TIDMRBW
RNS Number : 6231R
Rainbow Rare Earths Limited
30 October 2023
30 October 2023
Rainbow Rare Earths Limited
("Rainbow" or "the Company")
LSE: RBW
Preliminary Results for the Year ended 30 June 2023
Rainbow Rare Earths is pleased to announce its preliminary
results for the year ended 30 June 2023 ("FY 2023" or the "Year").
The financial information in this release does not constitute the
Financial Statements. The Group's Annual Report, which includes the
audit report and audited Financial Statements for the year ended 30
June 2023, will be available on the Company's website at
www.rainbowrareearths.com .
Highlights
-- Demand for the rare earth elements ("REEs") used in permanent
magnets is forecast to rise significantly to meet global
decarbonisation targets due to their essential use in electric
vehicles ("EVs") and wind turbines.
-- Rapid progress has been made towards Rainbow's aim to be a
forerunner in the establishment of an independent and ethical
supply chain of REEs.
-- Rainbow has the opportunity to be a multi-asset rare earth
developer with two opportunities targeting secondary sources of
rare earths: the Phalaborwa phosphogypsum project in South Africa
and, post Year-end via the Memorandum of Understanding signed with
the Mosaic Company ("Mosaic"), the earlier stage Uberaba
phosphogypsum project in Brazil.
-- Both Phalaborwa and Uberaba host all four of the critical
magnet rare earths, being neodymium and praseodymium ("NdPr") and
the heavies Dysprosium ("Dy") and Terbium ("Tb"), which is where
the most severe supply shortages are forecast.
-- The Preliminary Economic Assessment ("PEA") published in
October 2022 highlighted Phalaborwa as one of the lowest cost rare
earth projects in development today, allowing for strong cash
generation in all foreseeable REE pricing scenarios.
-- Phalaborwa's proposed processing flow sheet to recover REEs
was confirmed via the delivery of mixed rare earth sulphate in
September 2023 from the front-end pilot plant in Johannesburg,
South Africa; the back-end pilot plant in Lakeland, USA has
completed commissioning and is expected to deliver separated rare
earth oxides during the current quarter.
-- Rainbow continued to cement its position within an
independent and ethical supply chain via offtake agreements in
principle with UK-based Less Common Metals for future rare earth
oxide production, and with NEXUS in South Africa for its gypsum
by-product.
-- Phalaborwa project is founded on principles of circularity
via the extraction of value from 'waste' products; planned sale of
gypsum by-product will allow for complete environmental
rehabilitation of site.
-- Phalaborwa ownership increased from 70% to 85% with an option to acquire the remaining 15%.
-- Rainbow has been working with carbon and climate change
advisors to further understand Phalaborwa's potential environmental
impacts and will provide its first annual disclosure in line with
the recommendations of the Task Force on Climate-related Financial
Disclosures in its 2023 Annual Report.
-- Following the change in focus of Rainbow's business the
Directors decided against investing significant amounts in Burundi
to develop a formal mineral resource resulting in an impairment
review for the Gakara cash generating unit, which has been written
down to a net asset value of nil.
Certain information contained in this announcement would have
been deemed inside information for the purposes of Article 7 of
Market Abuse Regulation (EU) No 596/2014 ("MAR") which has been
incorporated into UK law by the European Union (Withdrawal) Act
2018 until the release of this announcement.
For further information, please contact:
Rainbow Rare Earths George Bennett
Ltd Company Pete Gardner +27 82 652 8526
IR Cathy Malins +44 7876 796 629
cathym@rainbowrareearths.com
Matthew Armitt
Jennifer Lee
Berenberg Broker Detlir Elezi +44 (0) 20 3207 7800
Tavistock Communications PR/IR Charles Vivian +44 (0) 20 7920 3150
Tara Vivian-Neal 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 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
NPV(10) of US$627 million ([1]) , an average EBITDA operating
margin of 75% and a payback period of less than 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.
For more information, visit www.rainbowrareearths.com
Chairman's Statement
Dear Shareholder,
The world is currently in the midst of a new industrial
revolution - the transition to a sustainable green energy system.
This shift is set to drive a huge increase in the requirements for
the minerals needed to power clean energy technologies. Of these
minerals, REEs are recognised as amongst those with the highest
risk for supply shortages, as well as displaying considerable
supply chain vulnerability due to China's dominant position in the
market.
REEs are essential components of permanent magnets, which are
found in a plethora of high tech products, including smartphones,
camera lenses, plasma screens, hard drives and even artificial
joints. However, it is their use in electric vehicles ("EVs") and
wind turbines that is driving major future market growth, with
Argus Media Ltd estimating that supply of the magnet rare earths,
NdPr, Dy and Tb, will need to grow by ca. 8% per annum by 2032 in
order to match demand.
Rainbow's aim is to be a forerunner in the establishment of an
independent, sustainable and ethical supply chain of REEs and I am
delighted to note that we made excellent progress towards this aim
in the Year via the advancement of the Phalaborwa project in South
Africa and, post Year end, via the MOU entered into with Mosaic to
jointly develop the Uberaba project in Brazil.
Both projects target secondary sources of rare earths, being
phosphogypsum stacks that are the residue of phosphoric acid
production. These stacks sit at surface, thereby eliminating the
traditional geological risk and cost of mining, and are therefore
expected to have a significantly lower capital intensity and
operating expenditure ("opex") than traditional rare earth mining
projects. Furthermore they can be considered "near-term" production
opportunities - for example, the Phalaborwa project is expected to
commence operations in 2026, which is just five years after Rainbow
secured the project.
The outstanding economics of the Phalaborwa project were
confirmed via the publication of its Preliminary Economic
Assessment ("PEA") in October last year, which noted a base case
NPV(10) of US$627 million, an average EBITDA operating margin of
75% and a payback period of less than two years. This very high
margin sets Phalaborwa apart from other development projects in our
space as it can withstand significant pricing volatility.
Post Year-end, the Phalaborwa project recorded a major milestone
with the recovery of the first mixed rare earth sulphate from the
front-end pilot plant in Johannesburg. This material is considered
to be a commercially saleable product that could be a standalone
revenue stream for the project, with an estimated sales value of
ca. 60% of the global price for separated rare earth oxides. The
mixed rare earth sulphate will be used as the feed stock to produce
separated rare earth oxides at the back end pilot plant at K-Tech's
facility in Florida.
Responsible supply
Rainbow's business model is driven by the shift to cleaner
energy, in that we will produce the materials required to make
permanent magnets needed for EVs and wind turbines - with this
comes a responsibility to operate in a sustainable manner. We have
the opportunity at Phalaborwa to clean up legacy environmental
issues on site, the main one being acid water which has accumulated
over the unlined gypsum stacks. The acid water will be neutralised
and used as process water, with the remnant gypsum then deposited
on new lined stacks according to International Finance Corporation
("IFC") / Equator Principles. This gypsum is intended to be further
on-sold as a clean and benign feed for the cement and other
industries, leaving the site rehabilitated to its original state
over time.
Phalaborwa's potential to be a near-term source of ethical
magnet rare earth supply was recognised by Less Common Metals Ltd
("LCM"), with whom we have entered into a strategic supply
agreement for Phalaborwa production. LCM is currently the only rare
earth metal and alloy manufacturing facility in the UK and one of
the only facilities in the EU. Its location is of strategic
importance to Rainbow as the Group's aim is to play an important
part in the establishment of a Western supply chain for critical
REEs outside of Chinese control.
Portfolio development
Post Year-end, the agreement with Mosaic represents a major
opportunity for Rainbow to replicate Phalaborwa at a potentially
larger scale. The Uberaba phosphogypsum material is similar to
Rainbow's Phalaborwa project in South Africa in that the original
feedstock was based on a hardrock carbonatite phosphate deposit.
Initial assay analysis from samples have indicated an average grade
of 0.58% total rare earth oxides ("TREO"), which is more than 30%
higher than the 0.44% TREO for Phalaborwa, and confirmed that the
Uberaba basket contains all four of the most economically important
rare earths, NdPr at ca. 25% of the basket and includes the two
"heavy" permanent magnet rare earths, Dy and Tb.
Further to the acquisition of the Phalaborwa project in December
2020 and the subsequent development of processing technology to
recover REEs from phosphogypsum as a by-product of phosphoric acid
production, the Directors have re-focused the business on secondary
sources of REEs where they consider higher returns are available.
As such, the Directors no longer intend to invest significant
capital at the Gakara asset in Burundi to convert the existing
resource target to a reserve status. This resulted in an impairment
review being carried out for the Gakara assets in the year ended 30
June 2023 and led to the net assets being written down to nil as at
30 June 2023.
Corporate development
Rainbow's successful development in FY 2023 was rewarded by
continued strong backing for the Company in the market, with a
placing to raise US$9.5 million in May 2023 achieved at a premium
of 30% to the share price, and a placing post Year-end in September
2023 to raise US$5.4 million achieved at a minor discount of 3% to
the share price.
Both fundraisings included cornerstone participation by TechMet
Limited ("TechMet"), a private investment company developing world
class projects across the critical metals for the global energy
transition, and which counts the US International Development
Finance Corporation ("DFC") as a major backer.
Pursuant to the nomination right held by TechMet, Darryll Castle
(currently Director of Operations for TechMet) joined the Rainbow
Board in June 2023. Through his extensive career Darryll has served
as an executive director of a number of mining and production
companies and has first-hand operations and projects experience
globally. We welcome Darryll to the Board.
Responsible production is a core component of our business model
and Rainbow has made good progress this year with setting up the
structural aspects that will ensure ESG is integrated into our
operations. Post Year-end, the Board approved a new Sustainability
Policy for the Group and we have committed to a number of United
Nations Sustainable Development Goals ("SDGs"), which will provide
a focal point for our sustainability strategy and plans.
We have been working with carbon and climate change advisors to
further understand Phalaborwa's potential environmental impacts and
have provided our first annual disclosure in line with the
recommendations of the Task Force on Climate-related Financial
Disclosures ("TCFD").
Poised for success
I believe Rainbow offers a compelling investment opportunity in
our space. Further to the MOU with Mosaic in Brazil, Rainbow has
become one of the only rare earth development companies in the
world with multiple near-term production opportunities, as well as
occupying a unique position in the pipeline given our ability to
utilise innovative and proprietary technology to take the
processing of our material all the way through to separated rare
earth oxides.
This is an exciting time for the Group and I look forward to the
imminent production of separated rare earth oxides in Q4 calendar
year ("CY") 2023, bearing in mind Rainbow will be one of the first
companies to do this on US soil, which further validates our vision
to be an integral part of an independent and Western supply chain
of rare earths.
I would like to thank the host countries in which we operate and
all our staff who have worked so diligently in laying the platform
for delivering one of the most exciting rare earth stories in the
world.
Adonis Pouroulis
Non-Executive Chairman
Q&A with the CEO
What do you consider to be the key achievements of FY 2023?
FY 2023 has been a period of further rapid development for
Rainbow and the progression of our aim to be a forerunner in the
establishment of an independent and ethical supply chain of the
rare earth elements driving the green energy transition.
The publication of the Phalaborwa PEA in October last year
demonstrated that this was one of the lowest cost rare earth
projects in development today and, not only that, it could be
brought into production at much quicker pace than traditional
projects, as it involves the processing of gypsum stacks already
sitting at surface, thereby eliminating the cost and risk of
mining.
Phalaborwa will use a unique processing flowsheet that was
developed by and in conjunction with our partner K-Tech and which
incorporates continuous ion exchange ("CIX") and continuous ion
chromatography ("CIC"). While this technology was proven at
lab-scale, we wanted to demonstrate that it is commercially viable
and this was achieved both during the Year and post Year-end via
the successful operation of our pilot plant and the production of
the mixed rare earth sulphate.
This validates Rainbow's business model and has allowed us to
target other phosphogypsum resources globally. Post Year-end, we
signed an MOU with Mosaic in Brazil with regards to the Uberaba
phosphogypsum stack, which is expected to have comparable
characteristics to Phalaborwa due to the similarities of the host
rock. This deal has opened up the future for Rainbow to become a
multi-asset producer of rare earth elements from secondary
sources.
Post Year-end, we also entered into a strategic supply agreement
with LCM, the UK-based world leader in the manufacture and supply
of complex alloy systems and metals. Securing a buyer of our
separated rare earth oxides that shares our values and aspirations
was of strategic importance to Rainbow, especially as the vast
majority of rare earth processing and manufacturing companies are
based in China.
The intention is for the separated rare earth oxides produced by
Phalaborwa to be manufactured by LCM into metal in order to create
an alloy, which is then supplied to permanent magnet manufacturers
in the EU and the USA, with the ultimate customer of the rare earth
permanent magnets being clearly defined and in alignment with the
positioning of both Rainbow and LCM in a Western supply chain.
And what were the key challenges?
We continued to see turbulence in the global geopolitical
landscape, which had ramifications for economies worldwide,
particularly with the ongoing disruption to supply chains and the
rising cost of various inputs and commodities. This compounded the
issue of slower global economic activity and growth that was
already an issue further to the impacts of the Covid-19
pandemic.
We have found that this has played out with investors taking a
"risk-off" approach, especially with regards to smaller companies
in the resources sector. In spite of these external, macro-economic
challenges, we continue to be greatly encouraged by the progress we
have been able to make internally and fortunately we have a host of
catalyst points over the next six months to two years, as we
deliver on the various milestones that bring Phalaborwa closer to
first production in 2026.
Another challenge relates to volatility in the pricing of rare
earths experienced during the Year, albeit Rainbow is not in
production as of yet. Pricing performed strongly in the year ended
30 June 2022 ("FY 2022") due to surging demand, especially
following a rush to install offshore wind capacity in China to take
advantage of government subsidies, combined with the continued
adoption of EVs worldwide. Pricing was also positively impacted by
supply disruptions due to the COVID-19 pandemic and the start of
the conflict between Ukraine and Russia. However, in FY 2023 we saw
a correction in pricing as China increased supply, set against a
backdrop of softer economic conditions.
At the time of this Report, pricing has recovered from the lows
and expectations are for further improvements into 2024.
We remain confident that the long-term outlook for rare earth
demand and pricing is positive as there is a mandated shift to the
electrification of our transport system, as well as the exponential
roll-out of offshore wind capacity worldwide in order to meet
global decarbonisation and net zero targets.
Can you give an update on the Phalaborwa project?
Work at Phalaborwa has continued apace and we are underway with
all the various workstreams required for the Definitive Feasibility
Study ("DFS"), which we plan to complete by the end of H2 CY 2024
subject to funding.
A major component of this was the construction, commissioning
and operation of the pilot plant to prove up our proprietary
separation technology, both at scale and on a continuous basis, as
well as to produce sufficient quantities of separated permanent
magnet rare earth oxides for testing and marketing purposes.
During the Year, the decision was made to split the pilot plant,
so that the front-end, which will produce a high-value mixed rare
earth sulphate, would remain in South Africa close to the
Phalaborwa project, while the back-end, which will produce
separated rare earth oxides, would be built and run at the premises
of our partner, K-Tech. This would deliver 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, as well as ensuring that
key K-Tech personnel would be available on site to oversee and
optimise the process in real-time.
Post Year-end, we achieved a major milestone with the production
of the first mixed rare earth sulphate from Phalaborwa
phosphogypsum material at the pilot plant front-end pilot plant in
Johannesburg. This was a significant de-risking event for the
project and the Group, as it confirms Phalaborwa as a rare earth
producer and can provide a standalone revenue stream for the
project.
This material will be used as feed for the back-end pilot plant
and will be processed further to produce separated rare earth
oxides in Q4 CY 2023.
How does the Phalaborwa project compare to other rare earth
development projects globally?
Phalaborwa is a unique project with exceptional economics, as
demonstrated by the PEA. One of the main aspects that attracted me
to the project was its comparatively low cost base, which provides
resilience against pricing volatility:
-- firstly, as this is not a traditional mining project there
are no costs associated with drilling, blasting, crushing, milling
and flotation to produce a mixed rare earth concentrate;
-- secondly, the phosphogypsum material has already been
chemically "cracked" because it is the by-product of phosphoric
acid production, meaning it has already been subjected to heat and
sulphuric acid - the cracked material allows for a simpler
hydrometallurgical process to produce separated and purified rare
earth oxides; and
-- thirdly, the CIX / CIC separation technology developed by
K-Tech replaces traditional solvent extraction ("SX") 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. We
will be taking a waste product (the existing phosphogypsum stacks),
cleaning it and extracting value from it - both via the recovery of
the REEs and then via the sale of the benign gypsum that is
produced as the by-product of the process. Our 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.
Finally, a key benefit of targeting a secondary source of rare
earths in this manner is that the project can be brought into
production in a much quicker manner than traditional mining
projects. In fact, we are targeting for the project to begin
production just five years after we commenced work on site.
What are the key risks to its development?
As the process developed with and by K-Tech is a novel process,
albeit using existing technologies and equipment, investors
undoubtedly saw technology risk as a key hurdle to investment. This
was why the successful production of a mixed rare earth sulphate
from the front-end pilot plant in August 2023 was an important
milestone; however, we expect to see the benefit of a "de-risked"
investment case once the backend pilot plant produces the separated
rare earth oxides - expected in Q4 2023.
Management has always had a high level of confidence in the
technology. For us, it is more about timing of the project
development and what could impact that. Permitting in South Africa
is a factor, which is why we are running the various workstreams
required already, alongside or incorporated with the DFS
requirements. The fact that the project will be cleaning up the
legacy issue of acid water on site I think incentivises the
permitting process to stay on track as it is to the benefit of the
local environment and communities.
In terms of financing, we believe that Phalaborwa will continue
to be of interest to strategic investors, especially since it will
produce all four of the critical rare earths for permanent magnets,
including the heavies Dy and Tb, which are of even scarcer supply.
In fact, McKinsey released a report in 2023 noting that of all the
critical minerals it surveyed, Dy could see the most severe
imbalances of supply with potential "shortages of up to 70% of
demand". These heavy rare earths are essential to produce the kind
of high-performance permanent magnets needed for EVs and wind
turbines.
Our job is to ensure that Phalaborwa maintains its position in
an independent and responsible supply chain. This will open the
door to investment from the various US initiatives that have been
set up to fund US interests in the green transition. We have
already seen this via the involvement of TechMet, which has a 12%
stake in Rainbow, and, indirectly, their major shareholder the
DFC.
What are the priorities for FY 2024?
The production of the separated rare earth oxides in the
back-end pilot plant will be the most important milestone in the
project to date and it is even more exciting and symbolic that they
will be produced in the US. This favourable position has led us to
consider permanently basing our oxide separation process in the US
and we will continue to evaluate this.
We will maintain the pace of the project development to date
with the continued progress with the environmental and social
impact assessment ("ESIA") and publication of the DFS by the end of
FY 2024 and that will set the scene to commence project finance and
on to construction.
We will look to gain a better understanding of the mineralogy of
the Uberaba stack, which will inform the future work programme
around resource delineation and development of a flowsheet adapted
to the Uberaba material.
We will continue to work with OCP and UM6P to evaluate the
optimal technique for the extraction of REEs from
sedimentary-sourced phosphogypsum. While this is a longer-term
project, it represents an exciting opportunity for Rainbow due to
the scale of the opportunity if test work can achieve favourable
results, as it will unlock the enormous potential of rare earths
contained in sedimentary-sourced phosphogypsum material.
Finally we will also be continuing to develop our sustainability
approach and practices within the Group, bearing in mind these are
an essential part of our future success, and are conducting a life
cycle assessment ("LCA") at Phalaborwa to understand the
environmental impacts associated with the lifecycle of rare earths
production.
It's an exciting period ahead. I would like to thank the Rainbow
team, as well as our various partners and contractors, for working
tirelessly to deliver the results we have to date.
George Bennett
Chief Executive Officer
Financial Review
Rainbow's strategic focus is to identify and develop secondary
rare earth deposits that can be brought into production quicker and
at a lower cost than traditional hard rock mining projects. As a
developer, Rainbow capitalises the costs of exploration and
evaluation for each identifiable project once the legal right to
the project has been secured. During the Year, as a result of the
successful PEA released for Phalaborwa and the growing pipeline of
growth opportunities from the associated processing technology, the
Directors decided against investing significant amounts in Burundi
to develop a formal mineral resource. As a result an impairment
review was carried out on the Gakara cash generating unit, which
has been written down to a net asset value of nil. As a result, the
Financial Statements now reflect the updated business strategy,
with the exploration and evaluation assets on the balance sheet
relating solely to Phalaborwa and the income statement dominated by
the impairment charge against Gakara.
Profit and Loss
The loss for the Year reflects the impairment of the Gakara cash
generating unit and the ongoing administrative costs for the
Group.
As noted above, due to the change in strategy an impairment
review was carried out for the Gakara cash generating unit during
the Year, which comprised both intangible and tangible fixed assets
together with cash, mineral concentrate, royalty receivables and
consumables held in stock. The liabilities associated with the
Gakara project include a loan, decommissioning, site rehabilitation
and environmental costs, tax liabilities and trade payables. Based
on the assessment of both the legal and political position in
Burundi, the Directors were unable to foresee a date when the
operations at the project would be able to restart and accordingly
have written the net assets of the Gakara cash generating unit to
nil, with an impairment charge of US$9.6 million recognised.
Within administration expenses, the costs associated with
maintaining the Gakara project on care and maintenance totalled
US$0.9 million (FY 2022: US$1.3 million) including US$0.3 million
of non-cash depreciation associated with the tangible fixed assets
prior to the impairment (FY 2022: U$0.4 million). The Group
continues to focus on minimising costs associated with the
asset.
The Group's other corporate costs totalled US$2.6 million (FY
2022: US$2.3 million). This increase was driven primarily by an
increase in business development costs as the Group started to
develop its pipeline of growth opportunities including both Uberaba
and OCP.
Net finance income of US$0.2 million (FY 2022: costs of US$0.3
million) represents foreign exchange differences, primarily
relating to movements between the Burundian Franc ("BIF") and US
dollars, the functional currency of the Group. Finance costs also
include US$0.1 million (FY 2022: US$0.1 million) associated with
the FinBank loan in Burundi.
Balance Sheet
As set out above, the Gakara impairment has had a significant
impact on the Group balance sheet, with US$9.8 million of
non-current assets at 30 June 2022 relating to Gakara (US$8.6
million of exploration and evaluation costs and tangible fixed
assets with a net book value of US$1.0 million) being written down
to nil. The Gakara cash generating unit now includes US$0.7 million
of mineral concentrate inventory, carried at cost, which is offset
by the FinBank loan (US$0.4 million) and other net liabilities of
US$0.3 million dominated by tax and government liabilities in
Burundi which have not been settled whilst the suspension of
activities persists.
A total of US$2.9 million of exploration and evaluation assets
were capitalised in the Year relating to Phalaborwa, leaving a
closing capitalised cost of US$4.8 million. Expenditure accelerated
following completion of the PEA in October 2022 as pilot test work
commenced alongside other activities to develop a DFS. At the
balance sheet date, the Group has no tangible fixed assets and no
obligations for environmental closure at the Phalaborwa site.
At 30 June 2023, the Group held US$8.1 million of cash and cash
equivalents which is predominantly held with Barclays Bank in
London, having raised US$9.5 million in May 2023 at a price of
10.377 pence per share.
Going Concern
In July 2023, US$5 million was paid to Barak Fund SPC Limited on
behalf of Bosveld Phosphates (Pty) Limited to secure a path to 100%
ownership of Phalaborwa. As a result of the payment, the Group
secured an immediate 85% interest in Phalaborwa and was granted an
option to acquire the remaining 15% via the issue of US$7 million
in shares. In September 2023, the Company replenished the funds
spent on the Phalaborwa acquisition, raising US$5.5 million at a
price of 15 pence per share, of which US$0.7 million is subject to
shareholder approval at the forthcoming AGM.
Based on a review of cash flow forecasts for the period to 31
December 2024, at least US$3.4 million of additional funding will
need to be raised before 31 December 2024, the timing of which is
dependent primarily on the speed at which the Phalaborwa DFS is
completed, which is within management's control. Whilst this
funding requirement does represent a material uncertainty which may
cast significant doubt on the ability of the Company to continue as
a going concern, the Board is confident that this funding will be
secured based on its history of successful fundraising.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 June 2023
Year ended Year ended
30 June 30 June
Notes 2023 2022
US$'000 US$'000
Revenue - -
Cost of sales - -
---------- ----------
Gross profit - -
Administration expenses (3,509) (3,585)
Impairment of Gakara assets 3 (9,575) (69)
Loss from operating activities (13,084) (3,654)
---------- ----------
Finance income 377 216
Finance costs (158) (543)
Loss before tax (12,865) (3,981)
---------- ----------
Income tax expense - (4)
Total loss after tax and comprehensive expense for the year (12,865) (3,985)
========== ==========
Total loss after tax and comprehensive expense for the year is attributable to:
Non-controlling interest (881) (105)
Owners of parent (11,984) (3,880)
---------- ----------
(12,865) (3,985)
========== ==========
The results of each year are derived from continuing operations
Loss per share (cents)
Basic 4 (2.23) (0.76)
Diluted 4 (2.23) (0.76)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2023
Year ended Year ended
Notes 30 June 30 June
2023 2022
US$'000 US$'000
Non-current assets
Exploration and evaluation assets 5 4,830 10,588
Property, plant and equipment 6 27 1,043
Right of use assets 39 108
Total non-current assets 4,896 11,739
----------- -----------
Current assets
Inventory 718 858
Trade and other receivables 365 401
Cash and cash equivalents 8,107 4,134
----------- -----------
Total current assets 9,190 5,393
----------- -----------
Total assets 14,086 17,132
----------- -----------
Current liabilities
Trade and other payables (1,250) (909)
Borrowings (201) (235)
Lease liabilities (23) (32)
Total current liabilities (1,474) (1,176)
Non-current liabilities
Borrowings (285) (518)
Lease liabilities (21) (81)
Provisions (55) (61)
----------- -----------
Total non-current liabilities (361) (660)
Total liabilities (1,835) (1,836)
----------- -----------
NET ASSETS 12,251 15,296
Equity
Share capital 7 50,937 41,442
Share-based payment reserve 1,719 1,467
Other reserves - -
Retained loss (38,483) (26,572)
----------- -----------
Equity attributable to the parent 14,173 16,337
Non-controlling interest (1,922) (1,041)
TOTAL EQUITY 12,251 15,296
=========== ===========
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2023
Share- Share Attributable
Share based warrant Other Accumulated to the Non-controlling
capital Payments reserve reserves losses parent interest Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Balance at 1
July 2021 32,465 1,295 - 60 (22,878) 10,942 (936) 10,006
----------- ---------- ---------- ---------- ----------- ------------ --------------- --------
Total
comprehensive
expense
Loss and total
comprehensive
loss for year - - - - (3,880) (3,880) (105) (3,985)
Transactions
with owners
Shares placed
during the
year for cash
consideration 8,779 - - - - 8,779 - 8,779
Share placing
transaction
costs (240) - - - - (240) - (240)
Non-cash issue
of shares
during the
period, net of
costs 157 - - - - 157 - 157
Eliminate
historic
discount on
extinguishment
of interest
free bridge
loan - - - (60) 60 - - -
Fair value of
employee share
options in
year - 298 - - - 298 - 298
Share options
exercised in
the year, net
of costs 281 (126) - - 126 281 - 281
Balance at 30
June 2022 41,442 1,467 - - (26,572) 16,337 (1,041) 15,296
----------- ---------- ---------- ---------- ----------- ------------ --------------- --------
Total
comprehensive
expense
Loss and total
comprehensive
loss for year - - - - (11,984) (11,984) (881) (12,865)
Transactions
with owners
Shares placed
during the
year for cash
consideration 9,485 - - - - 9,485 - 9,485
Share placing
transaction
costs (115) - - - - (115) - (115)
Fair value of
employee share
options in
year - 325 - - - 325 - 325
Share options
cancelled in
year - (13) - - 13 - - -
Share options
exercised in
the year, net
of costs 125 (60) - - 60 125 - 125
Balance at 30
June 2023 50,937 1,719 - - (38,483) 14,173 (1,922) 12,251
----------- ---------- ---------- ---------- ----------- ------------ --------------- --------
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 30 June 2023
For year ended For year ended
30 June 30 June
2023 2022
US$'000 US$'000
Cash flow from operating activities
Loss from operating activities (13,084) (3,654)
Adjustments for:
Depreciation 382 380
Impairment 9,575 69
Share-based payment charge 325 297
Operating loss before working capital changes (2,802) (2,908)
Net decrease in inventory - 5
Net increase in trade and other receivables (31) (29)
Net decrease in trade and other payables (94) (100)
--------------- ---------------
Cash used by operations (2,927) (3,032)
Realised foreign exchange gains 156 186
Finance income - -
Finance costs - -
Taxes paid - (2)
--------------- ---------------
Net cash used in operating activities (2,771) (2,848)
--------------- ---------------
Cash flow from investing activities
Purchase of property, plant & equipment (28) (42)
Exploration and evaluation costs (2,510) (837)
Net cash used in investing activities (2,538) (879)
--------------- ---------------
Cash flow from financing activities
Repayment of borrowings (61) (1,009)
Interest payments on borrowings (78) (138)
Payment of lease liabilities (42) (24)
Proceeds from the issuance of ordinary shares 9,610 9,077
Transaction costs of issuing new equity (115) (275)
Net cash generated by financing activities 9,314 7,631
--------------- ---------------
Net increase in cash and cash equivalents 4,005 3,904
--------------- ---------------
Cash & cash equivalents at the beginning of the year 4,134 573
Foreign exchange loss on cash and cash equivalents (32) (343)
Cash & cash equivalents at the end of the year 8,107 4,134
=============== ===============
NOTES:
1. BASIS OF PREPARATION
The financial information set out herein does not constitute the
Group's statutory financial statements for the year ended 30 June
2023, but is derived from the Group's audited financial statements.
The auditors have reported on the FY 2023 financial statements and
their reports were unqualified. The financial information in this
statement is audited but does not have the status of statutory
accounts.
The financial statements and the information contained in this
announcement have been prepared in accordance with International
Financial Reporting Standards (IFRS) as adopted by the European
Union (EU), including International Accounting Standards and
Interpretations issued by the International Financial Reporting
Interpretations Committee (IFRIC). This is consistent with the
accounting policies in the 30 June 2022 financial statements.
2. GOING CONCERN
As at 30 June 2023, the Group had total cash of US$8.1 million.
During Q3 CY2023 the Group paid out a total of US$7.3 million
including costs of US$5.7 million to secure an immediate 85%
interest in the Phalaborwa project. On 27 September 2023 the
Company announced a private placement raising GBP4.5 million
(approximately US$5.5 million) before costs estimated at US$0.1
million, of which GBP3.9 million had been received at 27 October
2023. Going forward the Group expects further cash income of GBP0.6
million from the equity fund raise that is subject to shareholder
approval, which is expected to be received at the Company's AGM on
20 November 2023, and has no commitments.
The Board have reviewed a range of potential cash flow forecasts
for the period to 31 December 2024, including reasonable possible
downside scenarios. This has included the following
assumptions:
Corporate
The forecast includes US$3.2 million of ongoing general and
administrative costs of the Group over the 18-month period from 1
July 2023 to 31 December 2024 (the "Period"), based on the current
administrative costs of the Group. This includes US$0.2 million in
respect of pursuing new business opportunities, which will cover
only the initial test work at the opportunities identified to date
including the opportunity with OCP in Morocco and the opportunity
with the Mosaic Company in Brazil.
Management's reasonably plausible downside scenario includes a
10% contingency for unexpected costs plus a further US$0.25 million
per annum for business development costs.
Phalaborwa
The forecast includes US$5.7 million of costs relating to the
acquisition of the 85% ownership in Phalaborwa, including relevant
transaction costs, which was announced on 28 June 2023 and paid in
Q3 2023 as noted above. The forecast also includes all costs
required for the completion of the Phalaborwa DFS, estimated at
US$5.9 million, inclusive of a 10% contingency. This includes all
costs associated with the ongoing pilot test work campaign underway
in both South Africa and USA.
The forecast also includes salary and consultant costs of US$0.6
million for the core project team tasked with advancing the
project. No further contingency on the costs associated with the
DFS was considered necessary for management's reasonably plausible
downside scenario as the base case forecast includes relevant
contingencies. Management's reasonably plausible downside scenario
includes a 10% contingency on the costs of the core project
team.
Uberaba
A memorandum of understanding was signed on 17 July 2023 with
Mosaic to jointly develop a process flowsheet and conduct a
preliminary economic assessment related to the extraction of rare
earth elements from Mosaic's phosphogypsum stack in the Uberaba
area of Minas Gerais in Brazil. At the date of this Report, the
Group has no commitments in respect of this project. A detailed
budget for the anticipated work stream is not yet available and
will need to be agreed with Mosaic, but it is noted that
management's reasonably plausible downside scenario would not be
sufficient for a resource to be defined and a PEA to be developed
and further funding may be required to allow for the Uberaba
opportunity to be de-risked, the timing of which cannot be
accurately predicted at this time.
Gakara
The cash flow forecasts assume ongoing care and maintenance
costs totalling US$0.6 million, including amounts payable under the
FinBank loan facility in Burundi. The Group has determined that no
additional cash outflows will be incurred on Gakara until the
export ban and mining suspension has been lifted. In the event that
the Gakara project did return to operations, stock of rare earth
concentrates with a current estimated gross sales value of US$1.0
million would be sold to provide the funds to re-commence
operations. The re-start would be conditional on the Gakara project
not requiring additional financial support from Rainbow Rare Earths
Limited at then current rare earth prices.
Conclusion
The base case forecast includes a total cash outflow over the
Period of US$16.1 million. Management's reasonably plausible
downside scenario, which includes a 10% contingency for corporate
costs, fixed costs at Phalaborwa and Gakara costs, together with a
further allowance for business development opportunities, includes
a total cash outflow of US$16.9 million.
At 30 June the Group had US$8.1 million of available cash which
together with US$5.4 million of net funds raised in September 2023
provides US$13.5 million of available resources, which confirms
that the Group will need to raise additional funds before 31
December 2024, the timing of which is dependent primarily on the
speed at which the Phalaborwa DFS is completed, which is within
managements control. Management's reasonably plausible downside
scenario suggests that at least US$3.4 million will need to be
raised, along with any funds required to progress the Uberaba
opportunity in Brazil.
The Board is confident that this funding will be secured, based
on its history of successful fundraising. However, it also
acknowledges that this funding is not, at the present time, in
place. Accordingly, the Board acknowledges that the need for
additional funding represents a material uncertainty which may cast
significant doubt on the ability of the Group to continue as a
going concern and, therefore, that it may be unable to realise its
assets and discharge its liabilities in the normal course of
business. The financial statements do not include any adjustments
that would result if the Group was unable to continue as a going
concern.
3. IMPAIRMENT OF GAKARA ASSETS
The assets associated with the Gakara project include both
intangible and tangible fixed assets together with cash, mineral
concentrate, royalty receivables and consumables held in stock. The
liabilities associated with the Gakara project include a loan,
decommissioning, site rehabilitation and environmental costs, tax
liabilities and trade payables.
Despite the ongoing suspension, the Directors note that the
Government of Burundi has not suggested that the licence will be
withdrawn. The Directors also continue to believe that the licence
area represents a significant area of rare earth mineral potential.
However, the Directors do consider that an indicator of impairment
exists at 30 June 2023 due to the re-focus of Rainbow's business on
the Phalaborwa asset and growth opportunities from the associated
processing technology. As such, the Directors do not envisage
investing significant amounts in Burundi to develop a formal
mineral resource and therefore an impairment review is required
under IFRS 16 paragraph 20.
Based on the assessment of both the legal and political position
in Burundi, the Directors were unable to foresee a date when the
operations at the project would be able to restart and accordingly
have written the net assets of the Gakara cash generating unit to
nil, with a total impairment cost of US$9.6 million recognised in
the Year.
4. LOSS PER SHARE
The earnings per share calculations for 30 June 2023 reflect the
changes to the number of ordinary shares during the Year.
At the start of the Year, 524,405,810 shares were in issue.
During the Year, a total of 74,452,846 new shares were allotted
(see note 7 Share Capital) and on 30 June 2023, 598,858,656 shares
were in issue. The weighted average of shares in issue in the Year
was 536,805,149.
The loss per share has been calculated using the weighted
average number of ordinary shares in issue. The Group was loss
making for all periods presented, therefore the dilutive effect of
share options has not been accounted for in the calculation of
diluted earnings per share, since this would decrease the loss per
share for each reporting period.
Basic and diluted
2023 2022
---------------- ---------------
Loss for the year (US$'000) attributable to ordinary equity holders (11,984) (3,880)
Weighted average number of ordinary shares in issue during the Year 536,805,149 508,566,911
Loss per share (cents) (2.23) (0.76)
---------------- ---------------
5. EXPLORATION AND EVALUATION ASSETS
Gakara Phalaborwa Total
US$'000 US$'000 US$'000
At 1 July 2021 8,635 1,116 9,751
Additions - 837 837
At 30 June 2022 8,635 1,953 10,588
------------------ ------- ---------- -------
Additions - 2,877 2,877
Impairment (8,635) - (8,635)
At 30 June 2023 - 4,830 4,830
------------------ ------- ---------- -------
Only costs relating to the Phalaborwa Project were capitalised
during the Year. The Burundi Project has been under care and
maintenance throughout the Year and, accordingly, none of the costs
meet the requirements under the Group's accounting policy for
capitalisation.
On 12 April 2021, RMB received notification from the Ministry of
Hydraulics, Energy and Mines of the Republic of Burundi of a
temporary suspension on the export of concentrate produced from the
trial mining and processing operations at the Gakara Project. On 29
June 2021, a further notification was received temporarily
suspending all trial mining and processing operations pending
negotiations on the terms of the Gakara mining convention signed in
2015.
The Directors have confirmed from independent legal advisors
that the mining convention in place between RMB and the Government
of Burundi remains legally binding on both parties, and that the
actions of the Government of Burundi have not been in accordance
with that legally binding agreement. However, despite ongoing
engagement with the Government of Burundi since the export ban was
initially imposed, RMB has not received permission to re-start
operations and is unable to reliably estimate when such a re-start
may be possible.
Since acquiring the Phalaborwa project in December 2020 and the
subsequent development of processing technology to recover rare
earth elements from phosphogypsum as a by-product of phosphoric
acid production, the Directors have re-focused the business on
secondary sources of rare earth elements where they consider higher
returns are available. As such the Directors no longer intend to
invest significant amounts at Gakara to convert the existing
resource target to a reserve capable of supporting long term
commercial production, resulting in an impairment review being
carried out for the Gakara exploration and evaluation assets in the
year ended 30 June 2023.
Based on an assessment of both the legal and political position
in Burundi, the Directors consider that the fair value of the
Gakara exploration and evaluation assets calculated in accordance
with IAS 36 is nil and an impairment loss has been recognised.
FinBank SA hold security over the fixed and floating assets of
RMB which include the impaired exploration and evaluation assets
associated with the Gakara mining permit in Burundi.
6. PROPERTY, PLANT AND EQUIPMENT
US$'000 Mine development costs Plant & machinery Vehicles Office equipment Total
------------------------------- ---------------------- ----------------- -------- ---------------- -----
Cost
---------------------- ----------------- -------- ---------------- -----
At 1 July 2021 183 2,847 1,582 45 4,657
Additions - 42 - - 42
---------------------- ----------------- -------- ---------------- -----
At 30 June 2022 183 2,889 1,582 45 4,699
------------------------------- ---------------------- ----------------- -------- ---------------- -----
Additions - - 24 4 28
At 30 June 2023 183 2,889 1,606 49 4,727
------------------------------- ---------------------- ----------------- -------- ---------------- -----
Depreciation
At 1 July 2021 73 2,667 539 24 3,303
Charge for year 26 1 316 10 353
---------------------- ----------------- -------- ---------------- -----
At 30 June 2022 99 2,668 855 34 3,656
Charge for the year 25 5 317 2 349
Impairment 59 216 410 10 695
------------------------------- ---------------------- ----------------- -------- ---------------- -----
At 30 June 2023 183 2,889 1,582 46 4,700
------------------------------- ---------------------- ----------------- -------- ---------------- -----
Net Book Value at 30 June 2023 - - 24 3 27
------------------------------- ---------------------- ----------------- -------- ---------------- -----
Net Book Value at 30 June 2022 84 221 727 11 1,043
------------------------------- ---------------------- ----------------- -------- ---------------- -----
Net Book Value at 30 June 2021 110 180 1,043 21 1,354
------------------------------- ---------------------- ----------------- -------- ---------------- -----
As set out in note 5, the Directors recognise that the ongoing
suspension of all activities of RMB in Burundi and the subsequent
decision not to commit investment for the conversion of the Gakara
resource target to reserves requires an impairment review for the
tangible fixed assets relating to the project in accordance with
IAS36. Based on an assessment of both the legal and political
position in Burundi, the Directors consider that the fair value of
the property, plant and equipment associated with the Gakara
project calculated in accordance with IAS 36 is nil and an
impairment loss has been recognised.
FinBank SA hold security over the fixed and floating assets of
RMB which include the impaired property, plant, and equipment in
Burundi
7. SHARE CAPITAL
Year Ended Year Ended
30 June 2023 30 June 2022
US$'000 US$'000
Share Capital 50,937 41,442
------------- -------------
Issued Share Capital 50,937 41,442
------------- -------------
The table below shows a reconciliation of share capital
movements:
Number of shares US$'000
At 30 June 2021 476,411,434 32,465
July 2021 - Exercise of share options (cash receipts) 2,500,000 182
October 2021 - Share placing - Cash receipts net of costs 32,900,000 6,557
November 2021 - Share placing - Cash receipts net of costs 10,000,000 1,982
December 2021 - Pipestone Loan repayment shares 875,389 175
April 2022 - Exercise of share options (cash receipts) 1,718,987 116
Costs associated with exercise of share options and loan settlement - (35)
---------------- --------
At 30 June 2022 524,405,810 41,442
November 2022 - Exercise of share options (cash receipts) 2,000,000 125
May 2023 - Share placing (cash receipts) 72,452,846 9,485
Costs associated with exercise of share options and share placing - (115)
At 30 June 2023 598,858,656 50,937
---------------- --------
On 13 July 2021, the 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).
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).
On 25 April 2022, the Australian Special Opportunity Fund, LP
exercised options over 1,718,987 million shares at an exercise
price of 5.28p per share, raising gross cash proceeds of
US$116k.
On 10 November 2022, the Australian Special Opportunity Fund, LP
exercised options over 2,000,000 shares at an exercise price of
5.28p per share, raising gross cash proceeds of US$125k.
On 9 May 2023, the Company issued 72,452,846 shares at a price
of 10.377 pence per share, raising gross cash proceeds of US$9.5
million (before costs of US$0.1 million).
On 5 October 2023 a further 26,412,257 shares were issued at a
price of 15 pence per share.
8. POST BALANCE SHEET EVENTS
On 28 June 2023, the Company announced an agreement with Bosveld
Phosphates (Pty) Limited ("Bosveld") to secure a path to 100%
ownership of the Phalaborwa project. As a result, in July 2023 the
Company paid US$5 million to Barak Fund SPC Limited on behalf of
Bosveld as a result of which the Company secured an immediate 85%
interest in the Phalaborwa project and was granted an option to
acquire the remaining 15% via the issue of US$7 million in shares.
As a result of the transaction a success fee of GBP500,000 was paid
to Magna in July 2023.
On 17 July 2023, the Company announced that it had entered into
a memorandum of understanding with Mosaic to jointly develop a
process flowsheet and conduct a preliminary economic assessment
related to the extraction of rare earth elements from Mosaic's
phosphogypsum stack in the Uberaba area of Minas Gerais in
Brazil.
On 27 September 2023, the Company announced the successful
completion of a private placement raising GBP4.5 million
(approximately US$5.5 million) via the issue of 30 million new
Ordinary Shares of no par value at an issue price of GBP0.15 per
share. The initial tranche of 25,786,541 shares was allotted and
admitted to trading on 5 October 2023 under the disapplication of
pre-emption rights granted at the Company's last Annual General
Meeting held on 22 November 2022. The final tranche of 4,213,459
shares are subject to the approval of shareholders at the next
Annual General Meeting to be held in November 2023.
[1] Net present value using a 10% forward discount rate
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