TIDMRBW
RNS Number : 7063S
Rainbow Rare Earths Limited
08 November 2023
8 November 2023
Rainbow Rare Earths Limited
("Rainbow" or "the Company")
LSE: RBW
TechMet option to invest US$50 million materially de-risks
Phalaborwa equity financing
-- Critical metals champion TechMet Limited ("TechMet") granted
option to invest US$50 million to take direct stake in the
Phalaborwa project in South Africa
-- TechMet's mission is to develop world-class projects across
the critical minerals supply chain and counts the United States
International Development Finance Corporation ("DFC") as a major
backer
-- TechMet's extensive due diligence process has confirmed
Phalaborwa's potential to be one of the lowest cost producers of
separated rare earth oxides in development, leading to economic
resilience across all anticipated future pricing scenarios
Rainbow Rare Earths is pleased to announce that it has entered
into an option agreement with TechMet (the "TechMet Option"),
whereby TechMet has the right to invest US$50 million to fund a
substantial part of the equity component required for the project
financing for Rainbow's Phalaborwa project in South Africa.
Under the terms of the TechMet Option the US$50 million
investment will, depending on final project economics, give TechMet
between a 15% and 33% direct equity interest in the project,
underpinning a valuation of the project equity at between US$151.5
million and US$333.3 million. Given the de-risking that the TechMet
Option will bring to the overall funding requirement to develop
Phalaborwa, Rainbow sees this as a significant validation of the
robust economics of Phalaborwa.
The TechMet Option agreement follows a period of extensive due
diligence, as required by its own internal processes and as part of
its commitments to the DFC and other shareholders. TechMet's
mandate is to identify world-class projects across the critical
minerals space, which are operated according to high standards of
environmental, social and governance criteria, as well as showing
the potential for excellent economic returns.
The overall capital expenditure for the project set out in the
Preliminary Economic Assessment released in October 2022 was US$295
million, which is expected to be financed predominantly via
debt.
George Bennett, CEO of Rainbow, commented: "We are delighted
with the confidence shown by our long-term strategic investor,
TechMet, following their due diligence on Phalaborwa. We believe
that the TechMet Option is a significant de-risking for the
financing requirements. This validates the Company's focus on the
development of rare earths from secondary sources, as well as
supporting the Company's belief that Phalaborwa is a strong and
unique project. We expect Phalaborwa to continue to attract
funding, especially from US-sources of capital, due to the focus on
the critical role of these rare earth metals in the
technology-driven industrial and clean energy age."
Brian Menell, Chairman and CEO of TechMet, said : "Phalaborwa
has the potential to become one of the most environmentally
friendly and lowest-cost rare earth projects anywhere in the world.
Thanks to Rainbow's proprietary separation technology, Phalaborwa
provides a significant opportunity to fast-track production of the
four most economically important rare earth elements which are
essential for future supply chains for electric vehicles, wind
turbines and other products vital to the energy transition and the
global economy. TechMet , is excited to be able to continue to
support this outstanding project, which will produce rare earths in
the most responsible manner possible."
About the Phalaborwa project
The Phalaborwa project in South Africa represents an exciting,
near-term production opportunity of all four of the permanent
magnet rare earths required for the green energy transition. The
operation will involve the processing of phosphogypsum stacks,
which are the byproduct of historic phosphoric acid production on
the site, which ceased in 2014. This resource sits at surface,
thereby eliminating the cost and risk of traditional mining
projects.
Rainbow will be using proprietary separation technology
developed by, and in conjunction with, its partner K-Technologies,
Inc., which will allow for the material to be processed into
separated rare earth oxides of 99.95% purity. This separation
technique replaces traditional solvent extraction 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.
Rainbow will be taking a waste product (the existing phosphogypsum
stacks), cleaning it and extracting value from it - both via the
recovery of the rare earth elements and then via the sale of the
benign gypsum that is produced as the by-product of the process.
Rainbow's 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.
The Phalaborwa Preliminary Economic Assessment 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 < two years. Due to its comparatively low
operating cost and high EBITDA margin, the project is expected to
be highly cash generative across the rare earth pricing cycle.
TechMet Option - Key Terms
TechMet has been granted an option to invest US$50 million as
part of the equity funding component for the Phalaborwa capital
cost, which will see TechMet take a direct ownership stake at
project level. The TechMet stake will be dependent on the net
present value set out in the definitive feasibility study for the
project. Based on the agreed formula, the equity stake will be
within a range of 15-33%.
The TechMet Option is executable for three months following
receipt of a credit approved term sheet for construction debt,
which will define the total equity requirement for the project
development.
As part of the TechMet Option agreement, Rainbow has also
granted TechMet a put option to exchange the direct stake in the
project for shares in the listed entity at the fair market value of
the underlying Phalaborwa stake for a period of two years from the
commercial completion of the Phalaborwa project, or at any time in
the event of a change in control of Rainbow.
For further information, please contact:
Rainbow Rare Earths George Bennett
Ltd Company Pete Gardner +27 82 652 8526
Cathy Malins +44 7876 796 629
(IR) 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:
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 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[2], an average EBITDA operating margin of
75% and a payback period of < 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.
More information is available at www.rainbowrareearths.com .
About TechMet
TechMet Limited is a leading technology metals investment
company with a portfolio of assets that responsibly produce,
process, and recycle the metals that are critical to the global
energy transition and the electric vehicle revolution. Current
assets in the TechMet portfolio include lithium extraction from
both brine and hard rock sources, nickel and cobalt hydroxide
production from laterite ores, vanadium chemical production from
industrial waste feedstocks, rare earth production and processing,
tin and tungsten mining, lithium-ion battery recycling, and
high-performance cathode manufacturing. TechMet's major
shareholders include the U.S. International Development Finance
Corporation (DFC) and the global energy and commodity group
Mercuria.
More information is available at www.techmet.com .
[1] Net present value using a 10% forward discount rate
[2] Net present value using a 10% forward discount rate
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