Rainbow Rare Earths Regulatory News (RBW)

31 March 2023

Rainbow Rare Earths Limited

("Rainbow" or "the Company")

LSE: RBW

Interim Results for the six months ended 31 December 2022

Rainbow Rare Earths is pleased to announce its unaudited results for the six months ended 31 December 2022 ("the Period").

Highlights

· Strong supply/demand fundamentals for permanent magnet rare earths supported by projection that c. 25% of supply will need to come from new projects by 2030[1].

· Robust Phalaborwa project economics demonstrated by the preliminary economic assessment ("PEA") published during the Period which presented base case figures of:

o  NPV10 of US$627 million[2];

o  an IRR of 40%;

o  an average EBITDA operating margin of 75%; and

o  a payback period of only two years.

· Using long-term rare earth price forecasts provided by Argus Media Group, underpinned by compelling supply/demand fundamentals, the PEA delivers an NPV10 over US$1 billion.

· Key workstreams have commenced to advance Phalaborwa to the definitive feasibility study ("DFS") stage, with the pilot plant due to commence commissioning in Q2 2023. The project remains on track to reach production in 2026 - five years after initial work commenced on site in 2021.

· The overall size of the Phalaborwa Mineral Resource Estimate is confirmed at 30.4 Mt, comprising 0.44% total rare earth oxides ("TREO"). High-value magnet rare earths Neodymium ("Nd") and Praseodymium ("Pr") represent 29% of the TREO in the rare earths basket, with economic quantities of Dysprosium ("Dy") and Terbium ("Tb").

· As a brownfield site, the development of Phalaborwa provides Rainbow with a significant opportunity to make positive environmental, social and economic impacts.

· Leveraging our proprietary technology, we continue to explore opportunities to deliver separated rare earth oxides from secondary phosphogypsum sources around the world.

· Continued progress in ongoing discussions with strategic funding partners.

· Strong technical team to drive Phalaborwa's successful development, as well as progressing our global growth pipeline.

George Bennett, CEO, commented: "We have made very significant progress in the Period with the successful publication of Phalaborwa's PEA, which underscores the enormous potential of this project. 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 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.

We are continuing to engage with the government of Burundi in order to come to an agreement to restart the Gakara rare earth project, which adds geographic and project diversification to our 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 that 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."

Market Abuse Regulation ("MAR") Disclosure

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with the Company's obligations under Article 17 of MAR.

Rainbow H1 2023 Interim Results investor presentation

CEO, George Bennett, will host a presentation and live question and answer session via the Investor Meet Company platform on 3 April 2023 at 11am GMT.  Questions can be submitted pre-event via your Investor Meet Company dashboard up until 9am the day before the meeting or at any time during the live presentation.

Investors can sign up to Investor Meet Company for free and add to meet RAINBOW RARE EARTHS LIMITED via:

https://www.investormeetcompany.com/rainbow-rare-earths-limited/register-investor

Investors who already follow RAINBOW RARE EARTHS LIMITED on the Investor Meet Company platform will automatically be invited.

For further information, please contact:

Notes to Editors:

Rainbow's strategy is to identify near-term, secondary rare earths production opportunities. Meeting escalating demand for critical minerals needed for global decarbonisation, we are focused on producing the magnet rare earth metals neodymium and praseodymium ("NdPr"), dysprosium and terbium. With our strong operating experience, proven project development experience, unique intellectual property and diversified portfolio, Rainbow will develop a responsible rare earths supply chain to drive the green energy transition.

The Phalaborwa Rare Earths Project, located in South Africa, comprises an Inferred 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% 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. The rare earths are contained in chemical form in the gypsum stacks, which allows high value separated rare earth oxides to be produced in a single processing plant at site with lower operating costs than a typical rare earth mineral project.

The Phalaborwa Preliminary Economic Assessment has confirmed strong base line economics for the project, which has a base case NPV10 of US$627 million[3], an average EBITDA operating margin of 75% and a payback period of only 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.

CEO Review

Market

As essential building blocks in permanent magnets, which are key components for wind turbines and electric vehicle motors as well as vital in the defence industry, rare earths have been designated as strategic / critical metals by many Western governments. In light of projected demand escalation, there is an increasing drive towards responsible and resilient critical mineral supply chains to achieve security of supply.

According to International Renewable Energy Agency ("IRENA"), rare earth element production will need to rise by 11 to 26 times over present levels in order to meet the substantial increase in demand driven by the 2050 global wind power targets. However, as noted by the International Energy Agency ("IEA"), there are several vulnerabilities associated with rare earths mining projects such as high geographical concentration of production, long project development lead times, declining resource quality and growing scrutiny of environmental and social performance.

Whilst some rare earth supply increase is expected over the next decade, it is not forecast to meet the growing demand for permanent magnet materials. According to Argus, new projects will be required to supply c. 25% of the rare earths market by 2030.

Operational update

Phalaborwa

Against this backdrop of mounting magnet rare earth demand, progress continues apace at Phalaborwa, Rainbow's South African rare earths project. Unlike traditional mining projects, which have exceptionally long lead times, Phalaborwa presents a near-term opportunity. By extracting rare earths from secondary sources at Phalaborwa, we are able to fast track production to deliver rare earths in the period of forecast supply deficit in the late 2020's. Having commenced operations in 2021, this is significantly quicker than most traditional mining projects with significantly longer lead times.

Robust economics demonstrated by PEA

Contained in phosphogypsum in two unconsolidated stacks derived from historic phosphate hard rock mining, the rare earths are in a "cracked" chemical form allowing separated rare earth oxides to be produced at site. With no significant costs associated with mining, crushing and grinding ore, or with chemical cracking of the underlying rare earth minerals, the project economics are exceptionally strong. This has been demonstrated by the publication of the project's PEA in October 2022 which presented a base case NPV10 of US$627 million, an IRR of 40%, an average EBITDA operating margin of 75%, and a payback period of only two years. The PEA envisages a 2.2 million tonne per annum processing operation, with total production of 26,208 tonnes of separated magnet rare earth oxides[4], with a weighted average sales value of US$137.92/kg[5] generating US$3.6 billion of revenue over 14.2 years.

Using long-term rare earth price forecasts provided by Argus Media Group, underpinned by compelling supply/demand fundamentals, the PEA delivers an NPV10 over US$1 billion.

Pilot plant

Following the publication of the PEA, Rainbow is currently working to advance the project to DFS and a key part of this is the implementation of a pilot plant operation, to be undertaken at Mintek in Johannesburg and the K-Tech facility in Lakeland, USA. This will produce sufficient quantities of separated permanent magnet rare earth oxides for testing and marketing purposes.

The unique and innovative rare earths processing flowsheet designed for the Phalaborwa project, which will use CIX/CIC technology to deliver separated magnet rare earth oxides, has been developed in collaboration with Rainbow's partner K-Tech. This proprietary CIX/CIC process replaces traditional solvent extraction technology for the separation of rare earth oxides, which can be a convoluted process and also 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 due to a simplified flowsheet, which can be accommodated by a single hydrometallurgical processing plant.

The key workstreams for the DFS and pilot plant have commenced and are progressing well:

Work has started on the front end of the pilot plant, which will comprise the main phosphogypsum handling circuit that will produce a mixed rare earth sulphate intermediate solid material. An initial bench-scale programme is in progress to confirm the pilot testing parameters. The front end of the plant will be executed at Mintek in Johannesburg, which is one of the world's leading technology organisations specialising in mineral processing and extractive metallurgy.

The back-end CIX/CIC separation circuit, which will be piloted at the K-Tech facility in Lakeland, will produce marketable separated rare earth oxides.

By separating the pilot process between two different centres of minerals processing excellence, we expect to benefit from:

· cost and time efficiencies as a result of removing the logistics involved in transporting pilot-scale equipment from the USA, where it is designed, fabricated, and tested, to South Africa, where it would have to be reassembled and commissioned. It will be more efficient to transport the mixed rare earth sulphate intermediate solid material produced by the front end, which is a low-volume but high-value product that is readily transportable; and

· key K-Tech personnel being present throughout the running of the pilot, with the ability to oversee and optimise the CIX/CIC process in real time.

The metallurgical testing for the CIX/CIC processes required in the back end of the plant has already been undertaken by K-tech and the required CIX/CIC pilot units have been delivered to its Lakeland facility for setup and testing.

Progress with DFS

METC Engineering, the minerals processing engineering firm and one of the key authors of Phalaborwa's PEA, has been engaged to work alongside the Rainbow team to fully define the required engineering scope for the DFS.

US-based global gypsum experts Ardaman and Associates, Inc., a Tetra Tech Company ("Ardaman") have been engaged to conduct test and initial design work for the new stacks upon which the benign gypsum will be deposited.

Resource update

The recent resource update at Phalaborwa has confirmed a total mineral resource estimate ("MRE") of 30.4 Mt at 0.44% TREO, with the high-value, permanent magnet elements Nd and Pr representing 29% of the TREO in the rare earths basket, as well as economic quantities of Dy and Tb. The MRE is reported at a 0.2% TREO cut-off grade.

Whilst the majority of the resource has been upgraded to the measured and indicated resource categories, a portion remains in the inferred category as a result of surface water ponds in the centre of the gypsum stacks. This material requires a specialised drilling campaign to confirm the continuity of the grade below the water table. This work will be completed to convert the MRE to Reserves as part of the DFS.

The technical team is currently focused on evaluation of the density at depth of the stacks and the Company has sought advice on this matter from Ardaman. It is probable, based on the Ardaman techniques used to evaluate the resource of similar phosphogypsum stacks, that the in-situ dry density for the stacks below the water table is higher than that for the upper dry material. This may result in an increase in the MRE.

MRE overview

1. The MRE is reported at a 0.2% TREO cut-off grade.

2. The MRE has been estimated by independent consultant Malcolm Titley of Maja Mining Limited.

3. Mineral resources are not mineral reserves and do not have demonstrated economic viability.

Using our unique rare earths processing technology developed in collaboration with K-Tech, a viable process flowsheet has been designed for economic extraction and purification leading to an unoptimised recovery of 65% of the rare earth elements.

Environmental

Phalaborwa is founded on the principles of circularity, reprocessing phosphogypsum which is the by-product of historic phosphoric acid production to produce rare earths required for global decarbonisation. With legacy environmental issues prior to our ownership, Rainbow has the opportunity not only to exploit a secondary source of these critical minerals, but also to clean up the operation. This will involve neutralising the acidic solution currently on top of the gypsum stacks for use in a closed loop process and also redepositing benign gypsum on stacks which will be lined in accordance with International Finance Corporation ("IFC") Standards and Equator Principles.

As a brownfield development project on an industrial site, the majority of the environmental permits are in place at Phalaborwa and only require updating.

Pipeline secondary rare earths projects

Leveraging our proprietary technology, we continue to explore opportunities to deliver separated rare earth oxides from secondary phosphogypsum sources around the world. Given the prevalence of phosphate mining, phosphogypsum is available in large volumes and constitutes an attractive secondary source of rare earth elements.

During H1 2023, a Master Agreement was signed with OCP, the Moroccan world leading producer of phosphate products, and UM6P, a Moroccan university with a strong focus on science, technology and innovation, as well as a Memorandum of Understanding prior to this with a diversified chemicals group based in South Africa. Test work has commenced for both these opportunities. We continue to investigate further potential to extract rare earths from phosphogypsum on a global scale.

Gakara

Gakara was placed on care and maintenance in June 2021 at the request of the Government of Burundi. Although the suspension has continued for longer than anticipated, Rainbow continues to engage constructively with all stakeholders to resolve the issue and allow operations to recommence, with further face to face discussions due to take place in Burundi in Q2 2023.

Corporate

The Company continues to make good progress in discussions with strategic funding partners to finance the pilot plant operation at Phalaborwa and further progress the feasibility study.

We have continued to build our technical team during the Period with the appointment of Roux Wildenboer, further complementing our wide range of skills and applicable rare earths experience. Roux joins Rainbow's Technical Director, Dave Dodd and Lead Process Consultant, Chris le Roux. Dave has over 45 years of unrivalled extractive metallurgy experience covering research and development, metallurgical project development and execution across the majority of minerals and a wide range of geographies. Chris brings significant experience and an in-depth knowledge of numerous technical processing operations, including a number of rare earths projects.

In his previous role as Process Engineer, Roux Wildenboer gained valuable experience across all project development phases, from scoping level studies to definitive feasibility studies and project execution. He has worked in various African countries, as well as on a global scale, in a wide range of commodities including work on a recent rare earths feasibility study, along with copper, cobalt, gold, uranium, manganese, lithium and vanadium.

Phalaborwa's successful and comprehensive PEA accurately reflects the rigour and expertise we apply to project assessment. The expanded technical team will be instrumental in Phalaborwa's successful development as well as providing Rainbow with the capacity to develop our growth pipeline.

Financial Review

The six months ended 31 December 2022 saw the publication of the Phalaborwa PEA as Rainbow advanced its flagship asset. Costs totalling US$0.8 million were capitalised for Phalaborwa during the Period compared to a total of US$0.8 million in the year ended 30 June 2022 ("FY22"). This acceleration of expenditure at Phalaborwa is expected to continue as Rainbow focuses on delivering the pilot plant and progressing towards the DFS. As at 31 December 2022, costs totalling US$2.8 million have been capitalised for Phalaborwa.

The income statement showed a net loss of US$1.5 million for the Period, of which US$1.2 million related to corporate overheads in line with US$2.3 million spent in FY22. During the Period, a total of US$0.3 million was incurred to maintain the Gakara project on care and maintenance. This represents a significant reduction of expenditure compared to US$1.4 million spent in FY22, which included US$128k of retrenchment costs due 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 whilst discussions continue with the Burundi Government to allow operations to recommence.

At 31 December 2022, the Group had US$2.1 million of cash available. Rainbow is currently in discussions with strategic investors to secure the funding required to allow the next steps to be delivered at Phalaborwa.

Cautionary Statement:

The business review and certain other sections of this interim report contain forward looking statements that have been made by the Directors in good faith based on the information available to them up to the time of their approval of this report. However, they should be treated with caution due to inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information and no statement should be construed as a profit forecast.

Directors' Responsibility Statement

We confirm that to the best of our knowledge:

a) the Condensed set of Interim Financial Statements has been prepared in accordance with IAS 34 'Interim Financial Reporting';

b) the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year);

c) the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein); and

d) the condensed set of interim financial statements, which has been prepared in accordance with the applicable set of accounting standards, gives a true and fair view of the assets, liabilities, financial position and profit or loss of the issuer, or the undertakings included in the consolidation as a whole as required by DTR 4.2.4R.

This Interim Report has been approved by the Board and signed on its behalf by:

George Bennett

Chief Executive Officer

31 March 2023

Condensed Consolidated Statement of Comprehensive Income

For the six months ended 31 December 2022

The results of each period are derived from continuing operations.

Condensed Consolidated Statement of Financial Position

As at 31 December 2022

Condensed Consolidated Cash Flow Statement

For the six months ended 31 December 2022

Condensed Consolidated Statement of Changes in Equity

For the six months ended 31 December 2022

Notes to the Condensed Financial Statements

For the six months ended 31 December 2022

1. General information

Rainbow Rare Earths Limited (the 'Company' or 'Rainbow', together with its subsidiaries the 'Group'), is a company limited by shares domiciled in Guernsey, incorporated on 5 August 2011 with company registration number 53831. The Company's registered office is Connaught House, St Julian's Avenue, St Peter Port, Guernsey. The nature of the Group's operations and its principal activities are set out in the CEO and Financial Reviews.

The financial information for the year ended 30 June 2022 does not constitute the audited statutory accounts but has been extracted from those accounts. The report of the auditors on those accounts was unqualified.

This Interim Report has not been audited or reviewed.

A copy of this Half Yearly Report has been published and may be found on the Company's website at www.rainbowrareearths.com

2. Basis of preparation

These condensed consolidated interim financial statements for the 6 months ended 31 December 2022 have been prepared in accordance with IAS 34 'Interim Financial Reporting'. They do not include disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the 2022 Annual Report and Accounts.

The same accounting policies and methods of computation are followed in the condensed interim financial statements as were followed in the most recent annual financial statements of the Group, which were published on 27 October 2022. There are no newly effective IFRS Standards which have had an impact on the financial statements.

(a) Going concern

The Directors have continued to use the going concern basis in preparing these condensed financial statements. The Group's business activities, together with the factors likely to affect future development, performance and position are set out in the CEO Statement. The financial position of the Group, its cash flow and liquidity position are described in the Financial Review.

The Group's cash balance at 31 December 2022 was US$2.1 million (30 June 2022: US$4.1 million). The Board has reviewed the Group's latest cash flow forecasts for the period to 30 June 2024, including reasonably possible downside scenarios. This has included the following assumptions:

· Forecast expenditure of US$2.8 million for ongoing general and administrative costs of the Group over the 18-month period from 1 January 2023 to 30 June 2024, based on the current administrative cost base. The reasonably possible downside scenario includes a 10% contingency for unexpected costs.

· Estimated funding requirements of US$5.3 million for Phalaborwa, of which US$1.0 million has been incurred to date or is committed. This includes US$4.2 million to build and run the pilot plant, US$0.2 million committed to critical path work for the DFS and US$0.9 million for Rainbow's technical team and associated costs. A further US$2.9 million will be required to complete the DFS. Due to the nature of the work, actual costs and the timing of expenditure may differ to estimates. The budget includes a 5% contingency for increased costs. The reasonably possible downside scenario increases this to a 10% contingency for all Phalaborwa expenditure.

· A continuation of care and maintenance for the Group's Gakara project in Burundi at a total cost of US$0.6 million for the 18-month period from 1 January 2023 to 30 June 2024, based on the current administrative cost base. The reasonably possible downside scenario includes a 10% contingency for unexpected costs. In the event that the Gakara project returns to operations, stock of rare earth concentrates with an estimated gross sales value of US$1.5 million would be sold to provide the funds to re-commence trial mining and processing operations. The forecasts show that, with the current productive capacity of the trial mining operations, the Gakara project would not require additional financial support from Rainbow Rare Earths Limited at current rare earth prices.

Based on management's reasonably plausible downside scenario outlined above, the Group will need to raise additional finance of at least US$7.2 million for the period ending 30 June 2024 and a further US$3.0 million to fully complete the Phalaborwa DFS. Based on the robust economic prospects for the Phalaborwa project, the Board is confident that additional funding will be secured as required. However, the Board accepts that these circumstances indicate the existence of a material uncertainty which may cast significant doubt about the Group's ability to continue as a going concern and therefore it may be unable to realise its assets and discharge its liabilities in the normal course of business. The financial statements do not include the adjustments that would result if the Group was unable to continue as a going concern.

(b) Dividend

The Directors do not recommend the payment of a dividend for the period (six months ended 31 December 2021: US$Nil, six months ended 30 June 2022: US$Nil).

(c) Principal Risks and uncertainties

There are a number of potential risks and uncertainties inherent in the mining and metals sector which could have a material impact on the long-term performance of the Company, and which could cause the actual results to differ materially from expected and historical results. The Company has taken reasonable steps to mitigate these where possible. Full details are disclosed on pages 26-27 of the Annual Report for the year ended 30 June 2022. The risks and uncertainties are summarised below:

· Project definition risk:

- At Gakara, the Company does not currently have a code-compliant Mineral Resource or Reserve due to the complexity of the geological mineralisation. It is possible that the quantity of rare earths present in the licence area is less than management expectations with resulting impacts on plans to develop a long-term commercial operation at Gakara. Subject to trial mining operations re-starting, the Company expects to use operating cash flow to define further low-cost exploration techniques to improve confidence in the Gakara mineralisation.

· Political risk in Burundi

- On 12 April 2021 the Government of Burundi temporarily suspended the export of concentrate produced at Gakara. This was followed on 29 June 2021 with a suspension of all trial mining and exploration activity. All operations remain on care and maintenance at March 2023. There has been no attempt by the Government of Burundi to remove the mining licence for the Gakara project. Whilst recognising that the situation has persisted longer than originally anticipated, management continue to expect operations at Gakara to be allowed to re-start.

· Civil unrest

- Burundi has experienced civil unrest, including most recently in 2015. South Africa experienced some civil unrest in 2021. Any subsequent instances of civil unrest could impact the long-term operations of the Company's development projects, including the ability to obtain supplies, export production and manage administrative matters.

· Currency controls in Burundi

- The Company receives proceeds from the sale of rare earth concentrate from the Gakara project in US dollars, which are repatriated to an account in the Burundi Central Bank. The Company has the right, under its Mining Convention with the Burundian Government, to unfettered access to its foreign currencies.

- Burundi has experienced shortages of foreign currency reserves in the past, and it is therefore possible that, in the event of operations re-starting at Gakara, access to US dollars held in country might be difficult. This would affect the Company's ability to meet ongoing foreign currency obligations including international suppliers, servicing of international debt and repatriation of profits.

· Project development risk

- At Phalaborwa, the Company announced a positive Preliminary Economic Assessment in October 2022 which confirmed a processing flow sheet capable of economically extracting the magnet rare earth metals from the gypsum stacks in a low capital and low operating cost environment. Further test work, including pilot test work to confirm the efficacy of the processing flowsheet, will be required to provide sufficient confidence for project development, which may not deliver results in line with the preliminary economic assessment.

- Development of Phalaborwa will require updated permits in South Africa to allow the gypsum stacks to be processed. Applications for the updated permits are dependent on technical studies that will be undertaken as part of the Phalaborwa DFS. Whilst there can be no certainty that the required licences will be issued, management notes that the project is located on a brownfield site already licenced for industrial use and therefore does not anticipate any problems securing the necessary permits.

- The Phalaborwa earn-in agreement signed with Bosveld Phosphates (Pty) Limited ("Bosveld"), under which the Company is earning a 70% interest in the project, envisages Bosveld transferring or licensing to a dedicated joint venture company all of their rights, title and interest in the gypsum stacks. At present, the assets of Bosveld are secured by notarial bonds in South Africa issued in favour of third parties, which may impact the ability of Bosveld to transfer the rights to a new entity as envisaged. Management is aware of a repayment plan agreement that will release these securities and is therefore confident that this will not prevent the intended use of the gypsum stacks and the recovery of the rare earth elements therefrom.

· Financing risk

- The Company currently forecasts that additional funding will be required in order to deliver its project development plans at Phalaborwa as well as for general working capital requirements. Management maintains strong relationships with key sources of finance. Rainbow has a history of securing funding required for the Company's growth plans, including support from its cornerstone investors, and management expect to be able to secure additional funding as required.

- At Phalaborwa in South Africa, additional finance is expected to be required to deliver a DFS, including pilot test-work, ahead of a larger fundraising for commercial scale project development.

- At Gakara in Burundi, the Company expects funds received from the sale of the current mineral concentrate to be available to finance the re-commencement of operations which would not be expected to require further funding to maintain. However, additional financing would be required to fund commercial scale development beyond the current trial mining and processing operations.

· Rare earth prices and off-take arrangements

- Rainbow's strategy is to become a globally-significant and responsible producer of rare earth metals from secondary sources, with a particular focus on NdPr - the fundamental building blocks for the permanent magnets driving the global green technology revolution.

- Whilst analysts are predicting strong growth in demand for rare earths, prices have been volatile in the past. If the underlying rare earth basket price of the Group's development projects fall, this reduces potential revenue that will impact the long-term profitability of the projects and could impact the commercial viability of any development.

- The strong returns set out in the Phalaborwa preliminary economic assessment demonstrate that the project is expected to remain robust in a lower rare earth price environment. The Company has not yet contracted off-take agreements for the likely rare earth products from Phalaborwa.

- The Company currently has an off-take agreement with ThyssenKrupp for the Gakara project trial mining activities in Burundi, selling a mixed rare earth mineral concentrate at a discount of approximately 70% to the quoted price of the underlying metal oxides.

3. Administrative expenses

Burundi administrative expenses incurred in the six months ended 31 December 2022 include all costs associated with maintaining the Gakara project on care and maintenance.

4. Loss per ordinary share

Loss per ordinary share is calculated by dividing the net loss for the period attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period.

The Company was loss making for all periods presented, therefore the dilutive effect of share options has not been taken account of in the calculation of diluted earnings per share, since this would decrease the loss per share for each of the period reported.

The calculation of the basic loss per share is based on the following data:

5. Exploration and evaluation assets

Only costs relating to the Phalaborwa project were capitalised during the period. The Gakara project has been under care and maintenance throughout the Period and, accordingly, none of the costs meet the requirements under the Group's accounting policy for capitalisation.

The Phalaborwa project represents an opportunity to extract rare earth elements from the chemical re-treatment of gypsum stacks. An updated JORC compliant rare earth resource was published on 20 March 2023 and the costs of establishing the commercial viability of development for the project are being capitalised as exploration and evaluation assets under IFRS 6. Additions in the period include costs associated the preliminary economic assessment, published in October 2022.

The Directors note the uncertainty relating to the ongoing suspension of activities in Burundi. Based on an assessment of both the legal and political position in Burundi, the Directors have a reasonable expectation that the current temporary suspension does not represent a threat to the licence and activities will be allowed to re-start. Accordingly, the Directors do not believe this uncertainty represents an indication of impairment of the exploration and evaluation assets at Gakara, or the associated property, plant and equipment or inventory within the Gakara cash generating unit. The Directors note that the current suspension of activities could result in future losses for the Group if it is not resolved as anticipated.

FinBank SA holds security over the fixed and floating assets of Rainbow Mining Burundi SM ("RMB"), which include US$7.3 million of exploration and evaluation assets associated with the Gakara mining permit in Burundi.

6. Property, plant and equipment

FinBank SA holds security over the fixed and floating assets of RMB, which include US$1.2 million of tangible fixed assets in Burundi.

As set out in note 5, the Directors note the uncertainty relating to the ongoing suspension of activities in Burundi which could impact the carrying value of the property, plant and equipment within the Gakara cash generating unit, which comprises the entire net book value at the balance sheet date.

7. Trade and other payables

The Directors consider that the carrying value of trade and other payables approximate to their fair value.

8. Borrowings

FinBank Loan

The FinBank loan facility is expressed in Burundian Francs and carries an interest rate of 15%. Interest has been paid throughout the period. Capital repayments have been suspended since April 2021 as a result of the export ban imposed in Burundi on the Group's rare earth concentrate from trial mining and processing activities.

Under the terms of this loan, Finbank has security over the fixed and floating assets of RMB (the local operating company in Burundi which owns the Gakara project and mining permit), the shares of RMB, and the cash held in RMB's Finbank bank accounts.

Warrant Liability

On 21 February 2020, 2,000,000 warrants were issued to Pipestone Capital Inc, in which George Bennett, the Company's CEO, has a beneficial interest. The warrants were issued in lieu of interest on a US$1 million bridging loan provided to the Company, which was repaid in full in December 2021. The warrants have a contractual life of 4 years at an exercise price of 4.55 pence per warrant. The Pipestone warrants are recognised as a financial liability at fair value through profit and loss with changes in value included under finance costs/income.

9. Share capital

The table below shows a reconciliation of share capital movements:

On 13 July 2021 Australian Special Opportunity Fund, LP exercised options over 2.5 million shares at an exercise price of 5.28p per share, raising gross cash proceeds of US$182k.

On 13 October 2021 the Company issued 32.9 million shares at a price of 15 pence per share, raising gross cash proceeds of US$6.8 million (before costs of $221k). No related parties were involved in the placing.

On 15 November 2021 the Company issued a further 10.0 million shares at a price of 15 pence per share, raising gross cash proceeds of US$2.0 million (before costs of $18k). No related parties were involved in the placing.

On 25 April 2022 Australian Special Opportunity Fund, LP exercised options over 1,718,987 shares at an exercise price of 5.28p per share, raising gross cash proceeds of US$116k (before costs of $17k).

On 10 November 2022 Australian Special Opportunity Fund, LP exercised options over 2 million shares at an exercise price of 5.28p per share, raising gross cash proceeds of US$125k (before costs of $16k).

10. Related party transactions

The above table does not include remuneration of Directors and senior management.

1. Pipestone Capital Inc, in which George Bennett, the Company's CEO, has a beneficial interest, provided a US$1 million bridging loan to the Group in February 2020 as explained in note 8, of which US$75k was settled in June 2020 and the balance settled in December 2021. In addition, in October 2020 Pipestone Capital Inc provided an additional bridging loan of US$150k in October 2020 which was settled in cash together with US$3k interest in December 2020.

2. MPD Consulting Limited, in which Pete Gardner, the Company's CFO, has a beneficial interest, has recharged certain costs relating to travel to Burundi and UK support incurred on behalf of the Group.

3. Magna Capital (Guernsey) Limited, in which Adonis Pouroulis, the non-executive Chairman of the Board of Directors, has a beneficial interest, was engaged in December 2022 to assist the Company with its strategy to secure ownership of opportunities to recover rare earths from phosphogypsum.

11. Post balance sheet events

No events after the reporting date were identified that would affect the group of companies significantly or cause its financial results to be materially misstated.