Rare earths company Rainbow Rare Earths made considerable progress at its Phalaborwa project, in South Africa, in the six months ended December 31, 2022, with the successful publication of a preliminary economic assessment (PEA) underscoring the project’s “enormous” potential, CEO George Bennett says.
The PEA presented base case figures of a net present value (NPV) of $627-million; an internal rate of return of 40%; an average earnings before interest, taxes, depreciation and amortisation operating margin of 75%; and a payback period of only two years.
Using long-term rare earth price forecasts provided by Argus Media Group, underpinned by compelling supply and demand fundamentals, the PEA estimates an NPV of over $1-billion.
“We have further bolstered our team, amassing a group of technical experts with unparalleled rare earths knowledge. Having together completed over 100 feasibility studies (including feasibility studies for three other rare earth projects in Africa) and designed and built over 80 processing plants, we are now paving the way for near-term production of separated rare earth oxides from Phalaborwa.
“I am pleased by the headway we are making with plans to implement a continuous pilot plant operation at Phalaborwa to advance the project to definitive feasibility study (DFS) stage, with key workstreams having successfully commenced.
“The project remains on track to commence production in 2026 and this fast-track development has made the company of interest to global strategic investors, with whom financing discussions are progressing well,” Bennett outlines.
Key workstreams have started to advance Phalaborwa to the DFS stage, with the pilot plant due to be commissioned in the second quarter. The project remains on track to reach production in 2026 – five years after initial work began on site in 2021.
Bennett says Rainbow is also continuing to engage with the government of Burundi to come to an agreement to restart the Gakara rare earth project, which adds geographic and project diversification to the company’s portfolio.
“Given the team’s development and operating experience, combined with our unique rare earths phosphogypsum processing technology and diversified asset base, I firmly believe Rainbow is well positioned to succeed in our goal of achieving responsible and efficient production of the magnet rare earths required to drive the green energy transition,” Bennett acclaims.
The company highlights that strong supply and demand fundamentals for permanent magnet rare earths are supported by projections that about 25% of supply will need to come from new projects by 2030.
The overall size of the Phalaborwa mineral resource estimate is confirmed at 30.4-milllion tonnes, comprising 0.44% total rare earth oxides (TREOs). High-value magnet rare earths neodymium and praseodymium represent 29% of the TREOs in the rare earths basket, with economic quantities of dysprosium and terbium.
As a brownfield site, the development of Phalaborwa is said to provide Rainbow with a significant opportunity to make positive environmental, social and economic impacts.
Leveraging its proprietary technology, the company says it continues to explore opportunities to deliver separated rare earth oxides from secondary phosphogypsum sources around the world.
FINANCIAL REVIEW
Costs of $800 000 were capitalised for Phalaborwa during the six-month period to December 31. Acceleration of expenditure at Phalaborwa is expected to continue as Rainbow focuses on delivering the pilot plant and progressing towards the DFS.
As at period end, costs totalling $2.8-million have been capitalised for Phalaborwa.
The income statement showed a net loss of $1.5-million for the period, of which $1.2-million related to corporate overheads in line with the $2.3-million spent in full-year 2022.
During the period, a total of $300 000 was incurred to maintain the Gakara project on care and maintenance.
This represents a significant reduction of expenditure compared to $1.4-million spent in full-year 2022, which included $128 000 of retrenchment costs owing to the termination of employment contracts for local staff in December 2021 as a direct result of the Burundi government suspension.
Costs in Burundi will remain minimised while discussions continue with the Burundi government to allow operations to restart.
At period end, the group had $2.1-million of cash available. Rainbow is in discussions with strategic investors to secure the funding required to allow the next steps to be delivered at Phalaborwa.