Rainbow Rare Earths Regulatory News (RBW)

5 December 2023

Rainbow Rare Earths Limited

("Rainbow" or "the Company")

LSE: RBW

Proposed US$50 million TechMet investment in Phalaborwa to be funded by

the U.S. International Development Finance Corporation

· The TechMet Limited ("TechMet") option to invest US$50 million directly in the Phalaborwa project in South Africa will be funded by the U.S. International Development Finance Corporation ("DFC")

· DFC US$50 million funding commitment announced at COP28, the United Nation's Climate Change Conference, demonstrating the global effort to responsibly scale production of the metals essential for clean energy technologies

· Phalaborwa recognised as having the potential to play a significant role in the establishment of a more diversified Western supply chain of the critical rare earths vital for electric vehicles and wind turbines, as well as many other advanced technologies

· Rainbow's innovative processing flowsheet will deliver separated rare earth oxides, highlighting its unique position within the pipeline

NEWS RELEASE

Rainbow Rare Earths is pleased to announce that it has received confirmation that the DFC will be the sole source of funding for the proposed US$50 million investment by TechMet to acquire a direct equity stake in the Phalaborwa project (the "TechMet Option", as announced on 8 November 2023).

A focus for the DFC is critical minerals, defined as those minerals that are essential to the economic or national security of the U.S. and which have a supply chain vulnerable to disruption. The DFC addresses critical mineral investment for the U.S. via its strategic stake in TechMet, which aims to assist in the development of world-class projects across the critical minerals supply chain. The projects identified by TechMet must be operated according to high standards of environmental, social and governance criteria, as well as showing the potential for excellent economic returns.

The four rare earths that will be produced at Phalaborwa - neodymium, praseodymium, dysprosium and terbium - are all designated as critical minerals further to their important role in the transition to the green economy. As vital components of permanent magnets, these rare earth elements are used within electric vehicles and wind turbines, as well as many other advanced technologies including those required for strategic defence purposes, such as guided missiles, drones, electronic displays, sonar and jet fighter engines.

This funding agreement for Phalaborwa follows a period of extensive due diligence by the DFC and TechMet into Rainbow and the project, including a site visit for DFC representatives and multiple layers of approval to ensure that the investment meets the strict criteria of a U.S. sovereign wealth fund.

Adonis Pouroulis, Chairman of Rainbow, commented: "This approval of funding from the DFC confirms that Phalaborwa offers a strategic source of the four most economically important rare earths that are vital to the green energy transition. Furthermore, Phalaborwa will use our innovative processing technique to take its material all the way through to separated rare earth oxides, unlike most rare earth projects that produce an intermediate mixed rare earth concentrate which is then sent to China for further refinement. By providing an independent and reliable source of separated rare earth oxides, Phalaborwa will help the U.S. to deliver on its goals to develop a U.S. down-stream supply-chain including specialist alloy, REE permanent magnets, drive trains, and ultimately EV/wind turbine manufacture."

Scott Nathan, CEO of the DFC, commented: "The Phalaborwa Rare Earths Project being developed by Rainbow Rare Earths represents a compelling opportunity to extract and refine four critical minerals essential to both the green energy transition and economic security. DFC is pleased to be able to support this project which will remediate the effects of legacy mining activities, boost local economic growth, and diversify the critical minerals supply chain."

Brian Menell, Chairman and CEO of TechMet, said: "Rainbow's Phalaborwa Project has an immensely exciting future and this funding gives it the potential to become one of the world's most environmentally friendly and low-cost rare earth projects anywhere.

"We congratulate Chairman Adonis Pouroulis and CEO George Bennett for the fantastic progress that the Rainbow team has made. TechMet looks forward to continuing our partnership and bringing the project to fruition. Rainbow's proprietary separation technology provides a terrific opportunity to fast-track production of the four most economically important rare earth elements essential for future supply chains for electric vehicles, wind turbines and other products vital to the energy transition."

About the Phalaborwa project

The Phalaborwa project in South Africa represents an exciting, near-term production opportunity of all four of the permanent magnet rare earths required for the green energy transition. The operation will involve the processing of phosphogypsum stacks, which are the byproduct of historic phosphoric acid production on the site, which ceased in 2014. This resource sits at surface, thereby eliminating the cost and risk of traditional mining projects.

Rainbow will be using proprietary separation technology developed by, and in conjunction with, its partner K-Technologies, Inc., which will allow for the material to be processed into separated rare earth oxides of 99.95% purity. This separation technique replaces traditional solvent extraction technology, which uses toxic and flammable solvents and diluents and requires many different stages, thereby delivering a process that is safer and more environmentally responsible, as well as reduced capital and operating costs due to a simplified flowsheet.

The project also has exceptional sustainability related opportunities as it is founded on the principles of circularity. Rainbow will be taking a waste product (the existing phosphogypsum stacks), cleaning it and extracting value from it - both via the recovery of the rare earth elements and then via the sale of the benign gypsum that is produced as the by-product of the process. Rainbow's operations will see the clean-up of the legacy environmental issues, namely the acid water on site, and will fully deplete the gypsum stacks over time, thereby allowing for a full circle environmental rehabilitation of the site.

The Phalaborwa Preliminary Economic Assessment 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 < two years. Due to its comparatively low operating cost and high EBITDA margin, the project is expected to be highly cash generative across the rare earth pricing cycle.

TechMet Option - Key Terms

TechMet has been granted an option to invest US$50 million as part of the equity funding component for the Phalaborwa capital cost, which will see TechMet take a direct ownership stake at project level. The TechMet stake will be dependent on the net present value set out in the definitive feasibility study for the project. Based on the agreed formula, the equity stake will be within a range of 15-33%, underpinning a valuation of the project equity at between US$151.5 million and US$333.3 million.

The TechMet Option is executable for three months following receipt of a credit approved term sheet for construction debt, which will define the total equity requirement for the project development.

As part of the TechMet Option agreement, Rainbow has also granted TechMet a put option to exchange the direct stake in the project for shares in the listed entity at the fair market value of the underlying Phalaborwa stake for a period of two years from the commercial completion of the Phalaborwa project, or at any time in the event of a change in control of Rainbow.

For further information, please contact:

Notes to Editors:

About Rainbow:

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 permanent magnet rare earth elements neodymium and praseodymium, dysprosium and terbium.

The Company is focused on the development of the Phalaborwa Rare Earths Project in South Africa and the earlier stage Uberaba Project in Brazil. Both projects entail the recovery of rare earths from phosphogypsum stacks that occur as the by-product of phosphoric acid production, with the original source rock for both deposits being a hardrock carbonatite. Rainbow intends to use a proprietary separation technique developed by and in conjunction with its partner K-Technologies, Inc., which simplifies the process of producing separated rare earth oxides (versus traditional solvent extraction), leading to cost and environmental benefits.

The Phalaborwa Preliminary Economic Assessment has confirmed strong base line economics for the project, which has a base case NPV10 of US$627 million[2], an average EBITDA operating margin of 75% and a payback period of < two years. Pilot plant operations commenced 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 is available at www.rainbowrareearths.com.

About the DFC

The U.S. International Development Finance Corporation (DFC) is U.S. Government's development finance institution. DFC partners with the private sector to finance solutions to the most critical challenges facing the developing world today. We invest across sectors including energy, healthcare, infrastructure, agriculture, and small business, and financial services. DFC investments adhere to high standards and respect the environment, human rights, and worker rights. 

About TechMet

TechMet Limited is a leading technology metals investment company with a portfolio of assets that responsibly produce, process, and recycle the metals that are critical to the global energy transition and the electric vehicle revolution. Current assets in the TechMet portfolio include lithium extraction from both brine and hard rock sources, nickel and cobalt hydroxide production from laterite ores, vanadium chemical production from industrial waste feedstocks, rare earth production and processing, tin and tungsten mining, lithium-ion battery recycling, and high-performance cathode manufacturing. TechMet's major shareholders include the U.S. International Development Finance Corporation (DFC) and the global energy and commodity group Mercuria.

More information is available at www.techmet.com.