REG - Rainbow Rare Earths - Preliminary Results for Year-end 30 June 2024
18/10/2024 07:00
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RNS Number : 6799I Rainbow Rare Earths Limited 18 October 2024
18 October 2024
Rainbow Rare Earths Limited
("Rainbow" or "the Company")
Preliminary Results for the Year ended 30 June 2024
Rainbow Rare Earths is pleased to announce its preliminary results for the
year ended 30 June 2024 ("FY 2024" or the "Year"). 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 2024, will be available on the Company's
website at www.rainbowrareearths.com (http://www.rainbowrareearths.com) .
Highlights
· The market for rare earth permanent magnets nearly doubled between
2020 to 2024, and demand is forecast to continue to grow strongly by ca. 7%
per annum over the next 10 years, according to Argus Media, driven by the
unstoppable global megatrend of the green energy transition, as well as
exciting new markets such as robotics and advanced air mobility.
· The supply chain for rare earth elements ("REE") is almost entirely
dominated by one country, China, leading to concerted efforts by Western and
aligned governments to create supply chain diversification in order to
mitigate the inherent risks and vulnerabilities.
· Pilot operations at Rainbow's Phalaborwa project have produced two
saleable products: a mixed rare earth carbonate, and separated neodymium and
praseodymium oxide ("Nd/Pr") of ca. 96% purity, paving the way for the first
commercial recovery of rare earths from phosphogypsum. Once optimisation of
the Nd/Pr oxide separation is complete, focus will turn to the separation of
the heavy rare earths: dysprosium ("Dy") and terbium ("Tb").
· Phalaborwa's status as a near-term, low-cost and strategic source of
all four critical rare earths used in permanent magnets confirmed further to a
proposed US$50 million investment from the U.S. International Development
Corporation (the "DFC") via strategic shareholder TechMet Limited ("TechMet").
· Strong project validation also received via the royalty and share
placement agreement announced post Year end with Ecora Resources plc
("Ecora"), raising US$10 million.
· Significant optimisation and simplification of the Phalaborwa primary
plant flowsheet achieved, boding well for the updated economics of the project
to be released in an Interim Report before the end of 2024.
· The honing of this technology will unlock a global opportunity for
low-cost and responsible magnet rare earth supply from similar secondary
sources, such as the partnership with the Mosaic Company ("Mosaic") at Uberaba
in Brazil.
· Responsible production is at the heart of Rainbow's business model and
the Company continues to embed environmental, social and governance ("ESG")
standards and practices within its corporate and project development.
Investor Meet Company Presentation - Tuesday 22 October
Rainbow is pleased to announce that CEO George Bennett will provide a live
presentation via Investor Meet Company on 22 October 2024 at 10:00 BST.
The presentation is open to all existing and potential shareholders. Questions
can be submitted pre-event via your Investor Meet Company dashboard up until
21 Oct 2024, 09:00 BST, 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.
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
IR Cathy Malins +44 7876 796 629
cathym@rainbowrareearths.com (mailto:cathym@rainbowrareearths.com)
Berenberg Broker Matthew Armitt +44 (0) 20 3207 7800
Jennifer Lee
Stifel Broker Ashton Clanfield +44 20 7710 7600
Varun Talwar
Tavistock Communications PR/IR Charles Vivian +44 (0) 20 7920 3150
Tara Vivian-Neal rainbowrareearths@tavistock.co.uk (mailto:rainbowrareearths@tavistock.co.uk)
Notes to Editors:
About Rainbow:
Rainbow Rare Earths aims to be a forerunner in the establishment of an
independent and ethical supply chain of the rare earth elements that are
driving the green energy transition. It is doing this successfully via the
identification and development of secondary rare earth deposits that can be
brought into production quicker and at a lower cost than traditional hard rock
mining projects, with a focus on the permanent magnet rare earth elements
neodymium and praseodymium, dysprosium and terbium.
The Company is focused on the development of the Phalaborwa Rare Earths
Project in South Africa and the earlier stage Uberaba Project in Brazil. Both
projects entail the recovery of rare earths from phosphogypsum stacks that
occur as the by-product of phosphoric acid production, with the original
source rock for both deposits being a hardrock carbonatite. Rainbow intends to
use a proprietary separation technique developed by and in conjunction with
its partner K-Technologies, Inc., which simplifies the process of producing
separated rare earth oxides (versus traditional solvent extraction), leading
to cost and environmental benefits.
The Phalaborwa Preliminary Economic Assessment has confirmed strong base line
economics for the project, which has a base case NPV(10) of US$627
million(( 1 )), an average EBITDA operating margin of 75% and a payback period
of less than two years. Pilot plant operations commenced in 2023, with the
project expected to reach commercial production in 2026, just five years after
work began on the project by Rainbow. More information is available at
www.rainbowrareearths.com (http://www.rainbowrareearths.com) .
Chairman's Statement
Dear Shareholder,
Rare earth elements lie at the intersection of two global megatrends:
decarbonisation and geopolitics. In the former: rare earth elements are
crucial materials in the most powerful and efficient permanent magnets in use
today, which are vital components of electric vehicles ("EVs"), wind turbines
and many of the electronic devices so integral to our lives today. In the
latter, because the supply chain of REE is almost entirely dominated by one
country, China, leading to supply chain risks and vulnerabilities.
REE also have many highly strategic uses in advanced technologies, including
defence applications from jet fighters to submarines, as well as exciting new
markets such as robotics and advanced air mobility, adding to their
criticality worldwide.
These factors have led to the designation of magnet REE as critical minerals
by the U.S., the EU and many other governments.
The magnet REE are noted as being among those critical minerals at most risk
of supply disruptions due to the market's reliance on China which currently
controls over 70% of primary production and over 90% of global processing
capacity. As we have seen recently, with the announcement of controls by China
on the export of graphite, gallium, germanium and antimony, it is vital to
develop alternative sources of supply.
The U.S., the E.U. and aligned governments are taking action across a number
of fronts, via a combination of supportive fiscal measures, investment and a
focus on the development of skills and technologies that can support their
aims. The announcement in May 2024 that the U.S. would impose tariffs on
Chinese-made rare earth permanent magnets further demonstrated the growing
commitment to the development of a fully independent supply chain.
Gaining this independence in REE requires multi-faceted development across the
supply chain, from access to the raw materials to the facilities and skills
required to refine and manufacture those materials into alloys, metals, and
eventually magnets. This cannot be done without taking a medium to long-term
view that looks beyond short-term market conditions and pricing fluctuations.
According to Argus Media, the market for rare earth permanent magnets has
nearly doubled between 2020 to 2024, and demand is forecast to continue to
grow strongly by ca. 7% per annum over the next ten years, which means a
further doubling of demand to come. While the long-term demand drivers for the
market remain strong, in the short-term market volatility may continue, as
seen during the period of weak pricing during the Year with Chinese-controlled
production exceeding supply growth.
Notwithstanding recent price weakness, industry commentators agree that the
longer-term outlook for REE pricing is supportive given the unstoppable global
megatrend of moving towards a transitional energy environment and
decarbonisation. This has led to the drive from Western and aligned
governments to reduce supply chain vulnerability through diversified sources
of supply that are traceable and meet high ESG standards.
Africa has an important role to play given its endowment of critical minerals
and the U.S. is increasing its activity on the continent to combat the inroads
that China has made over the last few decades. This was evident at this year's
Mining Indaba conference in Cape Town, where the U.S. sent its largest-ever
delegation, including senior government officials.
Rainbow's Phalaborwa project has been chosen by the U.S. Government as an
important contributor to REE supply chain independence, with the DFC committed
to investment of US$50 million to Phalaborwa, via TechMet, as announced at the
U.N.'s Climate Change Conference, COP28.
Due to the unique characteristics of the project, which will see REE recovered
from phosphogypsum stacks that are sitting at surface in a chemically
'cracked' form on an industrial site in South Africa, Phalaborwa is likely to
have one of the lowest operating costs of any rare earth project in
development today. This gives the project resilience against rare earth
pricing volatility, as has been experienced in FY 2024.
Phalaborwa will play a role in furthering global goals to reach net zero
emissions via the production of REE essential to decarbonisation. In addition,
the project offers unique ESG opportunities by extracting value from a 'waste'
product (phosphogypsum), cleaning up legacy environmental issues and allowing
for full-circle site rehabilitation.
Phalaborwa's position as a best-in-class REE project was highlighted in July
2024 by the royalty agreement and associated share placement with Ecora, which
raised a total of US$10 million. Rainbow is Ecora's only investment in the REE
space and the agreement followed an extensive due diligence process, giving
additional third-party validation of the quality of our assets.
Rainbow's ability to raise funds from strategic partners such as the DFC,
TechMet and Ecora comes at a time of continued difficulty in the UK equity
markets for small- to mid-cap resources companies, and I am proud of the high
quality of our stakeholders.
Both myself, the CEO George Bennett, and others on the Board and in senior
management also continued to support the business via participation in the
private placement announced in October 2023, which brought in US$5.5 million
in funding. As we continue to develop and de-risk Phalaborwa, as well as
evaluate longer-term opportunities, we will maintain Rainbow's tight corporate
overheads to ensure that the majority of the funds raised will go directly
towards building value across our portfolio.
Our focus is to ensure that the technology to recover REE from phosphogypsum
being developed at Phalaborwa will unlock a global opportunity for low-cost
and responsible REE supply from similar secondary sources, such as the
partnership with Mosaic at Uberaba in Brazil. This will allow Rainbow to
benefit from anticipated growth in REE demand from the green energy, defence
and technology sectors to develop a long-term sustainable business.
I would like to thank our team, consultants and partners for the tremendous
commitment and drive that has propelled the Company and our project forward,
as well as our host countries for their support. It is a truly exciting period
ahead as we work towards bringing Phalaborwa into production by 2027.
Adonis Pouroulis
Non-Executive Chairman
CEO's Statement
Dear Shareholder,
In FY 2024 Rainbow made significant strides towards becoming a leader in
establishing an independent and ethical supply chain for the rare earth
elements that are driving the green energy transition.
The main focus this year was commissioning the Phalaborwa pilot plant to
demonstrate and optimise the unique flowsheet developed for recovering REE
from phosphogypsum. I am extremely proud of our team's hard work in
establishing and optimising the primary front-end leach flowsheet, which has
resulted in a much more simplified process compared to that which was
published in our Preliminary Economic Assessment ("PEA"), maintaining REE
recoveries at 66%. Extensive test work, including repeatability tests, has
given us a high-level of confidence in our primary flow sheet.
Results from the primary pilot plant in South Africa, alongside preliminary
results from the CIX/CIC separation pilot plant in USA, have delivered two
saleable products: a mixed rare earth carbonate, and separated Nd/Pr of ca.
96% purity, paving the way for the first commercial recovery of rare earths
from phosphogypsum.
As announced in September 2024, we decided to relocate the continuous ion
exchange and continuous ion chromatography ("CIX/CIC") separation plant from
Florida to Johannesburg earlier than originally envisaged. This will allow for
the recycling of critical streams from the separation process to the
appropriate destinations in the leach plant and the relevant disposal of waste
material. Complementary bench scale IX/IC tests have commenced in South Africa
and are aimed at achieving +99% purity while the pilot plant is shipped. I
firmly believe that the successful utilisation of CIX/CIC technology will be a
game changer for our industry, due to the efficiencies, improved environmental
footprint, and the lower associated cost base it offers versus traditional
solvent extraction methods.
Moving this work to South Africa will have the added benefit that the
separation work can be the full focus of Rainbow's technical team. We have
built an excellent team, including Chris Le Roux and Roux Wildenboer who both
have extensive experience in REE processing and project development, and who
have been integral to the successful development of the primary plant
flowsheet at Phalaborwa. A recent and valuable addition to the team has been
Tamsyn De Jager, who is an exceptional project manager having led studies from
concept phase to project execution and worked across many minerals including
REE and uranium.
Both myself and our Technical Director, Dave Dodd, have delivered on multiple
feasibility studies, and built numerous processing plants over our careers,
most recently at MDM Engineering. Our long history in developing mineral
flowsheets has taught us the importance of doing things right, even if it
takes longer than anticipated, as this is the only way to ensure the long-term
success of a project.
In addition to the progress with our process flow sheet, an updated Mineral
Resource Estimate ("MRE") released in September 2024 saw the total resource
tonnage for Phalaborwa increase 15% to 35.0 Mt due to the application of
updated bulk density calculations. This increases the project life by two
years to a total of 16 years and demonstrates the potential to generate value
from other recoverable REE not included in our PEA project economics. Even at
today's lower spot prices, the MRE has an in-situ value of ca. US$7.3 billion.
The full MRE can be accessed at www.rainbowrareearths.com/
project/phalaborwa/.
It is important to us that Phalaborwa is aligned with Rainbow's values and our
stakeholder expectations. For this reason, ESG considerations are a
fundamental part of Phalaborwa's development. Understanding our impacts, both
positive and negative, is foundational to the proper management of the
project. The Environmental and Social Impact Assessment ("ESIA") is a critical
component of ensuring this. Work done to date has established that Phalaborwa
offers important benefits to its local communities in terms of job creation
and environmental remediation. We have also commenced work to calculate carbon
emissions for the project, which has underlined how important it will be to
establish a low-carbon energy source for the project, given that South
Africa's state power remains primarily coal-based. We are evaluating renewable
energy power options which we envisage can provide the bulk of the project's
power requirements.
We see offtake as an important component of the Phalaborwa project's finance
process and have commenced offtake discussions with a number of industry
participants, including original equipment manufacturers ("OEMs") and global
trading companies. Phalaborwa's ability to play a part in an ethical and
alternative supply chain was also recognised by UK-based Less Common Metals
Ltd ("LCM"), a world leader in the manufacture and supply of complex alloy
systems and metals, with whom we entered into a strategic supply agreement
during the Year. LCM has been looking to secure feedstock required for their
business, and Rainbow was chosen due to Phalaborwa's robust cost base, which
should see the project resilient to rare earth pricing volatility, as well as
its green credentials as an environmental remediation project.
In the long term, we believe that by honing the technology required to recover
REE from phosphogypsum, Rainbow will be able to access a much larger
addressable market to develop a scalable and sustainable business.
The Memorandum of Understanding signed with Mosaic, the world's leading
integrated producer of concentrated phosphate and potash, for the Uberaba
project in Brazil, offers an exciting opportunity to replicate the type of
operation proposed at Phalaborwa. It will offer lower-cost REE production
based in a favourable jurisdiction that could be brought into production much
faster than traditional mining projects.
In addition, we are currently evaluating approaches for strategic partnership
opportunities in Saudi Arabia, Canada and India, alongside the partnership
with OCP S.A. and Mohammed VI Polytechnic University in Morocco.
The Gakara project in Burundi has remained on care and maintenance throughout
the Year at the request of the Government of Burundi. Recent engagement with
the Government has not delivered progress with regards to a resolution and the
re-start of operations in the near term cannot be reasonably assumed. As a
result, all assets of the Gakara cash-generating unit, with the exception of
cash and VAT recoverable, have now been impaired to nil.
I would like to thank all our stakeholders for their continued support and
especially our employees, whose remarkable efforts have brought the Phalaborwa
project to where it is today. Their dedication allows Rainbow to focus on
leveraging our ability to recover REE from phosphogypsum and develop a
sustainable long-term business.
George Bennett
Chief Executive Officer
Financial Review
Rainbow's strategic focus is to identify and develop secondary rare earth
deposits that can be brought into production quicker and at a lower cost than
traditional hard rock mining projects. As a developer, Rainbow capitalises the
costs of exploration and evaluation for each identifiable project once the
legal right to the project has been secured. The Board and management focus on
maintaining a tight control of costs, including corporate overheads, ensuring
that most of the funds raised will go directly towards building value across
our portfolio. In this respect, during FY 2024 the Group invested US$10.6
million to progress the Phalaborwa project in South Africa with an additional
cash outflow of US$2.6 million for general and administrative costs, including
costs relating to the Gakara asset in Burundi.
Profit and loss account
The US$4.3 million loss for FY 2024 (FY 2023 US$12.9 million) includes a
further US$0.7 million (FY 2023 US$9.6 million) impairment of the assets in
the Gakara cash generating unit relating to the previously recognised
inventory of available for sale mineral concentrate. Despite meaningful
negotiations with the Government of Burundi in FY 2024 no progress has been
made to resolve the ongoing suspension. Accordingly, the Directors can no
longer reasonably assume that the operations at the project will be able to
restart and, with the exception of cash and VAT recoverable, all assets
associated with the Gakara cash generating unit have now been written down to
nil.
Within administration expenses, the costs associated with maintaining the
Gakara project on care and maintenance totalled US$0.4 million (FY 2023:
US$0.9 million including US$0.3 million of non-cash depreciation). The Group
continues to focus on minimising costs associated with the asset whilst
considering all options to try to realise the value associated with the REE
mineral opportunity.
The Group's other corporate costs totalled US$3.1 million (FY 2023: US$2.6
million). This increase was driven primarily by inflation including an
increase in staff costs. To reduce cash outflows, management short term
incentives totalling US$0.3 million were settled in shares in September 2024.
Net finance income was reduced to US$22k (FY 2023: income of US$200k). In FY
2024 foreign exchange differences off-set US$ 0.1 million interest (FY 2023:
US$0.1 million) associated with the FinBank loan in Burundi.
Balance Sheet
The Group balance sheet is dominated by the cumulative US$15.7 million
relating to the Phalaborwa asset which have been capitalised as an intangible
asset in accordance with IFRS 6, of which US$10.9 million was incurred in the
FY 2024. At the balance sheet date, the Group has no tangible fixed assets and
no obligations for environmental closure at the Phalaborwa site.
The Group has a US$282k loan with FinBank in Burundi, denominated in Burundi
Francs, which is due to be repaid on a reducing balance basis by April 2027.
There are no other significant borrowings or long-term cash settled
liabilities. With the exception of indirect taxes and contributions payable
under the Gakara mining convention, which are not being settled during the
ongoing suspension of the Gakara operations, the Group continues to pay all
trading liabilities as they fall due.
Going Concern
At 30 June 2024 the Group had total cash of US$0.1 million prior to the
announcement, on 1 July 2024, of a US$10 million financing with Ecora
comprising US$1.5 million of equity and US$8.5 million proceeds for a 0.85%
gross revenue royalty over future sales from the Phalaborwa project. Following
receipt of these funds, after associated costs, the Group has available cash
resources of US$9.7 million.
Based on a review of cash flow forecasts for the period to 31 December 2025,
additional funding estimated at US$1.5 million will need to be raised before
31 December 2025, the timing of which is dependent primarily on the speed at
which the Phalaborwa DFS is completed, which is within the Directors' control.
In addition, further funds may be required to progress the Uberaba opportunity
in Brazil or other new business opportunities. Whilst this funding requirement
does represent a material uncertainty which may cast significant doubt on the
ability of the Company to continue as a going concern, the Directors are
confident that this funding will be secured based on its history of successful
fundraising.
Pete Gardner
Chief Financial Officer
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 June 2024
Year ended Year ended
30 June 30 June
Notes 2024 2023
US$'000 US$'000
Revenue - -
Cost of sales - -
Gross profit - -
Administration expenses (3,567) (3,509)
Impairment of Gakara assets (717) (9,575)
Loss from operating activities (4,284) (13,084)
Finance income 141 377
Finance costs (119) (158)
Loss before tax (4,262) (12,865)
Income tax expense - -
Total loss after tax and comprehensive expense for the year (4,262) (12,865)
Total loss after tax and comprehensive expense for the year is attributable
to:
Non-controlling interest (87) (881)
Owners of parent (4,175) (11,984)
(4,262) (12,865)
The results of each year are derived from continuing operations
Loss per share (cents)
Basic 3 (0.67) (2.23)
Diluted 3 (0.67) (2.23)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2024
Year ended Year ended
Notes 30 June 30 June
2024 2023
US$'000 US$'000
Non-current assets
Exploration and evaluation assets 4 15,716 4,830
Property, plant and equipment 21 27
Right of use assets 84 39
Total non-current assets 15,821 4,896
Current assets
Inventory 1 718
Trade and other receivables 374 365
Cash and cash equivalents 79 8,107
Total current assets 454 9,190
Total assets 16,275 14,086
Current liabilities
Trade and other payables (1,850) (1,250)
Borrowings (245) (201)
Lease liabilities (48) (23)
Total current liabilities (2,143) (1,474)
Non-current liabilities
Borrowings (192) (285)
Lease liabilities (44) (21)
Provisions (55) (55)
Total non-current liabilities (291) (361)
Total liabilities (2,434) (1,835)
NET ASSETS 13,841 12,251
Equity
Share capital 5 56,362 50,937
Share-based payment reserve 1,839 1,719
Other reserves - -
Retained loss (42,351) (38,483)
Equity attributable to the parent 15,850 14,173
Non-controlling interest (2,009) (1,922)
TOTAL EQUITY 13,841 12,251
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2024
Share capital Share- based Payments Accumulated losses Attributable Non-controlling interest Total
to the
parent
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Balance at 1 July 2022 41,442 1,467 (26,572) 16,337 (1,041) 15,296
Total comprehensive loss
Loss and total comprehensive loss for year - - (11,984) (11,984) (881) (12,865)
Transactions with owners
Shares placed during the year for cash consideration 9,485 - - 9,485 - 9,485
Share placing transaction costs (115) - - (115) - (115)
Fair value of employee share options in year - 325 - 325 - 325
Share options cancelled in the year (13) 13 - - -
Share options exercised in the year, net of costs 125 (60) 60 125 - 125
Balance at 30 June 2023 50,937 1,719 (38,483) 14,173 (1,922) 12,251
Total comprehensive loss
Loss and total comprehensive loss for year - - (4,175) (4,175) (87) (4,262)
Transactions with owners
Shares placed during the year for cash consideration 5,501 - - 5,501 - 5,501
Share placing transaction costs (76) - - (76) - (76)
Fair value of employee share options in year - 427 - 427 - 427
Share options cancelled in the year (106) 106 - - -
Share options exercised in the year, net of costs - (201) 201 - - -
Balance at 30 June 2024 56,362 1,839 (42,351) 15,850 (2,009) 13,841
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 30 June 2024
For year ended For year ended
30 June 30 June
2024 2023
US$'000 US$'000
Cash flow from operating activities
Loss from operating activities (4,284) (13,084)
Adjustments for non-cash transactions:
Depreciation 52 382
Impairment 717 9,575
Share-based payment charge 427 325
Operating loss before working capital changes (3,088) (2,802)
Net increase in trade and other receivables (45) (31)
Net increase/(decrease) in trade and other payables 372 (94)
Cash used by operations (2,761) (2,927)
Realised foreign exchange gains 123 156
Taxes paid - -
Net cash used in operating activities (2,638) (2,771)
Cash flow from investing activities
Purchase of property, plant & equipment - (28)
Exploration and evaluation costs (10,637) (2,510)
Net cash used in investing activities (10,637) (2,538)
Cash flow from financing activities
Repayment of borrowings (77) (61)
Interest payments on borrowings (49) (78)
Interest received 5 -
Payment of leases (53) (42)
Proceeds from the issuance of ordinary shares 5,501 9,610
Transaction costs of issuing new equity (76) (115)
Net cash generated by financing activities 5,251 9,314
Net increase in cash and cash equivalents (8,024) 4,005
Cash & cash equivalents at the beginning of the year 8,107 4,134
Foreign exchange loss on cash and cash equivalents (4) (32)
Cash & cash equivalents at the end of the year 79 8,107
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 2024, but is derived
from the Group's audited financial statements. The auditors have reported on
the FY 2024 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 2023 financial
statements.
2. GOING CONCERN
As at 30 June 2024, the Group had total cash of US$0.1 million prior to the
announcement, on 1 July 2024, of a US$10 million financing with Ecora
Resources plc comprising US$1.5 million of equity and US$8.5 million proceeds
for a 0.85% gross revenue royalty over future sales from the Phalaborwa
project. Following receipt of these funds, after associated costs, the Group
has available cash resources of US$9.7 million.
The Directors have reviewed a range of potential cash flow forecasts for the
period to 31 December 2025, including reasonable possible downside scenarios.
This has included the following assumptions:
Corporate
The forecast includes US$3.6 million of ongoing general and administrative
costs of the Group over the 18-month period from 1 July 2024 to 31 December
2025 (the "Period"), based on the current administrative costs of the Group.
This includes US$0.2 million in respect of pursuing new business
opportunities, which will cover only the initial low cost test work at the
opportunities identified to date including the opportunity with Mosaic in
Brazil.
The Directors' reasonably plausible downside scenario includes a 10%
contingency for unexpected costs plus a further US$0.25 million per annum for
business development costs. Corporate costs include costs incurred in British
Pounds at an exchange rate of £1:US$1.25 and South African Rand at an
exchange rate of US$1:ZAR18.5. The Directors' reasonably plausible downside
scenario includes an adjustment to reflect a higher US Dollar cost based on an
exchange rate of £1:US$1.35 and US$1:ZAR17.5.
Phalaborwa Project
The forecast includes all costs anticipated for the completion of the
Phalaborwa Definitive Feasibility Study ("DFS"), estimated at US$4.8 million,
inclusive of a 10% contingency. This includes all costs associated with the
ongoing test work campaigns, including separation test work, ongoing costs
associated with the DFS, expected to be completed in 2025, and costs
associated with the ongoing permitting process.
The forecast also includes salary and consultant costs of US$0.9 million for
the core project team tasked with advancing the project. The Directors'
reasonably plausible downside scenario includes a further 10% contingency on
all costs associated with the Phalaborwa project. Phalaborwa project costs
include costs incurred in South African Rand at an exchange rate of
US$1:ZAR18.5. The Directors' reasonably plausible downside scenario includes
an adjustment to reflect a higher US Dollar cost based on an exchange rate of
US$1:ZAR17.5.
The forecast does not include costs related to a formal financing process for
the Phalaborwa project, or any costs associated with the management of the
gypsum stacks, which will be transferred from Bosveld Phosphates (Pty) Limited
to the Group under the Phalaborwa co-development agreement at the Group's
election. The co-development agreement includes an option for the Group to
obtain 100% of Phalaborwa via the issue to Bosveld of 38,873,663 new ordinary
shares at any time up to 31 December 2025. It is expected that the assets
relating to Phalaborwa will be transferred to the Group prior to the exercise
of this option. The Group does not intend to arrange that transfer or
exercise the option until the funding needs for the management of the gypsum
stacks have been defined and funds are available for the ongoing management
thereof.
Uberaba Project
As set out in the operations review, the opportunity relating to Mosaic's
phosphogypsum stack in Uberaba, Brazil is considered to present an opportunity
to replicate Phalaborwa at a potentially larger scale. At the date of these
financial statements, the Group has no commitments in respect of this project.
Low-cost test work is expected to continue in the short term. A detailed
budget to deliver a preliminary economic assessment, as anticipated in the
agreement with Mosaic, is not yet available and will need to be agreed with
Mosaic before funds can be committed. It is noted that the Directors'
reasonably plausible downside scenario would not be sufficient for a
preliminary economic assessment to be developed, and further funding may be
required to allow for the Uberaba opportunity to be de-risked, the timing of
which cannot be accurately predicted at this time.
Gakara Project
The cash flow forecasts assume ongoing care and maintenance costs totalling
US$0.6 million, including amounts payable under the FinBank loan facility in
Burundi. The Group has determined that no additional cash outflows beyond the
US$0.6 million care and maintenance budget will be incurred on Gakara until
the export ban and mining suspension has been lifted. A re-start of operations
would be conditional on the Gakara project not requiring additional financial
support from Rainbow Rare Earths Limited at then current rare earth prices.
Conclusion
The base case forecast includes a total cash outflow over the Period of US$9.9
million. The Directors' reasonably plausible downside scenario, which includes
a 10% contingency for corporate costs, fixed costs at Phalaborwa and Gakara
costs, together with a further allowance for business development
opportunities and foreign exchange variances, includes a total cash outflow of
US$11.2 million.
At 30 June 2024 the Group had US$9.7 million of available cash including the
receipt from the fundraising with Ecora announced in July 2024, of which the
final US$8.2 million was received in September 2024. The forecast indicates
that under all scenarios the Group will need to raise additional funds before
31 December 2025, the timing of which is dependent primarily on the speed at
which the Phalaborwa DFS is completed, which is within the Directors' control.
In addition, further funds may be required to progress the Uberaba opportunity
in Brazil or other new business opportunities.
As a result, the Group is reliant on securing additional funding which is not
guaranteed. Based on the above, this indicates the existence of a material
uncertainty which may cast significant doubt over the Group's ability to
continue as a going concern and therefore, it may be unable to realise its
assets and discharge its liabilities in the ordinary course of business.
The Directors are confident that funding will be secured, based on the Group's
history of successful fundraising. The financial statements do not include any
adjustments that would result if the Group was unable to continue as a going
concern.
3. LOSS PER SHARE
The earnings per share calculations for 30 June 2024 reflect the changes to
the number of ordinary shares during the Year.
At the start of the Year, 598,858,656 shares were in issue. During the Year, a
total of 31,458,000 new shares were allotted and on 30 June 2024, 630,316,656
shares were in issue. The weighted average of shares in issue in the Year
was 621,094,938.
The loss per share has been calculated using the weighted average number of
ordinary shares in issue. The Group was loss making for all periods
presented, therefore the dilutive effect of share options has not been
accounted for in the calculation of diluted earnings per share, since this
would decrease the loss per share for each reporting period.
Basic and diluted
2024 2023
Loss for the year (US$'000) attributable to ordinary equity holders (4,175) (11,984)
Weighted average number of ordinary shares in issue during the Year 621,094,938 536,805,149
Loss per share (cents) (0.67) (2.23)
4. EXPLORATION AND EVALUATION ASSETS
Gakara Phalaborwa Total
US$'000 US$'000 US$'000
At 1 July 2022 8,635 1,953 10,588
- 2,877
Additions 2,877
Impairment (8,635) - (8,635)
At 30 June 2023 - 4,830 4,830
- 10,886
Additions 10,886
At 30 June 2024 - 15,716 15,716
Only costs relating to the Phalaborwa Project were capitalised during the
Year. The Gakara Project has been under care and maintenance throughout the
Year and, accordingly, none of the costs meet the requirements under the
Group's accounting policy for capitalisation.
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
temporarily suspending all trial mining and processing operations pending
negotiations on the terms of the Gakara mining convention signed in 2015.
The Directors have confirmed from independent legal advisors that the mining
convention in place between Rainbow Mining Burundi SM ("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. However, due to the actions of the Government of
Burundi, which have not been in accordance with the legally binding mining
convention in place, management assesses that it cannot be reasonably assumed
that the current suspension of activities will be lifted in due course.
Since acquiring the Phalaborwa project in December 2020 and the subsequent
development of processing technology to recover rare earth elements from
phosphogypsum as a by-product of phosphoric acid production, the Directors
have re-focused the business on secondary sources of rare earth elements where
they consider higher returns are available. As such the Directors no longer
intend to invest significant amounts at Gakara to convert the existing
resource target to a reserve capable of supporting long-term commercial
production, resulting in an impairment review being carried out for the Gakara
exploration and evaluation assets in the prior year. In accordance with IAS
36, the Gakara exploration and evaluation assets were impaired to a value of
US$nil.
FinBank SA hold security over the fixed and floating assets of RMB, which
include the impaired exploration and evaluation assets associated with the
Gakara mining permit in Burundi.
5. SHARE CAPITAL
Year Ended Year Ended
30 June 2024 30 June 2023
US$'000 US$'000
Share Capital 56,362 50,937
Issued Share Capital 56,362 50,937
The table below shows a reconciliation of share capital movements:
Number of shares US$'000
At 30 June 2022 524,405,810 41,442
November 2022 - Exercise of share options (cash receipts) 2,000,000 125
May 2023 - Share placing (cash receipts) 72,452,846 9,485
Costs associated with exercise of share options and share placing - (115)
At 30 June 2023 598,858,656 50,937
October 2023 - Share placing (cash receipts) 25,786,541 4,699
December 2023 - Share placing (cash receipts) 4,213,459 802
December 2023 - Exercise of share options (nil value) 1,458,000 -
Costs associated with exercise of share options and share placing - (76)
At 30 June 2024 630,316,656 56,362
On 5 October 2023, 25,786,541 shares were issued at a price of 15 pence per
share as a private placement, raising US$4.7 million (before costs of US$57k).
The issue of additional shares without pre-emption rights was authorised by
the shareholders at the annual general meeting in November 2024.
Subsequently, a further 5,671,459 shares were issued on 5 December 2023 of
which:
o 4,213,459 shares were issued for cash proceeds of US$802k at a price of
15p per share.
o 1,458,000 shares were issued for no value, representing the exercise of
nil value share options.
Costs relating to these share issues were US$19k.
During the prior year:
· On 10 November 2022, the Australian Special Opportunity Fund, LP
exercised options over 2,000,000 shares at an exercise price of 5.28p per
share, raising gross cash proceeds of US$125k.
· On 9 May 2023, the Company issued 72,452,846 shares at a price of
10.377 pence per share, raising gross cash proceeds of US$9.5 million (before
costs of US$1k).
6. POST BALANCE SHEET EVENTS
On 1 July 2024, the Company entered into a binding agreement with Ecora
Resources PLC to raise US$10 million by:
- The issue of 10,442,427 new ordinary shares in the Company at a
price of 11.3652p for cash consideration of US$1.5 million.
- The sale of a 0.85% Gross Revenue Royalty over future rare earths
sales from the Group's Phalaborwa project in South Africa, plus any other
saleable products, for a cash consideration of US$8.5 million, which was
completed and settled net of US$0.2 million transaction costs in September
2024.
On 3 September 2024 the Company issued 2,595,735 shares as settlement of
bonuses to key management personnel.
On 3 September 2024 the Company issued 333,332 shares as replacement of
options cancelled on 30 April 2024 that had been issued to US residents that
were due to vest on 19 May 2024.
1 Net present value using a 10% forward discount rate
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