TIDMRBW
RNS Number : 7912D
Rainbow Rare Earths Limited
24 October 2022
24 October 2022
Rainbow Rare Earths Limited
("Rainbow" or "the Company")
LSE: RBW
Preliminary results for the year ended 30 June 2022
Rainbow Rare Earths is pleased to announce its preliminary
results for the year ended 30 June 2022 ("FY 2022").
The financial information in this release does not constitute
the Financial Statements. The Group's Annual Report, which includes
the audit report and audited Financial Statements for the year
ended 30 June 2022, will be available on the Company's website at
www.rainbowrareearths.com .
Highlights
-- Increasing demand for magnet rare earths underpinned by
rising electric vehicle sales forecasts and mounting capacity
acceleration in the offshore wind market.
-- A major shortage of neodymium and praseodymium is predicted
by 2035 [1] due to a lack of rare earths sources and the inability
of existing producers to increase their output.
-- Rare earth prices rose substantially in FY 2022, with
Phalaborwa's basket price up 82%, and long-term supply demand
fundamentals support significant increases towards the second half
of this decade.
-- Progress made at Phalaborwa during FY 2022, culminating in
the recent publication of Phalaborwa's PEA highlighting its robust
economics and the significant opportunity provided by this project
to provide near-term production of rare earth oxides:
o Base case scenario establishes an NPV(10) of US$627 million,
an IRR of 40%, an average operating margin of 75% and a two-year
payback period.
o Using 2022 year to date average rare earth prices or long term
forecast rare earth prices, the PEA delivers an NPV(10) of c. US$1
billion, an average operating margin over 80%, an IRR of 51% and a
payback of 1.7 years.
-- By collaborating with third parties, Rainbow is working to
harness value from rare earths contained within other secondary
phosphogypsum sources.
-- Rainbow became a member of the European Raw Material Alliance
("ERMA") in FY 2022 - an essential alliance working to accelerate
the green and digital transition through securing and reinforcing
rare earths supply chains.
-- Continued constructive engagement with all stakeholders at
Gakara in Burundi, with confidence in the Company's ability to find
a resolution to allow operations to recommence.
Certain information contained in this announcement would have
been deemed inside information for the purposes of Article 7 of
Market Abuse Regulation (EU) No 596/2014 ("MAR") which has been
incorporated into UK law by the European Union (Withdrawal) Act
2018 until the release of this announcement.
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
Matthew Armitt
Berenberg Broker Jennifer Lee +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:
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 30.7Mt at 0.43%
TREO contained within unconsolidated gypsum 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 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.
Chairman's statement
From wind turbines to EVs, clean energy is dependent on
unlocking increased supplies of critical minerals, including rare
earths such as neodymium, praseodymium, dysprosium and terbium
which are fundamental components in permanent magnets.
Current geopolitical tensions and energy security risks serve to
further highlight the urgency of the clean energy transition, which
will not be possible without a reliable supply of minerals.
According to the IEA, demand for rare earth elements by 2040 may
rise between three and seven times from today's levels.
China currently dominates the global production of rare earth
magnets; however, many major governments have now implemented
critical and strategic materials policies, with a focus on creating
independent rare earth supply.
Rainbow has recently become a member of the European Raw
Material Alliance ("ERMA") - an essential alliance which is working
to accelerate the green and digital transition through securing and
reinforcing rare earths supply chains. Aiming to make Europe
economically more resilient, ERMA's goal is to diversify supply
chains, promote innovation, create jobs, and attract
investment.
With our near-term development opportunity at Phalaborwa,
alongside our unique and innovative technologies and processes, we
believe Rainbow is well positioned to contribute to a responsible,
independent supply chain, unlocking sources of critical permanent
magnet rare earths which are required to drive global
decarbonisation.
According to Adamus Intelligence, a major shortage of NdPr is
predicted by 2035 due to a lack of rare earths sources in the
market and the inability of existing producers to increase their
output. This underscores the compelling opportunity presented to
Rainbow, both at Phalaborwa and from the wider application of our
proprietary technology, to achieve near-term, responsible and
efficient rare earths production from secondary sources.
Rare earth prices rose substantially in FY 2022, with
Phalaborwa's basket price up 82% to US$173.91 per kg of magnet rare
earth oxides. Whilst prices fell back after the end of the
financial year, they have since moved upwards again and the
long-term supply demand fundamentals support significant increases
towards the second half of this decade.
We have made significant strides forward in 2022 with a number
of interesting collaborations and opportunities which we believe
will be central to harnessing value from rare earths contained
within secondary sources. Rainbow continues to work closely with
K-Technologies Inc. ("K-Tech") and is planning on jointly patenting
the rare earths extraction technology we have together developed.
We are also collaborating with OCP S.A. ("OCP"), the Moroccan world
leading producer of phosphate products, and Mohammed VI Polytechnic
University ("UM6P"), a Moroccan university, by signing a Master
Agreement in August 2022 on rare earths extraction from
phosphogypsum. In addition to this, we signed a Memorandum of
Understanding with a major chemicals company in South Africa in
June, as part of which we are investigating the opportunity to
extract rare earth elements from a nitro phosphate process stream
and identifying further global opportunities for our unique rare
earth extraction technology.
At our Gakara project in Burundi, which has been on care and
maintenance since June 2021, we continue to engage constructively
with all stakeholders and remain confident in our ability to
resolve the issue and allow operations to recommence.
On behalf of the Board of Directors, I would like to extend our
gratitude to our shareholders for their steadfast support, and to
Rainbow's management team, employees and contractors for their
unwavering commitment to the business' success. We also thank our
host governments for their continued productive engagement. Having
contributed a considerable amount of value to the Board since we
founded the Company in 2011, Robert Sinclair resigned as a
Non-Executive Director due to health reasons in January 2022. The
Board joins me in thanking Robert for the considerable contribution
he has made to Rainbow.
Our purpose is to produce the critical rare earth products
required to progress the global green technology revolution in an
efficient and responsible manner and thanks to the good progress at
Phalaborwa, I believe we are working well towards achieving this
goal.
I am encouraged by additional opportunities to leverage our
intellectual property and technology to extract rare earths from
phosphogypsum. Through our processing projects, which have
fundamentally different risk profiles to traditional rare earth
mining projects, we see enormous potential to facilitate near-term
access to sources of critical permanent magnet rare earths, which
are required to decarbonise energy systems in an environmentally
responsible way.
CEO's statement
This has been a year of notable progress for Rainbow, enabling
us to unlock a valuable, near-term source of the rare earth
permanent magnet metals required so urgently to drive the global
green energy revolution. This has involved carrying out a programme
of detailed test work at Phalaborwa to better understand the
exciting opportunity presented by this asset, leading to the
development of an economic flowsheet and the recent publication of
the preliminary economic assessment ("PEA").
By concentrating on phosphogypsum opportunities, the usual,
extensive resource definition period is removed, significantly
reducing the long lead time and risks associated with bringing a
traditional mine into production. In addition, we benefit from
considerable reductions in capital ("capex") and operating costs
("opex") compared to a traditional mine, due to the absence of hard
rock mining, mine waste disposal, ore crushing and milling within
the overall project cost base. Because the rare earth elements are
present in a 'cracked' chemical form in the phosphogypsum,
Rainbow's process will deliver separated rare earth oxides in a
single process flowsheet at site. This replaces the multiple stages
of reagent intensive processing usually required to crack a rare
earth mineral concentrate and separate out the rare earth oxides
from a mixed rare earth carbonate. Rainbow's process is also
expected to have a number of environmental benefits.
Phalaborwa's PEA, which establishes an NPV(10) [2] of US$627
million, an IRR [3] of 40%, an average operating margin of 75% and
a payback period of only 2 years, corroborates our long-held view
of the operation's enormous potential as a low capital intensity,
high margin, near-term rare earths development project. The base
case financial model presented, using near-term rare earth price
forecasts well below 2022 averages, demonstrates a robust project
with low sensitivity to changes in both rare earth prices and
costs.
The work carried out to date at this asset demonstrates
Rainbow's ability to overcome the historical technical,
environmental, and economic challenges related to extracting rare
earths from phosphogypsum. Importantly, whilst the configuration of
the process flowsheet is innovative, each individual stage is well
tested on a commercial basis, with the required equipment and
reagents being readily available.
The successful completion of this PEA represents not only a
breakthrough step in the development of Phalaborwa, demonstrating
the viability of this opportunity, but also underscores the broader
potential to use our unique IP and technology to extract rare
earths from other phosphogypsum sources on a global scale. We now
intend to advance to feasibility study, identify all permits
required for Phalaborwa's development, engage with the relevant
authorities to expedite permitting and undertake further process
optimisation tests culminating in an extensive process pilot plant
operation.
We are committed to responsible business practices from an
environmental, social and governance perspective. As a brownfield
site, the development of Phalaborwa provides us with a significant
opportunity to make positive environmental, social and economic
impacts. Effective stakeholder engagement will be a fundamental
part of project development, concentrating on understanding key
risks and integrating stakeholder considerations into project
development decisions to create long-term value.
I believe Phalaborwa's PEA accurately reflects the rigour and
expertise we apply to project assessment. As a team, we have led
numerous projects through development and have significant
experience throughout the asset lifecycle from optimisation and
feasibility to plant construction and commissioning. I am
exceptionally proud of the progress we have made over the past few
years and am confident that we have the right people in place to
take Phalaborwa's development forward. With our proven operating
experience, unique phosphogypsum processing intellectual property
and portfolio of opportunities, I believe that Rainbow is well
positioned to develop a responsible rare earths supply chain to
drive the green energy transition.
Operational review
Phalaborwa
Rainbow's Phalaborwa rare earths project in South Africa
presents the Company with an exciting near-term opportunity to
extract rare earths from a secondary source. 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.
Phalaborwa has an inferred mineral resource estimate of 30.7Mt
at 0.43% TREO, with a rare earth basket that is weighted towards
high value NdPr oxide, a critical building block for the global
energy transition, which represents 29.1% of the total contained
rare earth oxides. Economic Dysprosium (Dy) and Terbium (Tb) oxide
credits further enhance its overall value. 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.
Fundamental to unlocking the rare earths contained within the
phosphogypsum at Phalaborwa (and more widely) is the innovative
processing flowsheet developed by Rainbow in parallel with K-Tech.
It represents a breakthrough in allowing for the economic
extraction of rare earth elements from phosphogypsum, which has
historically proven to be challenging. The flowsheet will comprise
the following steps:
-- Phosphogypsum will be reclaimed hydraulically from the
existing stacks and pumped to the processing facility removing
soluble impurities prior to the leach process.
-- A pre-leach regime will be employed to remove fluoride from
the gypsum stream, allowing rare earth grades in the pregnant leach
solution to be maximised. The extracted fluoride will produce
reagents for use elsewhere in the processing circuit, reducing
operating costs.
-- The fluoride leached phosphogypsum progresses to a rare earth
counter current sulphuric acid leach system for the extraction of
the target rare earth elements. This allows for successful
recycling of the various acid streams to optimise the overall
processing costs.
-- A rapid consolidation process for the rare earths in the
pregnant leach solution allows the rare earths to be concentrated
with primary impurity rejection. This process replaces the
originally anticipated nano filtration system, which significantly
improves the overall acid recycling, thereby reducing operating
costs.
-- The rapid consolidation process feeds the downstream
continuous ion exchange and continuous ion chromatography processes
to deliver separated rare earth oxides. The flow rates to these
processes are considerably lower than originally anticipated using
nano filtration techniques resulting in significant capital and
operating cost savings.
Phalaborwa PEA
Rainbow is earning a 70% interest in the Phalaborwa project by
delivering a pre-feasibility study, which is now in planning having
published the strong economic outcome from the PEA.
Robust base case economics
The PEA was based on processing 2.2 million tonnes per annum of
phosphogypsum over a 15-year project life to deliver 26,208 tonnes
of separated rare earth magnet oxides at an average cost of
US$33.86/kg. This delivers an exceptional 75% operating margin at
the base case basket price of US$137.92 per kg for the rare earth
oxides, based on near term forecasts well below both 2022 year to
date average prices and long-term market forecasts.
The base case financial model set out in the PEA delivered
exceptionally robust economic returns including:
-- Post-tax NPV(10) of US$627.4 million, representing 212% of
the US$295.5 million total capital cost1;
-- Post-tax IRR of 40%; and
-- Post-tax payback of upfront capital costs after 2.0 years of operations.
NPV upside using year-to-date prices
Using 2022 year to date average rare earth prices or long term
forecast rare earth prices the PEA delivers an EBITDA operating
margin over 80%, with an NPV(10) of c. US$1 billion and a payback
of 1.7 years.
Minimal sensitivities to cost
The project is insensitive to changes in costs, including an
overall low energy intensity at just 20% of annual operating costs.
Against a backdrop of the expected demand strength and supply
constraints for permanent magnet rare earths forecast over the next
decade and beyond, Phalaborwa is expected to deliver an independent
source of responsibly sourced rare earth oxides for the green
revolution.
Environmental benefits
Studies at Phalaborwa have highlighted the 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
remove existing environmental liabilities and redeposit benign
gypsum on a new stack, built according to International Finance
Corporation ("IFC") Performance Standards and Equator
Principles.
Next steps
Following the publication of the PEA Rainbow intends to advance
the project to feasibility study, identify all permits required for
the Project to be developed, engage with the relevant authorities
to expedite permitting and undertake further process optimisation
tests culminating in an extensive process pilot plant operation. A
resource update is also expected for Phalaborwa following drilling
work undertaken in June 2022.
Gakara
The Gakara rare earths project is located in Western Burundi
covering an area of approximately 135km(2). The project benefits
from good infrastructure, with road links to Dar es Salaam,
Tanzania and Mombasa, Kenya. Trial mining and processing has
demonstrated that a high-grade rare earth mineral concentrate, with
a 19-20% NdPr content, can be consistently produced via simple
gravity separation from the narrow high-grade rare earth veins
found across the Gakara license area.
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 and short-term cash requirements minimised.
Rainbow continues to engage constructively with all stakeholders to
resolve the issue and allow trial mining to recommence. On the
expected restart of operations, Rainbow will assess the available
options to move the project to commercial production
Developing sources of phosphogypsum
The successful global transition to clean energy is reliant on a
considerable increase in supply of critical materials. Rainbow is
focused on identifying the optimal way of producing rare earths
responsibly from secondary sources, removing significant time, risk
and cost from the overall project timeline.
Phosphate rock is mined all over the world, with over three
quarters of global reserves located in Northern Africa. Given the
prevalence of phosphate mining, phosphogypsum is available
throughout the world in large volumes. This makes it an attractive
secondary source of rare earth elements.
Recognising this enormous potential, our team is concentrated on
securing opportunities for both collaboration and expertise
sharing, as well as gaining access to new supply.
In June, Rainbow entered into a Memorandum of Understanding with
a diversified chemicals group based in South Africa to investigate
the opportunity of extracting rare earth elements from a nitro
phosphate process stream at its phosphoric acid production plant
near Johannesburg in South Africa.
Under the terms of the MoU, Rainbow is conducting a rare earths
extraction pilot study with the chemicals group, involving initial
grade test work on processing stream material. This will be
followed by a technical programme to confirm a flowsheet using
Rainbow's unique knowledge and IP.
The feedstock for the phosphoric acid production plant
originates from the same ore originally mined by Foskor that
generated the two gypsum stacks at Phalaborwa. Preliminary sampling
of the processing stream indicates a grade of 0.81% TREO, with a
circa 27% weighting to high-value NdPr, alongside economic levels
of terbium and dysprosium, similar to Phalaborwa.
Direct costs associated with the pilot study utilising Rainbow's
exclusive IP and technology will be financed by the chemicals
group. Subject to a successful outcome, the parties intend to
negotiate terms for a potential joint venture agreement to extract
value from the rare earths present in the phosphoric acid
processing stream.
Post Year-end, in August 2022, Rainbow entered into a Master
Agreement with OCP, the Moroccan world leading producer of
phosphate products, and UM6P, a Moroccan university with a strong
focus on science, technology and innovation, to further investigate
and develop the optimal technique for the extraction of rare earth
elements from phosphogypsum.
Together with the innovative research carried out by UM6P, OCP
has built up significant IP assets and expertise in the field of
phosphogypsum processing. This provides a synergistic opportunity
for joint development with Rainbow, given Rainbow's expertise and
intellectual property on rare earths extraction and processing
gained from work carried out to date at Phalaborwa. OCP and UM6P
will contribute with their respective expertise, including adapted
complementary separation technologies. The Parties intend to
develop the optimal route for the extraction of rare earths from
phosphogypsum, and the development of pilot and industrial-scale
extraction of rare earths from phosphogypsum.
The recovery of rare earths from phosphogypsum arising as a
residue from phosphoric acid production has been the subject of
international research for many years. However, the process has
proven technically, environmentally and economically
challenging.
In 2022, following a robust international test work programme,
Rainbow confirmed the successful development of a process flowsheet
to extract rare earth elements efficiently from the phosphogypsum
stacks at Phalaborwa using an innovative process developed in
collaboration with K-Tech. Rainbow and K-Tech and are now in the
process of jointly patenting this breakthrough.
The process flowsheet utilises existing technology, proven at a
commercial scale across a number of industries, in a novel way to
overcome the technical challenges associated with economically
recovering the rare earth elements from the phosphogypsum. The
process includes a number of simple steps to remove impurities from
the phosphogypsum before leaching the rare earth elements into a
high-grade pregnant leach solution. Efficient recycling of leach
streams ensures reagent costs are optimised.
The high grade mixed rare earth solution is ultimately fed into
a patented continuous ion exchange and continuous ion
chromatography system to allow for the recovery of high purity
separated magnet rare earth oxides with far fewer steps than a
traditional solvent exchange process. Unlike traditional separation
techniques, the process does not require the costly separation of
low value products, such as cerium and lanthanum, before the high
value magnet rare earth oxides can be targeted.
The production of separated magnet rare earth oxides in a single
processing facility, without the need to ship significant volumes
of low value or waste material between a mine, cracking plant and
separation facility, also provide significant environmental and
cost benefits when compared to traditional methods.
Financial Review
PROFIT AND LOSS
With Rainbow's strategic focus on processing rare earths from
secondary sources, predominantly at Phalaborwa in South Africa, and
the Gakara project remaining on care and maintenance throughout the
year, the income statement represents the administrative costs for
the Group for the year.
Income statement costs associated with maintaining the Gakara
project on care and maintenance totalled US$1.3 million (FY 2021:
US$0.8 million). The increase is due to the change in treatment of
costs previously capitalised within exploration and evaluation
assets. In FY 2021 a total of US$1.9 million was spent at Gakara,
of which US$1.1 million was capitalised comprising US$0.4 million
of net costs associated with trial mining and processing, US$0.3
million of depreciation on the mining fleet and US$0.4 million of
direct exploration costs. With the project on care and maintenance
throughout FY 2022, all costs associated with Gakara are recognised
within the income statement as they do represent costs incurred to
evaluate the commercial viability of extracting the mineral
resource at the Gakara project. The reduced overall cost base at
Gakara in FY 2022 includes costs associated with suspending staff
contracts up to 31 December 2021, following which the team was
reduced to a core of 22 staff to safeguard the assets and maintain
the administration in country. All staff with terminated employment
contracts received redundancy payments in accordance with Burundi
law.
The Group's corporate costs grew in FY 2022. With the expected
fast track development of Phalaborwa, the administrative structures
for the Group are being strengthened, and a new administrative hub
has been established in South Africa. FY 2022 costs totalled US$2.3
million, increasing from US$1.9 million in FY 2021, predominantly
driven by staff costs.
Net finance costs of US$0.3 million (FY 2021: US$Nil) relate
primarily to foreign exchange differences. Gains on movements
between the Burundian Franc ('BIF') and US dollars, the functional
currency of the Group, were offset in FY 2022 by losses on
movements between GB Pounds, which the Group holds to match future
expected costs, and US dollars. Finance costs also include US$0.1
million (FY 2021: US$0.1 million) associated with the FinBank loan
in Burundi.
The corporation tax rate in Burundi is 30%. In the absence of
taxable profit, a minimum tax is charged calculated as 1% of
revenue. The tax charge in the year represents an adjustment to
minimum tax from prior periods.
BALANCE SHEET
The Group balance sheet includes US$9.8 million of non-current
assets at 30 June 2022 relating to Gakara, including US$8.6 million
of exploration and evaluation costs and tangible fixed assets with
a net book value of US$1.0 million. The Gakara cash generating unit
also includes US$0.9 million of inventory, carried at cost,
primarily relating to the stock of available for sale rare earth
concentrate in Burundi. Whilst the Gakara project remains on care
and maintenance, the Directors are confident that the issues with
the Government of Burundi will be resolved, allowing the asset to
recommence operations.
A total of US$0.8 million of exploration and evaluation assets
were capitalised in the year relating to Phalaborwa, leaving a
closing capitalised cost of US$1.9 million. The Group is earning a
70% interest in the Phalaborwa project by completing a
pre-feasibility study and at the balance sheet date has no tangible
fixed assets and no obligations for environmental closure at the
Phalaborwa site.
The Group balance sheet includes US$0.3 million of tax
receivables relating to the historic overpayment of royalties and
VAT recoverable in Burundi, both measured at expected recoverable
value. There are also US$0.5 million of tax and government
liabilities in Burundi.
During the year, 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 in October 2021. This funding
allowed the Pipestone loan to be fully repaid, including accrued
interest, via US$0.9 million cash and US$0.2 million equity at 15p
per new Ordinary Share. The sole remaining long-term financial
liability is the US$0.6 million FinBank loan in Burundi, on which
capital repayments are currently being deferred. At 30 June 2022,
the Group has US$4.1 million of cash which is predominantly held
with Barclays Bank in London.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 June 2022
Year ended Year ended
30 June 30 June
Notes 2022 2021
US$'000 US$'000
Revenue - 639
Cost of sales - (639)
---------- ----------
Gross profit - -
Administration expenses (3,654) (2,707)
Loss from operating activities (3,654) (2,707)
---------- ----------
Finance income 216 433
Finance costs (543) (466)
Loss before tax (3,981) (2,740)
---------- ----------
Income tax expense (4) (2)
Total loss after tax and comprehensive expense for the year (3,985) (2,742)
========== ==========
Total loss after tax and comprehensive expense for the year is attributable to:
Non-controlling interest (105) (52)
Owners of parent (3,880) (2,690)
---------- ----------
(3,985) (2,742)
========== ==========
The results of each year are derived from continuing operations
Loss per share (cents)
Basic 3 (0.76) (0.60)
Diluted 3 (0.76) (0.60)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2022
Year ended Year ended
Notes 30 June 30 June
2022 2021
US$'000 US$'000
Non-current assets
Exploration and evaluation assets 4 10,588 9,751
Property, plant and equipment 5 1,043 1,354
Right of use assets 108 70
Total non-current assets 11,739 11,175
----------- -----------
Current assets
Inventory 858 863
Trade and other receivables 401 441
Cash and cash equivalents 4,134 573
----------- -----------
Total current assets 5,393 1,877
----------- -----------
Total assets 17,132 13,052
----------- -----------
Current liabilities
Trade and other payables (909) (1,009)
Borrowings (235) (1,231)
Lease liabilities (32) (14)
Total current liabilities (1,176) (2,254)
Non-current liabilities
Borrowings (518) (662)
Lease liabilities (81) (69)
Provisions (61) (61)
----------- -----------
Total non-current liabilities (660) (792)
Total liabilities (1,836) (3,046)
----------- -----------
NET ASSETS 15,296 10,006
Equity
Share capital 6 41,442 32,465
Share-based payment reserve 1,467 1,295
Other reserves - 60
Retained loss (26,572) (22,878)
----------- -----------
Equity attributable to the parent 16,337 10,942
Non-controlling interest (1,041) (936)
TOTAL EQUITY 15,296 10,006
=========== ===========
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2022
Share- Share Attributable
Share based warrant Other Accumulated to the Non-controlling
capital Payments reserve reserves losses parent interest Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Balance at 1
July 2020 28,132 1,099 40 60 (20,542) 8,789 (884) 7,905
Total
comprehensive
expense
Loss and total
comprehensive
loss for year - - - - (2,690) (2,690) (52) (2,742)
Transactions
with owners
Shares placed
during the year
for cash
consideration 3,423 - - - - 3,423 - 3,423
Share placing
transaction
costs (85) - - - - (85) - (85)
Non-cash issue
of shares
during the
period 250 250 - 250
Share warrants
expired in the
year - - (40) - 40 - - -
Fair value of
employee share
options in year - 510 - - - 510 - 510
Share options
exercised in
the year, net
of costs 745 (314) - - 314 745 - 745
Balance at 30
June 2021 32,465 1,295 - 60 (22,878) 10,942 (936) 10,006
---------- --------- ---------- ---------- ----------- ------------ --------------- -------
Total
comprehensive
expense
Loss and total
comprehensive
loss for year - - - - (3,880) (3,880) (105) (3,985)
Transactions
with owners
Shares placed
during the year
for cash
consideration 8,779 - - - - 8,779 - 8,779
Share placing
transaction
costs (240) - - - - (240) - (240)
Non-cash issue
of shares
during the
period, net of
costs 157 - - - - 157 - 157
Eliminate
historic
discount on
extinguishment
of interest
free bridge
loan - - - (60) 60 - - -
Fair value of
employee share
options in year - 298 - - - 298 - 298
Share options
exercised in
the year, net
of costs 281 (126) - - 126 281 - 281
Balance at 30
June 2022 41,442 1,467 - - (26,572) 16,337 (1,041) 15,296
---------- --------- ---------- ---------- ----------- ------------ --------------- -------
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 30 June 2022
For year ended For year ended
30 June 30 June
2022 2021
US$'000 US$'000
Cash flow from operating activities
Loss from operating activities (3,654) (2,707)
Adjustments for:
Depreciation 380 37
Impairment of royalties receivable 69 128
Share-based payment charge 297 510
Operating loss before working capital changes (2,908) (2,032)
Net decrease/(increase) in inventory 5 (121)
Net increase in trade and other receivables (29) (190)
Net(decrease)/increase in trade and other payables (100) 136
--------------- ---------------
Cash used by operations (3,032) (2,207)
Realised foreign exchange gains 186 359
Finance income - -
Finance costs - (23)
Taxes paid (2) -
--------------- ---------------
Net cash used in operating activities (2,848) (1,871)
--------------- ---------------
Cash flow from investing activities
Purchase of property, plant & equipment (42) (690)
Exploration and evaluation costs (837) (2,024)
Net cash used in investing activities (879) (2,714)
--------------- ---------------
Cash flow from financing activities
Proceeds of new borrowings - 275
Repayment of borrowings (1,009) (438)
Interest payments on borrowings (138) (104)
Payment of lease liabilities (24) (56)
Proceeds from the issuance of ordinary shares 9,077 4,727
Transaction costs of issuing new equity (275) (85)
Net cash generated by financing activities 7,631 4,319
--------------- ---------------
Net increase/(decrease) in cash and cash equivalents 3,904 (266)
--------------- ---------------
Cash & cash equivalents at the beginning of the year 573 788
Foreign exchange (loss)/gains on cash and cash equivalents (343) 51
Cash & cash equivalents at the end of the year 4,134 573
=============== ===============
NOTES:
1. BASIS OF PREPARATION
The financial information set out herein does not constitute the
Group's statutory financial statements for the year ended 30 June
2022, but is derived from the Group's audited financial statements.
The auditors have reported on the FY 2022 financial statements and
their reports were unqualified. The financial information in this
statement is audited but does not have the status of statutory
accounts.
The financial statements and the information contained in this
announcement have been prepared in accordance with International
Financial Reporting Standards (IFRS) as adopted by the European
Union (EU), including International Accounting Standards and
Interpretations issued by the International Financial Reporting
Interpretations Committee (IFRIC). This is consistent with the
accounting policies in the 30 June 2021 financial statements.
2. GOING CONCERN
As at 30 September 2022, the Group had total cash of US$2.9
million.
The Board have reviewed a range of potential cash flow forecasts
for the period to 31 December 2023, including reasonable possible
downside scenarios. This has included the following
assumptions:
Corporate:
The forecast includes US$2.5 million of ongoing general and
administrative costs of the Group over the 18-month period from 1
July 2022 to 31 December 2023, based on the current administrative
costs of the Group. The budget excludes any significant expenditure
on new business opportunities beyond early costs totalling US$39k
over the 18-month period.
Management's reasonably plausible downside scenario includes a
10% contingency for unexpected costs plus a further US$500k for
business development costs.
Phalaborwa:
This forecast includes all costs required for the completion of
the Phalaborwa PEA (announced in October 2022) and the ongoing
resource update, estimated at US$583k. The forecast also includes
salary and consultant costs of US$623k for the core project team
tasked with advancing the project. A budget for the further work
required to deliver a feasibility study at Phalaborwa, including
pilot test work, has not yet been defined. Management's reasonably
plausible downside scenario includes US$7.6 million for further
work at Phalaborwa during the 18-month forecast period.
Gakara:
The cash flow forecasts assume ongoing care and maintenance
costs totalling US$746k. Further, in the event that the Gakara
project returns to operations, stock of rare earth concentrates
with an estimated gross sales value of US$1.6 million would be sold
to provide the funds to re-commence operations. The forecasts show
that, with the current productive capacity of the operations, the
Gakara project would not require additional financial support from
Rainbow Rare Earths Limited at current rare earth prices. At 30
June 2022 the Group has US$557k of undiscounted financing
liabilities relating to a term loan from FinBank in Burundi.
Capital repayment of this loan is formally suspended until 31
December 2022, with interest of US$7k per month being paid in cash.
Whilst operations at Gakara remain suspended management expect the
repayment of principal to remain suspended. Notwithstanding, the
forecast includes repayment at a rate of US$21k per month from 1
January 2023, including interest, within the care and maintenance
costs for the Gakara project.
Conclusion
The base case forecast includes a total cash outflow over the
Period of US$4,735k, compared to a cash balance at 1 July 2022 of
US$4,134k, which confirms that the Group will need to raise
additional finance before 31 December 2023. Management's reasonably
plausible downside scenario, which includes the discretionary costs
to progress a feasibility study at the Phalaborwa project and an
allowance for other business development opportunities, suggests
that a total of US$9.2 million will need to be raised.
The Board is confident that this funding will be secured, based
on its history of successful fundraising. However, it also
acknowledges that this funding is not, at the present time, in
place. Accordingly, the Board acknowledges that the need for
additional funding represents a material uncertainty which may cast
significant doubt on the ability of the Company to continue as a
going concern and, therefore, that it may be unable to realise its
assets and discharge its liabilities in the normal course of
business. The financial statements do not include any adjustments
that would result if the Group was unable to continue as a going
concern.
3. LOSS PER SHARE
The earnings per share calculations for 30 June 2022 reflect the
changes to the number of ordinary shares during the period.
At the start of the year, 476,411,434 shares were in issue.
During the year, a total of 9,598,875 new shares were allotted (see
note 6 Share Capital) and on 30 June 2022, 524,405,810 shares were
in issue. The weighted average of shares in issue in the year was
508,566,911.
The loss per share has been calculated using the weighted
average number of ordinary shares in issue. The Company was loss
making for all periods presented, therefore the dilutive effect of
share options has not been accounted for in the calculation of
diluted earnings per share, since this would decrease the loss per
share for each reporting period.
Basic and diluted
2022 2021
----------------- --------------
Loss for the year (US$'000) attributable to ordinary equity holders (3,880) (2,690)
Weighted average number of ordinary shares in issue during the year 508,566, 911 450,749,572
Loss per share (cents) (0.76) (0.60)
----------------- --------------
4. EXPLORATION AND EVALUATION ASSETS
Gakara Phalaborwa Total
US$'000 US$'000 US$'000
At 1 July 2020 7,572 - 7,572
Additions 1,102 1,116 2,218
Adjustment of rehabilitation provision (39) - (39)
----------------------------------------- ------- ---------- -------
At 30 June 2021 8,635 1,116 9,751
Additions - 837 837
At 30 June 2022 8,635 1,953 10,588
----------------------------------------- ------- ---------- -------
Only costs relating to the Phalaborwa Project were capitalised
during the financial year. The Burundi Project has been under care
& maintenance throughout the year and, accordingly, none of the
costs meet the requirements under the Group's accounting policy for
capitalisation.
The Phalaborwa project represents an opportunity to extract rare
earth elements from the chemical re-treatment of gypsum stacks. A
JORC compliant rare earth resource was declared on 17 June 2021 and
the costs of establishing the commercial viability of development
for the project are being capitalised as exploration and evaluation
assets under IFRS 6. Additions in the year include costs associated
with process development to deliver an economic and technically
viable route to recovering rare earths. Additions in 2021 included
US$750k consideration payable under the earn-in agreement payable
in cash and shares together with costs associated with the
definition of the inferred mineral resource, metallurgical test
work and technical support.
On 12 April 2021 RMB received notification from the Ministry of
Hydraulics, Energy and Mines of the Republic of Burundi of a
temporary suspension on the export of concentrate produced from the
trial mining and processing operations at the Gakara Project. On 29
June 2021 a further notification was received suspending all trial
mining and processing operations pending negotiations on the terms
of the Gakara mining convention signed in 2015.
Following face to face meetings in Burundi in April 2022 the
Company presented a detailed plan to the Government for the export
of the current stock of rare earth concentrate along with responses
to all questions raised by the Government relating to the Company's
operations in Burundi. The Company is awaiting a formal response to
this export plan, noting increased engagement following significant
changes in the political landscape in Burundi in September 2022.
The Directors have also received confirmation from independent
legal advisors that the mining convention in place between RMB and
the Government of Burundi remains legally binding on both parties,
and that the actions of the Government of Burundi have not been in
accordance with that legally binding agreement.
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 royalty recoverable, which
also forms part of the Gakara cash generating unit, is considered
separately. The Directors do not consider there to be any
indicators of impairment for the Gakara cash generating unit,
however they note that the current suspension of activities could
result in future losses for the Group if it is not resolved as
anticipated.
FinBank SA hold security over the fixed and floating assets of
Rainbow Mining Burundi SM ('RMB') which include US$7.3 million of
exploration and evaluation assets associated with the Gakara mining
permit in Burundi.
5. PROPERTY, PLANT AND EQUIPMENT
US$'000 Mine development costs Plant & machinery Vehicles Office equipment Total
--------------------------------- ---------------------- ----------------- -------- ---------------- -----
Cost
---------------------- ----------------- -------- ---------------- -----
At 1 July 2020 183 2,665 1,074 45 3,967
Additions - 182 508 - 690
At 30 June 2021 183 2,847 1,582 45 4,657
Additions - 42 - - 42
--------------------------------- ---------------------- ----------------- -------- ---------------- -----
At 30 June 2022 183 2,889 1,582 45 4,699
--------------------------------- ---------------------- ----------------- -------- ---------------- -----
Depreciation
At 1 July 2020 47 2,665 298 15 3,025
Charge for year 26 2 241 9 278
---------------------- ----------------- -------- ---------------- -----
At 30 June 2021 73 2,667 539 24 3,303
Charge for the year 26 1 316 10 353
--------------------------------- ---------------------- ----------------- -------- ---------------- -----
At 30 June 2022 99 2,668 855 34 3,656
--------------------------------- ---------------------- ----------------- -------- ---------------- -----
Net Book Value at 30 June 2022 84 221 727 11 1,043
--------------------------------- ---------------------- ----------------- -------- ---------------- -----
Net Book Value at 30 June 2021 110 180 1,043 21 1,354
--------------------------------- ---------------------- ----------------- -------- ---------------- -----
Net Book Value at 30 June 2020 136 - 776 30 942
--------------------------------- ---------------------- ----------------- -------- ---------------- -----
Depreciation of US$Nil (2021: US$269k) relating to mining
vehicles, plant & machinery and site infrastructure was
capitalised in the year 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$1,042k (2021: US$1,353k)
of property, plant, and equipment in Burundi.
As set out in note 4 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 US$1,042k of the net book value at the
balance sheet date.
6. SHARE CAPITAL
Year Ended Year Ended
30 June 2022 30 June 2021
US$'000 US$'000
Share Capital 41,442 32,465
------------- -------------
Issued Share Capital 41,442 32,465
------------- -------------
The table below shows a reconciliation of share capital
movements:
Number of shares US$'000
At 30 June 2020 421,981,551 28,132
November 2020 - Share placing - Cash receipts net of costs 42,700,000 3,338
December 2020 - Exercise of share options (cash receipts) 3,000,000 215
January 2021 - Exercise of share options (cash receipts) 4,000,000 290
February 2021 - Exercise of share options (cash receipts) 2,700,000 200
April 2021 - Exercise of share options (cash receipts) 800,000 58
Costs associated with exercise of share options - (18)
June 2021 - Phalaborwa consideration shares 1,229,883 250
---------------- --------
At 30 June 2021 476,411,434 32,465
July 2021 - Exercise of share options (cash receipts) 2,500,000 182
October 2021 - Share placing - Cash receipts net of costs 32,900,000 6,557
November 2021 - Share placing - Cash receipts net of costs 10,000,000 1,982
December 2021 - Pipestone Loan repayment shares 875,389 175
April 2022 - Exercise of share options (cash receipts) 1,718,987 116
Costs associated with exercise of share options and loan settlement - (35)
524,405,810 41,442
---------------- --------
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).
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).
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).
On 25 April 2022 Australian Special Opportunity Fund, LP
exercised options over 1,718,987 million shares at an exercise
price of 5.28p per share, raising gross cash proceeds of
US$116k.
7. POST BALANCE SHEET EVENTS
No events after the reporting date were identified that would
affect the group of companies significantly or cause its financial
results to be materially misstated.
[1] Adamus Intelligence
[2] Net present value using a 10% forward discount rate
[3] Internal rate of return
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END
FR VXLFLLBLFFBE
(END) Dow Jones Newswires
October 24, 2022 02:00 ET (06:00 GMT)
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