28 June 2023

Rainbow Rare Earths Limited

(“Rainbow” or “the Company”)

LSE: RBW

Rainbow Confirms Agreement to Allow 100% Ownership of Phalaborwa Project

Rainbow Rare Earths is pleased to announce that it has signed an agreement with Bosveld Phosphates (Pty) Limited (“Bosveld”) to allow 100% ownership of the Phalaborwa Project in South Africa.

Under the terms of the agreement, Rainbow will receive an immediate 85% interest in the unincorporated joint venture that holds the rights to Phalaborwa, with Bosveld holding the remaining 15%.  This updates 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. Under the terms of the agreement, Rainbow will pay Bosveld US$5 million in cash in July 2023.

Under the agreement Rainbow is also being granted a call option to acquire the remaining 15% of the joint venture owned by Bosveld, in return for US$7 million of equity in the Company, at any time from 31 October 2023 until 31 December 2025.  Rainbow shares issued pursuant to the call option will be subject to a 24-month lock-up.

On completion of a definitive feasibility study (“DFS”) the unincorporated joint venture will be transferred into an incorporated joint venture company and, at Rainbow’s election, Bosveld will transfer all assets required for the project into that company.

Next steps for Phalaborwa

The consolidation of project ownership has been completed as activity for Phalaborwa is increasing to de-risk the project and deliver a DFS.

As previously announced, front end pilot plant operations have commenced in South Africa and are on track to produce first high-value mixed rare earth sulphate in Q3 2023.  The pilot plant back end is being constructed in Florida, USA, and will be commissioned in good time to receive the first batch of mixed rare earth sulphate to produce high purity separated magnet rare earth oxides.

Other key workstreams to deliver the DFS are progressing in parallel, which will underpin Phalaborwa as a near term solution to the need for a diversified western supply of permanent rare earth magnets required for the energy transition.

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George Bennett, CEO, commented:

 “We have always wanted to consolidate our interest in the Phalaborwa project, given the exceptional economics highlighted by our preliminary economic assessment that confirmed an NPV₁₀ of US$627m based on spot rare earth prices at the time of publication.  

 

“We are therefore delighted to reach this agreement with Bosveld which offers a clear path to Rainbow owning 100% of the project.

 

This is an exciting time for Rainbow and Phalaborwa, with the front end of the pilot plant operational in South Africa and the back end being constructed in USA. 

 

“I look forward to announcing the results from the front end pilot testing, confirming we are able to extract the rare earths and produce a saleable mixed rare earth sulphate. 

 

“The fact that we will have achieved this within three years of signing the initial Phalaborwa earn-in agreement is testament to the combined strength, delivery capabilities and rare earth experience of our technical team.”