Rare earths mining company Rainbow Rare Earths has signed an agreement with phosphate mining company Bosveld Phosphates to ensure it obtains 100% ownership of the Phalaborwa rare earths project, in Limpopo. 

Under the terms of the agreement, Rainbow will receive an immediate 85% interest in the unincorporated joint venture (JV) 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 prefeasibility study on the project. 

Under the terms of the updated agreement, Rainbow will pay Bosveld $5-million in cash in July. 

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

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

NEXT STEPS 

The consolidation of project ownership has been completed as part of efforts to derisk the project and deliver a DFS. 

Front-end pilot plant operations have started and are on track to produce the first batch of high-value mixed rare earth sulphate in the third quarter.  

The pilot plant back-end, meanwhile, is being built in Florida, in the US, 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 serve to transform Phalaborwa into a near-term supplier capable of meeting the demand for a diversified western supply of permanent rare earth magnets required for the energy transition. 

Rainbow CEO George Bennet says the company has always wanted to consolidate its interest in the Phalaborwa project, given the strong economics of the project. He notes that these were highlighted by the preliminary economic assessment that confirmed a net present value, with a 10% forward discount rate, of $627-million, based on current spot rare earth prices.  

“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 US,” he adds. 

Meanwhile, Rainbow says the $7-million equity that will be issued if it exercises its call option to acquire the remaining 15% of the JV company from Bosveld, will be priced based on the Rainbow share price in October.  

In addition to the call option held by Rainbow, Bosveld has been granted a put option to sell its 15% stake to Rainbow on the same terms, once the assets required for the project have been transferred into the JV company, as it is the intention of both parties that Rainbow will be the 100% owner of the project prior to construction. 

The long stop date for the exercise of the options is December 31, 2025. 

In addition to the gypsum stacks, the assets to be transferred into the JV company include a long-term notarial lease for the land required for the project, which will be located away from the historic phosphoric acid production facility located on the Bosveld site, as well as the rights to tie into existing infrastructure for power and water. 

Upon transfer, the JV company will take responsibility for the day-to-day management of the leased area, including the gypsum stacks. 

Bosveld will provide a contractual indemnity against the historic environmental liabilities for the leased area, which has an existing environmental rehabilitation fund in place that is currently managed by energy company Sasol, which is the historic owner of the site, and Bosveld.