Placing to Raise £1.25m

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS DEFINED UNDER THE MARKET ABUSE REGULATION (EU) NO. 596/2014, AS AMENDED (MAR), IS FOR INFORMATION PURPOSES ONLY AND IS NOT AN OFFER OF SECURITIES IN ANY JURISDICTION THIS ANNOUNCEMENT AND THE INFORMATION IN IT, IS NOT FOR PUBLICATION, RELEASE OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA, NEW ZEALAND, JAPAN, THE REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION WHERE TO DO SO MIGHT CONSTITUTE A VIOLATION OR BREACH OF ANY APPLICABLE LAW OR REGULATION.

FOR IMMEDIATE RELEASE

22 June 2020

Rainbow Rare Earths Limited

("Rainbow" or the "Company") (LSE: RBW)

Placing of New Ordinary Shares raises £1.25 million at 3p per share

Rainbow, the high-grade rare earth producer, is pleased to announce that it has conditionally issued 41,666,667 new ordinary shares of no par value each ("Ordinary Shares") in the Company at a price of 3p per Ordinary Share (the "Placing Price") thereby raising gross proceeds of £1.25 million (the "Placing").  The Placing Price represents a 3.4% premium to the closing mid-market share price of 2.9p per ordinary share on 19^th June 2020.

The 41,666,667 Ordinary Shares issued at the Placing Price includes:

·     £1,114,149 of cash receipts representing 37,138,284 Ordinary Shares

·     £76,038 of fees due to the Company's non-executive directors for the period from 1 January 2020 to 30 June 2020, which has been converted to equity representing 2,534,604 Ordinary Shares (the "Salary Shares"), and

·    The conversion of US$75,000 (£59,813) of the loan received from the Company's CEO in February 2020 into 1,993,779 Ordinary Shares (the "Loan Shares").

Reasons for the Placing

The placing proceeds will be used for general working capital purposes including capital additions to the Company's trial mining fleet and pilot processing plant at the Gakara Rare Earth Project (the "Gakara Project") in Burundi to accelerate the trial mining operations. 

The Company continues to focus trial mining on the Murambi area to demonstrate the continuity of both the strength of mineralisation and the simple nature of the mineralogy for production of a high-grade rare earth concentrate suitable for direct shipment.  To date, Rainbow has produced and shipped 1,600 tonnes of high-grade concentrate from the Gakara Project with an average grade of 57% total rare earth oxides of which over 19% represents high value Neodymium and Praseodymium oxide used for the manufacture of permanent magnets.  Significant volumes of these permanent magnets are necessary for the expected growth in both electric vehicle and wind turbine production, along with other industrial uses, underpinning the inherent value of Rainbow's Gakara Project.

Rainbow is expecting the finalisation of a maiden JORC (2012) compliant resource statement for the Gakara Project within the coming weeks, which will mark an important milestone for the Company.  This will allow the Company to further define the capital requirements for both exploration to grow the resource and further trial mining to demonstrate the continuity of minerology.  The understanding of the resource base from both exploration and trial mining will allow a technical study to be completed for the expansion of the operations at the Gakara Project to a commercial scale.

In parallel, Rainbow continues to explore options for further downstream processing of the high grade Gakara concentrate to a higher value mixed rare earth carbonate or individual rare earth oxides which will allow the Company to realise the full value of the deposit for shareholders.

George Bennett, Chief Executive of Rainbow, said:

"I am delighted by the strong support we have received from both existing and new institutional shareholders in the placing.  We believe that the rare earth business is poised for significant growth and that the Gakara Project can play an important part in this.  With the simple minerology of the deposit and the high-grade nature of the mineralised veins encountered to date we believe that the business can be developed to a commercial scale and look forward to announcing our maiden resource update which will form an important element in delivering that goal."

Participation of the Directors

As part of the Placing the Company's directors have been issued with or subscribed for the following new ordinary shares of nor par value each as follows:

Following the conversion of US$75,000 (£59,813) of the US$1 million unsecured loan received in February 2020 from the Company's CEO, George Bennett via Pipestone Capital Inc, the terms of the remaining US$925,000 have been amended to extend the repayment date.  As a result, the loan is now repayable at any time up to 31 December 2021.  It is intended that the loan be repaid out of the proceeds of a future fundraise; however Pipestone and the Company may agree to repay a portion of the loan in equity on the same terms as those offered to investors at that time.  The loan remains interest free.  The amendments to the loan and its commercial terms were considered fair and reasonable, and approved by the Company's directors other than George Bennett who have no interest in the loan transaction.

Total voting rights and Admission

An application has been made for the Placing Shares, Salary Shares and Loan Shares to be admitted to the Official List of the UK Listing Authority by way of a Standard Listing ("Admission") and it is expected that Admission will become effective and that dealing in the Placing Shares will commence on or around 26 June 2020. The Placing Shares will rank pari passu with the existing ordinary shares of the Company.

Following the Admission the Company will have 421,981,551 Ordinary Shares of no par value each in issue.

The above figure of 421,981,551 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 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

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.

**ENDS**

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