LSE-listed rare earth project developer Rainbow Rare Earths, which is developing its near-term Phalaborwa project, in South Africa, progressed with a programme of detailed test work at the project, leading to the development of an economic flowsheet and a preliminary economic assessment (PEA) in the 2022 financial year ended June 30.

Rainbow is earning a 70% interest in the Phalaborwa project by delivering a prefeasibility study, which is now in planning after having published the strong economic outcome from the PEA.

The base case financial model, as set out in the PEA, points to the project having a post-tax net present value of $627.4-million – representing 212% of the $295.5-million total capital cost. The project also has a post-tax internal rate of return of 40% and a post-tax payback of upfront capital costs after two years of operations.

CEO George Bennett says the period was one of notable progress for Rainbow, enabling the company to unlock a valuable, near-term source of the rare earth permanent magnet metals required to drive the global green energy revolution.

“This has involved carrying out a programme of detailed test work at Phalaborwa to better understand the exciting opportunity presented by this asset, leading to the development of an economic flowsheet and the recent publication of the PEA,” he says.

Chairperson Adonis Pouroulis says rare earth prices rose substantially in the period, with Phalaborwa's basket price up 82% year-on-year to $173.91/kg of magnet rare earth oxides.

“Whilst prices fell back after the end of the financial year, they have since moved upwards again and the long-term supply-demand fundamentals support significant increases towards the second half of this decade,” he says.

In terms of financial performance, as at September 30, Rainbow held $2.9-million in cash, while financial year costs totalled $2.3-million, increasing from $1.9-million in the 2021 financial year, predominantly driven by staff costs.

Net finance costs of $300 000 relate primarily to foreign exchange differences.

Finance costs also include $100 000 associated with the FinBank loan in Burundi, where Rainbow is maintaining its Gakara project on care and maintenance. Costs associated with maintaining Gakara on care and maintenance totalled $1.3-million in the period under review, the increase mainly owing to the change in treatment of costs previously capitalised within exploration and evaluation assets.

Rainbow’s corporate costs also grew in the 2022 financial year. With the expected fast-track development of Phalaborwa, the administrative structures for the group are being strengthened, and a new administrative hub has been established in South Africa.

During the period, Rainbow significantly strengthened its balance sheet, raising $8.5-million, net of costs, at a price of 15 pence per new ordinary share in October 2021. This funding enabled the Pipestone loan to be fully repaid, including accrued interest, through $900 000 cash and $200 000 equity at 15p apiece.

Meanwhile, by concentrating on phosphogypsum opportunities, Bennett says the usual, extensive resource definition period is removed, significantly reducing the long lead time and risks associated with bringing a traditional mine into production.

“In addition, we benefit from considerable reductions in capital and operating costs compared to a traditional mine, due to the absence of hard rock mining, mine waste disposal, ore crushing and milling within the overall project cost base,” he says.

Because the rare earth elements are present in a cracked chemical form in the phosphogypsum, Bennett says Rainbow’s process will deliver separated rare earth oxides in a single process flowsheet at site. “This replaces the multiple stages of reagent intensive processing usually required to crack a rare earth mineral concentrate and separate out the rare earth oxides from a mixed rare earth carbonate.”