Mixed rare earth sulphate
London-listed Rainbow Rare Earths has conditionally agreed to issue 30-million new ordinary shares in the company, each with no par value, at a price of 15p an ordinary share. This issuance is expected to raise gross proceeds of £4.5-million.
The placing price of 15p an ordinary share represents a 3.2% discount to the closing mid-market share price of 15.5p an ordinary share on September 26.
The placing proceeds, amounting to about $5.5-million, will replace the $5-million in funding paid to Bosveld Phosphates in July, along with associated fees.
This payment secured an immediate 85% ownership stake in the group's flagship Phalaborwa rare earths project, in South Africa, with an option to acquire the remaining 15% interest.
In addition to the $1.3-million cash balance as of August 31, the placing proceeds will cover Rainbow's financing requirements beyond the end of the first quarter of next year.
This financial injection will also enable the completion of the Phalaborwa pilot plant operation, which is expected to produce separated rare earth oxides by the fourth quarter of this year, as well as to address general working capital requirements.
"This is an exciting time for the Phalaborwa project, following the milestone production of the mixed rare earth sulphate from the front-end pilot plant in South Africa and with the production of separated rare earth oxides from our back-end pilot plant in the US expected in the fourth quarter," Rainbow CEO George Bennett said.
The placing proceeds are comprised of three primary sources.
The first, amounting to £540 000, was received from existing shareholder Pella Ventures, a family office with a focus on clean technologies and sustainable energy. Pella Ventures is considered a related party owing to its founder Adonis Pouroulis, who is also Rainbow nonexecutive chairperson.
The second amount of £630 000 was received from existing shareholder TechMet, a private investment company engaged in projects related to critical metals vital for the global energy transition.
Lastly, £3.33-million was received from other investors, including £240 000 from other members of Rainbow's board of directors and senior management.
Of the 30-million ordinary shares issued as part of this placing, the ordinary shares allocated to Pella Ventures are subject to approval by shareholders at the annual general meeting scheduled for November.
"This will be the final de-risking step in order to demonstrate the commerciality of the unique rare earth process flow sheet that Rainbow has developed with its partner K-Technologies to deliver the separated permanent magnet rare earth oxides vitally needed for the green energy transition.
“It will also open up the opportunity to apply this intellectual property to other phosphogypsum projects globally, starting with the Uberaba project in Brazil," Bennett said.
Following its announcement of a private placement on May 9, Rainbow signed an agreement with Bosveld to eventually acquire full ownership of the Phalaborwa project.
Under the terms of the agreement, Rainbow received an immediate 85% interest in the unincorporated joint venture (JV) that holds the rights to Phalaborwa in return for a payment of $5-million made in July. This updated 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.
As a result, the company requires additional financing to complete the workstreams necessary to advance the project to a definitive feasibility study (DFS), with the publication expected in the first half of next year.
A key part of the DFS workstreams is the operation of the pilot plant, consisting of a front-end situated at Mintek’s facilities, in Johannesburg, South Africa – which specialises in mineral processing and extractive metallurgy – as well as a back-end situated at K-Technologies in Lakeland, in the US.
The unique and innovative rare earths processing flowsheet designed for the Phalaborwa project, which uses continuous ion exchange (CIX) and continuous ion chromatography (CIC) technology to deliver separated rare earth oxides, has been developed in collaboration with K-Tech.
The K-Tech proprietary CIX/CIC process replaces traditional solvent extraction technology for the separation of rare earth oxides, which can be a convoluted process associated with environmental risks. The CIX/CIC method is therefore safer and more environmentally responsible, as well as coming at a significantly reduced capital and operating cost.
First production of mixed rare earth sulphate at the Phalaborwa front-end pilot plant was announced on September 5, validating Rainbow's successful development of a process flow sheet to recover rare earths from phosphogypsum.
The mixed rare earth sulphate produced was of the expected purity and grade, with recoveries in line with Rainbow’s preliminary economic assessment published in October last year. The mixed rare earth sulphate includes all four of the critical ‘magnet’ rare earths, neodymium and praseodymium, dysprosium and terbium, and is capable of being sold to generate a standalone revenue stream for Rainbow.
The mixed rare earth sulphate will be shipped to the back-end pilot plant at K-Tech’s facility in the US for separation into rare earth oxides. The back-end pilot plant has started commissioning, and first production of separated rare earth oxides is expected in the fourth quarter.
The pilot plant operation (both front and back ends) will continue to operate for about four months to produce enough separated permanent magnet rare earth oxides for testing and marketing purposes.
Other key workstreams for the DFS have started and are progressing as planned. Metallurgical engineering technology and construction company METC Engineering has started work on the DFS and is managing the inputs from various specialist consultants.
Meanwhile, Paragon Tailings is advising on reclamation of the existing gypsum stacks.
Global gypsum expert Ardaman is conducting test and design work for the new gypsum stacks, Rainbow said. A drilling programme is also underway to update the Phalaborwa resource, and environmental work, including full environmental impact assessment and social assessment workstreams, is underway by consulting firm WSP Golder for the purpose of both the DFS and permitting.
The placing proceeds will be used primarily for the Phalaborwa project, reflecting the refocus of Rainbow’s business on secondary sources of rare earth elements, where the directors consider higher returns are available compared to primary hosted ore bodies such as the company’s Gakara project, in Burundi.
The fact that Rainbow’s directors have said they do not envisage investing significant amounts in Burundi to develop a formal mineral resource is an indicator of impairment under the International Financial Reporting Standard 6 Exploration for and Evaluation of Mineral Resources. Accordingly, for the June 30 yearly report, a formal impairment review for the Gakara project will be undertaken.
Based on an assessment of both the legal and political position in Burundi, the directors said they were unable to foresee a date when the operations at the project would be able to restart.
As such, they believed it would be likely that the carrying value of the exploration and evaluation assets in Burundi and the associated tangible fixed assets, which had a combined net book value of $9.7-million on June 30 last year, would be fully impaired.