Private Placement Raises £4.5 Million

27 September 2023

Rainbow Rare Earths Limited

("Rainbow" or "the Company")

LSE: RBW

PRIVATE PLACEMENT RAISES £4.5 MILLION

Rainbow Rare Earths is pleased to announce that it has agreed conditionally to issue 30 million new ordinary shares in the Company of no par value each ("Ordinary Shares") at a price of 15p per Ordinary Share (the "Placing Price"), thereby raising gross proceeds of £4.50 million (the "Placing"). 

The Placing Price represents a 3.2% discount to the closing mid-market share price of 15.5p per Ordinary Share on 26 September 2023.

The Placing proceeds include:

·    £0.54 million received from existing shareholder Pella Ventures Limited ("Pella"), a family office with a focus on clean technologies and sustainable energy. Pella is a related party on the basis that its founder, Adonis Pouroulis, is also Non-Executive Chairman of Rainbow;

·    £0.63 million received from existing shareholder TechMet Limited ("TechMet"), the private investment company developing world class projects across the critical metals that form the key building blocks for the global energy transition; and

·    £3.33 million received from other investors, including £0.24 million from other members of Rainbow's Board of Directors and Senior Management.

Of the 30 million Ordinary Shares issued under the Placing, the Ordinary Shares to be issued to Pella are subject to the approval of shareholders at the AGM to be held in November 2023 as set out in more detail below ("Shareholder Approval").

Reasons for the Placing

The Placing proceeds, which total approximately US$5.5 million, replace the US$5.0 million paid to Bosveld Phosphates (Pty) Limited ("Bosveld") in July 2023, plus associated fees, to secure an immediate 85% ownership in the Group's flagship Phalaborwa rare earths project, with an option to acquire the remaining 15%, as announced on 28 June 2023.  In addition to the Company's cash balance of US$1.3 million as at 31 August 2023, the Placing proceeds cover the Company's financing requirements beyond the end of Q1 2024 and will allow for the completion of the Phalaborwa pilot plant operation, which is expected to deliver separated rare earth oxides in Q4 2023, together with general working capital requirements.

George Bennett, CEO, commented: "This is an exciting time for the Phalaborwa project, following the milestone production of the mixed rare earth sulphate from the front-end pilot plant in South Africa and with the production of separated rare earth oxides from our back-end pilot plant in the US expected in Q4 2023. This will be the final de-risking step in order to demonstrate the commerciality of the unique rare earth process flow sheet that Rainbow has developed with its partner K-Technologies, Inc ("K-Tech") to deliver the separated permanent magnet rare earth oxides vitally needed for the green energy transition. It will also open up the opportunity to apply this intellectual property to other phosphogypsum projects globally, starting with the Uberaba project in Brazil."

Participation of the Directors

The following Directors and Senior Management of Rainbow are participating in the Placing:

1.    Calculation includes shares issued to Pella Ventures Limited, beneficially owned by Adonis Pouroulis, which are subject to Shareholder Approval.

Corporate Update

Following its announcement of a private placement on 9 May 2023, the Company signed an agreement with Bosveld, to allow 100% ownership of the Phalaborwa Project in South Africa, as announced on 28 June 2023.  Under the terms of the agreement, Rainbow received an immediate 85% interest in the unincorporated joint venture that holds the rights to Phalaborwa in return for a payment of US$5m that was made in July 2023.  This updated the original Project Co-Development Agreement, which envisaged Rainbow earning a 70% interest in Phalaborwa further to the completion of a pre-feasibility study on the project.

As a result, the Company requires additional financing in order to complete the workstreams to advance the project to DFS, publication of which is expected in H1 2024.  A key part of the DFS workstreams is the operation of the pilot plant, consisting of a front-end situated at the Johannesburg facilities of the Council for Mineral Technology ("Mintek") a global leader in mineral processing, extractive metallurgy, and related fields, and a back-end situated at the Lakeland, USA facilities of K-Technologies Inc ("K-Tech").

The unique and innovative rare earths processing flowsheet designed for the Phalaborwa project, which uses continuous ion exchange ("CIX") and continuous ion chromatography ("CIC") technology to deliver separated rare earth oxides, has been developed in collaboration with K-Tech.  The K-Tech proprietary CIX/CIC process replaces traditional solvent extraction technology for the separation of rare earth oxides, which can be a convoluted process 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.

First production of mixed rare earth sulphate at the Phalaborwa front-end pilot plant was announced on 5 September 2023 and validated Rainbow's successful development of a process flow sheet to recover rare earths from phosphogypsum.  The mixed rare earth sulphate produced was of the expected purity and grade, with recoveries in line with Rainbow's Preliminary Economic Assessment published in October 2022.  The mixed rare earth sulphate includes all four of the critical 'magnet' rare earths, neodymium and praseodymium ("NdPr"), dysprosium ("Dy") and terbium ("Tb"), and is capable of being sold to generate a standalone revenue stream for Rainbow.

The mixed rare earth sulphate will be shipped to the back-end pilot plant at K-Tech's facility in the USA for separation into rare earth oxides.  The back-end pilot plant has commenced commissioning and first production of separated rare earth oxides is expected in Q4 2023.  The pilot plant operation as a whole (both front and back ends) will continue to operate for approximately four months in order to produce sufficient quantities of separated permanent magnet rare earth oxides for testing and marketing purposes.

Other key workstreams for the DFS have commenced and are progressing well.  METC Engineering has commenced work on the DFS and is managing the inputs from the various specialist consultants.  Paragon Tailings is advising on reclamation of the existing gypsum stacks.  Ardaman, a leading global gypsum expert, is conducting test and design work for the new gypsum stacks.  A drilling programme is underway to update the Phalaborwa resource and environmental work, including full ESIA workstreams are underway by WSP Golder for the purpose of both the DFS and permitting.

The Placing proceeds will be used primarily for the Phalaborwa project, reflecting the re-focus of the Company's business to secondary sources of rare earth elements where the Directors consider higher returns are available compared to primary hosted ore bodies such as the Company's Gakara project in Burundi.  The fact that the Directors do not envisage investing significant amounts in Burundi to develop a formal mineral resource is considered to be an indicator of impairment under IFRS 6 and, accordingly, for the 30 June 2023 annual report a formal impairment review for the Gakara project will be undertaken.  Based on an 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 it is likely that the carrying value of the exploration and evaluation assets in Burundi and the associated tangible fixed assets, which had a combined net book value of US$9.7 million at 30 June 2022, will be fully impaired.

As disclosed in the interim results announced on 31 March 2023 Rainbow engaged the services of a related party, Magna Capital (Guernsey) Limited ("Magna"), in which Adonis Pouroulis, the Non-Executive Chairman of the Board of Directors, has a beneficial interest, to assist in the negotiation and execution of the transaction to allow 100% consolidation of the Phalaborwa asset.  During the year ended 30 June 2023, a total of £60k was paid to Magna and a further £500k success fee was paid in July 2023 in relation to the successful completion of that transaction.  This related party contract has now finished with no further work planned between the Company and Magna.

Total voting rights and Admission

An application has been made for the initial 26,412,257 Ordinary Shares to be issued pursuant to the Placing (the "Unconditional Shares") to be admitted to the Official List (by way of a Standard Listing) and to trading on the London Stock Exchange Plc's Main Market for listed securities ("First Admission").  It is expected that First Admission will become effective and that dealing in the Unconditional Shares will commence on or around 6 October 2023.  The Unconditional Shares will rank pari passu with the existing Ordinary Shares.  Following Admission of the Unconditional Shares, the Company will have 625,270,912 Ordinary Shares in issue.

The issue of a further 3,587,743 Ordinary Shares to Pella (the "Conditional Shares") is subject to Shareholder Approval.  It is expected that admission of the Conditional Shares will become effective and that dealing in the Conditional Shares will commence on or around 4 December 2023 ("Second Admission") following the AGM.  The Conditional Shares will rank pari passu with the existing Ordinary Shares.

Following the First Admission and prior to the AGM and the issue of the Conditional Shares, the above figures of 625,270,912 Ordinary Shares may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the Company under the FCA's Disclosure, Guidance and Transparency Rules.

IMPORTANT NOTICES

This announcement includes "forward looking statements" which include all statements other than statements of historical facts, including, without limitation, those regarding the Company's financial position, business strategy, plans and objectives of management for future operations, or any statements proceeded by, followed by or that include the words "targets", "believes", "expects", "aims", "intends", "will", "may", "anticipates", "would", "could" or similar expressions or negatives thereof.  Such forward looking statements involve known and unknown risks, uncertainties and other important factors beyond the Company's control that could cause the actual results, performance or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward looking statements.  Such forward looking statements are based on numerous assumptions regarding the Company's present and future business strategies and the environment in which the Company will operate in the future.  These forward-looking statements speak only as at the date of this announcement.  Except as required by the FCA, the London Stock Exchange or applicable law (including as may be required by the Listing Rules, the Prospectus Regulation, the Prospectus Rules, MAR and the Disclosure Guidance and Transparency Rules), the Company expressly disclaims any obligation or undertaking to disseminate or release publicly any updates or revisions to any forward looking statements contained in this announcement to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based.

Market Abuse Regulation 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, as amended ("MAR"), and is disclosed in accordance with the Company's obligations under Article 17 of MAR. Market soundings, as defined in MAR, were taken in respect of the Placing, with the result that certain persons became aware of inside information, as permitted by MAR. That inside information is set out in this announcement and has been disclosed as soon as possible in accordance with paragraph 7 of article 17 of MAR. Therefore, those persons that received inside information in a market sounding are no longer in possession of inside information relating to the Company and its securities.

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Notes to Editors:

About Rainbow:

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

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

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