28 March 2024
Rainbow Rare Earths
Limited
("Rainbow" or "the Company")
LSE: RBW
Interim Results for the six
months ended 31 December 2023
Rainbow Rare
Earths is pleased to announce its unaudited
results for the six months ended 31 December 2023 ("the
Period").
Highlights
· Global net zero
greenhouse gas ("GHG") emissions will require unprecedented levels
of critical minerals, including rare earth elements
("REEs").
· Phalaborwa
expected to be the highest margin REE project in development today
due to its fundamentally different capital and operating cost
profile compared to traditional projects. The project remains
highly cash generative even at lower rare earth prices.
· Phalaborwa to
produce all four of the high-value magnet rare earths: neodymium
and praseodymium ("NdPr"), dysprosium ("Dy") and terbium ("Tb").
Forecast CAGR of ca. 10% for rare earth permanent magnets from 2022
to 2033[1] driven by their use in electric
vehicles and wind turbines.
· Project backed by
U.S. Government, with a US$50 million funding commitment from the
U.S. International Development Finance Corporation ("DFC")
announced at COP28, to be invested via strategic shareholder
TechMet Limited ("TechMet").
· Successful
production of ca. 35kg of mixed rare earth carbonate at the
front-end pilot plant in South Africa; this material is being used
as feed for the back-end pilot plant in Florida, USA to produce
separated rare earth oxides expected in Q2 2024.
· Phalaborwa offers
environmental advantages due to the clean-up of legacy issues and
the opportunity to fully rehabilitate the site over time. The use
of continuous ion exchange ("CIX") and continuous ion
chromatography ("CIC") to produce separated rare earth oxides also
provides cost and environmental benefits over traditional solvent
exchange methods.
· Updated bulk
density calculations have increased the Phalaborwa project tonnage
by ca. 16% and added over two years to project life; an update to
the JORC-compliant Resource is expected in Q2 2024.
· Letter of Intent
entered into for an off-take agreement to sell ca. 400-600,000
tonnes of Phalaborwa's gypsum by-product per annum into the South
African domestic and surrounding markets, which are anticipating
supply shortages of gypsum, thereby providing an additional revenue
stream to Rainbow.
· Strategic supply agreement
entered into with Less Common Metals ("LCM"), the only
rare earth metal and alloy manufacturing facility in the UK and one
of the only facilities in the Western world.
· Memorandum of
understanding ("MOU") entered into with The Mosaic Company
("Mosaic") with regards to the Uberaba phosphogypsum project in
Brazil. Uberaba represents an exciting opportunity to potentially
replicate Phalaborwa at a larger scale and initial test-work to
date is promising.
George
Bennett, CEO, commented: "Phalaborwa
is a unique project in the rare earths space. Due to the fact that
it is focused on the reprocessing of phosphogypsum stacks to
recover rare earths, it has a fundamentally different cost profile
to traditional mining projects and it is therefore expected to be
the highest margin rare earth project in development today. Its
potential to offer exceptional financial returns, its ability to go
further down the supply chain to produce separated rare earth
oxides, and its strong environmental credentials have seen the
project backed by the U.S. Government during the Period, with a
US$50 million funding commitment from the DFC announced at COP28,
to be invested via TechMet.
We are also
excited about the prospects for the Uberaba phosphogypsum project
in Brazil, which is being developed in partnership with Mosaic.
Initial test-work to date has been encouraging and the project is
of a significantly larger scale than Phalaborwa. Furthermore, the
addition of Uberaba adds geographical diversification to our
portfolio and is in line with our aspiration 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."
Market Abuse Regulation ("MAR") Disclosure
This announcement contains inside
information for the purposes of Article 7 of the Market Abuse
Regulation (EU) 596/2014 as it forms part of UK domestic law by
virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is
disclosed in accordance with the Company's obligations under
Article 17 of MAR.
Rainbow H1 FY 2024 Interim Results investor
presentation
CEO, George Bennett, will host a
presentation and live question and answer session via the Investor
Meet Company platform on 3 April 2024 at 11am GMT.
Questions can be submitted pre-event via your
Investor Meet Company dashboard up until 9am the day before the
meeting or at any time during the live presentation.
Investors can sign up to Investor
Meet Company for free and add to meet RAINBOW RARE EARTHS LIMITED
via:
https://www.investormeetcompany.com/rainbow-rare-earths-limited/register-investor
Investors who already follow
RAINBOW RARE EARTHS LIMITED
on the Investor Meet Company platform will automatically be
invited.
For further
information, please contact:
Rainbow Rare
Earths Ltd
|
Company
|
George Bennett
Pete Gardner
|
+27 82 652 8526
|
|
IR
|
Cathy Malins
|
+44 7876 796 629
cathym@rainbowrareearths.com
|
Berenberg
|
Broker
|
Matthew Armitt
Jennifer Lee
|
+44 (0) 20 3207 7800
|
Stifel
|
Broker
|
Ashton Clanfield
Varun Talwar
|
+44 20 7710 7600
|
Tavistock
Communications
|
PR/IR
|
Charles Vivian
Tara Vivian-Neal
|
+44 (0) 20 7920 3150
rainbowrareearths@tavistock.co.uk
|
Notes to
Editors:
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
("PEA") has confirmed strong base line economics for the project,
which has a base case NPV10 of US$627
million[2], an average EBITDA operating
margin of 75% and a payback period of < 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.
CEO
Review
Market
The world is in the midst of a new industrial
revolution: the green energy transition. Global net zero GHG
emissions will require unprecedented levels of critical minerals,
including REEs which are essential components of the permanent
magnets used in the production of electric vehicles ("EVs") and
wind turbines. Furthermore, REEs have many highly strategic uses in
advanced technologies, including in defence applications, adding to
their criticality worldwide; for example, each American F-35
Lightning II fighter jet contains over 400kg of rare earths, the
Arleigh Burke DDG-51 missile destroyer contains ca. 2,300kg of rare
earths and a Virginia class submarine contains ca. 4,200kg of rare
earths[3].
The International Energy Agency ("IEA")
estimates that the market for REEs has more than doubled over the
period from 2017 to 2022, and demand for rare earth permanent
magnets is forecast to continue to grow strongly by a CAGR of ca.
10% per annum to 2030, according to Argus.
While the long-term demand drivers for the
market remain strong due to the electrification of our transport
system, as well as the unstoppable move towards renewable energy
solutions, in the short-term the market may continue to see some
volatility due to the current weakness of the Chinese economy, a
slow-down in the take-up of EVs and the roll-out of wind power
generational projects, as well as its reliance on consumer trends
worldwide.
Rare earth pricing has been notably weak in
2023 and into 2024. The current price of NdPr oxide of ca. US$50/kg
is estimated to be well below the average breakeven price for the
industry and is not deemed to be sustainable over the medium to
long-term, with Argus expecting pricing to strengthen by the end of
2024.
Phalaborwa's rare earths basket includes the
'heavy' rare earths Dy and Tb, which are noted to be more at risk
of supply disruption than that of the light rare earths due to
their scarcity in economic quantities worldwide. The inclusion of
Dy and Tb, as well as NdPr, improves the overall value of the
Phalaborwa basket in comparison to the industry average.
Furthermore, Phalaborwa's PEA indicated a
comparatively low operating cost of ca. US$34/kg of separated
magnet rare earth oxides (NdPr, Dy and Tb), which provides
resilience against all modelled pricing scenarios. By contrast,
Canaccord Genuity estimates that the incentive pricing for
greenfield ex-China projects is likely to be over
US$100/kg.
Operational update
Phalaborwa - South
Africa
Rainbow's primary focus is the
Phalaborwa project in South Africa, which represents an exciting,
near-term production opportunity of all four of the magnet rare
earths required for the green energy transition.
The operation will involve the processing of
phosphogypsum stacks, which are the by-product of historic
phosphoric acid production on the site. This resource sits at
surface in a "cracked" chemical form, which is why it
has a fundamentally different cost profile to traditional rare
earth development projects.
Rainbow is using proprietary technology
developed in conjunction with its partner K-Technologies, Inc.
("K-Tech"), to allow for the material to be processed first into a
mixed rare earth carbonate, before being refined further into
separated rare earth oxides of 99.5% purity.
The Phalaborwa PEA published in October 2022
(using spot rare earth pricing of ca. US$112/kg NdPr oxide at the
time) confirmed strong base line economics for the project, which
has a base case NPV10 of US$627 million, an average
EBITDA operating margin of 75% and a payback period of less than
two years. Recent analysis has confirmed that Phalaborwa is
expected to be the highest margin rare earth project in development
today, which provides resilience against pricing
volatility.
Rainbow is currently carrying out a Definitive
Feasibility Study ("DFS") at Phalaborwa, which is on track to be
completed in the last quarter of 2024/early 2025. Following
completion of the DFS, a Final Investment Decision will be made by
the Board prior to construction and the expected commencement of
operations by the end of 2026.
Pilot
plant
A key component of the DFS is the operation of
a pilot plant to confirm and optimise the operating parameters for
the unique flowsheet developed in conjunction with K-Tech to
deliver separated rare earth oxides from the Phalaborwa
phosphogypsum.
The pilot plant comprises a front-end circuit
that produces a mixed rare earth carbonate and a back-end circuit
that utilises CIX and CIC to produce separated rare
earth oxides. The innovative application of this established
technology has been pioneered by K-Tech in the rare earth space and
replaces traditional solvent extraction which uses
toxic and flammable solvents and diluents and requires more than
100 separate stages.
The front-end pilot plant is located at the
Johannesburg facilities of the Council for Mineral Technology
("Mintek"), a global leader in mineral processing, extractive
metallurgy, and related fields. The front-end piloting programme
has successfully completed all three of its planned campaigns to
date, with the integrated whole circuit 24/7 campaign completed in
March 2023. Throughout its duration of operation, the front-end
pilot plant has produced ca. 35kg of mixed rare earth carbonate as
planned and this material is being shipped in progressive batches
to the back-end pilot plant in Florida for separation.
During operation the following key
opportunities for optimisation of the front-end plant process were
identified and are expected to result in capex and opex
savings:
·
improvement in the impurity and rare earths leach temperature
conditions from the 40⁰C set out in the PEA to 30⁰C, delivering a
significant ca. 50% saving in energy requirements;
· the
successful regeneration of two key reagents in the leach solution,
improving on our founding principles of circularity; and
·
optimisation of the second stage acid leach circuit which has
reduced the number of counter current decantation thickeners
required from 12 to six.
As part of the optimisation process, Rainbow
worked with K-Tech to establish the optimal mixed rare earth
product for the back-end CIX / CIC system, which is located at
K-Tech's premises in Lakeland, Florida, USA. Having first
successfully produced a mixed rare earth sulphate, it was decided
to further beneficiate the product, removing certain unwanted
elements, with the optimal end product for separation agreed as a
cerium-depleted mixed rare earth carbonate, providing a
higher-grade feedstock to the back-end separation circuit.
A summary of the progress made with the back-end flowsheet is
as follows:
·
successful impurity removal in the initial ion-exchange step
providing suitable feed solution for group separation;
·
successful separation of the uneconomic lanthanum and cerium
group;
·
successful group separation in the first step of the
chromatography stage, delivering a NdPr group, grading ca. 68%, as
feed for purification in the subsequent individual chromatography
separation steps;
·
considerable upgrading of the concentration of the Dy and Tb
from a combined feed grade of 0.9% to 14.6%, which requires
separation from the samarium, europium and gadolinium ("SEG")
group; and
·
good separation of the SEG group at a grade of ca. 63%, which
provides the strong potential for an additional valuable product
line.
The current focus of the pilot plant test work
at K-Tech is to optimise the second stage of the chromatography
process to produce a 99.5% NdPr product, expected in Q2 2024. This
will be followed by separation of Dy and Tb oxides.
Resource
update
Phalaborwa currently has a total mineral
resource estimate ("MRE") of 30.4 Mt at 0.44% TREO, with the
high-value, permanent magnet elements Nd and Pr representing 29% of
the TREO in the rare earths basket, as well as economic quantities
of Dy and Tb. The MRE is reported at a 0.2% TREO cut-off
grade.
During the Period, Rainbow's
technical team was focused on evaluation of the
density at depth of the two phosphogypsum stacks that make up the
Resource at Phalaborwa. On the advice of Ardaman and Associates,
Inc., a Tetra Tech Company ("Ardaman"), a revised drilling
technique was used for a drilling campaign carried out in the
Period to provide representative samples from the stacks. These
were submitted to Ardaman for comprehensive bulk density testing
and the results revealed a clear corelation of higher bulk density
with increasing depth.
The increased bulk density reported by Ardaman
has resulted in a significant increase of ca. 16% in the project
tonnes from 30.4 Mt to 35.1 Mt, extending the operating life by
over two years at the proposed operating rate.
Samples from the drill campaign will now be
assayed for grade by SGS in South Africa to allow for an updated
JORC compliant MRE. This work is also expected to upgrade the
Inferred Resources to the Measured and Indicated
categories.
Environmental
Phalaborwa is founded on the principles of
circularity, reprocessing phosphogypsum which is the by-product of
historic phosphoric acid production to produce rare earths required
for global decarbonisation. With legacy environmental issues prior
to our ownership, Rainbow has the opportunity not only to exploit a
secondary source of these critical minerals, but also to clean up
the project site. This will involve neutralising the acidic
solution currently on top of the gypsum stacks for use in a closed
loop process and redepositing benign gypsum on stacks which will be
lined in accordance with International Finance Corporation ("IFC")
Standards and Equator Principles.
Rainbow recognises the benefits that securing a
source of low carbon energy would bring to the project and its
stakeholders and is therefore well advanced in the evaluation of a
renewable energy power agreement. It is envisaged that renewable
energy will provide the bulk of the project's power requirements,
thereby further reinforcing its green credentials. While Phalaborwa
is a relatively low energy-intensive project with draw requirements
of ca. 13.3 MW (as set out in the PEA), management are also
exploring the potential for on-site solar back-up power
capacity.
As part of the DFS and as required for the
permitting process, a new Environmental and Social Impact
Assessment is being carried out by WSP Golder and all workstreams
for this are on track to allow permit applications to be lodged in
2024.
During the Period, Rainbow signed a Letter of
Intent to enter into an offtake agreement with NEXUS Intertrade
(Pty) Ltd ("NEXUS"), under which NEXUS will acquire the benign
gypsum which is the by-product of the Phalaborwa process and sell
it to end users. The ability to sell down the remaining gypsum
stacks at the project is expected to allow for complete
environmental rehabilitation of the site over time, as well as
providing an additional revenue stream to Rainbow.
Supply
agreement
Rainbow 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.
In accordance with this aim, the Company
entered into a strategic supply agreement in September 2023 with
LCM, a world leader in the manufacture and supply of complex alloy
systems and metals. LCM occupies a unique position in the rare
earths supply chain in that it is based in Ellesmere Port,
Cheshire. As such, it is currently the only rare earth metal and
alloy manufacturing facility in the UK and one of the only
facilities in the Western world.
LCM had been looking to partner with a supplier
with similar values in order to secure ethical supply of the
feedstock required for their business and it chose Rainbow after a
lengthy evaluation process of the various rare earth development
companies globally. This decision was based on Rainbow's capability
to take its rare earth material further downstream to the separated
rare oxide stage, as well as due to its low production cost, which
gives the Phalaborwa project resilience against rare earth pricing
volatility.
A framework will be set out in due course for
Rainbow and LCM to negotiate a binding offtake agreement for
separated rare earth oxides from Phalaborwa, with the ultimate
customer of the rare earth permanent magnets being clearly defined
and in alignment with both LCM's existing customer base and the
positioning of both companies in an expanding Western supply
chain.
Uberaba - Brazil
Following an extensive worldwide search to
identify phosphogypsum projects with similar characteristics to
Phalaborwa, Rainbow entered into an MOU with Mosaic in July 2023
with regards to the Uberaba project in Minas Gerais,
Brazil.
As at Phalaborwa, the Uberaba project will
entail the processing of a phosphogypsum stack that is the
by-product of phosphoric acid production which was originally based
on a hard rock carbonatite. Mosaic's phosphoric acid operations are
ongoing, meaning that new phosphogypsum is deposited on the stacks
annually.
Due to the similarities of the feedstock, the
Uberaba stack was expected to have a similar grade and rare earth
element make-up as those of Phalaborwa and this was confirmed by
initial assay analysis, which indicated an average grade of 0.58%
TREO and that the basket contains all four of the magnet rare
earths NdPr, Dy and Tb, with NdPr representing ca. 25% of the
basket.
Following the co-production of a process
flowsheet, Rainbow and Mosaic will collaborate on the production of
a PEA for this opportunity to extract rare earths.
Gakara - Burundi
Gakara was placed on care and maintenance in
June 2021 at the request of the Government of Burundi.
Further to the acquisition of the Phalaborwa
project in December 2020 and the subsequent development of
processing technology to recover REEs from phosphogypsum as a
by-product of phosphoric acid production, the Directors have
re-focused the business on secondary sources of REEs where they
consider higher returns are available. As such, the decision was
made not to invest any further funds in the project and Gakara was
fully written down in the Company's accounts for the year to 30
June 2023.
Corporate
Notwithstanding falling rare earth prices,
coupled with a wider difficult environment for small to medium
sized resource companies on the London Stock Exchange, Rainbow's
successful development was rewarded by continued strong backing for
the Company in the market via the completion of a private placement
in September 2023 to raise ca. US$5.5 million. This placing was
carried out at a minor discount of 3% to the share price and was
supported by the majority of Rainbow's Board, as well as its major
shareholder TechMet.
A major endorsement for Phalaborwa's
exceptional economic and environmental credentials was achieved via
the announcement at the U.N.'s Climate Change Conference, COP28,
that the DFC had committed US$50 million for the project, to be
invested via strategic shareholder TechMet. This funding commitment
helps to de-risk the overall capital requirement of ca. US$295.5
million for Phalaborwa and demonstrates the strategic role the
project is expected to play in the establishment of a responsible
supply chain for rare earths outside of China.
Financial
Review
The financial statements for the Period are
dominated by costs totalling US$8.5 million capitalised for
Phalaborwa, bringing the total balance sheet value for the
exploration and evaluation assets associated with the project to
US$13.4 million. This included US$5.7 million to increase Rainbow's
economic interests in Phalaborwa from 70% to 85%, with an option to
acquire the remaining 15% from Bosveld Phosphates (Pty) Limited via
the issue of 38,873,663 new Rainbow shares. Other expenditure at
Phalaborwa in the Period included US$2.0 million relating to the
ongoing pilot plant operations, US$0.4 million for other
workstreams associated with the DFS, US$0.2 million for mineral
resource work and US$0.2 million for Rainbow's technical team and
associated costs. At 31 December 2023, the Group had US$4.0 million
of cash available.
The income statement showed a net loss of
US$1.5 million for the Period in line with the comparative period
in FY 2023. This includes the Group's administrative costs,
business development costs associated with both the Uberaba project
in Brazil and Rainbow's wider long-term project pipeline, and costs
to maintain the Gakara asset on care and maintenance.
Cautionary
Statement:
The business
review and certain other sections of this interim report contain
forward looking statements that have been made by the Directors in
good faith based on the information available to them up to the
time of their approval of this report. However, they should be
treated with caution due to inherent uncertainties, including both
economic and business risk factors, underlying any such
forward-looking information and no statement should be construed as
a profit forecast.
Directors'
Responsibility Statement
We confirm that to the best of our
knowledge:
a) the Condensed set of Interim Financial
Statements has been prepared in accordance with IAS 34
'Interim Financial
Reporting';
b) the interim management report
includes a fair review of the information required by DTR 4.2.7R
(indication of important events during the first six months and
description of principal risks and uncertainties for the remaining
six months of the year);
c) the interim management report
includes a fair review of the information required by DTR 4.2.8R
(disclosure of related parties' transactions and changes therein);
and
d) the condensed set of interim financial
statements, which has been prepared in accordance with the
applicable set of accounting standards, gives a true and fair view
of the assets, liabilities, financial position and profit or loss
of the issuer, or the undertakings included in the consolidation as
a whole as required by DTR 4.2.4R.
This Interim Report has been approved by the
Board and signed on its behalf by:
George
Bennett
Chief Executive Officer
28 March 2024
Condensed Consolidated Statement of
Comprehensive Income
For the six
months ended 31 December 2023
|
|
6 months ended
31 December 2023
|
6 months ended
31 December 2022
|
|
Notes
|
US$'000
Unaudited
|
US$'000
Unaudited
|
|
|
|
|
Revenue
|
|
-
|
-
|
Production and sales
costs
|
|
-
|
-
|
Gross loss
|
|
-
|
-
|
Administration expenses
|
3
|
(1,461)
|
(1,500)
|
Loss from operating activities
|
|
(1,461)
|
(1,500)
|
|
|
|
|
Finance income
|
|
130
|
73
|
Finance costs
|
|
(120)
|
(54)
|
|
|
|
|
Loss before tax
|
|
(1,451)
|
(1,481)
|
|
|
|
|
Income tax expense
|
|
-
|
-
|
|
|
|
|
Total loss after tax and comprehensive expense for the
period
|
|
(1,451)
|
(1,481)
|
|
|
|
|
Total loss after tax and comprehensive expense for the period
is attributable to:
|
|
|
|
Non-controlling interest
|
|
(9)
|
(38)
|
Owners of parent
|
|
(1,442)
|
(1,443)
|
|
|
(1,451)
|
(1,481)
|
Loss per share (cents)
|
|
|
|
Basic
|
4
|
(0.24)
|
(0.27)
|
Diluted
|
4
|
(0.24)
|
(0.27)
|
|
|
|
|
The results of each period are
derived from continuing operations.
Condensed
Consolidated Statement of Financial Position
As at 31
December 2023
|
|
As at
31 December 2023
|
As at
30 June
2023
|
As at
31 December 2022
|
|
Notes
|
US$'000
Unaudited
|
US$'000
Audited
|
US$'000
Unaudited
|
Non-current assets
|
|
|
|
|
Exploration and evaluation
assets
|
5
|
13,363
|
4,830
|
11,405
|
Property, plant and
equipment
|
6
|
24
|
27
|
872
|
Right of use assets
|
|
99
|
37
|
89
|
Total non-current assets
|
|
13,486
|
4,896
|
12,366
|
|
|
|
|
|
Current assets
|
|
|
|
|
Inventory
|
|
718
|
718
|
858
|
Trade and other
receivables
|
|
565
|
365
|
426
|
Cash and cash equivalents
|
|
4,002
|
8,107
|
2,146
|
Total current assets
|
|
5,285
|
9,190
|
3,430
|
|
|
|
|
|
Total assets
|
|
18,771
|
14,086
|
15,796
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
Trade and other payables
|
7
|
(1,689)
|
(1,250)
|
(879)
|
Borrowings
|
8
|
(250)
|
(201)
|
(101)
|
Lease liabilities
|
|
(47)
|
(23)
|
(34)
|
Total current liabilities
|
|
(1,986)
|
(1,474)
|
(1,014)
|
|
|
|
|
|
Non-current liabilities
|
|
|
|
|
Borrowings
|
8
|
(283)
|
(285)
|
(589)
|
Lease liabilities
|
|
(59)
|
(21)
|
(56)
|
Provisions
|
|
(55)
|
(55)
|
(61)
|
Total non-current liabilities
|
|
(397)
|
(361)
|
(706)
|
|
|
|
|
|
Total Liabilities
|
|
(2,383)
|
(1,835)
|
(1,720)
|
|
|
|
|
|
NET
ASSETS
|
|
16,388
|
12,251
|
14,076
|
|
|
|
|
|
Equity
|
|
|
|
|
Share capital
|
9
|
56,303
|
50,937
|
41,552
|
Share based payment
reserve
|
|
1,634
|
1,719
|
1,588
|
Other reserves
|
|
-
|
-
|
-
|
Retained loss
|
|
(39,618)
|
(38,483)
|
(27,955)
|
Equity attributable to the parent
|
|
18,319
|
14,173
|
15,155
|
Non-controlling interest
|
|
(1,931)
|
(1,922)
|
(1,079)
|
TOTAL EQUITY
|
|
16,388
|
12,251
|
14,076
|
|
|
|
|
|
Condensed
Consolidated Cash Flow Statement
For the six
months ended 31 December 2023
|
|
6 months ended
31 December 2023
|
6 months ended
31 December 2022
|
|
|
US$'000
Unaudited
|
US$'000
Unaudited
|
|
|
|
|
Cash flow from operating activities
|
|
|
|
Loss from operating
activities
|
|
(1,461)
|
(1,500)
|
Adjustments
for:
|
|
|
|
Depreciation
|
|
25
|
189
|
Share-based payment
charge
|
|
223
|
151
|
Operating loss before working capital
changes
|
|
(1.213)
|
(1,160)
|
|
|
|
|
Net increase in other
receivables
|
|
(238)
|
(25)
|
Net increase / (decrease) in trade
and other payables
|
|
(276)
|
(30)
|
Cash used by operations
|
|
(1,727)
|
(1,215)
|
|
|
16
|
|
Realised foreign exchange
gains
|
|
16
|
73
|
Finance costs
|
|
(31)
|
(69)
|
Net
cash used in operating activities
|
|
(1,742)
|
(1,211)
|
|
|
|
|
Cash flow from investing activities
|
|
|
|
Purchase of property, plant &
equipment
|
|
-
|
(2)
|
Exploration and evaluation
costs
|
|
(7,831)
|
(817)
|
Net
cash used in investing activities
|
|
(7,831)
|
(819)
|
|
|
|
|
Cash flow from financing activities
|
|
|
|
Repayment of borrowings
|
|
(37)
|
-
|
Payment of lease
liabilities
|
|
(21)
|
(16)
|
Proceeds from the issuance of
ordinary shares
|
|
5,501
|
125
|
Transaction costs of issuing new
equity
|
|
(84)
|
(16)
|
Net
cash generated by financing activities
|
|
5,359
|
93
|
|
|
|
|
Net
decrease in cash and cash equivalents
|
|
(4,214)
|
(1,937)
|
|
|
|
|
Cash & cash equivalents at the beginning of the
period
|
|
8,107
|
4,134
|
Foreign exchange gain / (loss) on
cash & cash equivalents
|
|
109
|
(51)
|
Cash & cash equivalents at the end of the
period
|
|
4,002
|
2,146
|
Notes to the
Condensed Financial Statements
For the six
months ended 31 December 2023
1. General information
Rainbow Rare Earths Limited (the
"Company" or "Rainbow", together with its subsidiaries the
"Group"), is a company limited by shares domiciled in Guernsey,
incorporated on 5 August 2011 with company registration number
53831. The Company's registered office is Connaught House, St
Julian's Avenue, St Peter Port, Guernsey. The nature of the
Group's operations and its principal activities are set out in the
CEO and Financial Reviews.
The financial information for the
period ended 31 December 2023 does not constitute the audited
statutory accounts but the comparative information has been
extracted from those accounts. The report of the auditors on
those accounts was unqualified.
This Interim Report has not been
audited or reviewed.
A copy of this Half Yearly Report
has been published and may be found on the Company's website
at www.rainbowrareearths.com
2. Basis of preparation
These condensed consolidated interim
financial statements for the 6 months ended 31 December 2023 have
been prepared in accordance with IAS 34 'Interim Financial
Reporting'. They do not include disclosures that would otherwise be
required in a complete set of financial statements and should be
read in conjunction with the 2022 Annual Report and
Accounts.
The same accounting policies and
methods of computation are followed in the condensed interim
financial statements as were followed in the most recent annual
financial statements of the Group, which were published on 27
October 2023. There are no newly effective IFRS Standards
which have had an impact on the financial statements.
(a)
Going concern
The Directors have continued to use
the going concern basis in preparing these condensed financial
statements. The Group's business activities, together with
the factors likely to affect future development, performance and
position are set out in the CEO Statement. The financial
position of the Group, its cash flow and liquidity position are
described in the Financial Review.
The Group's cash balance at 31
December 2023 was US$4.0 million (30 June 2023: US$8.1
million). The Board has reviewed the Group's latest cash flow
forecasts for the period to 30 June 2025, including reasonably
possible downside scenarios. This has included the following
assumptions:
·
Forecast expenditure of US$4.0
million for ongoing general and administrative costs of the Group
over the 18-month period from 1 January 2024 to 30 June
2025, based on the current administrative cost base.
The reasonably possible downside scenario includes a 10%
contingency for unexpected costs.
· Estimated funding requirements of US$7.5 million for
Phalaborwa, of which US$4.0 million has been incurred
to date or is committed. This includes US$2.4 million to
complete pilot plant test-work, US$3.7 million to
finalise the DFS and US$0.9 million for Rainbow's technical team
and associated costs. Due to the nature of the
work, actual costs and the timing of expenditure may differ
to estimates. The forecast includes a 10%
contingency for increased technical costs associated with
the pilot plant and DFS. The reasonably possible
downside scenario adds a further 10%
contingency for all Phalaborwa
expenditure.
· A
continuation of care and maintenance for the Group's Gakara project
in Burundi at a total cost of US$0.6 million for the
18-month period from 1 January 2024 to 30 June 2025, based on the
current administrative cost base. The reasonably
possible downside scenario includes a 10% contingency
for unexpected costs.
Based on management's reasonably
plausible downside scenario outlined above, the Group will need to
raise additional finance of at least US$9.2 million for the period
ending 30 June 2025, along with any funds required to progress the
Uberaba opportunity in Brazil. Based on the robust economic
prospects for the Phalaborwa project, the Board is confident that
additional funding will be secured as required. However, the
Board accepts that these circumstances indicate the existence of a
material uncertainty which may cast significant doubt about the
Group's ability to continue as a going concern and therefore it may
be unable to realise its assets and discharge its liabilities in
the normal course of business. The financial statements do
not include the adjustments that would result if the Group was
unable to continue as a going concern.
(b)
Dividend
The Directors do not recommend the
payment of a dividend for the period (six months ended 31 December
2023: US$Nil, six months ended 31 December 2022:
US$Nil).
(c)
Principal Risks and uncertainties
There are a number of potential
risks and uncertainties inherent in the mining and metals sector
which could have a material impact on the long-term performance of
the Company, and which could cause the actual results to differ
materially from expected and historical results. The Company
has taken reasonable steps to mitigate these where possible. Full
details are disclosed on pages 46-47 of the Annual Report for the
year ended 30 June 2023. The risks and uncertainties are
summarised below:
· Project definition risk (High):
- At Phalaborwa, the
PEA published in October 2022 confirmed a processing flowsheet
capable of economically extracting the magnet rare earth metals
from the gypsum stacks in a low capital and low operating cost
environment. The Group's technical team has designed and
commissioned numerous commercial plants in Africa, including
completion of feasibility studies for rare earth projects, and are
therefore familiar with alternative technical options that may need
to be deployed if the original strategies prove
uneconomic.
- Pilot
test work to confirm the efficacy of the processing flowsheet is
underway with the production of a mixed rare earth carbonate in
South Africa which has been shipped for pilot testing of the final
separation process in the USA. As a result of the pilot test work,
changes may be required to the proposed processing flowsheet which
could have a detrimental impact on the economics of the project as
set out in the PEA. The results of the pilot test work programme to
date have been in line with the PEA.
- A DFS
will need to be completed to provide sufficient confidence for
project development, which may not deliver results in line with the
PEA.
· Permitting risk (High):
- New and
updated permits and licences will be required to develop the
Phalaborwa project including, but not limited to, a water use
licence, waste management licence and air emissions
licence. Rainbow is working with specialist
consultants to compile the technical reports required for the
permitting process and is aiming to make the relevant applications
in parallel with work on the DFS.
-
Whilst the timeframe for the
issuance of permits is difficult to predict, the Phalaborwa project
will clean up legacy environmental issues at the site, including
treating the acid water currently associated with the unlined
gypsum stacks and re-stacking the processed gypsum on new lined
stacks designed in accordance with IFC Performance Standards and
the Equator Principles. Accordingly, the Group is confident that
the relevant permits will be issued to allow the project to
proceed.
· Financing risk (High):
- The Group's ability to
continue to develop the Phalaborwa project and other new business
opportunities will rely upon its continued ability to access
financing, both at the corporate and project level. The strong
economic returns set out in the PEA for Phalaborwa are expected to
ensure funding is available to deliver the DFS and, ultimately, the
development of the Phalaborwa project.
- Management
maintains strong relationships with key sources of finance. Rainbow
has a history of securing funding required for the Group's growth
plans, including support from its cornerstone investors, and
management expects to be able to secure additional funding as
required.
· Rare
earth prices (High):
- Rainbow is
focused on 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.
- Whilst
analysts are predicting strong growth in demand for rare earths,
prices have been volatile in the past and are currently at levels
substantially below the base case set out in the Phalaborwa PEA.
Whilst the Phalaborwa PEA confirmed a low-cost operation that has
resilient economics in lower rare earth price environments, if the
underlying rare earth basket price falls or remains at low prices
for the long term, this reduces potential revenue that will impact
the long-term profitability of the project and could impact the
commercial viability of any development.
· Co-development risk (Medium):
- The Group's assets
include projects that will be conducted in joint arrangements or
with associates, which reduces the Group's ability to control and
manage risk and places reliance on partners not controlled by the
Group. For the earlier stage projects, Rainbow's rare earths
processing expertise and ownership, directly or under licence in
the relevant territories, of the IP rights to develop an economic
processing flow sheet similar to Phalaborwa is expected to ensure
that suitable commercial terms can be agreed for the long term
development of these assets.
- At
Phalaborwa, Bosveld Phosphates (Pty) Limited ("Bosveld") has a 15%
interest in the project and, as current owner of the site, their
assistance is required to ensure the assets necessary for the
project development are transferred at the necessary time into the
joint venture vehicle and they remain liable for the historic
environmental liabilities associated with the project site. Rainbow
has the option to acquire the 15% minority interest from Bosveld by
issuing 38,873,663 ordinary shares of no par value in Rainbow Rare
Earths Limited. This will enable the Group to fully control that
project and creates a strong incentive for Bosveld to ensure it
takes the necessary steps to allow the project to be
developed.
- The Group's
development pipeline, including the Uberaba property in Brazil and
the opportunity with OCP in Morocco, are at a much earlier stage of
development. The legal framework for the development of a
commercial operation for these opportunities has not been fully
defined and terms may not be agreed with the owners of these assets
to allow a development to occur.
· Country and Political (Medium):
- Rainbow's
operations are located in South Africa, Brazil and Burundi.
Emerging market economies are generally subject to greater risks,
including legal, regulatory, tax, economic and political risks, and
these risks are potentially subject to rapid change.
- In
South Africa, general elections will be held in May 2024, which
could lead to an increase in political and social instability. The
well-publicised challenges for state energy provider Eskom mean
there are ongoing requirements for load-shedding / power outages in
the country, albeit the power requirements for the industrial
sectors are prioritised versus other sectors. South Africa's
stance on geopolitical matters is at times contrarian to Western
interests.
- On 12 April 2021,
the Government of Burundi suspended the export of concentrate
produced at Gakara. This was followed on 29 June 2021 with a
suspension of all mining and exploration activity. All operations
remain on care and maintenance. Due to the re-focus of Rainbow's
business on the Phalaborwa asset and growth opportunities from the
associated processing technology, the Directors do not envisage
investing significant amounts in Burundi to develop a formal
mineral resource and therefore the net assets of the Gakara cash
generating unit were impaired to nil in the 2023 Annual Report and
Accounts.
3. Administrative expenses
|
6 months ended
31 December 2023
|
6 months ended
31 December 2022
|
|
US$'000
Unaudited
|
US$'000
Unaudited
|
Corporate expenses
|
1,254
|
1,171
|
Burundi administration
|
207
|
329
|
|
1,461
|
1,500
|
Burundi administrative expenses
incurred in the six months ended 31 December 2023 include all costs
associated with maintaining the Gakara project on care and
maintenance.
4. Loss per ordinary share
Loss per ordinary share is
calculated by dividing the net loss for the period attributable to
ordinary equity holders of the parent by the weighted average
number of ordinary shares outstanding during the period.
The Company was loss making for all
periods presented, therefore the dilutive effect of share options
has not been taken account of in the calculation of diluted
earnings per share, since this would decrease the loss per share
for each of the period reported.
The calculation of the basic loss
per share is based on the following data:
|
6 months ended
31 December 2023
|
6 months ended
31 December 2022
|
|
US$'000
Unaudited
|
US$'000
Unaudited
|
The loss for the period attributable
to ordinary equity holders of the parent company
|
(1,442)
|
(1,443)
|
|
|
|
|
Number
|
Number
|
|
'000
|
'000
|
Weighted average number of Ordinary
shares for the purposes of basic and diluted loss per
share
|
607,767
|
524,963
|
|
|
|
Loss per Ordinary share
|
Cents
|
Cents
|
Basic and diluted
|
(0.24)
|
(0.27)
|
5. Exploration and evaluation
assets
|
|
Gakara
|
Phalaborwa
|
Total
|
|
|
US$'000
|
US$'000
|
US$'000
|
At 1 July 2022 (audited)
|
|
8,635
|
1,953
|
10,588
|
Additions
|
|
-
|
817
|
817
|
At 31 December
2022(unaudited)
|
|
8,635
|
2,770
|
11,405
|
Additions
|
|
-
|
2,060
|
2,060
|
Impairment
|
|
(8,635)
|
-
|
(8,635)
|
At 30 June 2023 (audited)
|
|
-
|
4,830
|
4,830
|
Additions
|
|
-
|
8,533
|
8,533
|
At 31 December 2023
(unaudited)
|
|
-
|
13,363
|
13,363
|
Costs relating to the Phalaborwa
project were capitalised during the Period. The Gakara project has
been under care and maintenance throughout the Period 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 and therefore 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 Period include the costs relating to
resource testing, building and operating pilot plants in South
Africa and USA, and acquiring a further 15% economic interest in
the project from Bosveld.
Since acquiring the Phalaborwa
project 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 year ended 30 June 2023. Based on an assessment of both the
legal and political position in Burundi, the Directors consider
that the fair value of the Gakara exploration and evaluation assets
calculated in accordance with IAS 36 is nil and an impairment loss
has been recognised.
FinBank SA hold security over the
fixed and floating assets of Rainbow Mining Burundi SM ("RMB")
which include the impaired exploration and evaluation assets
associated with the Gakara mining permit in Burundi.
6. Property, plant and
equipment
US$'000
|
Mine development
costs
|
Plant &
machinery
|
Vehicles
|
Office
equipment
|
Total
|
Cost
|
|
|
|
|
|
At 1 July 2022 (audited)
|
183
|
2,889
|
1,582
|
45
|
4,699
|
Additions
|
-
|
-
|
-
|
2
|
2
|
At
31 December 2022 (unaudited)
|
183
|
2,889
|
1,582
|
47
|
4,701
|
Additions
|
-
|
-
|
24
|
2
|
26
|
At 30 June 2023 (audited)
|
183
|
2,889
|
1,606
|
49
|
4,727
|
Additions
|
-
|
-
|
-
|
-
|
-
|
At
31 December 2023 (unaudited)
|
183
|
2,889
|
1,606
|
49
|
4,727
|
Depreciation
|
|
|
|
|
|
At 1 July 2022 (audited)
|
99
|
2,668
|
855
|
34
|
3,656
|
Charge for period
|
13
|
2
|
158
|
-
|
173
|
At
31 December 2022 (unaudited)
|
112
|
2,670
|
1,013
|
34
|
3,829
|
Charge for period
|
12
|
3
|
159
|
2
|
176
|
Impairment
|
59
|
216
|
410
|
10
|
695
|
At 30 June 2023 (audited)
|
183
|
2,889
|
1,582
|
46
|
4,700
|
Charge for period
|
-
|
-
|
2
|
1
|
3
|
At
31 December 2023 (unaudited)
|
183
|
2,889
|
1,584
|
47
|
4,703
|
|
|
|
|
|
|
Net
Book Value at 31 December 2023 (unaudited)
|
-
|
-
|
22
|
2
|
24
|
Net Book Value at 30 June 2023
(audited)
|
-
|
-
|
24
|
3
|
27
|
Net Book Value at 31 December 2022
(unaudited)
|
71
|
219
|
569
|
13
|
872
|
As set out in note 5 the Directors
recognise that the ongoing suspension of all activities of RMB in
Burundi and the subsequent decision not to commit investment for
the conversion of the Gakara resource target to reserves requires
an impairment review for the tangible fixed assets relating to the
project in accordance with IAS36. Based on an assessment of
both the legal and political position in Burundi, the Directors
consider that the fair value of the property, plant and equipment
associated with the Gakara project calculated in accordance with
IAS 36 is nil and an impairment loss has been
recognised.
FinBank SA hold security over the
fixed and floating assets of RMB which include the impaired
property, plant, and equipment in Burundi.
7. Trade and other
payables
|
As at
31 December
2023
|
As at
30 June
2023
|
As at
31 December 2022
|
|
US$'000
Unaudited
|
US$'000
Audited
|
US$'000
Unaudited
|
Trade payable
|
818
|
124
|
43
|
Accrued expenses
|
357
|
736
|
316
|
Taxes and social security
|
380
|
290
|
361
|
Burundi land taxes
payable
|
100
|
100
|
80
|
Amounts due to staff and
management
|
34
|
-
|
11
|
Provision for employment
disputes
|
-
|
-
|
68
|
Total trade and other payables
|
1,689
|
1,250
|
879
|
The Directors consider that the
carrying value of trade and other payables approximate to their
fair value.
8. Borrowings
|
As at
31 December 2023
|
As at
30 June
2023
|
As at
31 December 2022
|
|
US$'000
Unaudited
|
US$'000
Audited
|
US$'000
Unaudited
|
Finbank Loan
|
324
|
363
|
557
|
Warrant liability
|
209
|
123
|
133
|
Total borrowings
|
533
|
486
|
690
|
|
|
|
|
Payable within 12 months
|
250
|
201
|
101
|
Payable after more than 12
months
|
283
|
285
|
589
|
|
533
|
486
|
690
|
FinBank Loan
The FinBank loan facility in Burundi
is expressed in BIF and carries an interest rate of 15%.
Repayment terms agreed from February 2023 require payments of BIF30
million per month until April 2027 covering both principal and
interest on a reducing balance basis. During 2023 the
devaluation of the BIF to US$1:BIF2,840.54 at 30 June 2023 reduced
the US dollar value of the liability by US$133k.
Under the terms of this loan,
FinBank has security over the fixed and floating assets of RMB, the
shares of RMB, and the cash held in RMB's FinBank bank
accounts. Interest on the loan amounted to US$26k (2022:
US$42k).
Warrant Liability
On 21 February 2020, 2,000,000
warrants were issued to Pipestone Capital Inc, in which George
Bennett, the Company's CEO, has a beneficial interest. The
warrants were issued in lieu of interest on a US$1 million bridging
loan provided to the Company, which was repaid in full in December
2021. The warrants have a contractual life of four years at
an exercise price of 4.55 pence per warrant. The Pipestone
warrants are recognised as a financial liability at fair value
through profit and loss with changes in value included under
finance costs/income. Subsequent to the balance sheet date
the contractual term of the warrants has been extended by a further
two years.
9. Share capital
|
As at
31 December 2023
|
As at
31 December
2022
|
As at
30 June
2023
|
|
Unaudited
|
Unaudited
|
Audited
|
Issued share capital (nil par value)
US$'000
|
56,303
|
41,552
|
50,937
|
Number of shares in issue
('000)
|
630,317
|
526,406
|
598,859
|
The table below shows a
reconciliation of share capital movements:
|
Number of
shares
|
US$'000
|
At
1 July 2022
|
524,405,810
|
41,442
|
November 2022 - Options exercised
(Cash receipts)
|
2,000,000
|
110
|
At
31 December 2022
|
526,405,810
|
41,552
|
May 2023 - Share placing (Cash
receipts)
|
72,452,846
|
9,386
|
At
30 June 2023
|
598,858,656
|
50,937
|
November 2023-share placing (Cash
receipts)
|
30,000,000
|
5,366
|
November 2023-Options exercised (nil
value options)
|
1,458,000
|
-
|
At
31 December 2023
|
630,316,656
|
56,303
|
On 26 September 2023, the Company
agreed conditionally to issue 30 million shares at a price of 15
pence per share, raising gross cash proceeds of US$5.5 million
(before costs of $135k).
The first tranche of 25,786,541
ordinary shares was issued on 5 October 2023. The second tranche of
4,213,459 ordinary shares was issued on 6 December 2023 following
shareholder approval at the Company's Annual General Meeting held
on 21 November 2023.
In addition, George Bennett,
Rainbow's CEO, has exercised 1,458,000 nil priced share options
originally issued in January 2021.
10. Related party transactions
US$'000
|
Six months to 31 Dec
2023
|
Six months to 31 Dec
2022
|
|
|
Charged in
period
|
Settled in
period
|
Closing
Balance
|
Charged in
period
|
Settled in
period
|
Closing
Balance
|
Benzu Minerals (Proprietary)
Limited1
|
-
|
-
|
-
|
1
|
(1)
|
-
|
MPD Consulting
Limited2
|
2
|
(3)
|
1
|
3
|
(1)
|
2
|
Magna Capital (Guernsey)
Limited3
|
647
|
(647)
|
-
|
10
|
-
|
10
|
|
649
|
(650)
|
1
|
13
|
(1)
|
12
|
|
|
|
|
|
|
|
| |
The above table does not include remuneration of Directors and
senior management.
1.
Benzu Minerals (Proprietary) Limited is connected to Cesare
Morelli who is currently engaged as the acting General Manager of
RMB. In addition to the comparative amounts disclosed, which relate
to costs associated with the drilling programme at Phalaborwa in
2022, salary was paid to Cesare Morelli via Benzu Minerals
(Proprietary) Limited.
2.
MPD Consulting Limited, in which Pete Gardner, the Company's
CFO, has a beneficial interest, has recharged certain costs
relating to UK support incurred on behalf of the Group.
3.
Magna Capital (Guernsey) Limited ("Magna"), in which Adonis
Pouroulis, the non-executive Chairman of the Board of Directors,
has a beneficial interest, was engaged in December 2022 to assist
the Company with its strategy to consolidate ownership of the
Phalaborwa project and lift the notarial bonds in South Africa
issued in favour of third parties which may have impacted the
ability of Bosveld to transfer the rights to the Phalaborwa project
to a new entity as envisaged. The transaction was concluded in July
2023 and a success fee of £500k was paid to Magna.
11. 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.