TIDMRBW
RNS Number : 1114F
Rainbow Rare Earths Limited
17 March 2022
Rainbow Rare Earths Limited
("Rainbow" or the "Company")
(LSE: RBW)
17 March 2022
Interim Results for the six months ended 31 December 2021
Rainbow is pleased to announce its unaudited results for the six
months ended 31 December 2021 ("H1 2022", "the period").
Highlights
-- The low-carbon technologies required to facilitate the green
revolution carry an intensive demand for minerals; accelerated by
evolving emissions legislation and targets, rare earths demand is
expected to be driven by growing electric vehicle production and
offshore wind exploitation.
-- Rainbow's rare earths basket prices have risen 80% during H1
2022, significantly outstripping forecast price rises, driven by a
94% increase in the reported price of Neodymium oxide.
-- Exclusive intellectual property licencing agreement with
K-Technologies, Inc. to use its rare earths separation technology
in the Southern African Development Community region, focusing on
recovering separated magnet rare earth oxides from the Phalaborwa
project in South Africa.
-- Positive test work results at Phalaborwa indicate:
o strong recoveries via a simple acid leaching process expected
to allow 65-70% of the rare earths contained in the Phalaborwa
gypsum stacks to be recovered in solution;
o low capital and operating costs expected compared to a
traditional hard rock rare earth mining project, with hydraulic
reclamation of the gypsum stacks to the processing facility
eliminating costs traditionally associated with primary mining,
crushing and griding of ore, and low-cost reagents available
locally to the project;
o optimisation opportunities identified to further reduce
capital and operating costs with trade-off studies under way;
o flexibility in terms of project development allowing a mixed
rare earth carbonate to be initially produced if required at a
lower up front capital cost; and
o environmental benefits identified from the very low levels of
radioactive elements associated with the gypsum stacks and the
ability to treat and use the existing water from the stacks as the
bulk of the process water in a closed circuit.
-- Rainbow's shareholding in Phalaborwa was confirmed at 70%,
removing any downside uncertainty concerning the potential to
dilute the Company's Joint Venture share, as well as assuring a
material share in future revenue.
-- Gross proceeds of GBP6.435 million raised through a placing
and subscription from Techmet Limited and other global
institutional investors.
-- Gakara remains on care and maintenance, with short-term cash
requirements minimised - Rainbow looks forward to further
constructive engagement with all stakeholders to allow trial mining
and processing operations to recommence.
George Bennett, CEO, said: "The escalating urgency to tackle
climate change is revealing a number of challenges, including a
supply deficit of the raw materials required to drive the clean
energy transition and a need to diversify the supply chain. With
our near-term development opportunity at Phalaborwa in South
Africa, we believe Rainbow is well positioned to contribute to this
global effort by providing a responsible, Western source of rare
earth oxides, critical minerals for the permanent magnets used in
offshore wind generation, electric vehicles, mobile phones,
electric scooters, bicycles, and other green technologies.
We have reached an important stage at Phalaborwa following the
recent test work carried out and are working hard to explore all
the optimisation opportunities and define the optimised process
flow sheet. With the right team in place, I believe we are in a
strong position to move forward and realise the full value of this
exciting asset for our stakeholders."
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.
For further information, please contact:
Rainbow Rare Earths George Bennett
Ltd Company Pete Gardner +27 82 652 8526
SP Angel Corporate Ewan Leggat
Finance LLP Broker Charlie Bouverat +44 (0) 20 3470 0470
Tavistock Communications PR/IR Charles Vivian +44 (0) 20 7920 3150
Limited Tara Vivian-Neal rainbowrareearths@tavistock.co.uk
Notes to Editors:
Rainbow's strategy is to become a globally significant producer
of rare earth metals. Nd/Pr and Dy are vital components of the
strongest permanent magnets used for the motors and turbines
driving the green technology revolution. Analysts are predicting
demand for magnet rare earth oxides will grow substantially over
the coming years, driven by increasing adoption of green
technology, pushing the overall market for Nd/Pr and Dy into
deficit.
The Phalaborwa Rare Earths Project, located in South Africa,
comprises an Inferred Mineral Resource Estimate of 38.3Mt at 0.43%
TREO contained within gypsum tailings stacked in unconsolidated
stacks derived from historic phosphate hard rock mining. High value
NdPr oxide represents 29.1% 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 is expected to allow high-value separated rare earth
oxides to be produced with lower operating costs than a typical
rare earth mineral project.
The Company's Gakara Project in Burundi has produced one of the
highest-grade rare earth concentrates in the world (typically 54%
total rare earths oxides ("TREO")) through trial mining operations.
The Gakara basket is weighted heavily towards Nd/Pr, which account
for approximately 19.5% of the contained TREO and 85% of the value
of the concentrate. The Gakara project is currently on care and
maintenance at the request of the Government of Burundi.
CEO Review
The shift away from fossil fuels toward the greater utilisation
of renewable energies and widespread adoption of green technology
is essential for the planet's future. However, the low-carbon
technologies required to drive the green revolution carry an
intensive demand for minerals.
Central to this demand are rare earth elements ("REEs") - in
particular, Neodymium, Praseodymium (together "NdPr") and
Dysprosium - which are used to make compact, high-strength
permanent magnets employed in hybrid and electric vehicles ("EVs")
and wind turbines. These permanent magnets also have specialist
uses in the aerospace and defence industries. According to the
International Energy Agency ("IEA"), REEs may see three to seven
times higher demand by 2040 when compared to 2021.[1]
With no acceptable substitutes for NdPr in permanent magnets, we
anticipate strong demand for these rare earth elements driven by
increasingly ambitious government targets and evolving global
emissions legislation, particularly in the wake of the United
Nations Climate Change Conference ("COP26") at the end of 2021.
With REE separation and refining plants predominantly located in
China (accounting for a 90% market share of the rare earths
refining market in 2019 ([2]) ), Rainbow is one of the few
companies operating in other parts of the world.
This demand growth stands in contrast to a scarcity of new
economic project development opportunities, which drive increasing
pressure on rare earths supply. As a result, REE prices have risen
considerably, with Rainbow's typical basket prices for both the
Gakara and Phalaborwa projects increasing by 80% in H1 2022 and
continuing to escalate after the period end. This was driven by a
94% increase in the reported price for Nd oxide and a 67% increase
in the reported price of Pr oxide. Many analysts are predicting
continued high prices throughout 2022 and beyond, given the tension
between supply and demand.
We believe that, with its near-term development opportunity at
Phalaborwa, Rainbow is in a pivotal position to provide the
foundational materials required to advance this clean technology
and the green revolution. Phalaborwa can be brought into production
quickly, with low capital and operating expenditure, in an
environmentally responsible manner to deliver a high-grade
oxide.
Operational update
Phalaborwa
The Phalaborwa Rare Earths Project, located in South Africa,
comprises an Inferred Mineral Resource Estimate of 38.3 million
tonnes at 0.43% TREO contained within gypsum residue stacked in
unconsolidated stacks derived from historic phosphate hard rock
mining. In January 2022, we signed an agreement confirming
Rainbow's shareholding in the Phalaborwa Joint Venture at 70%, with
the remaining 30% held by Bosveld Phosphates (Pty) Ltd. This
amendment removes any downside uncertainty concerning the potential
to dilute the Company's share within the Joint Venture, assuring
Rainbow's material share in future revenue.
High-value NdPr oxide represents 29.1% of the total contained
rare earth oxides, with economic Dysprosium (Dy) and Terbium (Tb)
oxide credits enhancing the overall value of the rare earth basket
contained in the stacks. Phalaborwa's NdPr grade is substantially
higher than a typical low-cost ionic clay rare earth project, much
closer to traditional hard rock style deposits. However, due to the
unique nature of the project, with the rare earths contained in a
'cracked' chemical form in the phosphogypsum, no significant costs
associated with mining, crushing and grinding, or chemical cracking
of the underlying rare earth minerals are required, comparing
favourably with other projects.
In September 2021, we entered into an exclusive intellectual
property ("IP") licencing agreement with K-Technologies, Inc.
("K-Tech"), the processing technology developer located in
Lakeland, Florida, USA, to use its rare earths separation
technology in the Southern African Development Community ("SADC")
region. We believe that this agreement provides Rainbow with a
significant competitive advantage and that the IP is ideally suited
to Phalaborwa, where it would enable us to focus on the separation
of only the most valuable rare earth oxides within the basket,
namely NdPr, Dy and Tb, which are all critical building blocks for
the green revolution.
Post year-end, positive results were received from the ongoing
phased test work programme, which is being conducted in conjunction
with ANSTO Minerals in Australia, a world-leading critical and
strategic metals processing expert ("ANSTO"), and K-Tech. The
K-Tech purification and separation desktop study has confirmed the
ability to participate further downstream in the value chain and
produce separated NdPr oxide, Dy oxide and Tb oxide on site with
99.5-99.9% purity from the leach solution, providing a 47% increase
in revenue over the expected sales price for a mixed rare earth
carbonate.
Test work has also indicated strong recoveries and optimisation
opportunities and continues to underscore Phalaborwa's robust
fundamentals. Potential for capital and operating cost savings have
been identified, with flexibility for phased project development if
required providing versatility: the K-Tech study has shown that a
cerium-depleted mixed rare earth carbonate could be produced at
Phalaborwa as an initial phase if required at a lower up-front
capital cost.
The studies have also highlighted the significant environmental
benefits of the project, which include very low levels of
radioactivity (exempting Phalaborwa from radioactivity regulation)
and the ability to neutralise the existing water from the stacks
for reuse in a closed circuit as plant process water. In processing
material from the existing gypsum stacks at Phalaborwa, we aim to
deliver a clean rare earths project, removing existing
environmental liabilities and redepositing benign gypsum on a new
stack, built according to International Finance Corporation ("IFC")
Performance Standards and Equator Principles.
The test work results are enabling us to develop an economic
rare earths extraction flowsheet as part of the ongoing work on the
Preliminary Economic Assessment ("PEA"). The next phase of the test
work programme, which includes several trade-off and project
optimisation studies, is progressing.
Despite some bottlenecks relating to covid restrictions at
international laboratories, which have delayed some of our
metallurgical analysis results, we have achieved considerable
progress at this asset since Rainbow secured the project in
December 2020. By getting this stage of process flow sheet
definition right we will realise the full value of Phalaborwa and
develop a responsible, independent Western rare earths supply
chain.
Gakara
Rainbow's Gakara Project is one of the world's richest rare
earth deposits, with trial mining and processing carried out since
2017 demonstrating the deposit's amenability to simple open pit
mining and low-cost gravity separation from ore sourced from
high-grade stockwork vein systems across the licence area. Gakara
produces a high-value rare earth concentrate of 52-58% TREO, with
low levels of radioactivity. NdPr represents approximately 85% of
the overall basket value, at only 19.5% of the mass.
Gakara was placed on care and maintenance in June 2021 at the
request of the Government of Burundi, with the majority of staff
placed on suspension. At 31 December 2021, to comply with Burundi
legislation, suspended staff contracts were terminated and
short-term cash requirements minimised. Rainbow looks forward to
further constructive engagement with all stakeholders to allow
trial mining and processing operations to recommence.
Corporate
Rainbow successfully raised gross proceeds of GBP6.435 million
through a placing and subscription of new ordinary shares of no par
value each in the Company ("Ordinary Share") in October 2021 (the
"Placing"), and we were delighted to welcome new institutional
shareholders alongside TechMet Limited ("TechMet") in the Placing.
With its stringent investment criteria and its goal to secure the
critical metals for the global technology revolution, the
substantial investment by TechMet, which counts the U.S. government
as a major investor, represented a significant development for the
Company. We also continue to be encouraged by the sustained strong
support of existing shareholders.
I firmly believe that we have the right people in place at
Rainbow to take Phalaborwa's development forward, with significant
experience throughout the asset lifecycle from optimisation,
feasibility and development to plant construction and
commissioning. As a team, we have led numerous projects through
this vital phase and recognise the enormous benefits of
implementing the correct trade-offs and optimising to the greatest
extent possible to deliver a successful result.
With our near-term development opportunity at Phalaborwa, we
believe Rainbow is ideally positioned to contribute to a
responsible, Western source of rare earths to drive the global
green energy transition.
George Bennett
Chief Executive Officer
Financial Review
The six months ended 31 December 2021 have seen a focus on the
definition of the Phalaborwa project processing flowsheet.
Exploration and Evaluation expenditure totalling US$294k was
capitalised in the period primarily relating to test work
undertaken at international laboratories and the management thereof
by the Rainbow team to understand the optimal economic methodology
for the extraction of separated rare earth oxides from the gypsum
residue.
At Gakara, operations remained on care and maintenance
throughout the period at the direction of the Government of
Burundi. As a result, no costs have been capitalised relating to
the project in the period, with expenditure totalling US$810k
recognised on the income statement for H1 2022. In the comparative
period in H1 2021, Burundi costs totalled US$1,311k, with US$268k
of administration costs recognised in the income statement, and a
further US$516k capitalised to exploration and evaluation assets
net of US$527k export revenue. Costs in the current period include
US$128k recognised for the retrenchment of staff following a period
of employment contract suspension since July 2021. With these
retrenchments, the care and maintenance costs at Gakara have now
been minimised, with a small team remaining to ensure the equipment
at the site remains in good order and to manage the ongoing
administration. In line with the International Financial Reporting
Standards requirements, depreciation totalling US$173k has been
recognised for the idle mining and processing equipment during the
period.
The Group's corporate costs grew in the six months ended 30 June
2021 from a low base. With the expected fast track development of
Phalaborwa, the administrative structures for the Group are being
strengthened, and a new head office function is being set up in
South Africa. Total expenditure of US$970k (excluding US$154k share
option costs) in the six months ended 31 December 2021 is
significantly higher than US$561k in the period ended 31 December
2020, as set out in note 3 to the interim financial statements.
However, it was in line with the costs incurred in the period from
1 January to 30 June 2021 (US$971k excluding US$554k share option
costs).
During the period, the Group significantly strengthened its
balance sheet, raising US$8.5 million, net of costs, at a price of
15 pence per new Ordinary Share. This funding has allowed the
Pipestone loan to be fully repaid, including accrued interest, via
US$886k cash and US$175k equity at 15p per new Ordinary Share. This
has left a closing bank balance of US$6.4 million at 31 December
2021, with the sole remaining long-term financial liability being
the US$0.6 million FinBank loan in Burundi, on which capital
repayments are currently being deferred. The current cash balance
is expected to allow the Preliminary Economic Assessment for the
Phalaborwa project to be delivered following a period of process
flow sheet definition and optimisation. Once this phase of work is
completed at Phalaborwa, a timetable and budget for the Definitive
Feasibility Study, including necessary on-site pilot test work,
will be prepared, allowing the longer-term financing strategy for
the Group to be set out with greater precision.
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
16 March 2022
Condensed Consolidated Statement of Comprehensive Income
For the six months ended 31 December 2021
6 months ended 6 months ended
31 December 2021 31 December 2020
US$'000 US$'000
Notes Unaudited Unaudited
Revenue - 527
Production and sales costs - (527)
----------------- -----------------
Gross loss - -
Administration expenses 3 (1,934) (829)
Loss from operating activities (1,934) (829)
----------------- -----------------
Finance income - 249
Finance costs (168) (310)
Loss before tax (2,102) (890)
----------------- -----------------
Income tax expense (5) (5)
Total loss after tax and comprehensive expense for the period (2,107) (895)
================= =================
Total loss after tax and comprehensive expense for the period is
attributable to:
Non-controlling interest (56) (7)
Owners of parent (2,051) (888)
(2,107) (895)
================= =================
Loss per share (cents)
Basic 4 (0.42) (0.21)
Diluted 4 (0.42) (0.21)
----------------- -----------------
The results of each period are derived from continuing
operations.
Condensed Consolidated Statement of Financial Position
As at 31 December 2021
As at As at As at
31 December 30 June 31 December
2021 2021 2020
US$'000 US$'000 US$'000
Notes Unaudited Audited Unaudited
Non-current assets
Exploration and evaluation assets 5 10,045 9,751 8,909
Property, plant and equipment 6 1,220 1,354 1,081
Right of use assets 68 70 93
------------
Total non-current assets 11,333 11,175 10,083
Current assets
Inventory 864 863 227
Trade and other receivables 414 441 630
Cash and cash equivalents 6,371 573 2,494
------------ -------- ------------
Total current assets 7,649 1,877 3,351
Total assets 18,982 13,052 13,434
------------ -------- ------------
Current liabilities
Trade and other payables 7 (990) (1,009) (610)
Borrowings 8, 2b (178) (1,231) (1,175)
Lease liabilities (18) (14) (27)
Total current liabilities (1,186) (2,254) (1,812)
------------ -------- ------------
Non-current liabilities
Borrowings 8 (749) (662) (622)
Lease liabilities (52) (69) (86)
Provisions (61) (61) (100)
------------ -------- ------------
Total non-current liabilities (862) (792) (808)
------------ -------- ------------
Total Liabilities 2b (2,048) (3,046) (2,620)
------------ -------- ------------
NET ASSETS 16,934 10,006 10,814
============ ======== ============
Equity
Share capital 9, 2b 41,345 32,465 31,686
Share based payment reserve 1,375 1,295 1,260
Other reserves 2b 60 60 60
Retained loss 2b (24,854) (22,878) (21,301)
------------ -------- ------------
Equity attributable to the parent 2b 17,926 10,942 11,705
Non-controlling interest (992) (936) (891)
------------
TOTAL EQUITY 16,934 10,006 10,814
============ ======== ============
Condensed Consolidated Cash Flow Statement
For the six months ended 31 December 2021
6 months ended 6 months ended
31 December 2021 31 December 2020
US$'000 US$'000
Unaudited Unaudited
Cash flow from operating activities
Loss from operating activities (1,934) (829)
Adjustments for:
Depreciation 187 28
Share-based payment charge 154 -
Operating loss before working capital changes (1,593) (801)
Net (increase)/decrease in inventory (1) 7
Net decrease/(increase) in other receivables 27 (251)
Net (decrease) in trade and other payables (16) (338)
----------------- -----------------
Cash used by operations (1,583) (1,383)
Realised foreign exchange gains 76 219
Finance costs (43) (8)
Taxes paid (2) (5)
----------------- -----------------
Net cash used in operating activities (1,552) (1,177)
----------------- -----------------
Cash flow from investing activities
Purchase of property, plant & equipment (44) (264)
Exploration and evaluation costs (294) (797)
Net cash used in investing activities (338) (1,061)
----------------- -----------------
Cash flow from financing activities
Proceeds of new borrowings - 275
Repayment of borrowings (885) (390)
Interest payments on borrowings (43) (70)
Payment of lease liabilities (17) (14)
Proceeds from the issuance of ordinary shares 8,962 4,198
Transaction costs of issuing new equity (257) (85)
Net cash generated by financing activities 7,760 3,914
----------------- -----------------
Net increase in cash and cash equivalents 5,870 1,676
Cash & cash equivalents at the beginning of the period 573 788
Foreign exchange (loss)/gain on cash & cash equivalents (72) 30
-----------------
Cash & cash equivalents at the end of the period 6,371 2,494
================= =================
Condensed Consolidated Statement of Changes in Equity
For the six months ended 31 December 2021
Share Share- Share Other Accumulated Attributable Non-controlling Total
capital based warrant reserves losses to the interest
Payments reserve parent
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Balance at 1
July 2020
(audited) 28,132 1,099 40 60 (20,542) 8,789 (884) 7,905
Total
comprehensive
expense
Total
comprehensive
loss - - - - (888) (888) (7) (895)
Transactions
with owners
Issue of
shares during
the period 3,423 - - - - 3,423 - 3,423
Share placing
transaction
costs (85) - - - - (85) - (85)
Phalaborwa
consideration
to be settled
in equity - 250 - - - 250 - 250
Share option
exercised in
period, net
of costs 216 (89) - - 89 216 - 216
Warrants
expired in
period - - (40) - 40 - - -
Balance at 31
December 2020
(unaudited ,
see note 2b ) 31,686 1,260 - 60 (21,301) 11,705 (891) 10,814
----------- ---------- ----------- ----------- ----------- ------------ --------------- -------
Total
comprehensive
expense
Total
comprehensive
loss - - - - (1,802) (1,802) (45) (1,847)
Transactions
with owners
Phalaborwa
consideration
settled in
equity 250 (250) - - - - - -
Share option
exercised in
period, net
of costs 529 (225) - - 225 529 - 529
Fair value of
employee
share options
in the period - 510 - - - 510 - 510
Balance at 30
June 2021
(audited) 32,465 1,295 - 60 (22,878) 10,942 (936) 10,006
----------- ---------- ----------- ----------- ----------- ------------ --------------- -------
Total
comprehensive
expense
Total
comprehensive
loss - - - - (2,051) (2,051) (56) (2,107)
Transactions
with owners
Issue of
shares during
the period 8,780 - - - - 8,780 - 8,780
Share placing
transaction
costs (239) - - - - (239) - (239)
Shares issued
as partial
settlement of
Pipestone
loan 175 - - - - 175 - 175
Costs
associated
with
Pipestone
loan
settlement
shares (18) - - - - (18) - (18)
Fair value of
employee
share options
in the period - 155 - - - 155 - 155
Share option
exercised in
period, net
of costs 182 (75) - - 75 182 - 182
Balance at 31
December 2021
(unaudited) 41,345 1,375 - 60 (24,854) 17,926 (992) 16,934
=========== ========== =========== =========== =========== ============ =============== =======
Notes to the Condensed Financial Statements
For the six months ended 31 December 2021
1. General information
Rainbow Rare Earths Limited (the 'Company' or 'Rainbow',
together with its subsidiaries the 'Group'), is a company limited
by shares domiciled in Guernsey, incorporated on 5 August 2011 with
company registration number 53831. The Company's registered office
is Trafalgar Court, Admiral Park, St Peter Port, Guernsey. The
nature of the Group's operations and its principal activities are
set out in the CEO and Financial Reviews.
The financial information for the year ended 30 June 2021 does
not constitute the audited statutory accounts but has been
extracted from those accounts. The report of the auditors on those
accounts was unqualified.
This Interim Report has not been audited or reviewed.
A copy of this Half Yearly Report has been published and may be
found on the Company's website at www.rainbowrareearths.com
2. Basis of preparation
These condensed consolidated interim financial statements for
the 6 months ended 31 December 2021 have been prepared in
accordance with IAS 34 'Interim Financial Reporting'. They do not
include disclosures that would otherwise be required in a complete
set of financial statements and should be read in conjunction with
the 2021 Annual Report and Accounts.
The same accounting policies and methods of computation are
followed in the condensed interim financial statements as were
followed in the most recent annual financial statements of the
Group, which were published on 27 October 2021. There are no newly
effective IFRS Standards which have had an impact on the financial
statements.
(a) Going concern
The Directors have continued to use the going concern basis in
preparing these condensed financial statements. The Group's
business activities, together with the factors likely to affect
future development, performance and position are set out in the CEO
Statement. The financial position of the Group, its cash flow and
liquidity position are described in the Financial Review.
The Group's cash balance at 31 December 2021 was US$6,371k (30
June 2021: US$573k). The Board have reviewed the Group's latest
cash flow forecasts for the period to 30 June 2023, including
reasonably possible downside scenarios. This has included the
following assumptions:
-- Forecast expenditure of US$2.6 million for ongoing general
and administrative costs of the Group over the 18-month period from
1 January 2022 to 30 June 2023, based on the current administrative
cost base. The reasonably possible downside scenario includes a 10%
contingency for unexpected costs.
-- Estimated funding requirements of US$1.7 million for
Phalaborwa, of which US$0.5 million is committed. This includes
ongoing process definition test work, upgrading the resources from
inferred to the measured and indicated categories, and delivery of
a Preliminary Economic Assessment for the project. Due to the
nature of the ongoing process definition work actual costs and the
timing of expenditure may differ to estimates. The reasonably
possible downside scenario includes all currently forecast costs,
including US$1.2 million not yet committed. The additional costs
required to complete a bankable feasibility study have been
excluded from management's base case forecasts and reasonably
plausible downside scenarios as these cannot be reliably forecast
until the final processing flow sheet has been defined.
-- A continuation of care and maintenance for the Group's Gakara
project in Burundi at a total cash cost of US$0.8 million,
including the scheduled repayments of the US$0.6 million term loan
from FinBank. In the event that the Gakara project returns to
operations, stock of rare earth concentrate with an estimated gross
sales value of US$1.8 million would be sold to provide the funds to
re-commence trial mining and processing operations. The forecasts
show that, with the current productive capacity of the trial mining
operations, the Gakara project would not require additional
financial support from Rainbow Rare Earths Limited at current rare
earth prices.
Based on management's reasonably plausible downside scenario
outlined above the Group will have US$1.0 million available at the
end of the forecast period. Accordingly, the Board are satisfied
that the Group has sufficient cash resources to continue its
operations and meet its commitments for the foreseeable future and
have concluded that it is appropriate for the financial statements
to be prepared on a going concern basis.
(b) Adjustment of prior period
The unaudited interim accounts for the period ended 31 December
2020, as originally published on 24 March 2021, indicated that
US$89k was transferred from the share-based payment reserve to
share capital relating to share options exercised in H2 2020. In
the audited accounts for the year-ended 30 June 2022 the
share-based payment reserve was transferred to retained earnings,
and the prior period balance sheet has been adjusted to reflect
that treatment.
In addition, the previously published interim accounts indicated
that US$87k was added to the other reserve representing a discount
on the Pipestone Loan in which George Bennett, the Company's CEO,
had a beneficial interest. As disclosed in the audited accounts for
the year ended 30 June 2021 on refinancing in December 2020 the
loan bore interest and therefore a discount was not required. The
prior period balance sheet has been adjusted to reflect that
treatment.
The below table summarises the impact of the adjustment to the
period ended 31 December 2019:
Original Adjustment Revised
US$'000 US$'000 US$'000
Unaudited Unaudited Unaudited
Consolidated Statement of Financial Position
Borrowings due within one year 1,088 87 1,175
Total liabilities 2,533 87 2,620
---------- ---------- ----------
Share Capital 31,775 (89) 31,686
Other reserve 147 (87) 60
Retained earnings (21,390) 89 (21,301)
Equity attributable to the parent 11,792 (87) 11,705
---------- ---------- ----------
(c) Dividend
The Directors do not recommend the payment of a dividend for the
period (six months ended 31 December 2020: US$nil, six months ended
30 June 2021: US$nil).
(d) Principal Risks and uncertainties
There are a number of potential risks and uncertainties inherent
in the mining sector which could have a material impact on the
long-term performance of the Company, and which could cause the
actual results to differ materially from expected and historical
results. The Company has taken reasonable steps to mitigate these
where possible. Full details are disclosed on pages 26-28 of the
Annual Report for the year ended 30 June 2021. The risks and
uncertainties are summarised below:
-- Project definition risk:
- At Phalaborwa, the Company is finalising a Preliminary
Economic Assessment which is expected to define a processing flow
sheet capable of economically extracting the permanent magnet rare
earth metals from the gypsum stacks in a low capital and low
operating cost environment. However, this is dependent on the
results of future test work, which may not meet management's
expectations.
- At Gakara, the Company does not currently have a
code-compliant Mineral Resource or Reserve due to the complexity of
the underlying geological mineralisation. It is possible that the
quantity of rare earths present in the licence area is less than
management expectations with resulting impacts on plans to develop
a long-term commercial operation at Gakara.
-- Political risk in Burundi
- On 12 April 2021, the Government of Burundi temporarily
suspended the export of concentrate produced at Gakara. This was
followed on 29 June 2021 with a suspension of all trial mining and
exploration activity. All operations remain on care and maintenance
at 16 March 2022. There has been no attempt by the Government of
Burundi to remove the mining licence for the Gakara project.
-- Financing risk
- The Company currently forecasts that additional funding will
be required in order to deliver its project development plans as
well as for general working capital requirements.
- At Phalaborwa in South Africa, additional finance is expected
to be required for on-site pilot test-work ahead of a larger
fundraising for commercial scale project development.
- At Gakara in Burundi, additional financing would be required
to fund commercial scale development beyond the current trial
mining and processing operations.
-- Rare earth prices
- Rainbow's strategy is to become a globally-significant and
responsible producer of rare earth metals, with a particular focus
on NdPr - the fundamental building blocks for the permanent magnets
driving the global green technology revolution.
- Whilst analysts are predicting strong growth in demand for
rare earths, prices have been volatile in the past. If the
underlying rare earth basket price of the Group's development
projects fall, this reduces potential revenue that will impact the
long-term profitability of the project and could impact the
commercial viability of any development.
- The Company currently has an off-take agreement with
ThyssenKrupp for the Gakara project trial mining activities in
Burundi, selling rare earth concentrate at a discount of
approximately 70% to the quoted price of the underlying metal
oxides. The Company has no off-take agreement for the likely rare
earth products from the Phalaborwa project in South Africa.
-- Civil unrest
- Burundi has experienced civil unrest, including most recently
in 2015. South Africa experienced some civil unrest in 2021. Any
subsequent instances of civil unrest could impact the long-term
operations of the Company's development projects, including the
ability to obtain supplies, export production and manage
administrative matters.
-- Currency controls in Burundi
- The Company receives proceeds from the sale of rare earth
concentrate from the Gakara project in US dollars, which, are
repatriated to an account in the Burundi Central Bank.
- Burundi has experienced shortages of foreign currency reserves
in the past, and it is therefore possible that access to US dollars
held in country might be difficult. This would affect the Company's
ability to meet ongoing foreign currency obligations including
international suppliers, servicing of international debt and
repatriation of profits.
-- Covid-19
- The Covid-19 pandemic could disrupt the Company's operations,
delaying project definition works. Delays have been experienced for
the Group's Phalaborwa metallurgical test work programme at ANSTO
in Australia.
There have been no significant changes to the risk profile
during the first half of the year.
3. Administrative expenses
6 months ended 6 months ended
31 December 2021 31 December 2020
US$'000 US$'000
Unaudited Unaudited
Corporate expenses 1,124 561
Burundi administration 810 268
1,934 829
----------------- -----------------
The corporate cost base for the six months ended 31 December
2021 shows a sharp increase from the extremely low base set in the
comparative period in 2020. The growth, which was evident in the
period from January to June 2021, has been driven by a number of
factors:
-- The issue of share options in Q1 2021 has led to a share
option charge of US$155k in the period compared to US$nil in the
comparative period;
-- Executive and non-executive director salaries were increased,
as set out in the 2021 annual report, following an exercise to
benchmark salaries against peer companies in Q1 2021, leading to an
increase in cost of US$105k;
-- A bonus of US$220k was paid to executive management to
reflect the transformation of the business since the acquisition of
the Phalaborwa project in December 2020;
-- Increased IR activity, group travel following the relaxation
of covid restrictions, and costs associated with the new
Johannesburg head office function have also increased costs in the
period by a total of US$80k.
Burundi administrative expenses incurred in the six months ended
31 December 2021 include all costs associated with maintaining the
Gakara project on care and maintenance. These include US$128k of
redundancy costs associated with the termination of the majority of
employment contracts in December 2021, required under Burundi
legislation following six months of suspension of activities, and
US$173k of depreciation for the mining and processing equipment in
Burundi which has previously been capitalised. In the comparative
period costs totalled US$1,311k, with US$516k capitalised to
exploration and evaluation costs net of US$527k export revenue.
4. Loss per ordinary share
Loss per ordinary share is calculated by dividing the net loss
for the period attributable to Ordinary equity holders of the
parent by the weighted average number of Ordinary shares
outstanding during the period.
The Company was loss making for all periods presented, therefore
the dilutive effect of share options has not been taken account of
in the calculation of diluted earnings per share, since this would
decrease the loss per share for each of the period reported.
The calculation of the basic loss per share is based on the
following data:
6 months ended 6 months ended
31 December 31 December 2020
2021
US$'000 US$'000
Unaudited Unaudited
The loss for the period attributable to ordinary equity holders of the parent
company (2,051) (888)
Number Number
'000 '000
Weighted average number of Ordinary shares for the purposes of basic and diluted
loss per
share 493,934 428,264
Loss per Ordinary share Cents Cents
Basic and diluted (0.42) (0.21)
5. Exploration and evaluation assets
Gakara Phalaborwa Total
US$'000 US$'000 US$'000
At 1 July 2020 (audited) 7,572 - 7,572
Additions 516 821 1,337
------- ---------- -------
At 31 December 2020 (unaudited) 8,088 821 8,909
Additions 586 295 881
Adjustment of rehabilitation provision (39) - (39)
------- ---------- -------
At 30 June 2021 (audited) 8,635 1,116 9,751
Additions - 294 294
------- ---------- -------
At 31 December 2021 (unaudited) 8,635 1,410 10,045
------- ---------- -------
No additions to exploration and evaluation assets were recorded
for Gakara in the period due to the project being held on care and
maintenance by order of the Government of Burundi. Based on an
assessment of both the legal and political position, the Directors
have a reasonable expectation that the current temporary suspension
does not represent a threat to the licence and activities will be
allowed to re-start. Accordingly, the Directors do not believe this
uncertainty represents an indication of impairment of the
exploration and evaluation assets at Gakara, or the associated
property, plant and equipment or inventory within the Gakara cash
generating unit. The Directors note that the current suspension of
activities could result in future losses for the Group if it is not
resolved as anticipated.
In H1 2022 no amounts were capitalised to exploration and
evaluation assets at Gakara as set out in note 3. Additions in the
six months ended 31 December 2020 are stated net of US$527k (six
months ended 30 June 2021: US$112k) related to gross revenues
earned at Gakara during the exploration phase which represent a
contribution towards exploration costs incurred.
FinBank SA hold security over the fixed and floating assets of
Rainbow Mining Burundi SA which include US$7.3 million of
exploration and evaluation assets associated with the Gakara mining
permit in Burundi as at 31 December 2021.
6. Property, plant and equipment
US$'000 Mine development costs Plant & machinery Vehicles Office equipment Total
---------------------------------------- ---------------------- ----------------- -------- ---------------- -----
Cost
At 1 July 2020 (audited) 183 2,665 1,074 45 3,967
Additions - 22 242 - 264
At 31 December 2020 (unaudited) 183 2,687 1,316 45 4,231
Additions - 160 266 - 426
At 30 June 2021 (audited) 183 2,847 1,582 45 4,657
Additions - 44 - - 44
At 31 December 2021 (unaudited) 183 2,891 1,582 45 4,701
---------------------------------------- ---------------------- ----------------- -------- ---------------- -----
Depreciation
At 1 July 2020 (audited) 47 2,665 298 15 3,025
Charge for period 13 - 107 5 125
At 31 December 2020 (unaudited) 60 2,665 405 20 3,150
Charge for period 13 2 134 4 153
At 30 June 2021 (audited) 73 2,667 539 24 3,303
Charge for period 13 2 158 5 178
At 31 December 2021 (unaudited) 86 2,669 697 29 3,481
---------------------------------------- ---------------------- ----------------- -------- ---------------- -----
Net Book Value at 31 December 2021
(unaudited) 97 222 885 16 1,220
---------------------------------------- ---------------------- ----------------- -------- ---------------- -----
Net Book Value at 30 June 2021 (audited) 110 180 1,043 21 1,354
---------------------------------------- ---------------------- ----------------- -------- ---------------- -----
Net Book Value at 31 December 2020
(unaudited) 123 22 911 25 1,081
---------------------------------------- ---------------------- ----------------- -------- ---------------- -----
Depreciation of US$nil (six months ended 31 December 2020:
US$107k, six months ended 30 June 2021: US$162k) relating to mining
vehicles, plant & machinery and site infrastructure was
capitalised in the period as part of Exploration and Evaluation
costs.
FinBank SA hold security over the fixed and floating assets of
Rainbow Mining Burundi SA which include US$1.2 million of tangible
fixed assets in Burundi.
As set out in note 5 the Directors recognise the uncertainty
relating to the temporary suspension of trial mining and processing
activities in Burundi which could impact the carrying value of the
property, plant and equipment within the Gakara cash generating
unit, which comprises the entire net book value at the balance
sheet date.
7. Trade and other payables
As at As at As at
31 December 2021 31 December 2020 30 June
2021
US$'000 US$'000 US$'000
Unaudited Unaudited Audited
Trade payable 142 135 71
Accrued expenses 73 157 233
Taxes and social security 364 25 363
Amounts due to staff and management 351 - 60
Pension contributions - 3 -
Other payables 60 290 250
Total trade and other payables 990 610 1,009
----------------- ----------------- --------
The Directors consider that the carrying value of trade and
other payables approximate to their fair value.
8. Borrowings
As at As at As at
31 December 2021 31 December 2020 30 June
2021
US$'000 US$'000 US$'000
Unaudited Unaudited Audited
Finbank Loan 574 647 579
Pipestone Loan - 935 1,008
Warrant liability 353 215 306
Total borrowings 927 1,797 1,893
----------------- ----------------- --------
Payable within 12 months 178 1,175 1,231
Payable after more than 12 months 749 622 662
----------------- ----------------- --------
927 1,797 1,893
----------------- ----------------- --------
FinBank Loan
The FinBank loan facility is expressed in Burundian Francs 'BIF'
and carries an interest rate of 15%. Interest has been paid
throughout the period. Capital repayments have been suspended since
April 2021 as a result of the export ban imposed in Burundi on the
Group's rare earth concentrate from trial mining and processing
activities. This is not a substantial modification of the loan.
Under the terms of this loan, Finbank has security over the
fixed and floating assets of Rainbow Mining Burundi SA ('RMB', the
local operating company in Burundi which owns the Gakara project
and mining permit), the shares of RMB, and the cash held in RMB's
Finbank bank accounts.
Pipestone Loan
On 21 February 2020, Pipestone Capital Inc, in which George
Bennett, the Company's CEO, has a beneficial interest, provided a
US$1 million unsecured bridging loan to the Company. The loan did
not bear interest, with the finance cost provided by the issue of 2
million warrants with a 4-year life over the Company's shares at a
strike price of 4.55p/share (a 30% premium to the 20-day VWAP and a
1.25p premium to the 3.3p/share closing mid-market price on the
date of the loan).
In June 2020, the original Pipestone loan was re-financed, with
US$75k repaid via the issue of 1,993,779 new Ordinary Shares as
part of the equity placing announced on 22 June 2020 at a price of
GBP0.03 per share. The remaining US$925k was extinguished and
replaced with a new, interest free, unsecured bridging loan of
US$925k pending a larger capital raise. No further warrants were
issued.
The loan was further refinanced following an equity raise in
November 2020, which triggered a repayment obligation for the loan.
The Company had no headroom under the prospectus directive
regulations to issue shares at the price of the November 2020
equity raise to repay the loan and had insufficient funds to allow
for repayment in cash. As a result, the US$925k interest-free
liability was extinguished and replaced with a new unsecured bridge
loan from 1 December 2020 which bears interest at a rate of 15% per
annum. The loan was fully repaid in December 2021, including
accrued interest, via the issue of 875,389 new Ordinary Shares
(representing US$175k at GBP0.15/share) plus US$886k cash.
9. Share capital
As at As at As at
31 December 2021 31 December 2020 30 June
2021
Unaudited Unaudited Audited
Issued share capital (nil par value) US$'000 41,345 31,686 32,465
Number of shares in issue ('000) 522,687 467,682 476,411
The table below shows a reconciliation of share capital
movements:
Number of shares US$'000
At 1 July 2020 421,981,551 28,132
December 2020 - share placing - cash receipts net of costs 42,700,000 3,338
December 2020 -options exercised 3,000,000 216
At 31 December 2020 467,681,551 31,686
January 2021 to April 2021 - options exercised 7,500,000 529
June 2021 - Phalaborwa consideration shares 1,229,883 250
At 30 June 2021 476,411,434 32,465
July 2021 - options exercised 2,500,000 182
October 2021 - share placing - cash receipts net of costs 32,900,000 6,559
November 2021 - share placing - cash receipts net of costs 10,000,000 1,982
December 2021 - shares issued as partial repayment of Pipestone loan 875,389 157
At 31 December 2021 522,686,823 41,345
---------------- -------
On 27 November 2020 the Company issued 42.7 million new ordinary
shares at a price of 6 pence per share, raising gross cash proceeds
of US$3.4 million (before costs of $85k). No related parties were
involved in the placing.
Between December 2020 and April 2021 Australian Special
Opportunity Fund, LP exercised options over 10.5 million shares at
an exercise price of 5.28p per share, raising gross cash proceeds
of US$763k (before costs of US$18k).
On 25 June 2021 1,229,882 shares were issued to Bosveld
Phosphates (Pty) Limited to settle US$250,000 consideration due
under the Phalaborwa co-development agreement originally announced
on 3 November 2020.
On 13 July 2021 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). No related parties were involved
in the placing.
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 $18k). No related
parties were involved in the placing.
10. Related party transactions
US$'000 Six months to 31 Dec 2021 Six months to 31 Dec 2020
Charged in Settled in Closing Balance Charged in Settled in Closing Balance
period period period period
Pipestone
Capital Inc(1) 52 (1,061) - 153 (153) 925
Robert
Sinclair(2) - - - 26 (26) -
Alex Lowrie(2) - - - 26 (26) -
Atul Bali(2) - - - 26 (26) -
Shawn
McCormick(2) - - - 26 (26) -
Pete Gardner(2) - - - 26 (26) -
MPD Consulting
Limited(3) 9 (9) - - - -
61 (1,070) - 302 (302) 925
-------------- -------------- --------------- -------------- --------------- ---------------
The above table does not include remuneration of Directors and
senior management.
1. Pipestone Capital Inc, in which George Bennett, the Company's
CEO, has a beneficial interest, provided a US$1 million bridging
loan to the Group in February 2020 as explained in note 8, of which
US$75k was settled in June 2020 and the balance settled in December
2021. In addition, in October 2020 Pipestone Capital Inc provided
an additional bridging loan of US$150k in October 2020 which was
settled in cash together with US$3k interest in December 2020.
2. Robert Sinclair, Alex Lowrie, Atul Bali, Shawn McCormick (all
non-executive directors of the Company), together with Pete Gardner
(CFO and a PDMR) each provided a bridge loan of US$25k in October
2020 which were settled in cash along with accrued interest in
December 2020.
3. MPD Consulting Limited, in which Pete Gardner, the Company's
CFO has a beneficial interest, has recharged certain costs relating
to travel to Burundi and UK support incurred on behalf of the
Group.
11. Post balance sheet events
Subsequent to 31 December 2021:
-- On 18 January 2022 Robert Sinclair retired as a director of Rainbow Rare Earths Limited.
-- On 3 February 2022 the Company issued 2.5 million share
options to senior management under the existing share option plan
with an exercise price of 15 pence per new Ordinary Share.
-- On 8 February 2022 Rainbow Rare Earths (UK) Limited was formally dissolved.
-- On 3 March 2022 a new subsidiary, Rainbow Rare Earths PTY
Limited was incorporated in South Africa.
[1] IEA, The Role of Critical Minerals in Clean Energy
Transitions
[2] IEA, The Role of Critical Minerals in Clean Energy
Transitions
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END
IR EAKDXFSPAEEA
(END) Dow Jones Newswires
March 17, 2022 03:06 ET (07:06 GMT)
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