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