Rainbow Rare Earths Regulatory News (RBW)

28 June 2023

Rainbow Rare Earths Limited

("Rainbow" or "the Company")

LSE: RBW

Rainbow Confirms Agreement to Allow 100% Ownership of Phalaborwa Project

Rainbow Rare Earths is pleased to announce that it has signed an agreement with Bosveld Phosphates (Pty) Limited ("Bosveld") to allow 100% ownership of the Phalaborwa Project in South Africa.

Under the terms of the agreement, Rainbow will receive an immediate 85% interest in the unincorporated joint venture 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 pre-feasibility study on the project. Under the terms of the agreement, Rainbow will pay Bosveld US$5 million in cash in July 2023. 

Under the agreement Rainbow is also being granted a call option to acquire the remaining 15% of the joint venture owned by Bosveld, in return for US$7 million of equity in the Company, at any time from 31 October 2023 until 31 December 2025. Rainbow shares issued pursuant to the call option will be subject to a 24-month lock-up.

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

Next steps for Phalaborwa

The consolidation of project ownership has been completed as activity for Phalaborwa is increasing to de-risk the project and deliver a DFS.

As previously announced, front end pilot plant operations have commenced in South Africa and are on track to produce first high-value mixed rare earth sulphate in Q3 2023. The pilot plant back end is being constructed in Florida, USA, 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 underpin Phalaborwa as a near term solution to the need for a diversified western supply of permanent rare earth magnets required for the energy transition.

George Bennett, CEO, commented: "We have always wanted to consolidate our interest in the Phalaborwa project, given the exceptional economics highlighted by our preliminary economic assessment that confirmed an NPV10 of US$627m based on spot rare earth prices at the time of publication. 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 USA. I look forward to announcing the results from the front end pilot testing, confirming we are able to extract the rare earths and produce a saleable mixed rare earth sulphate. The fact that we will have achieved this within three years of signing the initial Phalaborwa earn-in agreement is testament to the combined strength, delivery capabilities and rare earth experience of our technical team."

Further Details of the transaction

The US$7 million equity to be issued if the Company exercises its call option to acquire the remaining 15% of the joint venture company from Bosveld will be priced based on the Rainbow share price in October 2023. In addition to the call option held by Rainbow, Bosveld have been granted a put option to sell their 15% stake to Rainbow on the same terms, amongst other things, once the assets required for the project have been transferred into the joint venture 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 31 December 2025.

In addition to the gypsum stacks, the assets to be transferred into the joint venture 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, and the rights to tie into existing infrastructure for power and water. On transfer, the joint venture 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 Sasol Limited, the historic owner of the site, and Bosveld.

For further information, please contact:

Rainbow Rare Earths Ltd Company George Bennett +27 82 652 8526

Pete Gardner

Cathy Malins (IR) +44 7876 796 629

cathym@rainbowrareearths.com

Berenberg Broker Matthew Armitt

Jennifer Lee +44 20 3207 7800

Tavistock Communications PR/IR Charles Vivian

Tara Vivian-Neal +44 (0) 20 7920 3150

rainbowrareearths@tavistock.co.uk

Notes to Editors:

Rainbow Rare Earths aims to be a forerunner in the establishment of an independent and ethical supply chain of the rare earth elements that are driving the green energy transition. It is doing this successfully via the identification and development of secondary rare earth deposits that can be brought into production quicker and at a lower cost than traditional hard rock mining projects, with a focus on the magnet rare earth elements neodymium and praseodymium ("NdPr"), dysprosium and terbium.

The Phalaborwa Rare Earths Project, located in South Africa, comprises a total Mineral Resource Estimate of 30.4 Mt at 0.44% TREO contained within unconsolidated gypsum stacks derived from historic phosphate hard rock mining. High value NdPr oxide represents 29.0% of the total contained rare earth oxides, with economic Dysprosium and Terbium oxide credits enhancing the overall value of the rare earth basket in the stacks. Rainbow will use a proprietary separation technique developed by its partner K-Technologies, Inc. for the plant at Phalaborwa, which simplifies the process of producing separated rare earth oxides (versus traditional solvent extraction), leading to cost benefits, as well as being more environmentally friendly.

The Phalaborwa Preliminary Economic Assessment has confirmed strong base line economics for the project, which has a base case NPV10 of US$627 million[1], an average EBITDA operating margin of 75% and a payback period of less than two years. Pilot plant operations will commence in 2023, with the project expected to reach commercial production in 2026, just five years after work began on the project by Rainbow. More information on the company is available at www.rainbowrareearths.com.