in Burundi, which has been on care and maintenance since
June 2021, we continue to engage constructively with all stakeholders and
remain confident in our ability to resolve the issue and allow operations to
recommence.
On behalf of the Board of Directors, I would like to extend our gratitude to
our shareholders for their steadfast support, and to Rainbow's management
team, employees and contractors for their unwavering commitment to the
business' success. We also thank our host governments for their continued
productive engagement. Having contributed a considerable amount of value to
the Board since we founded the Company in 2011, Robert Sinclair resigned as a
Non-Executive Director due to health reasons in January 2022. The Board joins
me in thanking Robert for the considerable contribution he has made to
Rainbow.
Our purpose is to produce the critical rare earth products required to
progress the global green technology revolution in an efficient and
responsible manner and thanks to the good progress at Phalaborwa, I believe we
are working well towards achieving this goal.
I am encouraged by additional opportunities to leverage our intellectual
property and technology to extract rare earths from phosphogypsum. Through our
processing projects, which have fundamentally different risk profiles to
traditional rare earth mining projects, we see enormous potential to
facilitate near-term access to sources of critical permanent magnet rare
earths, which are required to decarbonise energy systems in an environmentally
responsible way.
CEO's statement
This has been a year of notable progress for Rainbow, enabling us to unlock a
valuable, near-term source of the rare earth permanent magnet metals required
so urgently to drive the global green energy revolution. This has involved
carrying out a programme of detailed test work at Phalaborwa to better
understand the exciting opportunity presented by this asset, leading to the
development of an economic flowsheet and the recent publication of the
preliminary economic assessment ("PEA").
By concentrating on phosphogypsum opportunities, the usual, extensive resource
definition period is removed, significantly reducing the long lead time and
risks associated with bringing a traditional mine into production. In
addition, we benefit from considerable reductions in capital ("capex") and
operating costs ("opex") compared to a traditional mine, due to the absence of
hard rock mining, mine waste disposal, ore crushing and milling within the
overall project cost base. Because the rare earth elements are present in a
'cracked' chemical form in the phosphogypsum, Rainbow's process will deliver
separated rare earth oxides in a single process flowsheet at site. This
replaces the multiple stages of reagent intensive processing usually required
to crack a rare earth mineral concentrate and separate out the rare earth
oxides from a mixed rare earth carbonate. Rainbow's process is also expected
to have a number of environmental benefits.
Phalaborwa's PEA, which establishes an NPV(10) 2 (#_ftn2) of US$627 million,
an IRR 3 (#_ftn3) of 40%, an average operating margin of 75% and a payback
period of only 2 years, corroborates our long-held view of the operation's
enormous potential as a low capital intensity, high margin, near-term rare
earths development project. The base case financial model presented, using
near-term rare earth price forecasts well below 2022 averages, demonstrates a
robust project with low sensitivity to changes in both rare earth prices and
costs.
The work carried out to date at this asset demonstrates Rainbow's ability to
overcome the historical technical, environmental, and economic challenges
related to extracting rare earths from phosphogypsum. Importantly, whilst the
configuration of the process flowsheet is innovative, each individual stage is
well tested on a commercial basis, with the required equipment and reagents
being readily available.
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 rare earths from other phosphogypsum sources on a
global scale. We now intend to advance to feasibility study, identify all
permits required for Phalaborwa's development, engage with the relevant
authorities to expedite permitting and undertake further process optimisation
tests culminating in an extensive process pilot plant operation.
We are committed to responsible business practices from an environmental,
social and governance perspective. As a brownfield site, the development of
Phalaborwa provides us with a significant opportunity to make positive
environmental, social and economic impacts. Effective stakeholder engagement
will be a fundamental part of project development, concentrating on
understanding key risks and integrating stakeholder considerations into
project development decisions to create long-term value.
I believe Phalaborwa's PEA accurately reflects the rigour and expertise we
apply to project assessment. As a team, we have led numerous projects through
development and have significant experience throughout the asset lifecycle
from optimisation and feasibility to plant construction and commissioning. I
am exceptionally proud of the progress we have made over the past few years
and am confident that we have the right people in place to take Phalaborwa's
development forward. With our proven operating experience, unique
phosphogypsum processing intellectual property and portfolio of opportunities,
I believe that Rainbow is well positioned to develop a responsible rare earths
supply chain to drive the green energy transition.
Operational review
Phalaborwa
Rainbow's Phalaborwa rare earths project in South Africa presents the Company
with an exciting near-term opportunity to extract rare earths from a secondary
source. 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.
Phalaborwa has an inferred mineral resource estimate of 30.7Mt at 0.43% TREO,
with a rare earth basket that is weighted towards high value NdPr oxide, a
critical building block for the global energy transition, which represents
29.1% of the total contained rare earth oxides. Economic Dysprosium (Dy) and
Terbium (Tb) oxide credits further enhance its overall value. Phalaborwa's
NdPr grade is substantially higher than a typical low-cost ionic clay rare
earth project, much closer to traditional hard rock style deposits.
Fundamental to unlocking the rare earths contained within the phosphogypsum at
Phalaborwa (and more widely) is the innovative processing flowsheet developed
by Rainbow in parallel with K-Tech. It represents a breakthrough in allowing
for the economic extraction of rare earth elements from phosphogypsum, which
has historically proven to be challenging. The flowsheet will comprise the
following steps:
· Phosphogypsum will be reclaimed hydraulically from the existing
stacks and pumped to the processing facility removing soluble impurities prior
to the leach process.
· A pre-leach regime will be employed to remove fluoride from the
gypsum stream, allowing rare earth grades in the pregnant leach solution to be
maximised. The extracted fluoride will produce reagents for use elsewhere in
the processing circuit, reducing operating costs.
· The fluoride leached phosphogypsum progresses to a rare earth counter
current sulphuric acid leach system for the extraction of the target rare
earth elements. This allows for successful recycling of the various acid
streams to optimise the overall processing costs.
· A rapid consolidation process for the rare earths in the pregnant
leach solution allows the rare earths to be concentrated with primary impurity
rejection. This process replaces the originally anticipated nano filtration
system, which significantly improves the overall acid recycling, thereby
reducing operating costs.
· The rapid consolidation process feeds the downstream continuous ion
exchange and continuous ion chromatography processes to deliver separated rare
earth oxides. The flow rates to these processes are considerably lower than
originally anticipated using nano filtration techniques resulting in
significant capital and operating cost savings.
Phalaborwa PEA
Rainbow is earning a 70% interest in the Phalaborwa project by delivering a
pre-feasibility study, which is now in planning having published the strong
economic outcome from the PEA.
Robust base case economics
The PEA was based on processing 2.2 million tonnes per annum of phosphogypsum
over a 15-year project life to deliver 26,208 tonnes of separated rare earth
magnet oxides at an average cost of US$33.86/kg. This delivers an exceptional
75% operating margin at the base case basket price of US$137.92 per kg for the
rare earth oxides, based on near term forecasts well below both 2022 year to
date average prices and long-term market forecasts.
The base case financial model set out in the PEA delivered exceptionally
robust economic returns including:
· Post-tax NPV(10) of US$627.4 million, representing 212% of the
US$295.5 million total capital cost1;
· Post-tax IRR of 40%; and
· Post-tax payback of upfront capital costs after 2.0 years of
operations.
NPV upside using year-to-date prices
Using 2022 year to date average rare earth prices or long term forecast rare
earth prices the PEA delivers an EBITDA operating margin over 80%, with an
NPV(10) of c. US$1 billion and a payback of 1.7 years.
Minimal sensitivities to cost
The project is insensitive to changes in costs, including an overall low
energy intensity at just 20% of annual operating costs. Against a backdrop of
the expected demand strength and supply constraints for permanent magnet rare
earths forecast over the next decade and beyond, Phalaborwa is expected to
deliver an independent source of responsibly sourced rare earth oxides for the
green revolution.
Environmental benefits
Studies at Phalaborwa have highlighted the environmental benefits 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 reuse in a closed circuit as plant process water. In
processing material from the existing gypsum stacks at Phalaborwa, we aim 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.
Next steps
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.
Gakara
The Gakara rare earths project is located in Western Burundi covering an area
of approximately 135km². The project benefits from good infrastructure, with
road links to Dar es Salaam, Tanzania and Mombasa, Kenya. Trial mining and
processing has demonstrated that a high-grade rare earth mineral concentrate,
with a 19-20% NdPr content, can be consistently produced via simple gravity
separation from the narrow high-grade rare earth veins found across the Gakara
license area.
Gakara was placed on care and maintenance in June 2021 at the request of the
Government of Burundi, with the majority of staff placed on suspension and
short-term cash requirements minimised. Rainbow continues to engage
constructively with all stakeholders to resolve the issue and allow trial
mining to recommence. On the expected restart of operations, Rainbow will
assess the available options to move the project to commercial production
Developing sources of phosphogypsum
The successful global transition to clean energy is reliant on a considerable
increase in supply of critical materials. Rainbow is focused on identifying
the optimal way of producing rare earths responsibly from secondary sources,
removing significant time, risk and cost from the overall project timeline.
Phosphate rock is mined all over the world, with over three quarters of global
reserves located in Northern Africa. Given the prevalence of phosphate mining,
phosphogypsum is available throughout the world in large volumes. This makes
it an attractive secondary source of rare earth elements.
Recognising this enormous potential, our team is concentrated on securing
opportunities for both collaboration and expertise sharing, as well as gaining
access to new supply.
In June, Rainbow entered into a Memorandum of Understanding with a diversified
chemicals group based in South Africa to investigate the opportunity of
extracting rare earth elements from a nitro phosphate process stream at its
phosphoric acid production plant near Johannesburg in South Africa.
Under the terms of the MoU, Rainbow is conducting a rare earths extraction
pilot study with the chemicals group, involving initial grade test work on
processing stream material. This will be followed by a technical programme to
confirm a flowsheet using Rainbow's unique knowledge and IP.
The feedstock for the phosphoric acid production plant originates from the
same ore originally mined by Foskor that generated the two gypsum stacks at
Phalaborwa. Preliminary sampling of the processing stream indicates a grade of
0.81% TREO, with a circa 27% weighting to high-value NdPr, alongside economic
levels of terbium and dysprosium, similar to Phalaborwa.
Direct costs associated with the pilot study utilising Rainbow's exclusive IP
and technology will be financed by the chemicals group. Subject to a
successful outcome, the parties intend to negotiate terms for a potential
joint venture agreement to extract value from the rare earths present in the
phosphoric acid processing stream.
Post Year-end, in August 2022, Rainbow entered into a Master Agreement with
OCP, the Moroccan world leading producer of phosphate products, and UM6P, a
Moroccan university with a strong focus on science, technology and innovation,
to further investigate and develop the optimal technique for the extraction of
rare earth elements from phosphogypsum.
Together with the innovative research carried out by UM6P, OCP has built up
significant IP assets and expertise in the field of phosphogypsum processing.
This provides a synergistic opportunity for joint development with Rainbow,
given Rainbow's expertise and intellectual property on rare earths extraction
and processing gained from work carried out to date at Phalaborwa. OCP and
UM6P will contribute with their respective expertise, including adapted
complementary separation technologies. The Parties intend to develop the
optimal route for the extraction of rare earths from phosphogypsum, and the
development of pilot and industrial-scale extraction of rare earths from
phosphogypsum.
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. However, the process has proven technically, environmentally and
economically challenging.
In 2022, following a robust international test work programme, Rainbow
confirmed the successful development of a process flowsheet to extract rare
earth elements efficiently from the phosphogypsum stacks at Phalaborwa using
an innovative process developed in collaboration with K-Tech. Rainbow and
K-Tech and are now in the process of jointly patenting this breakthrough.
The process flowsheet utilises existing technology, proven at a commercial
scale across a number of industries, in a novel way to overcome the technical
challenges associated with economically recovering the rare earth elements
from the phosphogypsum. The process includes a number of simple steps to
remove impurities from the phosphogypsum before leaching the rare earth
elements into a high-grade pregnant leach solution. Efficient recycling of
leach streams ensures reagent costs are optimised.
The high grade mixed rare earth solution is ultimately fed into a patented
continuous ion exchange and continuous ion chromatography system to allow for
the recovery of high purity separated magnet rare earth oxides with far fewer
steps than a traditional solvent exchange process. Unlike traditional
separation techniques, the process does not require the costly separation of
low value products, such as cerium and lanthanum, before the high value magnet
rare earth oxides can be targeted.
The production of separated magnet rare earth oxides in a single processing
facility, without the need to ship significant volumes of low value or waste
material between a mine, cracking plant and separation facility, also provide
significant environmental and cost benefits when compared to traditional
methods.
Financial Review
PROFIT AND LOSS
With Rainbow's strategic focus on processing rare earths from secondary
sources, predominantly at Phalaborwa in South Africa, and the Gakara project
remaining on care and maintenance throughout the year, the income statement
represents the administrative costs for the Group for the year.
Income statement costs associated with maintaining the Gakara project on care
and maintenance totalled US$1.3 million (FY 2021: US$0.8 million). The
increase is due to the change in treatment of costs previously capitalised
within exploration and evaluation assets. In FY 2021 a total of US$1.9 million
was spent at Gakara, of which US$1.1 million was capitalised comprising US$0.4
million of net costs associated with trial mining and processing, US$0.3
million of depreciation on the mining fleet and US$0.4 million of direct
exploration costs. With the project on care and maintenance throughout FY
2022, all costs associated with Gakara are recognised within the income
statement as they do represent costs incurred to evaluate the commercial
viability of extracting the mineral resource at the Gakara project. The
reduced overall cost base at Gakara in FY 2022 includes costs associated with
suspending staff contracts up to 31 December 2021, following which the team
was reduced to a core of 22 staff to safeguard the assets and maintain the
administration in country. All staff with terminated employment contracts
received redundancy payments in accordance with Burundi law.
The Group's corporate costs grew in FY 2022. With the expected fast track
development of Phalaborwa, the administrative structures for the Group are
being strengthened, and a new administrative hub has been established in South
Africa. FY 2022 costs totalled US$2.3 million, increasing from US$1.9 million
in FY 2021, predominantly driven by staff costs.
Net finance costs of US$0.3 million (FY 2021: US$Nil) relate primarily to
foreign exchange differences. Gains on movements between the Burundian Franc
('BIF') and US dollars, the functional currency of the Group, were offset in
FY 2022 by losses on movements between GB Pounds, which the Group holds to
match future expected costs, and US dollars. Finance costs also include US$0.1
million (FY 2021: US$0.1 million) associated with the FinBank loan in Burundi.
The corporation tax rate in Burundi is 30%. In the absence of taxable profit,
a minimum tax is charged calculated as 1% of revenue. The tax charge in the
year represents an adjustment to minimum tax from prior periods.
BALANCE SHEET
The Group balance sheet includes US$9.8 million of non-current assets at 30
June 2022 relating to Gakara, including US$8.6 million of exploration and
evaluation costs and tangible fixed assets with a net book value of US$1.0
million. The Gakara cash generating unit also includes US$0.9 million of
inventory, carried at cost, primarily relating to the stock of available for
sale rare earth concentrate in Burundi. Whilst the Gakara project remains on
care and maintenance, the Directors are confident that the issues with the
Government of Burundi will be resolved, allowing the asset to recommence
operations.
A total of US$0.8 million of exploration and evaluation assets were
capitalised in the year relating to Phalaborwa, leaving a closing capitalised
cost of US$1.9 million. The Group is earning a 70% interest in the Phalaborwa
project by completing a pre-feasibility study and at the balance sheet date
has no tangible fixed assets and no obligations for environmental closure at
the Phalaborwa site.
The Group balance sheet includes US$0.3 million of tax receivables relating to
the historic overpayment of royalties and VAT recoverable in Burundi, both
measured at expected recoverable value. There are also US$0.5 million of tax
and government liabilities in Burundi.
During the year, the Group significantly strengthened its balance sheet,
raising US$8.5 million, net of costs, at a price of 15 pence per new Ordinary
Share in October 2021. This funding allowed the Pipestone loan to be fully
repaid, including accrued interest, via US$0.9 million cash and US$0.2 million
equity at 15p per new Ordinary Share. The sole remaining long-term financial
liability is the US$0.6 million FinBank loan in Burundi, on which capital
repayments are currently being deferred. At 30 June 2022, the Group has US$4.1
million of cash which is predominantly held with Barclays Bank in London.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 June 2022
Year ended Year ended
30 June 30 June
Notes 2022 2021
US$'000 US$'000
Revenue - 639
Cost of sales - (639)
Gross profit - -
Administration expenses (3,654) (2,707)
Loss from operating activities (3,654) (2,707)
Finance income 216 433
Finance costs (543) (466)
Loss before tax (3,981) (2,740)
Income tax expense (4) (2)
Total loss after tax and comprehensive expense for the year (3,985) (2,742)
Total loss after tax and comprehensive expense for the year is attributable
to:
Non-controlling interest (105) (52)
Owners of parent (3,880) (2,690)
(3,985) (2,742)
The results of each year are derived from continuing operations
Loss per share (cents)
Basic 3 (0.76) (0.60)
Diluted 3 (0.76) (0.60)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2022
Year ended Year ended
Notes 30 June 30 June
2022 2021
US$'000 US$'000
Non-current assets
Exploration and evaluation assets 4 10,588 9,751
Property, plant and equipment 5 1,043 1,354
Right of use assets 108 70
Total non-current assets 11,739 11,175
Current assets
Inventory 858 863
Trade and other receivables 401 441
Cash and cash equivalents 4,134 573
Total current assets 5,393 1,877
Total assets 17,132 13,052
Current liabilities
Trade and other payables (909) (1,009)
Borrowings (235) (1,231)
Lease liabilities (32) (14)
Total current liabilities (1,176) (2,254)
Non-current liabilities
Borrowings (518) (662)
Lease liabilities (81) (69)
Provisions (61) (61)
Total non-current liabilities (660) (792)
Total liabilities (1,836) (3,046)
NET ASSETS 15,296 10,006
Equity
Share capital 6 41,442 32,465
Share-based payment reserve 1,467 1,295
Other reserves - 60
Retained loss (26,572) (22,878)
Equity attributable to the parent 16,337 10,942
Non-controlling interest (1,041) (936)
TOTAL EQUITY 15,296 10,006
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2022
Share capital Share- based Payments Share warrant reserve Other reserves Accumulated losses Attributable Non-controlling interest Total
to the
parent
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Balance at 1 July 2020 28,132 1,099 40 60 (20,542) 8,789 (884) 7,905
Total comprehensive expense
Loss and total comprehensive loss for year - - - - (2,690) (2,690) (52) (2,742)
Transactions with owners
Shares placed during the year for cash consideration 3,423 - - - - 3,423 - 3,423
Share placing transaction costs (85) - - - - (85) - (85)
Non-cash issue of shares during the period 250 250 - 250
Share warrants expired in the year - - (40) - 40 - - -
Fair value of employee share options in year - 510 - - - 510 - 510
Share options exercised in the year, net of costs 745 (314) - - 314 745 - 745
Balance at 30 June 2021 32,465 1,295 - 60 (22,878) 10,942 (936) 10,006
Total comprehensive expense
Loss and total comprehensive loss for year - - - - (3,880) (3,880) (105) (3,985)
Transactions with owners
Shares placed during the year for cash consideration 8,779 - - - - 8,779 - 8,779
Share placing transaction costs (240) - - - - (240) - (240)
Non-cash issue of shares during the period, net of costs 157 - - - - 157 - 157
Eliminate historic discount on extinguishment of interest free bridge loan - - - (60) 60 - - -
Fair value of employee share options in year - 298 - - - 298 - 298
Share options exercised in the year, net of costs 281 (126) - - 126 281 - 281
Balance at 30 June 2022 41,442 1,467 - - (26,572) 16,337 (1,041) 15,296
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 30 June 2022
For year ended For year ended
30 June 30 June
2022 2021
US$'000 US$'000
Cash flow from operating activities
Loss from operating activities (3,654) (2,707)
Adjustments for:
Depreciation 380 37
Impairment of royalties receivable 69 128
Share-based payment charge 297 510
Operating loss before working capital changes (2,908) (2,032)
Net decrease/(increase) in inventory 5 (121)
Net increase in trade and other receivables (29) (190)
Net(decrease)/increase in trade and other payables (100) 136
Cash used by operations (3,032) (2,207)
Realised foreign exchange gains 186 359
Finance income - -
Finance costs - (23)
Taxes paid (2) -
Net cash used in operating activities (2,848) (1,871)
Cash flow from investing activities
Purchase of property, plant & equipment (42) (690)
Exploration and evaluation costs (837) (2,024)
Net cash used in investing activities (879) (2,714)
Cash flow from financing activities
Proceeds of new borrowings - 275
Repayment of borrowings (1,009) (438)
Interest payments on borrowings (138) (104)
Payment of lease liabilities (24) (56)
Proceeds from the issuance of ordinary shares 9,077 4,727
Transaction costs of issuing new equity (275) (85)
Net cash generated by financing activities 7,631 4,319
Net increase/(decrease) in cash and cash equivalents 3,904 (266)
Cash & cash equivalents at the beginning of the year 573 788
Foreign exchange (loss)/gains on cash and cash equivalents (343) 51
Cash & cash equivalents at the end of the year 4,134 573
NOTES:
1. BASIS OF PREPARATION
The financial information set out herein does not constitute the Group's
statutory financial statements for the year ended 30 June 2022, but is derived
from the Group's audited financial statements. The auditors have reported on
the FY 2022 financial statements and their reports were unqualified. The
financial information in this statement is audited but does not have the
status of statutory accounts.
The financial statements and the information contained in this announcement
have been prepared in accordance with International Financial Reporting
Standards (IFRS) as adopted by the European Union (EU), including
International Accounting Standards and Interpretations issued by the
International Financial Reporting Interpretations Committee (IFRIC). This is
consistent with the accounting policies in the 30 June 2021 financial
statements.
2. GOING CONCERN
As at 30 September 2022, the Group had total cash of US$2.9 million.
The Board have reviewed a range of potential cash flow forecasts for the
period to 31 December 2023, including reasonable possible downside
scenarios. This has included the following assumptions:
Corporate:
The forecast includes US$2.5 million of ongoing general and administrative
costs of the Group over the 18-month period from 1 July 2022 to 31 December
2023, based on the current administrative costs of the Group. The budget
excludes any significant expenditure on new business opportunities beyond
early costs totalling US$39k over the 18-month period.
Management's reasonably plausible downside scenario includes a 10% contingency
for unexpected costs plus a further US$500k for business development costs.
Phalaborwa:
This forecast includes all costs required for the completion of the Phalaborwa
PEA (announced in October 2022) and the ongoing resource update, estimated at
US$583k. The forecast also includes salary and consultant costs of US$623k for
the core project team tasked with advancing the project. A budget for the
further work required to deliver a feasibility study at Phalaborwa, including
pilot test work, has not yet been defined. Management's reasonably plausible
downside scenario includes US$7.6 million for further work at Phalaborwa
during the 18-month forecast period.
Gakara:
The cash flow forecasts assume ongoing care and maintenance costs totalling
US$746k. Further, in the event that the Gakara project returns to
operations, stock of rare earth concentrates with an estimated gross sales
value of US$1.6 million would be sold to provide the funds to re-commence
operations. The forecasts show that, with the current productive capacity of
the operations, the Gakara project would not require additional financial
support from Rainbow Rare Earths Limited at current rare earth prices. At 30
June 2022 the Group has US$557k of undiscounted financing liabilities relating
to a term loan from FinBank in Burundi. Capital repayment of this loan is
formally suspended until 31 December 2022, with interest of US$7k per month
being paid in cash. Whilst operations at Gakara remain suspended management
expect the repayment of principal to remain suspended. Notwithstanding, the
forecast includes repayment at a rate of US$21k per month from 1 January 2023,
including interest, within the care and maintenance costs for the Gakara
project.
Conclusion
The base case forecast includes a total cash outflow over the Period of
US$4,735k, compared to a cash balance at 1 July 2022 of US$4,134k, which
confirms that the Group will need to raise additional finance before 31
December 2023. Management's reasonably plausible downside scenario, which
includes the discretionary costs to progress a feasibility study at the
Phalaborwa project and an allowance for other business development
opportunities, suggests that a total of US$9.2 million will need to be raised.
The Board is confident that this funding will be secured, based on its history
of successful fundraising. However, it also acknowledges that this funding
is not, at the present time, in place. Accordingly, the Board acknowledges
that the need for additional funding represents a material uncertainty which
may cast significant doubt on the ability of the Company to continue as a
going concern and, therefore, that it may be unable to realise its assets and
discharge its liabilities in the normal course of business. The financial
statements do not include any adjustments that would result if the Group was
unable to continue as a going concern.
3. LOSS PER SHARE
The earnings per share calculations for 30 June 2022 reflect the changes to
the number of ordinary shares during the period.
At the start of the year, 476,411,434 shares were in issue. During the year, a
total of 9,598,875 new shares were allotted (see note 6 Share Capital) and on
30 June 2022, 524,405,810 shares were in issue. The weighted average of
shares in issue in the year was 508,566,911.
The loss per share has been calculated using the weighted average number of
ordinary shares in issue. The Company was loss making for all periods
presented, therefore the dilutive effect of share options has not been
accounted for in the calculation of diluted earnings per share, since this
would decrease the loss per share for each reporting period.
Basic and diluted
2022 2021
Loss for the year (US$'000) attributable to ordinary equity holders (3,880) (2,690)
Weighted average number of ordinary shares in issue during the year 508,566, 911 450,749,572
Loss per share (cents) (0.76) (0.60)
4. EXPLORATION AND EVALUATION ASSETS
Gakara Phalaborwa Total
US$'000 US$'000 US$'000
At 1 July 2020 7,572 - 7,572
Additions 1,102 1,116 2,218
Adjustment of rehabilitation provision (39) - (39)
At 30 June 2021 8,635 1,116 9,751
- 837
Additions 837
At 30 June 2022 8,635 1,953 10,588
Only costs relating to the Phalaborwa Project were capitalised during the
financial year. The Burundi Project has been under care & maintenance
throughout the year 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. A JORC compliant
rare earth resource was declared on 17 June 2021 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 year
include costs associated with process development to deliver an economic and
technically viable route to recovering rare earths. Additions in 2021
included US$750k consideration payable under the earn-in agreement payable in
cash and shares together with costs associated with the definition of the
inferred mineral resource, metallurgical test work and technical support.
On 12 April 2021 RMB received notification from the Ministry of Hydraulics,
Energy and Mines of the Republic of Burundi of a temporary suspension on the
export of concentrate produced from the trial mining and processing operations
at the Gakara Project. On 29 June 2021 a further notification was received
suspending all trial mining and processing operations pending negotiations on
the terms of the Gakara mining convention signed in 2015.
Following face to face meetings in Burundi in April 2022 the Company presented
a detailed plan to the Government for the export of the current stock of rare
earth concentrate along with responses to all questions raised by the
Government relating to the Company's operations in Burundi. The Company is
awaiting a formal response to this export plan, noting increased engagement
following significant changes in the political landscape in Burundi in
September 2022. The Directors have also received confirmation from
independent legal advisors that the mining convention in place between RMB and
the Government of Burundi remains legally binding on both parties, and that
the actions of the Government of Burundi have not been in accordance with that
legally binding agreement.
Based on an assessment of both the legal and political position, 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 royalty recoverable, which also
forms part of the Gakara cash generating unit, is considered separately. The
Directors do not consider there to be any indicators of impairment for the
Gakara cash generating unit, however they note that the current suspension of
activities could result in future losses for the Group if it is not resolved
as anticipated.
FinBank SA hold security over the fixed and floating assets of Rainbow Mining
Burundi SM ('RMB') which include US$7.3 million of exploration and evaluation
assets associated with the Gakara mining permit in Burundi.
5. PROPERTY, PLANT AND EQUIPMENT
US$'000 Mine development costs Plant & machinery Vehicles Office equipment Total
Cost
At 1 July 2020 183 2,665 1,074 45 3,967
Additions - 182 508 - 690
At 30 June 2021 183 2,847 1,582 45 4,657
Additions - 42 - - 42
At 30 June 2022 183 2,889 1,582 45 4,699
Depreciation
At 1 July 2020 47 2,665 298 15 3,025
Charge for year 26 2 241 9 278
At 30 June 2021 73 2,667 539 24 3,303
Charge for the year 26 1 316 10 353
At 30 June 2022 99 2,668 855 34 3,656
84 221 727 11 1,043
Net Book Value at 30 June 2022
Net Book Value at 30 June 2021 110 180 1,043 21 1,354
Net Book Value at 30 June 2020 136 - 776 30 942
Depreciation of US$Nil (2021: US$269k) relating to mining vehicles, plant
& machinery and site infrastructure was capitalised in the year as part of
Exploration and Evaluation costs.
FinBank SA hold security over the fixed and floating assets of Rainbow Mining
Burundi SA which include US$1,042k (2021: US$1,353k) of property, plant, and
equipment in Burundi.
As set out in note 4 the Directors recognise the uncertainty relating to the
temporary suspension of trial mining and processing activities in Burundi
which could impact the carrying value of the property, plant and equipment
within the Gakara cash generating unit, which comprises US$1,042k of the net
book value at the balance sheet date.
6. SHARE CAPITAL
Year Ended Year Ended
30 June 2022 30 June 2021
US$'000 US$'000
Share Capital 41,442 32,465
Issued Share Capital 41,442 32,465
The table below shows a reconciliation of share capital movements:
Number of shares US$'000
At 30 June 2020 421,981,551 28,132
November 2020 - Share placing - Cash receipts net of costs 42,700,000 3,338
December 2020 - Exercise of share options (cash receipts) 3,000,000 215
January 2021 - Exercise of share options (cash receipts) 4,000,000 290
February 2021 - Exercise of share options (cash receipts) 2,700,000 200
April 2021 - Exercise of share options (cash receipts) 800,000 58
Costs associated with exercise of share options - (18)
June 2021 - Phalaborwa consideration shares 1,229,883 250
At 30 June 2021 476,411,434 32,465
July 2021 - Exercise of share options (cash receipts) 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 - Pipestone Loan repayment shares 875,389 175
April 2022 - Exercise of share options (cash receipts) 1,718,987 116
Costs associated with exercise of share options and loan settlement - (35)
524,405,810 41,442
On 27 November 2020 the Company issued 42.7 million new ordinary shares at a
price of 6 pence per share, raising gross cash proceeds of US$3.4 million
(before costs of $85k).
Between December 2020 and April 2021 Australian Special Opportunity Fund, LP
exercised options over 10.5 million shares at an exercise price of 5.28p per
share, raising gross cash proceeds of US$763k (before costs of US$18k).
On 25 June 2021 1,229,882 shares were issued to Bosveld Phosphates (Pty)
Limited to settle US$250,000 consideration due under the Phalaborwa
co-development agreement originally announced on 3 November 2020.
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).
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).
On 25 April 2022 Australian Special Opportunity Fund, LP exercised options
over 1,718,987 million shares at an exercise price of 5.28p per share, raising
gross cash proceeds of US$116k.
7. 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) Adamus Intelligence
2 (#_ftnref2) Net present value using a 10% forward discount rate
3 (#_ftnref3) Internal rate of return
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