REG - Rainbow Rare Earths - Private Placement Raises £4.5 Million

Rainbow Rare EarthsAnnouncement

27/09/2023 07:00

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RNS Number : 7477N  Rainbow Rare Earths Limited  27 September 2023

27 September 2023

Rainbow Rare Earths Limited

("Rainbow" or "the Company")

LSE: RBW

 

PRIVATE PLACEMENT RAISES £4.5 MILLION

Rainbow Rare Earths is pleased to announce that it has agreed conditionally to
issue 30 million new ordinary shares in the Company of no par value each
("Ordinary Shares") at a price of 15p per Ordinary Share (the "Placing
Price"), thereby raising gross proceeds of £4.50 million (the "Placing").

The Placing Price represents a 3.2% discount to the closing mid-market share
price of 15.5p per Ordinary Share on 26 September 2023.

The Placing proceeds include:

·    £0.54 million received from existing shareholder Pella Ventures
Limited ("Pella"), a family office with a focus on clean technologies and
sustainable energy. Pella is a related party on the basis that its founder,
Adonis Pouroulis, is also Non-Executive Chairman of Rainbow;

·    £0.63 million received from existing shareholder TechMet Limited
("TechMet"), the private investment company developing world class projects
across the critical metals that form the key building blocks for the global
energy transition; and

·    £3.33 million received from other investors, including £0.24
million from other members of Rainbow's Board of Directors and Senior
Management.

Of the 30 million Ordinary Shares issued under the Placing, the Ordinary
Shares to be issued to Pella are subject to the approval of shareholders at
the AGM to be held in November 2023 as set out in more detail below
("Shareholder Approval").

Reasons for the Placing

The Placing proceeds, which total approximately US$5.5 million, replace the
US$5.0 million paid to Bosveld Phosphates (Pty) Limited ("Bosveld") in July
2023, plus associated fees, to secure an immediate 85% ownership in the
Group's flagship Phalaborwa rare earths project, with an option to acquire the
remaining 15%, as announced on 28 June 2023.  In addition to the Company's
cash balance of US$1.3 million as at 31 August 2023, the Placing proceeds
cover the Company's financing requirements beyond the end of Q1 2024 and will
allow for the completion of the Phalaborwa pilot plant operation, which is
expected to deliver separated rare earth oxides in Q4 2023, together with
general working capital requirements.

George Bennett, CEO, commented: "This is an exciting time for the Phalaborwa
project, following the milestone production of the mixed rare earth sulphate
from the front-end pilot plant in South Africa and with the production of
separated rare earth oxides from our back-end pilot plant in the US expected
in Q4 2023. This will be the final de-risking step in order to demonstrate the
commerciality of the unique rare earth process flow sheet that Rainbow has
developed with its partner K-Technologies, Inc ("K-Tech") to deliver the
separated permanent magnet rare earth oxides vitally needed for the green
energy transition. It will also open up the opportunity to apply this
intellectual property to other phosphogypsum projects globally, starting with
the Uberaba project in Brazil."

Participation of the Directors

The following Directors and Senior Management of Rainbow are participating in
the Placing:

 Name              No. of Ordinary Shares held as at date of this announcement  No. of New Shares subscribed for in the Placing  No. of Ordinary Shares held immediately following Admission (1)  % interest in Ordinary Shares immediately following Admission (1)
 Adonis Pouroulis  84,108,869                                                   4,213,459                                        88,322,329                                                       14.04%
 George Bennett    36,799,683                                                   547,615                                          37,347,298                                                       5.94%
 Darryll Castle    -                                                            821,422                                          821,422                                                          0.13%
 Pete Gardner      400,000                                                      218,522                                          618,522                                                          0.10%

1.    Calculation includes shares issued to Pella Ventures Limited,
beneficially owned by Adonis Pouroulis, which are subject to Shareholder
Approval.

Corporate Update

Following its announcement of a private placement on 9 May 2023, the Company
signed an agreement with Bosveld, to allow 100% ownership of the Phalaborwa
Project in South Africa, as announced on 28 June 2023.  Under the terms of
the agreement, Rainbow received an immediate 85% interest in the
unincorporated joint venture that holds the rights to Phalaborwa in return for
a payment of US$5m that was made in July 2023.  This updated the original
Project Co-Development Agreement, which envisaged Rainbow earning a 70%
interest in Phalaborwa further to the completion of a pre-feasibility study on
the project.

As a result, the Company requires additional financing in order to complete
the workstreams to advance the project to DFS, publication of which is
expected in H1 2024.  A key part of the DFS workstreams is the operation of
the pilot plant, consisting of a front-end situated at the Johannesburg
facilities of the Council for Mineral Technology ("Mintek") a global leader in
mineral processing, extractive metallurgy, and related fields, and a back-end
situated at the Lakeland, USA facilities of K-Technologies Inc ("K-Tech").

The unique and innovative rare earths processing flowsheet designed for the
Phalaborwa project, which uses continuous ion exchange ("CIX") and continuous
ion chromatography ("CIC") technology to deliver separated rare earth oxides,
has been developed in collaboration with K-Tech.  The K-Tech proprietary
CIX/CIC process replaces traditional solvent extraction technology for the
separation of rare earth oxides, which can be a convoluted process associated
with environmental risks.  The CIX/CIC method is therefore safer and more
environmentally responsible, as well as coming at a significantly reduced
capital and operating cost.

First production of mixed rare earth sulphate at the Phalaborwa front-end
pilot plant was announced on 5 September 2023 and validated Rainbow's
successful development of a process flow sheet to recover rare earths from
phosphogypsum.  The mixed rare earth sulphate produced was of the expected
purity and grade, with recoveries in line with Rainbow's Preliminary Economic
Assessment published in October 2022.  The mixed rare earth sulphate includes
all four of the critical 'magnet' rare earths, neodymium and praseodymium
("NdPr"), dysprosium ("Dy") and terbium ("Tb"), and is capable of being sold
to generate a standalone revenue stream for Rainbow.

The mixed rare earth sulphate will be shipped to the back-end pilot plant at
K-Tech's facility in the USA for separation into rare earth oxides.  The
back-end pilot plant has commenced commissioning and first production of
separated rare earth oxides is expected in Q4 2023.  The pilot plant
operation as a whole (both front and back ends) will continue to operate for
approximately four months in order to produce sufficient quantities of
separated permanent magnet rare earth oxides for testing and marketing
purposes.

Other key workstreams for the DFS have commenced and are progressing well.
 METC Engineering has commenced work on the DFS and is managing the inputs
from the various specialist consultants.  Paragon Tailings is advising on
reclamation of the existing gypsum stacks.  Ardaman, a leading global gypsum
expert, is conducting test and design work for the new gypsum stacks.  A
drilling programme is underway to update the Phalaborwa resource and
environmental work, including full ESIA workstreams are underway by WSP Golder
for the purpose of both the DFS and permitting.

The Placing proceeds will be used primarily for the Phalaborwa project,
reflecting the re-focus of the Company's business to secondary sources of rare
earth elements where the Directors consider higher returns are available
compared to primary hosted ore bodies such as the Company's Gakara project in
Burundi.  The fact that the Directors do not envisage investing significant
amounts in Burundi to develop a formal mineral resource is considered to be an
indicator of impairment under IFRS 6 and, accordingly, for the 30 June 2023
annual report a formal impairment review for the Gakara project will be
undertaken.  Based on an assessment of both the legal and political position
in Burundi the Directors were unable to foresee a date when the operations at
the project would be able to restart and accordingly it is likely that the
carrying value of the exploration and evaluation assets in Burundi and the
associated tangible fixed assets, which had a combined net book value of
US$9.7 million at 30 June 2022, will be fully impaired.

As disclosed in the interim results announced on 31 March 2023 Rainbow engaged
the services of a related party, Magna Capital (Guernsey) Limited ("Magna"),
in which Adonis Pouroulis, the Non-Executive Chairman of the Board of
Directors, has a beneficial interest, to assist in the negotiation and
execution of the transaction to allow 100% consolidation of the Phalaborwa
asset.  During the year ended 30 June 2023, a total of £60k was paid to
Magna and a further £500k success fee was paid in July 2023 in relation to
the successful completion of that transaction.  This related party contract
has now finished with no further work planned between the Company and Magna.

Total voting rights and Admission

An application has been made for the initial 26,412,257 Ordinary Shares to be
issued pursuant to the Placing (the "Unconditional Shares") to be admitted to
the Official List (by way of a Standard Listing) and to trading on the London
Stock Exchange Plc's Main Market for listed securities ("First Admission").
It is expected that First Admission will become effective and that dealing in
the Unconditional Shares will commence on or around 6 October 2023.  The
Unconditional Shares will rank pari passu with the existing Ordinary Shares.
Following Admission of the Unconditional Shares, the Company will have
625,270,912 Ordinary Shares in issue.

The issue of a further 3,587,743 Ordinary Shares to Pella (the "Conditional
Shares") is subject to Shareholder Approval.  It is expected that admission
of the Conditional Shares will become effective and that dealing in the
Conditional Shares will commence on or around 4 December 2023 ("Second
Admission") following the AGM.  The Conditional Shares will rank pari passu
with the existing Ordinary Shares.

Following the First Admission and prior to the AGM and the issue of the
Conditional Shares, the above figures of 625,270,912 Ordinary Shares may be
used by shareholders as the denominator for the calculations by which they
will determine if they are required to notify their interest in, or a change
to their interest in, the Company under the FCA's Disclosure, Guidance and
Transparency Rules.

IMPORTANT NOTICES

This announcement includes "forward looking statements" which include all
statements other than statements of historical facts, including, without
limitation, those regarding the Company's financial position, business
strategy, plans and objectives of management for future operations, or any
statements proceeded by, followed by or that include the words "targets",
"believes", "expects", "aims", "intends", "will", "may", "anticipates",
"would", "could" or similar expressions or negatives thereof.  Such forward
looking statements involve known and unknown risks, uncertainties and other
important factors beyond the Company's control that could cause the actual
results, performance or achievements of the Company to be materially different
from future results, performance or achievements expressed or implied by such
forward looking statements.  Such forward looking statements are based on
numerous assumptions regarding the Company's present and future business
strategies and the environment in which the Company will operate in the
future.  These forward-looking statements speak only as at the date of this
announcement.  Except as required by the FCA, the London Stock Exchange or
applicable law (including as may be required by the Listing Rules, the
Prospectus Regulation, the Prospectus Rules, MAR and the Disclosure Guidance
and Transparency Rules), the Company expressly disclaims any obligation or
undertaking to disseminate or release publicly any updates or revisions to any
forward looking statements contained in this announcement to reflect any
change in the Company's expectations with regard thereto or any change in
events, conditions or circumstances on which any such statements are based.

Market Abuse Regulation 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, as amended ("MAR"), and
is disclosed in accordance with the Company's obligations under Article 17 of
MAR. Market soundings, as defined in MAR, were taken in respect of the
Placing, with the result that certain persons became aware of inside
information, as permitted by MAR. That inside information is set out in this
announcement and has been disclosed as soon as possible in accordance with
paragraph 7 of article 17 of MAR. Therefore, those persons that received
inside information in a market sounding are no longer in possession of inside
information relating to the Company and its securities.

 

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

                                    Detlir Elezi

 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 will use a
proprietary separation technique developed by and in conjunction with its
partner K-Technologies, Inc., which simplifies the process of producing
separated rare earth oxides (versus traditional solvent extraction), leading
to cost and environmental benefits.

The Phalaborwa Preliminary Economic Assessment has confirmed strong base line
economics for the project, which has a base case NPV(10) of US$627
million(( 1 )), an average EBITDA operating margin of 75% and a payback period
of less than two years. Pilot plant operations will commence in 2023, with the
project expected to reach commercial production in 2026, just five years after
work began on the project by Rainbow.

 1  Net present value using a 10% forward discount rate

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