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Daibando - you're exactly right about the 15-20 year demand for rare earths soaring. As you say, electric vehicles and renewable generators are the main drivers for this, from the perspective of this moment in time, with the need for stronger lighter magnets in particular.

There are several reports out there that have quantified this, giving forecasts for the expected demand curve, and they're very impressive.

As to how that affects Rainbow, as I said, we need to recognise that there are other companies in this. However few outside China, few actually producing, and none with such high ore concentration levels. The company itself also has to be able to produce ores profitably to ride this wave, which is why the bottom-up analysis is also important, and why the comments on takeovers are also relevant.

Let's all hope that things gently rise from here, starting with favourable full-year results some time soon.

"The Company's strategy is to seek to build an oil and gas investing company targeting projects with attractive risk reward profiles. Its investing strategy is to look at the natural resource sector, the oil services, power and energy sectors and in technology related to these sectors. The Company considers that it is likely to focus more on the natural resource sector in the coming period and plans to build a larger investment portfolio of undervalued projects by originating deals for appraisal, development and producing assets. The Company's primary approach to deal making will be to "option" appraisal assets where oil and gas has already been discovered, conduct a detailed evaluation, and then make a debt or equity contribution to access upside for all ADM Energy shareholders. The benefit of this approach is that the Company raises equity only after the asset has in principle been secured. This allows the Company to gear up its equity pre-commitment."

"The Company has formed alliances with key providers of debt within Africa which are supportive of natural resource deals. These relationships are mature and long standing and can potentially provide the Company with funding that preserves its equity which can later be deployed, post-investment, at higher, less dilutive valuations. Furthermore, the Company recently raised funds from Zark Capital Limited ("Zark") and is developing a relationship with Zark to seek to source alternative funding for investment opportunities as they arise. The directors consider that this will give the Company a greater ability to source opportunities knowing that funding, including the terms of any such funding, may be available in advance. "

"ADM Energy is reorganising its board of directors and senior management to bring in more financing industry specialists as well as technical expertise. This will further strengthen the Company's position to successfully appraise and progress investment opportunities as part of its asset selection and development strategy."

"With sustained oil prices and no planned or unforeseen expenditure needed at project level, it is expected that Aje will only require sales from two further liftings (October 2019 and January 2020) to generate positive cash flow. As a result, ADM Energy expects to achieve the significant milestone of becoming cash flow positive in H1 2020.

"It is the Company's intention to build a larger, balanced portfolio of projects, in line with its investment strategy, and the board and senior management team will look to be strengthened to add both financial oversight and technical expertise."

Also note: Loss per share down from 6.58p in the equivalent period last year, to 1.28p, as a result of lower admin costs and higher revenue

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4. Thoughts on the Annual Results

Results for year ending 30th June are due by the end of October. There are, IMO, 3 things to look for.

(i) Has the recently funded truck fleet been purchased so that we're ready for this year's rainy season?

(ii) Have either of the two new mines opened for production? How are preparations for the 5th mine progressing?

(iii) If they delay the results until far enough into October, we may get an operational report from Q1 of 2019/20. What output has been achieved?

There's also potential for some corporate activity to look for here. Given the global interest in rare earths, a company with a £12m market cap and a license for very good quality ores could be ripe for takeover interest or partnership / mergers. A larger company with mining expertise may have the capital needed to make sure that Gakara can weather the fluctuations and setup process successfully, and the targeted profits would be attractive in such a case. That comment is speculative, but I could certainly see some development like this as possible.

Over to everyone else. Thoughts?

[3/4]

3. Thoughts on Current Share Price

The company IPOd at 10p, giving it a market cap of about £15m.

The share price is currently 3p, but with extra shares in issue the market cap is £12m, 20% below IPO levels.

The 3p level is understandable, because it's the price of the most recent placing. In the absence of further positive news, the share price could have been expected to drift down to the previous placing level. The placing was at 3p because the price had already drifted, and 3p only presented a small discount. What knocked the share price from 10p to c. 5p was the annual results in Oct 2018 when it was clear the high expected production levels were not going to be sustained. Since then it's drifted lower to the 3p level we now have.

In May this year, the price spiked up to 7.5p. That was because of the growing geo-political tensions between the US and China. I suspected that would not be sustained, as the bottom-up fundamentals still needed addressing, and sure enough the price has since drifted back down.

However, I think this is now oversold, and the current 3p level is one where it deserves another look. Basically, I think the 20% drop in market cap is unwarranted. Why?

Yes, production levels did not remain at the 350 tonnes per quarter level. However at IPO the company was not in production at all. We are now producing.

Another negative is that, at IPO, the company had a mining license and an exploration license. The exploration license lapsed without being pursued further into a second mining area. However, since then the extent of deposits within the existing mining license area are known, and are extensive. Furthermore, proper quantification has been done, whereas the IPO prospectus stressed clearly that there was a huge risk because this had not been possible at that point. The company has more than enough areas to mine within the existing area, so the lack of a second mining license is not a drawback given what we know.

When you look at the uncertainties at the time of IPO, I'd say things are in a much better shape now, even if it's taking longer than expected to ramp up production to profitable levels.

[2/4]

2. From a bottom-up perspective, things are more mixed.

From the outset, the sales required for EBITDA break-even has been 250-300 tonnes per month. The first few quarterly updates when production began were positive, at 350 tonnes per quarter, just under half that required. However over time this dropped rather than rose.

There's rightly some concern about a company promising jam tomorrow. When target date for EBITDA break-even has slipped from end of June 2019 to end of June 2020; when deadlines start slipping, they can keep slipping (is the fear).

There are two reasons for the production falling short of targets, and both are being addressed. One is that the veins containing Gasagwe's ore was discoverd not to be as evenly thick. The strategy here is to have 4 mining areas operating at once to cover the fluctuations. The second, Murambi, is up and running. The 3rd and 4th are targeted to be in place by the end of this year (Kiyenzi and Gomvyi). A fifth is being developed so it can come on-stream when Gasagwe stops.

The second reason was that the rainy season slowed production. The solution is to buy new trucks that will be more resilient than the rented fleet they did have. Funding is in place, and we were told these should all be bought I think by the end of September.

The finances are relatively stable; since May 2019 when Pella offered an unsecured loan, meaning the Lint finance agreement is not currently going to be drawn down further. As that was repayable in new shares, that agreement had the potential for near limitless dilution, but no more.

In December 2018, a proper JORC Resource was produced, showing the extent of the reserves in the area covered by the mining license. The potential here has now been quantified.

Two other developments need mentioning.

In August 2018 a company called TechMet invested in RBW and will pay for a feasibility study to see if RBW could do some of the separation of different rare earth elements itself. That would significantly increase the revenue from each quarter's output, but would require captial outlay.

In August 2019, a new CEO was announced. George Bennett has significant African mining experience, so has the potential to lift Rainbow's game somewhat. In an FT interview on 8th September, he talked of moving from mining on a large scale by hand to a more mechanised mining. He hinted in that that this would need more expenditure to set up. If it comes off, the output per month would go up significantly. Having said which, Adamas Intelligence (who know a thing or two) expressed caution that it's not yet known whether the Gakara deposits will work well with this approach; certainly one of the advantages of Rainbow from IPO onwards has been that the artisanal methods used mean low production costs, and it's a shame to lose that. So this new approach could be what it needed, or may be overkill.

[1/4]

I've been researching Rainbow for a little while, so I'll summarise what I've found and how I see things, in the hope it helps others. Then let's talk about this.

I'll split this into four posts, because I like to distinguish two ways of looking at this one, then I have some thoughts on the current share price, then some thoughts on the annual results due shortly.

1. From a top-down perspective, the prospects are excellent, although not perfect.

The rare earth market will continue to expand; demand has been well researched as due to rise considerably, globally. Geopolitical fears mean that countries are looking for sources other than China.

In terms of competition, the biggest producer outside of China is in Australia. This is one of very few others, but the increased interest in rare earth mining is seeing other companies try to enter the fray.

They have three things that set us apart: (i) They are actually producing. For example, Kavango announced recently that they've discovered geological anomalies that warrant a test-drill. But they're well ahead of that. (ii) The quality of the ore at Gakara is exceptional and unique, with very high percentages of concentrate. (iii) They're a UK owned company, the only one in rare earths as far as I know, so if the UK government was to look to secure its sources, this would be a good place for them to start.

Hi Daibando

The accuracy over how your trade is reported is easily explained. Sites like this only show trades as buy / sell based on whether they fall above or below the published mid-price at the time. But, when you bought, it would seem that the advertised ask was way higher than the price at which it was actually possible to buy. So your buy actually came in below the mid price, so was shown as sell. Those lists of trades don't claim to show what is actually a buy or sell.

The consensus on the future of the company and its value. I've got some thoughts, yes. Why don't I start a new thread for that. See you there in a moment.

And Zark Capital

And hopefully, soon, all LTH will join the board in thanking him for his support.

Nice close at 46.21
I'm no chartist, so if someone who can draw charts fancies analysing this I'd love to see it.
But we've closed above the close of 45.78 from 11th Sept. Going back before that, the last time we closed above this level is 31st July at 47.85, which was basically where we landed after we fell off the cliff after the interims. So if we're back at the bottom of that cliff, hopefully that means things have bottomed and we'll start to see some progress.

Anyone fancy charting this properly?

I guessed that much. ;-)

That's why I said I was joking.

That said, I wish someone would take the shares off the market makers, because that would get things moving again.

>> i need to top up

Well, since lunchtime, this morning's run of buys has met a number of sells that have offloaded about 50m shares. This morning, market makers must have run out of shares to sell, which is why the price kept nudging up. But they've now loaded up with 50m, so they're available to buy at a much more reasonable price.

So I'd say now's your chance, because once they're mopped up we're back to where we were before and it'll be much harder to find some at a reasonable price.

Just kidding with you. As you rightly say, this morning's news makes things here look a lot more steady now, and the RTO a lot more likely (in my view). So tying up funds for 6 months is, as you say, more like putting into a fixed term savings account, only with the prospect for much better returns.

GLA!

Their Nomad is W H Ireland; Peterhouse and Ireland are joint brokers, yes. And, as J86 just pointed out, John Treacy is non-exec director at Abal as he is here.

https://idsa.in/idsacomments/china-continuing-rare-earth-dominance-shebonti-270919

And no, also, because they're 19% +/- 0.5%. Given their market making duties are tipping them back and forth in a range of about 1%, no matter what their average holding there would be a whole-number percentage threshold that they cross from time to time. It just happens it's 19 in this case.

And, once again, look at TRP for a parallel.

Nearly at 45.

Very different. That suspended because a partially worked out deal was announced. The deadline we face is the 6 months deadline after becoming a cash shell. The board could have told us news of their plans by now, but have presumably chosen not to because they want to wait until they have all the details ironed out. That suggests that we won't be going the route of partial details and then an 18 month wait.

When Peel topped up the other day, we all knew they'd drop below 19% again a few days later, because they're a market maker here. We've watched them drift above and below the 19% line ever since HH sold, so this is nothing new and no surprise. They're still happily holding 19% +/-, and Zark are about to take a second slice at 7p on Monday.

I explained in a post on Wednesday afternoon. Here's what I said:

=====================
They're doing two things at once, but because we only get TR1s for their total position it's easy to confuse them.
1. They're maintaining a holding of about 19%.
2. They're one of the market makers for ADME, which means they (like others) buy and sell to keep the market liquid.
Role 2 means that their total position fluctuates in the range 18.5% to 19.5%, and every time they cross the threshold of 19% they have to notify. But 1 is steady as a rock, and their target holding seems to have been a steady 19% since HH sold.

Sorry, typo. 3 months from end of half-year falls on Monday.