RAINBOW RARE EARTHS LIMITED
ANNUAL REPORT 2024
RAINBOW
RARE EARTHS
A STRATEGIC SOURCE
OF CRITICAL
RARE EARTHS
CONTENTS
OVERVIEW
01 Introduction to Rainbow and REE
02 Why Invest
STRATEGIC REPORT
06 Chairman’s Statement
09 CEO Statement
10 Market Review
14 Operations Review
19 Business Model
20 Sustainability Report
32 Financial Review
33 Payments to Governments
CORPORATE GOVERNANCE
36 Board of Directors
38 Senior Mangement
39 Corporate Governance Statement
44 Principal Risks and Uncertainties
48 Directors’ Report
FINANCIAL STATEMENTS
52 Independent Auditors’ Report
58 Consolidated Statement
of Comprehensive Income
59 Consolidated Statement
of Financial Position
60 Consolidated Statement
of Changes in Equity
61 Consolidated Cash Flow Statement
62 Notes to the Financial Statements
IBC Shareholder Information
INTRODUCTION TO RAINBOW AND
RARE EARTH ELEMENTS
OVERVIEW
PAVING THE WAY FOR THE FIRST COMMERCIAL PRODUCTION
OF RARE EARTH ELEMENTS FROM PHOSPHOGYPSUM
Phosphate is mined to produce
phosphoric acid
A hard-rock phosphate deposit
is mined and concentrated to produce
a phosphate slurry feed
This is fed to a phosphoric acid plant
which applies sulphuric acid and heat
to produce phosphoric acid for fertiliser
Hardrock carbonatite phosphate
sources contain rare earths which
are concentrated and fed to the
phosphoric acid plant
Phosphogypsum is the
by-product
The waste product of phosphoric
acid production is phosphogypsum
The rare earths concentrated in the
phosphoric acid plant are left behind
in the gypsum waste residue
The gypsum waste residue
is a cracked chemical stockpile
of rare earths which are amenable
to direct leaching
Rainbow has developed technology
to recover the REE
Rainbow has developed an innovative
flowsheet to recover REE critical to the
green energy transition from the gypsum
residue
The process has a low capital and operating
cost intensity due to the chemically cracked
nature of the gypsum feed stock
The process will deliver separated
rare earth oxides from a single
hydrometallurgical process plant
01
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
Rare earth elements are fundamental to life in the 21st century.
Due to their unique electrical and magnetic properties, these elements
allow for miniaturisation and much lighter, stronger, resilient, and efficient
components. To date, they have transformed the consumer electronics
market, enabling the high-tech products so integral to our lives and which
still account for ca. 50% of the rare earth market.
However, rare earths have an even more important role to play as
enablers of global decarbonisation. Rare earth elements are vital
components of the type of permanent magnets used within electric
vehicles and wind turbines, with both of these markets forecast to
continue to experience significant growth as part of the inexorable
transition to the green economy.
Currently China controls ca. 70% of rare earth mining, but ca. 90% of the
downstream rare earth processing and manufacturing. This reliance on
one country creates supply chain vulnerability and there is a drive from
western governments to develop supply chain independence, particularly
since rare earths are vital to next generation applications in defence and
exciting new markets such as robotics and advanced air mobility.
Rainbow has developed an innovative process to recover rare earths from phosphogyspum that is the by-product of phosphoric acid production.
The material sits at surface in gypsum stacks, thereby eliminating many of the costs and risks associated with traditional mining projects.
Rainbow’s flowsheet utilises existing processing technologies, which have been applied in multiple commercial applications over the decades, in a novel
combination. Test work to date has indicated that the Company’s proprietary process will recover separated rare earth oxides of the crucial magnet REE:
Nd, Pr, Dy and Tb.
Global demand for magnet rare earth oxides (“REOs”)
(Nd, Pr, Dy, Tb)
Wind power demand growth at a CAGR of ca. 15% p.a.
requires 0.2Mt additional magnet REOs by 2040
Source: Argus Media Ltd (“Argus Media”)
EV sales growth at a CAGR of ca. 10% p.a.
requires ca. 1.2Mt additional magnet REOs by 2040
Other uses of rare earths demand growth at a CAGR of ca. 3% p.a.
requires ca. 2.9Mt additional magnet REOs by 2040
2023 global demand
ca. 177.9kt
2040 global demand
ca. 272.5Kt
0
50
100
150
200
250
300
2023
2024
2026
2028
2030
2032
2034
2036
2038
2040
A STRATEGIC SOURCE OF THE
RARE EARTH ELEMENTS DRIVING
DECARBONISATION
Rainbow Rare Earths (“Rainbow” or the “Company”) aims to be a forerunner in the
establishment of an independent and ethical supply chain of the rare earth elements
(“REE”) that are driving the green energy transition.
It is doing this successfully via the identification and development of secondary rare earth
deposits that can be brought into production quicker and at a lower cost than traditional
hard rock mining projects, with a focus on the rare earth elements used to make permanent
magnets, namely neodymium (“Nd”), praseodymium (“Pr”), dysprosium (“Dy”) and
terbium (“Tb”).
Rainbow is listed on the main market of the London Stock Exchange under the ticker RBW.
Front cover image:
The primary pilot plant in Johannesburg
produced a mixed rare earth feed stream
for further processing into separated rare
earth oxides
INNOVATIVE TECHNOLOGY
Proprietary REE recovery process from
phosphogypsum opens up a new global
market opportunity; proposed separation
process more efficient than traditional
solvent extraction.
Read more on page 19
MULTI-ASSET RARE EARTH
PORTFOLIO
Rainbow has secured two secondary
source REE projects on different
continents and has been approached
for similar global partnerships.
Read more on pages 14 to 18
A UNIQUE INVESTMENT
OPPORTUNITY IN RARE EARTHS
RESPONSIBLE SUPPLY
Rainbow aims to be a forerunner in the
establishment of an independent and
ethical supply chain of Rare Earth Elements
and a focus on responsible production
is central to our business model.
Read more on pages 20 to 25
Phalaborwa – South Africa
• NPV10 of US$627 million (October 2022 PEA)
• Annual production of ca. 1,850t of separated magnet
rare earth oxides
• Annual EBITDA of ca. US$192 million
• Project life of ca. 16 years
• Opportunity to fully rehabilitate a site with
legacy environmental issues
Pilot Plant – South Africa
• Innovative and efficient flowsheet to recover REE from
phosphogypsum confirmed by extensive test work
• Multiple optimisation opportunities identified and actioned
expected to reduce capital and operating cost requirements
• Production of a high grade mixed rare earth feed stream for
separation achieved in South Africa
• Innovative separation flowsheet utilising continuous ion
exchange and continuous ion chromatography piloted
in USA to deliver separated rare earth oxides
• Successful separation of Nd/Pr oxide of ca. 96% purity to date
in Florida, USA
• Separation optimisation work underway in South Africa ahead
of relocation of pilot plant from USA
Uberaba – Brazil
• Exciting opportunity to replicate Phalaborwa at a potentially larger scale
• MoU with Mosaic on Uberaba phosphogypsum stacks – the waste residue
of ongoing phosphoric acid production
• Opportunity to recover REE from the higher-grade current arisings being
deposited annually
• Ongoing planning to define a resource based on existing data
EXPERIENCED TEAM
Rainbow’s team has a history of delivering
multiple processing plants, feasibility
studies and mine developments, including
extensive experience in rare earths.
Read more on pages 36 to 38
FOCUS ON SECONDARY
SOURCES
Rainbow is paving the way for the first
commercial production of REE from
phosphogypsum, thereby extracting value
from a “waste” product.
Read more on page 19
CRITICAL MINERALS
Demand for REE is forecast to rise
significantly to facilitate global
decarbonisation, as well as for use in
strategic and high-tech products.
Read more on pages 10 to 13
WHY INVEST CONTINUED
OVERVIEW
03
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
WHY INVEST
OVERVIEW
02
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
LCM - UK
• World-leader in the manufacture of alloys
for permanent magnets
• Agreement to purchase separated
rare earth oxides from Rainbow
STRATEGIC REPORT
05
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
STRATEGIC REPORT
04
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
STRATEGIC REPORT
DEVELOPING A
RESPONSIBLE RARE
EARTHS SUPPLY
CHAIN
06 Chairman’s Statement
08 CEO Statement
10 Market Review
14 Operations Review
19 Business Model
20 Sustainability Report
32 Financial Review
33 Payments to Governments
Global off-shore wind power installed
capacity grew 112% to 77GW in 2023,
with a further 500GW of capacity
forecast to be installed by 2034
CHAIRMAN’S STATEMENT CONTINUED
STRATEGIC REPORT
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Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
CHAIRMAN’S STATEMENT
STRATEGIC REPORT
06
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
OUR PHALABORWA PROJECT HAS
BEEN CHOSEN BY THE U.S.
GOVERNMENT AS AN IMPORTANT
CONTRIBUTOR TO REE SUPPLY CHAIN
INDEPENDENCE
Dear Shareholder,
Rare earth elements lie at the intersection
of two global megatrends: decarbonisation
and geopolitics. In the former: REE are crucial
materials in the most powerful and efficient
permanent magnets in use today, which are
vital components of electric vehicles (“EVs”),
wind turbines and many of the electronic
devices so integral to our lives today. In the
latter, because the supply chain of REE is
almost entirely dominated by one country,
China, leading to supply chain risks and
vulnerabilities.
REE also have many highly strategic uses
in advanced technologies, including defence
applications from jet fighters to submarines,
as well as exciting new markets such as
robotics and advanced air mobility, adding
to their criticality worldwide.
These factors have led to the designation of
magnet REE as critical minerals by the U.S.,
EU and many other governments.
The magnet REE are noted as being among
those critical minerals at most risk of supply
disruptions due to the market’s reliance on
China which currently controls over 70% of
primary production and over 90% of global
processing capacity. As we have seen recently,
with the announcement of controls by China
on the export of graphite, gallium, germanium
and antimony, it is vital to develop alternative
sources of supply.
The U.S., the E.U. and aligned governments
are taking action across a number of fronts,
via a combination of supportive fiscal
measures, investment and a focus on the
development of skills and technologies that
can support their aims. The announcement in
May 2024 that the U.S. would impose tariffs on
Chinese-made rare earth permanent magnets
further demonstrated the growing
commitment to the development of a fully
independent supply chain.
Gaining this independence in REE requires
multi-faceted development across the supply
chain, from access to the raw materials to the
facilities and skills required to refine and
manufacture those materials into alloys,
metals, and eventually magnets. This cannot
be done without taking a medium to long-
term view that looks beyond short-term
market conditions and pricing fluctuations.
According to Argus Media, the market
for rare earth permanent magnets has nearly
doubled between 2020 to 2024, and demand
is forecast to continue to grow strongly
by ca. 7% per annum over the next ten years,
which means a further doubling of demand
to come. While the long-term demand drivers
for the market remain strong, in the short-term
market volatility may continue, as seen during
the period of weak pricing in the year
to 30 June 2024 (“FY 2024” or the “Year”)
with Chinese-controlled production exceeding
supply growth.
Notwithstanding recent price weakness,
industry commentators agree that the longer-
term outlook for REE pricing is supportive
given the unstoppable global megatrend of
moving towards a transitional energy
environment and decarbonisation. This has
led to the drive from Western and aligned
governments to reduce supply chain
vulnerability through diversified sources
of supply that are traceable and meet high
environmental, social and governance
(“ESG”) standards.
Africa has an important role to play given
its endowment of critical minerals and the
U.S. is increasing its activity on the continent to
combat the inroads that China has made over
the last few decades. This was evident at this
year’s Mining Indaba conference in Cape Town,
where the U.S. sent its largest-ever delegation,
including senior government officials.
Rainbow’s Phalaborwa project has been
chosen by the U.S. Government as an
important contributor to REE supply chain
independence, with the U.S. International
Development Finance Corporation (the “DFC”)
committed to investment of US$50 million to
Phalaborwa, via TechMet Limited (“TechMet”),
as announced at the U.N.’s Climate Change
Conference, COP28.
Due to the unique characteristics of the
project, which will see REE recovered from
phosphogypsum stacks that are sitting at
surface in a chemically “cracked” form on an
industrial site in South Africa, Phalaborwa is
likely to have one of the lowest operating costs
of any rare earth project in development today.
This gives the project resilience against rare
earth pricing volatility, as has been
experienced in FY 2024.
Phalaborwa will play a role in furthering
global goals to reach net zero emissions
via the production of REE essential to
decarbonisation. In addition, the project offers
unique ESG opportunities by extracting value
from a “waste” product (phosphogypsum),
cleaning up legacy environmental issues and
allowing for full-circle site rehabilitation.
Phalaborwa’s position as a best-in-class
REE project was highlighted in July 2024
by the royalty agreement and associated
share placement with Ecora Resources PLC
(“Ecora”), which raised a total of US$10 million.
Rainbow is Ecora’s only investment in the REE
space and the agreement followed an
extensive due diligence process, giving
additional third-party validation of the
quality of our assets.
Rainbow’s ability to raise funds from strategic
partners such as the DFC, TechMet and Ecora
comes at a time of continued difficulty in the
UK equity markets for small- to mid-cap
resources companies, and I am proud of the
high quality of our stakeholders.
Both myself, the CEO George Bennett,
and others on the Board and in senior
management also continued to support
the business via participation in the private
placement announced in October 2023,
which brought in US$5.5 million in funding.
As we continue to develop and de-risk
Phalaborwa, as well as evaluate longer-term
opportunities, we will maintain Rainbow’s tight
corporate overheads to ensure that the
majority of the funds raised will go directly
towards building value across our portfolio.
Our focus is to ensure that the technology
to recover REE from phosphogypsum being
developed at Phalaborwa will unlock a global
opportunity for low-cost and responsible REE
supply from similar secondary sources, such
as the partnership with Mosaic at Uberaba in
Brazil. This will allow Rainbow to benefit from
anticipated growth in REE demand from the
green energy, defence and technology sectors
to develop a long-term sustainable business.
I would like to thank our team, consultants and
partners for the tremendous commitment and
drive that has propelled the Company and our
project forward, as well as our host countries
for their support. It is a truly exciting period
ahead as we work towards bringing
Phalaborwa into production by 2027.
ADONIS POUROULIS
NON-EXECUTIVE CHAIRMAN
17 October 2024
CEO STATEMENT CONTINUED
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Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
CEO STATEMENT
STRATEGIC REPORT
08
OUR TECHNOLOGY CAN UNLOCK
A GLOBAL OPPORTUNITY FOR A LOW
COST AND RESPONSIBLE SUPPLY
OF RARE EARTH ELEMENTS FROM
PHOSPHOGYPSUM
Dear Shareholder,
In FY 2024 Rainbow made significant strides
towards becoming a leader in establishing an
independent and ethical supply chain for the
rare earth elements that are driving the green
energy transition.
The main focus this year was commissioning
the Phalaborwa pilot plant to demonstrate and
optimise the unique flowsheet developed for
recovering REE from phosphogypsum. I am
extremely proud of our team’s hard work in
establishing and optimising the primary front-
end leach flowsheet, which has resulted in a
much more simplified process compared to
that which was published in our Preliminary
Economic Assessment (“PEA”), maintaining REE
recoveries at 66%. Extensive test work, including
repeatability tests, has given us a high-level of
confidence in our primary flow sheet.
Results from the primary pilot plant in South
Africa, alongside preliminary results from the
CIX/CIC separation pilot plant in USA, have
delivered two saleable products: a mixed rare
earth carbonate, and separated Nd/Pr
of ca. 96% purity, paving the way for the
first commercial recovery of rare earths
from phosphogypsum.
As announced in September 2024,
we decided to relocate the continuous ion
exchange and continuous ion chromatography
(“CIX/CIC”) separation plant from Florida to
Johannesburg earlier than originally
envisaged. This will allow for the recycling of
critical streams from the separation process to
the appropriate destinations in the leach plant
and the relevant disposal of waste material.
Complementary bench scale IX/IC tests have
commenced in South Africa and are aimed at
achieving +99% purity while the pilot plant is
shipped. I firmly believe that the successful
utilisation of CIX/CIC technology will be a game
changer for our industry, due to the efficiencies,
improved environmental footprint, and the
lower associated cost base it offers versus
traditional solvent extraction methods.
Moving this work to South Africa will have
the added benefit that the separation work
can be the full focus of Rainbow’s technical
team. We have built an excellent team,
including Chris Le Roux and Roux Wildenboer
who both have extensive experience in REE
processing and project development, and
who have been integral to the successful
development of the primary plant flowsheet at
Phalaborwa. A recent and valuable addition
to the team has been Tamsyn De Jager,
who is an exceptional project manager having
led studies from concept phase to project
execution and worked across many minerals
including REE and uranium.
Both myself and our Technical Director,
Dave Dodd, have delivered on multiple
feasibility studies, and built numerous
processing plants over our careers, most
recently at MDM Engineering. Our long history
in developing mineral flowsheets has taught
us the importance of doing things right,
even if it takes longer than anticipated,
as this is the only way to ensure the long-term
success of a project.
In addition to the progress with our process
flow sheet, an updated Mineral Resource
Estimate (“MRE”) released in September 2024
saw the total resource tonnage for Phalaborwa
increase 15% to 35.0 Mt due to the application
of updated bulk density calculations.
This increases the project life by two years
to a total of 16 years and demonstrates the
potential to generate value from other
recoverable REE not included in our PEA
project economics. Even at today’s lower spot
prices, the MRE has an in-situ value of ca.
US$7.3 billion. The full MRE can be accessed
at www.rainbowrareearths.com/
project/phalaborwa/.
It is important to us that Phalaborwa is aligned
with Rainbow’s values and our stakeholder
expectations. For this reason, ESG
considerations are a fundamental part of
Phalaborwa’s development. Understanding
our impacts, both positive and negative, is
foundational to the proper management of the
project. The Environmental and Social Impact
Assessment (“ESIA”) is a critical component of
ensuring this. Work done to date has
established that Phalaborwa offers important
benefits to its local communities in terms of
job creation and environmental remediation.
We have also commenced work to calculate
carbon emissions for the project, which has
underlined how important it will be to establish
a low-carbon energy source for the project,
given that South Africa’s state power remains
primarily coal-based. We are evaluating
renewable energy power options which we
envisage can provide the bulk of the project’s
power requirements.
We see offtake as an important component
of the Phalaborwa project’s finance process
and have commenced offtake discussions
with a number of industry participants,
including original equipment manufacturers
(“OEMs”) and global trading companies.
Phalaborwa’s ability to play a part in an ethical
and alternative supply chain was also
recognised by UK-based Less Common Metals
Ltd (“LCM”), a world leader in the manufacture
and supply of complex alloy systems and
metals, with whom we entered into a strategic
supply agreement during the Year. LCM has
been looking to secure feedstock required for
their business, and Rainbow was chosen due
to Phalaborwa’s robust cost base, which
should see the project resilient to rare earth
pricing volatility, as well as its green credentials
as an environmental remediation project.
In the long term, we believe that by honing
the technology required to recover REE from
phosphogypsum, Rainbow will be able
to access a much larger addressable market
to develop a scalable and sustainable business.
The Memorandum of Understanding (“MOU”)
signed with the Mosaic Company (“Mosaic”),
the world’s leading integrated producer of
concentrated phosphate and potash, for the
Uberaba project in Brazil, offers an exciting
opportunity to replicate the type of operation
proposed at Phalaborwa. It will offer lower-cost
REE production based in a favourable
jurisdiction that could be brought into
production much faster than traditional
mining projects.
In addition, we are currently evaluating
approaches for strategic partnership
opportunities in Saudi Arabia, Canada and
India, alongside the partnership with OCP S.A.
(“OCP”) and Mohammed VI Polytechnic
University (“UM6P”) in Morocco.
The Gakara project in Burundi has remained
on care and maintenance throughout the
Year at the request of the Government
of Burundi. Recent engagement with the
Government has not delivered progress with
regards to a resolution and the re-start of
operations in the near term cannot be
reasonably assumed. As a result, all assets
of the Gakara cash-generating unit,
with the exception of cash and VAT
recoverable, have now been impaired to nil.
I would like to thank all our stakeholders for
their continued support and especially our
employees, whose remarkable efforts have
brought the Phalaborwa project to where
it is today. Their dedication allows Rainbow
to focus on leveraging our ability to recover
REE from phosphogypsum and develop a
sustainable long-term business.
GEORGE BENNETT
CHIEF EXECUTIVE OFFICER
17 October 2024
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
MARKET REVIEW CONTINUED
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MARKET REVIEW
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Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
About Rare Earth Elements
Due to their unique electrical and magnetic properties, REE are integral
to modern life, being vital components of consumer electronics such as
laptops, smart phones and flat screen TVs, as well as systems required
for the construction industry. They are also used across diverse
applications such as lasers, glass, magnetic materials and
industrial processes.
The shift to a clean energy system is driving a huge increase in the
requirements for REE and other critical minerals. The four REE that are
particularly important to the green energy transition are Nd, Pr, Dy and Tb
(together “Magnet REE”) due to their role in the rare earth permanent
magnets (“REPM”). REPM, first developed in 1984, are 18 times stronger
than ordinary ferrite magnets by volume and 12 times stronger by mass,
which has led to their widespread use in high performance permanent
magnet motors enabling a proliferation of new technologies driving
growing demand.
REPM are by far the most economically important use of REE,
accounting for ca. 78% by value in 2023, which is forecast by Argus
to grow to 90% by value in 2034.
Uses of REE by volume and value
Source: Argus Media
Relevance to Rainbow: The Phalaborwa project is well placed
to capitalise on the growing demand for REPMs, as its rare earth
basket contains all four of the most important Magnet REE in
economic quantities.
Demand drivers
REE demand is estimated to have increased by 21% from 2020 to 2023
to a total of 203kt, driven by a 67% increase in demand for REPM utilising
58kt of REE. This high growth in REPM has driven a corresponding
growth in demand for Magnet REE, from 49kt in 2020 to a total,
including REPM, of 78kt in 2023.
REPM are widely used across a number of sectors: consumer electronics
including smart phones, speakers, microphones and computers;
construction including elevators, heating, ventilation and air conditioning
(“HVAC”); medical devices; defence; motor vehicles including both
electric and conventional vehicles; robotics; advanced air mobility such
as drones; and wind power generation.
In 2023, ca. 50% of REPM demand related to sectors such as consumer
electronics, HVAC and medical uses. The market is expected to be
increasingly dominated by high growth areas related to the move
to net zero, such as electric vehicles and wind turbines, and emerging
technologies such as robotics and advanced air mobility.
Magnet REE Demand
Electric Vehicles (EV)
The global adoption of EV is an unstoppable megatrend driven by
legislation, which is expected to remain a strong demand driver for
Magnet REE. Global sales across battery EV (“BEV”) and plug-in hybrid
EV (“PHEV”) have grown from ca. 3 million units in 2020 to ca. 14 million
units in 2023 and are forecast to reach ca. 46 million units in 2034. EV
penetration is forecast to increase from 1% of the global vehicle fleet in
2020 to 44% in 2045.
Global growth in sales of PHEV has overtaken BEV in 2023, driven
by trends in China with consumers focusing on both price and range
issues. Whilst a PHEV has a smaller battery than a BEV, the impact
on REPM usage is much smaller, with the average motor in a PHEV not
significantly smaller than a BEV. Whilst analysts continue to forecast BEV
sales to outgrow PHEV sales in the long term, PHEV growth will still lead
to a high growth in REPM demand. The average hybrid or EV requires
2kg to 5kg of REPM, two to four times the quantities in a typical internal
combustion engine vehicle.
Global passenger fleet forecast 2020-34 (bn units)
Wind Turbines
The increasing use of REPM direct drive generators in wind turbines,
which provide significant efficiency benefits over traditional gearbox-
based designs, is expected to be another key demand driver for Magnet
REE, as wind generation is one of the fastest growing forms of energy.
The IEA forecasts that wind power will grow from ca. 5% of global
generation capacity in 2018 to ca. 21% in 2040 if sustainable
development goals are met. Global off-shore wind power installed
capacity has grown 112% from 36GW in 2020 to 77GW in 2023,
with a further 500GW of capacity forecast to be installed by 2034.
With a 3MW direct-drive wind turbine requiring 1 to 2t of REPM this
is expected to be a further demand driver for Magnet REE.
Global offshore wind capacity additions 2020-34 (GW)
Robotics and Advanced Air Mobility
In addition to EV and wind turbines, emerging technologies are expected
to open up new frontiers for REPM demand.
Industrial and consumer robotics are estimated to represent 1% of REPM
demand in 2023 but are forecast to be a growing sector. The energy
efficiency, torque, power density and smooth torque curve of REPM
are important factors for robotics, driving a low substitution risk.
As technology advances, it is expected that growth rates will accelerate,
and analysts are forecasting that REPM demand for robotics could
surpass EV over the long term.
Advanced air mobility includes recreational and commercial drones,
with technical advances allowing for increasing payloads and
corresponding applications. In addition to the growing consumer
drone market, commercial drones are already being used for delivery
services and electric vertical take-off and landing (“eVTOL”) technology
is expected to allow low-cost commercial flights, such as airport
transfers, to launch in the coming years. Emerging eVTOL technology
requires higher power output per kg for motors, which is expected
to correspond to higher Magnet REE intensity than passenger EV,
which could create new demand for Magnet REE.
Relevance to Rainbow: The Phalaborwa project will produce all four
Magnet REE, including the heavies Dy and Tb. These elements are
critical to the permanent magnets used in EVs, wind turbines,
defence and robotics, as they improve efficiency and can maintain
performance under high temperatures.
Magnets
Categories
By Volume
By Value
Batteries
Catalysts
Glass Industry
Phosphors
Ceramics
Metal Alloys
Other
29%
9%
16%
25%
7%
6%
5%
78%
6%
5%
0
100
200
300
400
500
600
700
0
10
20
30
40
50
60
70
80
2020
2022
2024
2026
2028
2030
2032
2034
0%
10%
20%
30%
40%
50%
0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
2020
2022
2024
2026
2028
2030
2032
2034
Gasoline
Diesel
Europe
Other Asia
North America
Cumulative total capacity (right axis)
Source: Argus Media
Gasoline/Diesel hybrid
Flex fuel/LPG/Other
Electric
EV penetration (%)
Source: Argus Media
0
20000
40000
60000
80000
100000
120000
140000
2020
2022
2024
2026
2028
2030
2032
2034
Nd
Pr
Source: Argus Media
Dy
Tb
ABOUT RARE EARTH
ELEMENTS
Supply Outlook
Rare earth production is dominated by China, which has a 70% market
share for primary production and over 90% of the global processing
capacity. In China, the market is dominated by two state owned entities:
China Northern and China Rare Earth Group (in the South), with
consolidation since 2021 allied with stricter permitting allowing the
Government to control supply through quota allocations.
Total rare earth supply increased by 59% between 2020 and 2023
from 214kt REO to 340kt REO, driven by a 64% increase in Chinese
production (including imported feedstock from Myanmar, Laos and
Vietnam). The Chinese supply growth was managed via increased
quotas for both primary production and refining, which increased
by 20-25% per annum from 2020 to 2023. It is not reported how
sustainable these increases are in the context of Chinese reserves of
rare earth ores. Quota increases in 2024 have been much smaller,
at 6% for mining and 4% for smelting and separation, and Argus predict
supply growth for Magnet REE of c. 4% per annum over the next decade.
Magnet REE Supply
Production outside China is dominated by Mountain Pass in US and
Lynas in Australia. While there are a number of new REE projects outside
of China in development today, there are multiple challenges in bringing
new supply to market. Due to the nature of REE mineral deposits, they
often involve complex mineralogy with associated radioactive elements.
The current low rare earth pricing environment is also a major
impediment to new production coming on stream. Notwithstanding
government intervention to support new sources outside China,
analysts are predicting that supply growth will be restricted
by a combination of financing, permitting and technical risks,
expected to delay the start-up for new mines.
Rare earth supply by source
Relevance to Rainbow: The Phalaborwa project will recover REE
from phosphogypsum stacks that sit at surface, thereby eliminating
many of the costs and risks associated with traditional mining
development projects.
CASE STUDY
The Critical Role of REE in Defence
REPM are increasingly essential components in a range
of defence capabilities, which make use of next generation
technologies. These include:
•
F-35 Lightning II aircraft
•
Virginia and Columbia class submarines
•
Unmanned aerial vehicles
•
Tomahawk missiles
•
Radar systems
•
Guidance and control systems
REE are also used in non-magnetic applications such as:
•
Vehicle-mounted and portable laser range finders
•
Target designators
•
Fiber optic communications systems
•
Sonic transducers for submarines
Recognising the excessive supply chain vulnerability for magnet
REE, especially the heavies Dy and Tb, the U.S. Department
of Defense (“DOD”) has instigated a “Mine-to-magnet” initiative
aimed at establishing a fully domestic supply chain.
This will include the separation and refinement of REE mined
in the U.S., as well as developing the downstream processes
needed to convert those refined materials into metals,
alloys and ultimately magnets.
Since 2020, the DOD has awarded more than US$439 million
and is reported to be on track to meet its goal of a sustainable,
mine-to-magnet supply chain capable of supporting all U.S.
defence requirements by 2027.
Rare Earths are critical to the Defence supply chain
F-35
Arleigh Burke DDG-51
SSN-774 Virginia Class Submarine
MARKET REVIEW CONTINUED
STRATEGIC REPORT
13
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
MARKET REVIEW CONTINUED
STRATEGIC REPORT
12
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
Rare earth pricing
Since peaking in Q1 2022 rare earth prices have fallen significantly.
A decline in the price of Nd/Pr of ca. 45% was seen in FY 2023.
Weak pricing continued in FY 2024 with Nd/Pr falling a further 23% to
end the Year at US$51/kg. Since 30 June 2024 prices have stabilised,
reaching US$62/kg for Nd/Pr at 30 September 2024.
This weak performance is driven by the significantly increased Chinese
supply quotas exceeding growth in demand. Demand has been
impacted by the soft global economic backdrop, particularly in China,
which has led to slowdowns in construction (impacting elevator and
HVAC consumption) and consumer electronics. The market was also
impacted by the slower than anticipated roll-out of EVs and offshore
wind turbines, albeit these markets still recorded significant growth.
While REE supply is forecast to continue to grow, it is not expected to be
able to keep pace with the fast-growing demand for REPM, which would
need supply of the Magnet REE to grow by nearly 9% per annum to
satisfy the demand for the green energy transition.
The latest Argus forecasts foresee a supply deficit for Magnet REE
emerging from 2029, growing to 8,200t by 2034. These forecasts are
predicated on new non-Chinese supply growing from 4% of total REO
in 2023 to 17% in 2029 and 24% by 2034, excluding anticipated growth
from established non-Chinese suppliers. Delays to new supply additions
or slower quota growth in China could accelerate the predicted supply
deficits, as could increasing demand for REPM from emerging
technologies.
REO Supply vs Demand outlook
Source: Argus Media
Relevance to Rainbow: The Phalaborwa project will produce
ca. 1,850t of magnet rare earths per annum, which is equivalent
to ca. 2% of the forecast demand in 2027 when the project is
expected to commence operations.
At spot year-end prices the Phalaborwa Resource has an in-situ value
of US$92.40 per tonne of gypsum. This is forecast to grow to US$177.57
in 2027 when the project is anticipated to commence production and
US$304.73 by 2034 once long-term supply deficits start to emerge.
Phalaborwa in-situ vale US$/t gypsum
Source: Argus Media
At spot prices, the majority of rare earth production and development
projects are deemed by independent market analysts to be uneconomic,
including a significant proportion of Chinese production, suggesting that
current price levels are unsustainable.
While there could be continued pricing volatility in the short-term,
industry commentators agree that the longer-term outlook for REE
pricing is supportive given the unstoppable global megatrend of
decarbonisation and the drive from western governments to
develop an independent and diversified supply chain.
Relevance to Rainbow: The Phalaborwa PEA indicated an operating
cost of US$28.95 per tonne of gypsum treated, which is believed
to equate to one of the lowest REE operating costs globally.
Many of the REE projects in development today are estimated
by Canaccord Genuity to require an average Nd/Pr oxide price
of ca. US$80/kg to return a project NPV breakeven.
Total magnet RE supply
Total magnet RE demand
Surplus / (deficit)
Source: Argus Media
0
20000
40000
60000
80000
100000
120000
140000
2020
2022
2024
2026
2028
2030
2032
2034
0
50000
100000
150000
200000
250000
300000
350000
400000
2020
2021
2022
2023
2024
China-based production
Lynas
Mountain Pass
New projects & Other
0
20000
40000
60000
80000
100000
120000
140000
2020
2022
2024
2026
2028
2030
2032
2034
Nd
Pr
Source: Argus Media
Dy
Tb
0
50
100
150
200
250
300
350
2020
2022
2024
2026
2028
2030
2032
2034
400kg of REE
2,360kg of REE
4,170kg of REE
OPERATIONS REVIEW CONTINUED
STRATEGIC REPORT
15
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
OPERATIONS REVIEW
STRATEGIC REPORT
14
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
Overview
The Phalaborwa project in South Africa
represents an exciting, near-term production
opportunity of all four of the magnet rare
earths required for the green energy transition.
The operation will involve the processing
of phosphogypsum stacks, the by-product
of historic phosphoric acid production on the
site which ceased in 2014. The resource sits
at surface, thereby eliminating many of the
costs and risks associated with traditional
mining projects.
Rainbow has developed a unique flowsheet
which will allow for the rare earths to be
leached from the gypsum and upgraded
to a mixed rare earth feed stream before
further processing to deliver separated rare
earth oxides. Annual production is estimated
to be ca. 1,850 tonnes of the Magnet REE Nd,
Pr, Dy and Tb oxides, starting in 2027.
In September 2024, the Company published
an updated Resource for Phalaborwa, which
saw the total tonnage rise 15% to 35 Mt,
thereby increasing the project life from ca. 14
years to ca. 16 years. The new MRE for the first
time includes the full range of recoverable REE
that may have economic value for Rainbow in
the future, including the SEG group (samarium,
europium and gadolinium), lanthanum and
cerium. The full MRE can be accessed at
www.rainbowrareearths.com/
project/phalaborwa/.
Apart from delivering products that are vital to
global efforts of decarbonisation, Phalaborwa
has strong environmental credentials in terms
of reducing legacy risks from the previous
operations on site. ESG parameters are an
integral part of the Phalaborwa development
and operating plan.
Rainbow currently owns 85% of the project,
with an option to acquire the remaining 15%
from Bosveld Phosphates (Pty) Limited
(“Bosveld”) via the issue of 38,873,663
new ordinary shares in the Company.
Background to Phalaborwa
Phosphogypsum
The original source rock for the phosphoric
acid operations was a hardrock carbonatite,
which was mined and processed to produce
a phosphate slurry feed. The phosphate slurry
was further processed on a separate site
to produce phosphoric acid with a
phosphogypsum waste residue. While the
hardrock carbonatite did not contain rare
earths in sufficient quantities to be mined
for these elements alone, the processes it
underwent served to concentrate the quantity
of rare earths contained therein, resulting in
higher concentrations of rare earths deporting
to the phosphogypsum waste residue than
were in the original hard rock.
This phosphoric acid production process
also subjected the material to sulphuric acid
and heat, which led to the majority of the rare
earths in the phosphogypsum material
at Phalaborwa being in “cracked” chemical
form. These “cracked” rare earths are
amenable to direct acid leaching, which is
expected to allow Rainbow to produce
separated and purified rare earth oxides from a
single hydrometallurgical process plant.
With no need for hard rock mining, crushing and
milling, the phosphogypsum will be hydraulically
reclaimed from the stacks and pumped into the
processing facility which, together with the
elimination of a dedicated cracking plant for the
REE, is expected to reduce capital and operating
cost intensity compared to traditional hard rock
mining REE projects.
Robust economics
Rainbow published a PEA in October 2022
based on processing 2.2 million tonnes per
annum of phosphogypsum 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 of magnet rare earth oxides (“REO”).
The PEA generates a strong EBITDA
in all pricing scenarios. Pricing was notably
weak for the duration of FY 2024, with Nd/Pr
oxide trading below US$60/kg in the second
half of the Year. While this is believed to be
below breakeven for the majority of producers
worldwide and therefore unsustainable,
Phalaborwa is still expected to be profitable
at this level, generating ca. US$82 million
EBITDA per annum (at US$60/kg Nd/Pr,
US$300/kg Dy and US$1,000/kg Tb with the
PEA cost base). The operation is highly geared
to rising prices, which are expected given the
rapid growth in demand for REPMs globally.
At the time of the PEA, spot pricing of
US$110/kg Nd, US$112.50/kg Pr, US$340/kg
Dy and US$1,875/kg Tb was used for the base
case, which would generate US$192 EBITDA
per annum.
Phalaborwa magnet rare earth
basket value
61%
16%
8%
15%
Nd
Pr
Tb
Dy
Annual EBITDA $192m
75%
Operating Margin
PHALABORWA
SOUTH AFRICA
ONE OF THE HIGHEST MARGIN
RARE EARTH PROJECTS IN
DEVELOPMENT TODAY
Rainbow is planning to release an Interim
Report before the end of 2024 to update
the economics of the Phalaborwa project,
footprinted against the PEA, to reflect the
process flow sheet changes delivered from
the pilot test work campaigns and the increase
in project life driven by the updated mineral
resource. The Interim Report will evaluate
the various product options currently available
as revenue generators for the project and
is expected to allow financing workstreams
to commence.
EBITDA sensitivity to pricing
Phalaborwa’s positive impacts
As well as delivering products that
are essential to the green energy transition,
the Phalaborwa project is notable for having
a number of positive impacts for both its local
environment and communities.
Most importantly, the project will serve to clean
up a legacy environmental issue of acid water
associated with the historic unlined gypsum
stacks. Rainbow will neutralise this acid water
for use in the closed-circuit plant process,
which also eliminates the need to draw
on an external water source for the processing
plant. The clean-up of acid water is expected
to improve groundwater quality which
is impacted by the stack water emanating
from the base of the unlined stacks.
Rainbow’s process flowsheet will produce a
cleaner “benign” gypsum with fewer impurities
which will be deposited on new stacks which
are lined according to International Finance
Corporation standards and Equator Principles.
During the Year, Rainbow entered into a Letter
of Intent for an offtake agreement with NEXUS
Intertrade (Pty) Ltd (“NEXUS”), under which
NEXUS will acquire the benign gypsum and
sell it on to both the domestic and
neighbouring agricultural and industrial
sectors. This agreement will see the stacks at
Phalaborwa eventually fully depleted, allowing
for a complete environmental rehabilitation of
the site, as well as having a positive socio-
economic effect on local industry.
Part of the Circular Economy
Phalaborwa’s business model is founded
on the extraction of value from waste,
which gives the project a place in the
circular economy:
•
The project will recover magnet REE from
phosphogypsum stacks that are currently
a waste pile in need of environmental
rehabilitation.
•
A neighbouring company’s waste product,
sulphuric acid from copper production, will
be used as a key reagent.
•
The clean gypsum by-product can
be sold on for use in other industries.
•
As a brownfield operation on an existing
industrial site the project proposes to
repurpose and reuse existing selected
infrastructure.
Update on operations
Rainbow is progressing on the various
workstreams required to deliver the
Phalaborwa Definitive Feasibility Study (“DFS”),
which is expected to be completed in 2025.
A key component of the DFS has been the
operation of a pilot plant to demonstrate and
optimise the unique flowsheet that has been
developed for the project.
The primary leach flowsheet represents
+/−75% of the Phalaborwa flowsheet and
processes phosphogypsum to produce a rare
earth feed stream for the separation process.
The leach flowsheet has been subject
to an extensive programme of bench scale
and pilot plant leach test work conducted
at the Johannesburg facilities of the Council
for Mineral Technology (“Mintek”). This work
has confirmed the efficacy of a much simpler
flowsheet, which maintains the overall
recovery rate of rare earths at ca. 66%, paving
the way for the first commercial recovery
of Magnet REE from phosphogypsum.
The diagram to the right shows the original
flowsheet adopted for the PEA, with the
coloured blocks representing the processes
and circuits that have now been eliminated.
The extended test work has allowed
for the identification and action of multiple
optimisation opportunities. The end result of
these efficiency measures is the delivery
of a simplified leach flowsheet with a smaller
footprint, with expected capital and operating
cost benefits versus the PEA flowsheet,
which already showed strong economic
returns across the rare earth price cycle.
This bodes well for the updated economics
of the revised flowsheet to be published
in the Interim Report before the end of 2024.
The final separation flowsheet represents
+/−25% of the Phalaborwa flowsheet and
refines the mixed rare earth feed stream into
separated rare earth oxides. The separation
CIX/CIC pilot plant has successfully achieved
a separated Nd/Pr oxide of ca. 96% purity,
which is confirmed by market participants
as a saleable but discounted product.
As announced in September 2024,
it was decided to accelerate the relocation
of the CIX/CIC separation plant from Florida
to Johannesburg to allow for the integration
of the separation waste/recirculating streams
to the appropriate destinations in the leach
plant and relevant disposal of waste material.
It will also allow the Rainbow technical team to
bring dedicated focus to finalise the separation
and purification of target rare earths to the
desired oxide purity of +99%. Once this work
is completed, CIC work focused on the Dy/Tb
streams will continue, as well as further
progress SEG group. A Technical Update giving
more detail on the flowsheet optimisation work
carried out during the Year can be accessed at
www.rainbowrareearths.com/
project/phalaborwa/.
PEA Flowsheet Optimisation
Next steps
Rainbow is working with world-class
consultants to deliver the Phalaborwa DFS
including METC Engineering who are
coordinating the DFS and developing the
engineering work, the US-based global
gypsum experts Ardaman and Associates, Inc.,
a Tetra Tech company, (“Ardaman”), who are
carrying out the design work for the new
stacks upon which the benign gypsum will
be deposited and Paragon Tailings, who are
designing the hydraulic reclamation of the
stacks. Completion of the DFS is expected
in 2025, but is dependant on the finalisation
of the separation testwork underway.
Rainbow is carrying out an ESIA at
Phalaborwa, which is required in order to
receive the environmental permit for project,
which is being managed by WSP, though its
conclusion is dependent on the finalisation
of the overall project flowsheet and design
for the separated rare earths recovery process.
As part of the financing process, offtake
discussions have commenced with industry
participants, including OEMs and global trading
companies, who share Rainbow’s values and
are looking to secure responsible sources
of all four critical Magnet REE.
An important part of an independent
and responsible rare earths supply chain
Phalaborwa is a unique project in that it offers
a near-term and responsible source of the rare
earth elements that are essential to the green
energy transition. Furthermore, by extracting
rare earths from secondary sources,
Phalaborwa offers an improved cost profile
in comparison to the global peer group.
These credentials have seen strong backing
for the project by the Company’s stakeholders,
including the DFC, which has committed
US$50 million to Phalaborwa’s funding via
strategic shareholder TechMet, and Ecora,
which chose Rainbow as its first royalty
investment in the rare earths space.
These stakeholders carried out extensive
due diligence on the project, further validating
the quality of this opportunity.
OPERATIONS REVIEW CONTINUED
STRATEGIC REPORT
17
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
OPERATIONS REVIEW CONTINUED
STRATEGIC REPORT
PHALABORWA
CONTINUED
0
50
100
150
200
250
300
350
400
450
500
0
50
100
150
200
250
78.46
101.47
124.48
147.50
170.51
193.52
216.54
Revenue/kg magnet REO produced
Average EBITDA - US$m/annum
Average cost/kg magnet REO produced
16
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
Magnet REO basket price - US$/kg
Slurry
Undersize
Amorohous Silica
Hydrofluoric Acid
Impurities
Rare Earths
PLS direct to CIX
Eliminated from
oprimised flow sheet
Solids
Solutions
Optimised flow sheet
Hydraulic
Reclamation
Impurity Leach
Rare Earth Flouride
Precipitation
Acid Bake
Water Leach
CIX Impurity Removal
CIC Seperation Circuit
Screening
Pre-leach Thickening
& Filtration
Continuous Flouride
Ion-Exchange
Si Precipitation &
Flourine Recovery
New Residue Stacks
Rare Earth Leach
(3-Stage CCL)
Neutralisation
BUSINESS MODEL
STRATEGIC REPORT
Recovering REE from phosphogypsum
opens up a global opportunity
Rainbow’s technology can unlock a global
opportunity for a low-cost and responsible
supply of REE from phosphogypsum. The
global phosphoric acid market is expected to
grow from US$41.3bn in 2022 to US$87.1bn by
2040 driven by fertilisers, food and beverages,
pharmaceuticals, animal nutrition and water
treatment. As the phosphoric acid market
grows, Rainbow will focus on partnering with
both existing and emerging producers to
recover REE as a by-product.
Phosphoric acid is produced from phosphate
rock sourced from either sedimentary or hard
rock sources. Rainbow’s Phalaborwa project
and the Uberaba project in Brazil are both
associated with a hard rock carbonatite hosted
phosphate source, which have higher grades
of associated REE than sedimentary sources.
The innovative extraction technology
developed at Phalaborwa is believed to be
broadly applicable to recovering REE from
these types of opportunities.
The majority of phosphoric acid production is
associated with sedimentary phosphate ores,
which typically have lower REE grades than
hard rock sources. 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
sedimentary-sourced phosphogypsum.
This collaborative effort is at a much earlier
stage of development than Phalaborwa but
could represent a significant long-term
source of REE.
In addition to Uberaba and OCP, Rainbow is
currently evaluating approaches for strategic
partnership opportunities in Saudi Arabia,
Canada and India.
19
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
OPERATIONS REVIEW CONTINUED
STRATEGIC REPORT
The Uberaba project in Brazil is the subject
of an MOU between Rainbow and its owner
Mosaic, the world’s leading integrated
producer of concentrated phosphate
and potash.
The project is similar to Phalaborwa in that it
will entail the processing of phosphogypsum
that is the by-product of phosphoric acid
production sourced from a hard rock
carbonatite phosphate deposit.
While public data is not available on the size
of the Uberaba resource, initial indications are
that it could be significantly larger than
Phalaborwa. In addition, Mosaic’s phosphoric
acid operations are ongoing and are based on
long-life phosphate mines, meaning that new
phosphogypsum (the “current arisings”) is
deposited on the stacks annually. Rainbow
has commenced the planning work to define
a resource at Uberaba based on existing data.
Under the terms of the MOU, Rainbow and
Mosaic will look to jointly develop a process
flowsheet to extract the rare earth elements
from the Uberaba stack. Test work carried
out to date has included assays taken from
different areas of the Uberaba stack, which
were sent to SGS Laboratories in Lakefield,
Canada for testing. The assays found to have
the highest grade were those taken from the
current arisings. This material demonstrated
a grade of between 4,520 to 7,912ppm TREO,
with Nd/Pr being 24.7% of the rare earths
basket. For context, these grades are ca. 80%
higher for TREO and ca. 50% higher for Nd/Pr
than those at Phalaborwa.
As at Phalaborwa, the Uberaba
phosphogypsum is amenable to direct
acid leaching, with test work caried out to
date demonstrating that between 31% and
65% of the REE can be readily extracted.
Mineralogical evaluation of the leach residue
has revealed that 50% to 71% of the remaining
rare earth oxides are contained in monazite,
from which the REE are less readily extractable.
Further test work focused on both
hydrometallurgical and monazite concentration
is being undertaken at Mosaic’s laboratory in
Brazil focused on options to increase overall
REE recovery.
Following the production of the process
flowsheet, Rainbow and Mosaic will collaborate
on the production of a PEA of this opportunity
to extract rare earths. The costs for this initial
work programme and proposed PEA will be
shared by both parties 50:50.
18
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
UBERABA
BRAZIL
THE OPPORTUNITY TO
REPLICATE PHALABORWA
AT A POTENTIALLY
LARGER SCALE
TECHNOLOGY DRIVEN GROWTH
“
This agreement with
Mosaic represents a major opportunity
to become a multi-asset producer
of rare earth elements from
secondary sources.”
GEORGE BENNETT
CHIEF EXECUTIVE OFFICER
BUSINESS MODEL
Developing a
responsible supply of
critical rare earths
PROJECT
IDENTIFICATION
Focus on secondary sources of
supply that can be brought into
production quicker and at a lower
cost and carbon intensity than rare
earth mine development projects
INNOVATIVE
TECHNOLOGY
Application of proprietary
separation technologies including
CIX and CIC in order to deliver
separated magnet rare earth oxides
more efficiently than traditional solvent
extraction methods
RESPONSIBLE PRODUCTION
Rainbow will contribute to a
responsible supply chain for rare earths
by integrating strong environmental
and social practices into its
project development and
management
UNIQUE POSITION IN PIPELINE
Rainbow will be one of the few
companies outside of Asia to
produce separated rare earth
oxides, including the
“heavies” Dy and Tb
Our approach to sustainability
By focusing on the production of critical rare earths from secondary sources, integrating environmental considerations into decision making,
maintaining high governance and ethical standards and focusing on stakeholder value creation, Rainbow aims to be a forerunner in the establishment
of an independent and ethical supply chain of the rare earth elements that are driving the green energy transition.
Rainbow has placed responsible production at the heart of its business model. As such, the Company is focused on laying strong foundations
from which to embed sustainability in its project development as well as to manage, measure and report on its sustainability performance.
Rainbow’s sustainability disclosure and reporting will continue to evolve as the DFS for Phalaborwa is finalised and the project moves
into development and then on to production. This will include a comprehensive materiality assessment for Phalaborwa, the identification
of the most appropriate sustainability KPIs with which to measure the Company’s sustainability performance over time, and the setting
of short to long-term ESG targets.
Rainbow’s approach to sustainability is founded on the four pillars below:
SUSTAINABILITY CONTINUED
STRATEGIC REPORT
Our contribution to the global agenda
Rainbow recognises that by responsibly producing minerals critical to the green energy transition, it can contribute to the vision of the Sustainable
Development Goals (“SDGs”), which provide a shared blueprint for peace and prosperity for people and the planet, now and into the future.
Rainbow has identified three SDGs with which our business is currently aligned; however, we will continue to evaluate our contribution
to the SDGs over time and would expect that these goals may be revised as the business evolves and matures.
Sustainability governance and management
Sustainability is an important agenda point at Rainbow’s Board meetings
and the Company has established a Board-level Sustainability
Committee, which includes the CEO as a member.
The Sustainability Committee is responsible for overseeing on behalf
of the Board, and making recommendations to the Board, on:
•
the Group’s initiatives, including policies, compliance systems,
monitoring processes and strategies to manage sustainability-
related business practices and performance;
•
promoting the Group’s long-term success and viability by
seeking opportunities to strengthen the Group’s licence to operate,
recognising the role Rainbow has to play in taking a responsible
approach to managing its environmental and social impacts
as well as prioritising ethical business practices; and
•
oversight of the implementation of the Group’s sustainability
strategy, helping to ensure that Rainbow is a responsible,
resilient and sustainable business.
Rainbow’s Sustainability Policy guides the Company’s approach and sets
out clear commitments to operating in a safe, ethical, sustainable and
responsible way. This is approved by the Board and is available on our
website at: www.rainbowrareearths.com/about/corporate-governance/
company-policies/. The policy covers a range of topics such as
governance and ethics, human rights, health and safety, employment,
environmental impacts (including, but not limited to, those related to
climate change, emissions, pollution, water stewardship, responsible
waste management, biodiversity), communities and our supply chain.
It is fundamental to our business model that ESG considerations are
integrated into all strategic decision making. Sustainability risks and
opportunities are considered as part of the Company’s overall risk
management processes and frameworks.
Spotlight on the ESIA
Rainbow is currently finalising an ESIA for Phalaborwa conducted by
WSP, a specialist agency with multi-decade experience in environmental
consultancy. The first stage comprises a Scoping Report, to establish the
important socio-economic and environmental issues that will form the
basis of the ESIA. The Scoping Report is subject to a public participation
process with local stakeholders so their views can be taken into
consideration as part of the project development. An integrated public
participation process has been formulated by WSP to comply with
applicable legislation.
Following acceptance of the Scoping Report by the competent authority
an assessment process begins to evaluate the project’s environmental
and social impacts, how to mitigate the negative impacts and how
to enhance any positive impacts, prior to the formal application for
environmental authorisation. An Environmental Management
Programme (“EMPr”) is being developed as part of the ESIA work
to manage and monitor environmental and social matters.
As part of Rainbow’s strategy to embed ESG within its operations,
the following international standards in project development
are being incorporated into the ESIA:
•
The IFC Performance Standards, which focus on mobilising finance
for companies in developing countries by addressing environmental
and social management through the life of a project
•
The relevant Equator Principles (“EPs”), which are intended to serve
as a common baseline and risk management framework for
financial institutions to identify, assess and manage environmental
and social risks when financing projects
The incorporation of these standards into Phalaborwa’s project
development is a key part of the Company’s ESG risk mitigation,
managing operational risk and ensuring that the project will meet
the ESG standards that are increasingly required by financial
institutions and other stakeholders globally.
Rainbow has completed relevant base line assessments for the ESIA.
Filing of the Scoping Report is dependent on the finalisation of the
overall project flowsheet and design for the separated rare earths
recovery process.
Chosen SDG Description Reason for Rainbow alignment
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SUSTAINABILITY
STRATEGIC REPORT
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DEVELOPING A RESPONSIBLE
SUPPLY OF CRITICAL RARE EARTHS
With its innovative approach to producing critical rare earths in an environmentally
responsible manner from secondary sources, Rainbow aims to create economic value,
with a focus on local supply chain support and job creation, thereby supporting growth
and development.
Promote sustained, inclusive
and sustainable economic
growth, full and productive
employment and decent work.
Rainbow is developing proprietary technological expertise to efficiently process rare
earths, which are an essential building block for permanent magnets used in critical
sustainable infrastructure and environmentally sound technologies, such as wind
turbines and EV motors.
Build resilient infrastructure,
promote inclusive and
sustainable industrialization
and foster innovation.
The Company aims to be part of a circular economy by producing rare earths from
secondary sources, which could otherwise be considered waste, thereby rehabilitating
historical environmental degradation and avoiding the carbon emissions and other
environmental impacts associated with traditional rare earth mining.
Ensure sustainable
consumption and
production patterns.
DEVELOPING
A RESPONSIBLE
SUPPLY OF CRITICAL
RARE EARTHS
RESPONSIBLE
BUSINESS
CREATING
VALUE
FOCUS ON
SECONDARY
SOURCES
ENVIRONMENTAL
INTEGRATION
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RESPONSIBLE BUSINESS
Key achievements
Investment commitments from both the DFC/TechMet and
Ecora followed extensive due diligence into Rainbow’s ESG
approach and practices
No concerns raised via the Group whistleblowing procedure
Diversity briefing provided to the Nomination Committee
and wider Board
Governance, ethics and values
Rainbow is committed to good governance, transparency,
accountability, effective risk management and to conducting business
in an ethical and responsible manner. This is guided by our policies,
including the Group Code of Conduct and the Anti-Bribery Policy,
which set out the key principles of ethical and responsible conduct
and standards of behaviour to which all employees and stakeholders
are expected to adhere.
These policies are available on our website at
www.rainbowrareearths.com/about/corporate-governance/
company-policies/. The policies are reviewed on an annual basis and
approved by the Board. All personnel are required to receive guidance
and training in relation to the Group’s Policy and procedures.
Rainbow’s Whistleblowing Procedure provides a dedicated reporting
system whereby employees and others are able to raise serious
concerns about possible fraud, crime or other serious risk to the
Company or its stakeholders – read more on page 42. The procedure
is also available at www.rainbowrareearths.com/about/corporate-
governance/company-policies/ and is communicated to employees
and stakeholders. No complaints were received via the whistleblowing
procedure in FY 2024 (FY 2023: nil).
As our business continues to grow, we will focus on further maturing
our procedures and developing our policies to ensure continued
effective corporate governance.
Human rights
Rainbow is aware of its responsibility to respect and protect the
internationally recognised human rights of our people, business
partners and, where this is within our control, the human rights
of those within our supply chain and communities.
We are committed to the prevention, mitigation and, where
appropriate, remediation of any adverse human rights impacts
with which the Company is involved. Our approach is guided by the
UN Guiding Principles on Business and Human Rights and the UN
Declaration of Human Rights and is contained within the Company’s
Code of Conduct as well as within our Supplier Code of Conduct.
In terms of Phalaborwa’s unique profile, the project envisages
a brownfields chemical processing operation on an existing industrial
site. As such, it has no impact on local land use and no community
resettlements are required.
Purpose and values
Rainbow’s purpose is to produce the critical rare earths required
to progress the global green technology revolution in an efficient
and responsible manner. By integrating sustainable development
considerations into corporate strategy and decision-making
processes, we believe we can operate in a manner which creates
long-term shared value and benefits for our stakeholders and reflects
our core values of:
•
Zero harm
•
Integrity
•
Respect
•
Accountability
•
Transparency
•
Courage
Health and safety
Our primary objective is to achieve a zero-harm working environment
and we are committed to supporting employee health.
We prioritise the safety of our workforce and will implement and maintain
strong health and safety management systems at our operations.
Our approach to safety prioritises a commitment to identifying
and taking appropriate action to avoid or mitigate workplace incidents,
injuries and illnesses. We will also provide appropriate training on health
and safety management to our workforce and promote a culture of
responsibility for keeping ourselves and each other safe from harm.
No health and safety incidents have been recorded during
Rainbow’s test work programmes including the Phalaborwa
pilot plant operations.
Fair employment
Rainbow is committed to responsible and fair employment practices,
with due consideration to diversity, wherever we operate and looks
to provide a working environment in which everyone is treated with
respect and dignity.
We aim to provide training and skills development opportunities,
contributing to an effective and engaged workforce.
Rainbow is an equal opportunity employer and does not tolerate
discrimination against, or harassment of, any of our employees on any
grounds (including race, ethnicity, national origin, age, religion, gender,
sexuality) or retaliation. Any such instances of discrimination are treated
as serious misconduct, in line with the Company’s Code of Conduct.
OPERATING IN A SAFE, ETHICAL,
SUSTAINABLE AND RESPONSIBLE WAY
CREATING VALUE
Key achievements
Ongoing optimisation of flowsheet to enable a long-term
sustainable business
Phalaborwa ESIA work progressing
Stakeholder Engagement Plan and Grievance Mechanism
prepared
We aim to positively contribute to the communities in which we
operate through the provision of local employment opportunities,
the support of local supply chains, community support and the
transparent payment of taxes and royalties – read more in our
Payments to Governments Report on page 33.
Phalaborwa will create numerous employment opportunities over
its life, with priority being given to the local workforce. The Company
will also work closely with local contractors and suppliers to build long-
term supply chain solutions from the local area, contributing to socio-
economic development.
We are aware that effective stakeholder engagement
will be fundamental to the long-term success of Phalaborwa
and are focused on building mutual trust and respect with our local
communities and integrating stakeholder considerations into project
development decisions to create long-term value for all our
stakeholders, as well as allowing Phalaborwa to operate and grow
in a stable social environment.
Stakeholder engagement forms an integral part of the ESIA process
and Rainbow is expecting to commence stakeholder consultations
at Phalaborwa in FY 2025.
An integrated public participation process has been formulated by
WSP to comply with applicable legislation. As part of this, a Stakeholder
Engagement Plan (“SEP”) has been developed under South African
legislation and in accordance with the IFC Performance Standards
and the Equator Principles.
The SEP is a “living document” that will change over time as the
project progresses and associated aspects emerge. A stakeholder
database will be developed and all engagements and issues raised
during engagements will be recorded for follow-up and management
purposes over the project’s life.
A dedicated Grievance Mechanism for use by local stakeholders
has also been formulated by WSP in accordance with IFC
Performance Standards. This sets out how grievances can be
submitted, recorded, managed and addressed by the Company.
The Grievance Mechanism will go live once the public participation
process for the ESIA commences.
Responsible supply chain
Rainbow is committed to developing a responsible rare earths
supply chain, both upstream and downstream of Rainbow’s activities.
The Company’s Supplier Code of Conduct sets out the expectation
that all companies within our supply chains should apply the same
high standards of behaviour and business practices that we expect
at Rainbow.
Our Supplier Code of Conduct is available on our website at
www.rainbowrareearths.com/about/corporate-governance/
company-policies/ and includes some of the following key
expectations of our suppliers:
•
the provision of safe working conditions and responsible
employment practices, including a minimum requirement to pay
statutory wages and to follow applicable working time legislation;
•
taking adequate measures for the prevention, mitigation and,
where appropriate, remediation of any adverse human rights; and
•
environmentally responsible operating practices.
When working with suppliers for the first time, Rainbow’s process
is to supply them with the Code and ask them to confirm that they
have read, understood and will comply with the commitments. We
expect suppliers to implement or develop appropriate internal
processes and/or corrective actions to achieve compliance
with the Supplier Code of Conduct.
In the event of failure to uphold commitments and in the case
of a serious breach of practices, Rainbow may end a contractual
relationship.
As our business grows, responsible supply chain management
will continue to be an area of significant focus and we will develop
our policy and approach accordingly.
CONTRIBUTING TO A RESPONSIBLE
SUPPLY CHAIN, PROMOTING
SOCIO-ECONOMIC DEVELOPMENT AND
PROVIDING LOCAL OPPORTUNITIES
Related SDGs
Related SDGs
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FOCUS ON SECONDARY SOURCES
Key achievements
Pilot programme confirmed Rainbow’s unique and efficient
process to recover rare earths from phosphogypsum
Life Cycle Analysis training for the Board
By focusing on the production of rare earths from secondary sources,
Rainbow aims to integrate a circular economy approach into business
decisions, where possible, and avoid carbon emissions usually
associated with many elements of a traditional mining business
model, which are not required when processing secondary source
material as opposed to mining primary ore.
Using our unique processing technology, our intention at Phalaborwa
is to process material from historical waste (the phosphogypsum
stacks) in an efficient and responsible way, operating on a brownfield
site and thereby not impacting local land use. In so doing, the
Company has the opportunity to rehabilitate the environmental
degradation brought about by historical operations on site. Rainbow
will work closely with previous owners of the property to accelerate the
rehabilitation of unused areas in accordance with the closure plans
and funding already in place.
An important element of Rainbow’s opportunity to rehabilitate the site
will be neutralising the acidic water currently on top of the gypsum
stacks for use in a closed circuit in the processing plant. This will
negate the need to draw on local water sources from a water-stressed
region for its processing operations.
One of the key reagents used for the Phalaborwa process is sulphuric
acid and this can be supplied by the neighbouring Palabora Mining
Company operation, from its acid waste stream, thereby making use
of another “waste” product.
Furthermore, the by-product of Rainbow’s process will be benign
gypsum material that will be disposed of onto new stacks that are
being designed by gypsum specialists Ardaman in accordance with
IFC Performance Standards and Equator Principles. This clean
gypsum is in demand from the industrial and agricultural sectors in
South Africa and Rainbow has an offtake agreement with NEXUS,
under which NEXUS will acquire gypsum from the Phalaborwa project
for sale to end users.
Rainbow expects Phalaborwa to use a lower amount of energy and
reagents (due to the material already having been “cracked”) when
compared to traditional hard rock mining deposits. In order to better
understand Phalaborwa’s environmental impact, Rainbow will
conduct a life cycle analysis (“LCA”), which is a measurement of the
carbon emissions of a product or service over its life cycle, once the
processing flow sheet is finalised.
The LCA will quantify and analyse the GHG emissions associated
with the entire life cycle of rare earth elements production, including
mining, processing, manufacturing, product use, and disposal.
This will assist us in identifying opportunities for reduction to minimise
the Company’s carbon footprint by optimising energy use, improving
efficiency and exploring alternative materials and processes.
During FY 2024, a training session was provided to the Board of
Rainbow to provide further information about the nature of an LCA,
how it differs to a carbon footprint assessment, and the strategic
benefits it can provide in terms of business development.
Other portfolio opportunities
Leveraging our proprietary technology, we continue to explore
opportunities to deliver separated rare earth oxides from secondary
phosphogypsum sources around the world.
Rainbow has been approached for a number of global opportunities
and has signed an MOU with Mosaic to jointly develop a process
flowsheet to extract rare earth elements from the Uberaba stack
in Brazil - read more on page 18.
APPLY OUR UNIQUE PROCESSING
TECHNOLOGY TO HISTORICAL WASTE IN
THE FORM OF PHOSPHOGYPSUM STACKS
Related SDGs
ENVIRONMENTAL INTEGRATION
Key achievements
Carbon accounting workstreams underway including
the calculation of office-based Scope 1 & 2 emissions
Actively pursuing a low carbon energy source for Phalaborwa
Successful piloting programme identified multiple
optimisation opportunities
We are committed to integrating environmental considerations
into strategic decision-making at the highest level of the business
(i.e. Board and Sustainability Committee level) in order to create
a responsible and sustainable supply of critical rare earths.
We aim to achieve continuous improvement in environmental
practices and performance and to minimise, or where possible avoid,
negative impacts from our operations on the natural environment,
including those relating to climate change, water usage, waste
management and biodiversity.
The Phalaborwa project in South Africa offers a strategic
and traceable source of all four of the rare earths used in high
performance permanent magnets. The project is unique in that it will
incorporate environmental remediation work that will address legacy
issues on a site near to an important nature reserve, the Kruger
National Park, with the resultant clean-up offering benefits
to both the local communities and biodiversity.
By neutralising the acid water that has accumulated on top of the
phosphogypsum stacks and by depositing the process’ by-product
onto new lined stacks, Rainbow expects to:
•
improve the ground water quality
•
have a positive impact on local biodiversity due to better water
quality; and
•
have a positive impact on local community health
due to improved water quality.
Monitoring programmes and KPIs will be put in place once the project
is operational and progress can be tracked versus the baseline.
The ESIA at Phalaborwa is being conducted by consultants
WSP in accordance with IFC Performance Standards and this work
will inform the implementation of a robust environmental
management system for the project.
As Phalaborwa progresses to development, our aim will be to implement
sound environmental management practices around resource use,
energy, water and waste management, air quality and carbon emissions
and biodiversity. Given the site’s brownfield nature, we will look to
maximise our potential for positive impacts through rehabilitation and
remediation, including the selected reuse of existing infrastructure.
Phalaborwa is founded on the principles of circularity via the extraction
of value from “waste” products. As part of this, the intention to sell the
benign gypsum by-product produced at the project is expected to see
the phosphogypsum stacks at Phalaborwa eventually fully depleted,
which would allow for a complete environmental rehabilitation of the site.
The primary pilot plant programme identified multiple optimisation
opportunities that are expected to positively impact operating costs
and the carbon emissions associated with our processing operations –
read more on pages 16 to 17.
Climate change and carbon emissions
Rainbow acknowledges the global threat of climate change
and its importance and relevance to all its stakeholders.
Managing the impacts of our business is central to our
commitment to protecting our environment.
Rainbow has multiple workstreams underway to ensure that
it can properly and strategically address climate change mitigation.
Firstly, the Company is looking to fully assess and understand
Phalaborwa’s carbon footprint, both via carbon emissions calculations
and via a LCA. Secondly, Rainbow will be evaluating the impacts
of climate change on its operations via scenario analysis work
and physical risk assessments.
The work to evaluate Phalaborwa’s impacts has been dependent
on the finalisation of the pilot plant programme and the flowsheet
to recover rare earths from Phalaborwa phosphogypsum.
The Interim Report that will be published before the end of 2024
will set out updated operating and economic parameters for the
project reflecting the optimisations delivered from the pilot test work
campaigns, footprinted against the PEA published in October 2022,
and will therefore be used to update the preliminary carbon emissions
calculations. It will also allow for the progression of the LCA.
Rainbow recognises the benefits that securing a source of low carbon
energy would bring to the project and its stakeholders and is therefore
evaluating renewable energy power options. It is envisaged that
renewable energy will provide the bulk of the project’s power
requirements, thereby further reinforcing its green credentials.
Newly appointed project manager, Tamsyn de Jager has been
assigned managerial responsibility for the evaluation of low carbon
power for Phalaborwa, in line with the recommendations of the Task
Force on Climate-related Financial Disclosures (“TCFD”).
The Company will continue to implement and report on the
recommendations of the TCFD, which will be integrated into both
the Group and project development – read more on pages 26 to 31.
INTEGRATING ENVIRONMENTAL
CONSIDERATIONS INTO STRATEGIC
DECISION-MAKING
Related SDGs
Rainbow is focused on achieving responsible, near-term and efficient rare earths production from secondary sources. With demand for the rare
earths required in permanent magnets largely driven by global decarbonisation efforts, Rainbow’s business model itself is linked to climate-related
opportunities. As such, we acknowledge the importance of integrating climate-related risks and opportunities into our strategy and are intent on
putting the right foundations in place from the outset from which to build our approach to sustainability.
Developing climate change-related strategies and commitments, backed up by increased disclosure and reporting, is a key element of this
approach. These workstreams will continue to evolve as we finalise our project assessment phase before moving into the development phase
and on to production.
Rainbow intends to publish a standalone disclosure report in line with the recommendations of the Taskforce on Climate-related Financial
Disclosures (“TCFD”) in due course. As was the case in FY 2023, Rainbow has prepared the following disclosures for FY 2024 according
to the TCFD key themes and recommendations.
The disclosure has been prepared and Rainbow’s compliance assessed in conjunction with independent consultants.
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ENVIRONMENTAL INTEGRATION CONTINUED
GOVERNANCE
The TCFD was created by the Financial Stability Board in 2015 to develop guidance for consistent climate-related financial risk disclosures
for use by companies, banks, and investors in providing information to stakeholders. One of the Financial Stability Board’s key aims was
to enable stakeholders to better understand the “concentrations of carbon-related assets in the financial sector and the financial system’s
exposure to climate-related risks”1.
Ultimately, increasing the amount of reliable information on exposure to climate-related risks and opportunities will strengthen the stability
of the global financial system, contribute to a greater understanding of climate risks, and facilitate financing the transition to a more stable
and sustainable economy.
Accordingly, the TCFD developed a set of recommendations in 2017 to assist companies in identifying and disclosing the financial impacts
of climate change risks and opportunities on their business in their mainstream reports, including their annual reports and financial filings.
The latest TCFD guidance on implementing the recommendations was published in 2021, which includes supplemental guidance for
insurance companies and asset owners.
The TCFD recommendations are categorised according to four thematic areas that represent core elements of how organisations operate:
Governance, Strategy, Risk Management and Metrics and Targets. These elements are outlined in Figure 1 below.
Figure 1: TCFD framework.
1
FSB Proposal for a Disclosure Task Force on Climate-Related Risks, 2015.
ENVIRONMENTAL INTEGRATION CONTINUED
Recommendation
a. Describe the board’s
oversight of climate-
related risks and
opportunities
b. Describe
management’s role in
assessing and
managing climate-
related risks and
opportunities
Compliance
Partially compliant
Partially compliant
Response
Rainbow’s Board comprises the Chairman, one Executive Director,
four independent Non-Executive Directors and one Non-Executive Director.
The Board is responsible for regularly assessing and reviewing key business risks
in the Company’s operations and met nine times in the last financial year.
The Company’s Sustainability Policy states Rainbow’s commitment to sound
environmental management and minimising the impacts of our operations
on the environment, including those relating to climate change, water usage,
waste management and biodiversity. The policy is available at
www.rainbowrareearths.com/about/corporate-governance/company-policies/.
The Board has established a Sustainability Committee which has formally
delegated oversight of the Company’s management of sustainability-related
risks and opportunities (read more on page 42).
Upon the renaming of the Sustainability Committee (previously known
as the Safety, Health and Environment Committee), new Terms of Reference
were established which gave the committee responsibility for Group oversight
of its environmental impacts, including climate related risks and opportunities.
The Board delegates sustainability-related responsibilities to management.
Accordingly, the Directors and management regularly assess and discuss
the principal risks facing the Company. In addition, senior management regularly
discuss material developments (normally weekly) and consider the financial and
reporting implications of any matters arising.
Risk management, including climate-related risks, are formally overseen
by the Board and Audit Committee, in liaison with the Sustainability Committee.
Rainbow is currently working with independent environmental consultancy
Promethium Carbon (“Promethium”) to develop its climate-related strategy
and action plan, including its approach to disclosure and reporting.
TCFD FRAMEWORK
TCFD REPORT
Governance
Disclose the Group’s
governance around climate-
related risks and opportunities.
Strategy
Disclose the actual and
potential impacts of climate-
related risks and opportunities
on the Group’s businesses,
startegy and financial planning
where such information is
material.
Risk management
Disclose how the Group
identifies, assesses and
manages cliate-related risks.
Metrics and targets
Disclose the metric and targets
used to assess and manage
relevant climate-related risks
and opportunities where such
information is material.
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TCFD REPORT CONTINUED
TCFD REPORT CONTINUED
STRATEGY
Recommendation
a. Describe the climate-
related risks and
opportunities the
organisation has
identified over the
short, medium, and
long term.
b. Describe the impact
of climate-related
risks and
opportunities on the
organisation’s
businesses, strategy,
and financial
planning.
Compliance
Partially compliant
Partially compliant
Response
Rainbow’s strategy is to develop a responsible supply of rare earth minerals
to meet the escalating demand for these critical minerals needed for global
decarbonisation.
Phalaborwa is still in the preliminary stages of development; however, in order
to build strong foundations at the earliest stage, the following key workstreams
have been initiated to assess and help inform a robust view of the physical and
transitional climate-related risks and opportunities that may impact our operations
and the environment.
•
Rainbow is currently finalising an Interim Report to update the economics
of the Phalaborwa project versus the PEA which was published in October
2022, further to the pilot plant programme and the optimisation work that
was identified. The Interim Report data will be used to estimate Phalaborwa’s
Greenhouse Gas (“GHG”) emitting activities once in production.
•
Rainbow is planning, alongside external consultants Promethium,
to develop an LCA for Phalaborwa to assess the GHG emissions associated
with producing and using rare earth metals. This will enable Rainbow
to identify emission hotspots and opportunities for reduction, supporting
the development of the Group’s decarbonisation strategy.
•
Rainbow has embarked on developing scenario analyses to evaluate
future climate change-related risks and opportunities for the business
over the short, medium and long term.
Climate-related opportunities are some of the material drivers behind Rainbow’s
business model and growth strategy. Rainbow expects to contribute to the green
energy transition via the responsible production of rare earths, with a specific focus
on Nd, Pr, Dy and Tb. These Magnet REE are fundamental in the production of
permanent magnets used in wind turbines and EVs, with their demand projected
to escalate further to the green energy transition (read more on pages 10 to 13).
The financial impacts of the climate risks and opportunities facing the business
will be further explored and articulated following results from the LCA and
scenario analysis testing (as described above). These measures will inform
Rainbow’s business, strategy, and financial planning in relation to climate-related
risks and opportunities.
Rainbow is committed to integrating environmental considerations into strategic
decision-making and sound environmental management, with a focus on
environmental protection and the responsible use of natural resources. This
includes a focus on energy efficiency and the investigation of the commercial
viability of using renewable energy sources (read more on page 25).
STRATEGY CONTINUED
Recommendation
c. Describe the
resilience of the
organisation’s
strategy, taking into
consideration
different climate-
related scenarios,
including a 2°C or
lower scenario.
Compliance
Partially compliant
Response
Rainbow’s focus on processing separated rare earth oxides from historical waste
phosphogypsum contributes to the underlying strength and resilience of our
business model, as many of the costly, energy-intensive steps, associated with
traditional rare earth mining projects are removed. Furthermore, Rainbow has the
opportunity to reduce its negative environmental impact by utilising reclaimed
acid water from the phosphogypsum stacks in a closed circuit.
Leveraging our proprietary technology, we continue to explore opportunities
to deliver separated rare earth oxides from secondary phosphogypsum sources
around the world, which have the potential to be brought into production quicker
and at a lower cost than traditional hard rock mining projects. Rainbow is exploring
a second opportunity to recover magnet REE from phosphogypsum via an MOU
with Mosaic with regards to the Uberaba stack in Brazil - read more on page 18.
In addition, Rainbow intends to use climate change scenario analyses to fully
investigate the resilience of the Group’s strategy to climate change risks and
opportunities. The outcomes of these assessments will be published once
available.
The setting of a baseline carbon footprint in the future will assist the Company
in managing the performance of meeting emission reduction targets and other
related sustainability metrics.
ENVIRONMENTAL INTEGRATION CONTINUED
ENVIRONMENTAL INTEGRATION CONTINUED
1
Emissions were calculated by multiplying the activity data by the appropriate emission factor to get the tonnes (t) of carbon dioxide (CO2) equivalent (e).
The activity emissions are reported in line with the GHG Protocol Corporate Standard (GHG Protocol).
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TCFD REPORT CONTINUED
TCFD REPORT CONTINUED
RISK MANAGEMENT
Recommendation
a. Describe the
organisation’s
processes for
identifying and
assessing climate-
related risks;
b. Describe the
organisation’s
processes for
managing climate-
related risks, and
c. Describe how
processes for
identifying,
assessing, and
managing climate-
related risks are
integrated into the
organisation’s overall
risk management.
Compliance
Partially compliant
Response
Rainbow will use the updated operating parameters from the proposed Interim
Report to estimate and assess expected emissions from planned operations at
Phalaborwa, as a first-pass carbon footprint assessment. Alongside the LCA and
proposed scenario analysis workstreams, the first-pass carbon footprint will be
critical in identifying and assessing climate-related risks and identifying carbon
reduction opportunities. The emissions calculations will assist Rainbow in informing,
understanding, and optimising project development and subsequent operations.
The relatively small size of Rainbow’s management and finance team allows
the team to retain tight control over the identification and management of risks,
and related financial impacts, currently facing the business. The Board therefore
does not currently consider it appropriate to have a separate internal audit
function. Accordingly, the Board and the Audit Committee are responsible for
ensuring that the risks inherent to operating the Company, across numerous
jurisdictions, are identified, assessed, and managed. Rainbow’s Sustainability
Committee is also responsible for liaising with the Audit Committee, as
appropriate, on matters relevant to the Company’s management of sustainability-
related risks and opportunities. In addition to formal Audit Committee meetings,
the Chief Financial Officer has regular interaction with the Chairman of the Audit
Committee to discuss control and reporting matters in more detail. The Audit
Committee and Chief Financial Officer are supported by senior management,
who regularly discuss material developments (normally weekly) and consider
financial and reporting implications of any matters arising.
Environmental risks are disclosed on page 46. As the Company matures,
Rainbow will formalise the processes for identifying, assessing, and managing
climate-specific risks, which will be integrated into the organisation’s overall
risk management.
Using the outcomes of the ESIA, which is currently being undertaken
for Phalaborwa, Rainbow will introduce a robust environmental and
social management system to the project.
Recommendation
a. Disclose the metrics
used by the
organisation to assess
climate-related risks
and opportunities in
line with its strategy
and risk management
process.
b. Disclose Scope 1,
Scope 2 and, if
appropriate, Scope 3
GHG emissions and
the related risks.
c. Describe the targets
used by the
organisation to
manage climate-
related risks and
opportunities and
performance against
targets.
Compliance
Partially compliant
Partially compliant
Partially compliant
Response
The first-pass carbon footprint will assist in selecting appropriate metrics for
monitoring our operation’s emissions. Importantly, the first-pass carbon footprint
will be critical in identifying carbon reduction opportunities and will assist Rainbow
in informing and optimising project development and subsequent operations.
As was the case in FY 2023, we have again calculated Scope 1 and 2 emissions
for office-related activities, setting the Company on the right path for future
disclosure of more material operations emissions going forward.
Rainbow’s carbon footprint for our head office emissions is shown below.
This represents Rainbow’s actual emissions1 and first phase of annual carbon
disclosure.
Emissions1 from office-related activity
Scope
Emissions in tCO2e
Scope 1 – Direct emission sources 3.47
Scope 2 – Energy Indirect emissions 6.93
Scopes 1 & 2 10.40
The office activity-related carbon footprint does not serve as a baseline for
benchmarking against operation-related emissions in future, as the Company’s
material carbon emissions will be associated with its processing activities when
production commences. Rainbow will establish a baseline emissions profile once
the operations are in progress.
As the Company matures, Rainbow plans to set targets to manage climate-
related risks and opportunities. These targets will be informed by the culmination
of ongoing climate-related scenario analyses and the setting of a baseline carbon
footprint once the business is fully operating.
ENVIRONMENTAL INTEGRATION CONTINUED
ENVIRONMENTAL INTEGRATION CONTINUED
METRICS AND TARGETS
FINANCIAL REVIEW CONTINUED
STRATEGIC REPORT
Payments to Government
Rainbow is committed to full payment of its tax and fiscal obligations wherever it operates, as this supports the Group’s social licence to operate,
and ensures a fair contribution to local economies.
The table below sets out the key payments to governments for the Year arising as a result of Rainbow’s activity, including direct taxes
(such as royalties, land taxes and corporation tax) and indirect taxes (such as payroll taxes and VAT).
Payments disclosed in this Report are shown in US Dollars. Actual payments have been made in South African Rands and Burundian Francs.
FY 2024
FY 2023
US$’000
South Africa
Burundi
Total
South Africa
Burundi
Total
Royalties
-
-
-
-
-
-
Permit and land taxes
-
-
-
-
-
-
Corporation tax
-
-
-
-
-
-
Duties & other
-
-
-
-
-
-
Total tax borne
-
-
-
-
-
-
Payroll tax
189
15
204
139
20
159
Net VAT
(34)
3
(31)
133
3
136
Total net payments to government
155
18
173
272
23
295
Royalty payments relate to the Government of Burundi royalty of 4% charged on the value of exports of rare earths mineral concentrate.
No royalties were paid during FY 2024 as operations in Burundi, including all exports, are suspended by the Government of Burundi.
Permits and land taxes include annual taxes payable to the Government of Burundi under the terms of the Mining Convention for the Mining Permit at
Gakara. No payments were made during FY 2024 as the Burundi operations are suspended, with the annual cost accrued in the Financial Statements.
Corporation Tax is payable in Burundi based on a minimum 1% of turnover whilst the local operating entity remains loss making.
No turnover was reported in FY 2024 as operations in Burundi, including all exports, are suspended by the Government.
Payroll taxes and VAT (net of recovered amounts) are included as they represent funds paid by the Group to the government
either directly or via suppliers.
33
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
FINANCIAL REVIEW
STRATEGIC REPORT
Profit and loss account
The US$4.3 million loss for FY 2024 (FY 2023 US$12.9 million) includes a
further US$0.7 million (FY 2023 US$9.6 million) impairment of the assets
in the Gakara cash generating unit relating to the previously recognised
inventory of available for sale mineral concentrate. Despite meaningful
negotiations with the Government of Burundi in FY 2024 no progress
has been made to resolve the ongoing suspension. Accordingly, the
Directors can no longer reasonably assume that the operations at the
project will be able to restart and, with the exception of cash and VAT
recoverable, all assets associated with the Gakara cash generating unit
have now been written down to nil.
Within administration expenses, the costs associated with maintaining
the Gakara project on care and maintenance totalled US$0.4 million (FY
2023: US$0.9 million including US$0.3 million of non-cash depreciation).
The Group continues to focus on minimising costs associated with the
asset whilst considering all options to try to realise the value associated
with the REE mineral opportunity.
The Group’s other corporate costs totalled US$3.1 million (FY 2023:
US$2.6 million). This increase was driven primarily by inflation including
an increase in staff costs. To reduce cash outflows, management short
term incentives totalling US$0.3 million were settled in shares in
September 2024.
Net finance income was reduced to US$22k (FY 2023: income
of US$200k). In FY 2024 foreign exchange differences off-set
US$ 0.1 million interest (FY 2023: US$0.1 million) associated with
the FinBank loan in Burundi.
Balance Sheet
The Group balance sheet is dominated by the cumulative US$15.7 million
relating to the Phalaborwa asset which have been capitalised as an
intangible asset in accordance with IFRS 6, of which US$10.9 million
was incurred in the FY 2024. At the balance sheet date, the Group has
no tangible fixed assets and no obligations for environmental closure at
the Phalaborwa site.
The Group has a US$282k loan with FinBank in Burundi, denominated in
Burundi Francs, which is due to be repaid on a reducing balance basis by
April 2027. There are no other significant borrowings or long-term cash
settled liabilities. With the exception of indirect taxes and contributions
payable under the Gakara mining convention, which are not being
settled during the ongoing suspension of the Gakara operations, the
Group continues to pay all trading liabilities as they fall due.
Going Concern
At 30 June 2024 the Group had total cash of US$0.1 million prior to the
announcement, on 1 July 2024, of a US$10 million financing with Ecora
comprising US$1.5 million of equity and US$8.5 million proceeds for a
0.85% gross revenue royalty over future sales from the Phalaborwa
project. Following receipt of these funds, after associated costs,
the Group has available cash resources of US$9.7 million.
Based on a review of cash flow forecasts for the period to 31 December
2025, additional funding estimated at US$1.5 million will need to be
raised before 31 December 2025, the timing of which is dependent
primarily on the speed at which the Phalaborwa DFS is completed,
which is within management’s control. In addition, further funds may
be required to progress the Uberaba opportunity in Brazil or other new
business opportunities. Whilst this funding requirement does represent
a material uncertainty which may cast significant doubt on the ability
of the Company to continue as a going concern, the Board is confident
that this funding will be secured based on its history of successful
fundraising.
Rainbow’s strategic focus is to identify and develop secondary rare earth deposits that can be brought into production quicker and at a lower cost than
traditional hard rock mining projects. As a developer, Rainbow capitalises the costs of exploration and evaluation for each identifiable project once the
legal right to the project has been secured. The Board and management focus on maintaining a tight control of costs, including corporate overheads,
ensuring that most of the funds raised will go directly towards building value across our portfolio. In this respect during FY 2024 the Group invested
US$10.6 million to progress the Phalaborwa project in South Africa with an additional cash outflow of US$2.6 million for general and administrative
costs, including costs relating to the Gakara asset in Burundi.
32
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
RAINBOW’S STRATEGIC FOCUS
IS TO IDENTIFY AND DEVELOP SECONDARY
RARE EARTH DEPOSITS
CORPORATE GOVERNANCE
EFFECTIVE CORPORATE
GOVERNANCE IS
ESSENTIAL TO THE
SUCCESS OF OUR
BUSINESS
36 Board of Directors
38 Senior Mangement
39 Corporate Governance Statement
44 Principal Risks and Uncertainties
48 Directors’ Report
CORPORATE GOVERNANCE
35
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
CORPORATE GOVERNANCE
34
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
Rare earths are used in many of the
latest high tech applications, including
aircraft guidance and control systems
BOARD OF DIRECTORS CONTINUED
CORPORATE GOVERNANCE
ATUL BALI
INDEPENDENT
NON-EXECUTIVE DIRECTOR
Appointment date:
March 2017
Committees:
Audit (Chair), Nomination
Atul is a corporate CEO and
board member with extensive
experience in tech, government
contracting and regulated
industries operating on all six
continents. Over more than 25
years, he has led in excess of 50
M&A and JV transactions in over
25 countries and both managed
and served on the boards of
several highly regulated
businesses. Currently he advises
a number of high-growth
technology companies, is
Chairman of the Football Pools,
IWG Ltd, Fincore Ltd, is the Lead
Independent Director of Everi
holdings, Inc (NYSE: EVRI) and
is a board member and Finance
Committee Chair of The Bush
School Seattle. He has previously
held divisional CEO or President
positions with International Game
Technology PLC (NYSE: IGT),
Aristocrat Leisure Limited (ASX:
ALL), and RealNetworks, Inc
(NASDAQ: RNWK), a venture
capital firm, as well as Deputy
Chair of Gaming Realms PLC
(LSE: GMR).
Qualifications:
BA (Joint Hons) in Law &
Economics, University of Keele
Chartered accountant – KPMG, UK
Interest in the Company
As at 30 June 2024:
4,420,992 shares / 0.7%
1,250,000 share options
J. PETER PHAM
INDEPENDENT
NON-EXECUTIVE DIRECTOR
Appointment date:
May 2021
Committees:
Nomination
J. Peter Pham is a scholar and
practitioner of international
affairs with more than 20 years’
experience in Africa. Most
recently, he served until January
2021 as first-ever United States
Special Envoy for the Sahel
Region with the personal rank
of Ambassador. He had previously
served as the US Special Envoy
for the Great Lakes Region of
Africa from 2018-2020.
Ambassador Pham is currently
a Distinguished Fellow at the
Atlantic Council, a preeminent
American foreign policy think
tank, where he was Vice
President for Research and
Regional Initiatives and Director of
the Council’s Africa Center before
his service in government. He is
the author of several books and
more than 300 articles, essays
and reviews on African politics,
security, and economic issues.
He is also an emeritus member
of the board of the Smithsonian
National Museum of African Art
in Washington, DC, serving
between 2016-2021 as Vice Chair,
the Non-Executive Chairman
of High Power Exploration (HPX)
and a Non-Executive Director
of Africell Global Holdings.
Qualifications:
BA (Hons) in Economics -
University of Chicago;
MA (Hons), LLM (Hons), PhD
(Hons) - Gregorian University
Interest in the Company
As at 30 June 2024:
631,500 shares / 0.1%
750,000 share options
DARRYLL CASTLE
NON-EXECUTIVE DIRECTOR
Appointment date:
June 2023
Committees:
N/A
Darryll is Director of Operations for
TechMet, a strategic shareholder
with the right to nominate one
Director to the Rainbow Board for
so long as it holds at least 10%
of the issued shares in the
Company. Previously CEO
of a number of mining and
production companies including
CEO of Trafigura Mining, CEO of
PPC Cement, CEO of Anvil Mining
(listed in Toronto and Australia),
as well as multiple board
memberships of listed and private
companies, and previously Chief
Operations Officer at Metorex
Group Limited.
First hand operations and
projects experience globally
including in Cuba, Spain, Peru,
and particularly on the African
continent, having run projects
and companies in the DRC,
Zambia, Angola, Zimbabwe,
Ethiopia, Rwanda and Tanzania.
Qualifications:
BSc in Civil Engineering –
University of KwaZulu-Natal;
Bachelor of Commerce –
University of South Africa;
MBA – University of Cape Town;
past Chartered Financial Analyst
(CFA) Charterholder
Interest in the Company
As at 30 June 2024:
821,422 shares / 0.1%
37
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
BOARD OF DIRECTORS
CORPORATE GOVERNANCE
ADONIS POUROULIS
NON-EXECUTIVE CHAIRMAN
Appointment date:
August 2011
Committees:
Nomination (Chair), Remuneration
Adonis is an entrepreneur whose
expertise lies in the discovery,
exploration and development
of natural resources across Africa,
as well as more recently
becoming an active investor and
developer of clean technologies
and sustainable energy projects.
Having worked in the African
natural resources sector for over
30 years, he has extensive
experience and a wide network
of industry relationships across
the continent. Adonis is the
founder of Rainbow, which he
listed in 2017. He is also founder
and CEO of Chariot (AIM: CHAR),
founder and advisor to Energy
Revolution Ventures and
Chairman of Prosemino, a clean
energy incubation platform,
founder and Chairman of the
Pella Resources Group, and was
the founder and Chairman of
Petra Diamonds (LSE: PDL).
Qualifications:
BA (Hons) in Science and Mining
Engineer – University of
Witwatersrand
Interest in the Company
As at 30 June 2024:
89,466,830 shares / 14.2%
1,902,000 share options
GEORGE BENNETT
CHIEF EXECUTIVE OFFICER
Appointment date:
August 2019
Committees:
Sustainability
With over 30 years’ experience
in mining, finance and senior
management, George has led
a number of mining and energy
companies, including Shanta
Gold Ltd (which he successfully
listed on the London Stock
Exchange in 2005) and Orecorp
Ltd (which he seed funded,
raised the initial capital as a non-
executive director and listed on
the Australian Stock Exchange).
In 2006, George established MDM
Engineering Ltd, a mining
engineering company building
mineral process plants and
mining infrastructure throughout
Africa, which he successfully
listed on the London Stock
Exchange in 2008. In 2014,
George was instrumental in
selling the business to Foster
Wheeler Limited.
In addition, George has been a
partner and director with a number
of leading financial, stockbroking
and corporate advisory businesses
including Fergusson Bros,
Simpson McKie, and HSBC
Securities Africa (pty) Ltd.
Qualifications:
Member of the Johannesburg
Stock Exchange
Interest in the Company
As at 30 June 2024:
38,805,298 shares / 6.2%
2,500,000 share options
ALEXANDER LOWRIE
INDEPENDENT
NON-EXECUTIVE DIRECTOR
Appointment date:
November 2016
Committees:
Remuneration (Chair), Audit,
Sustainability
Alex is an experienced director,
advisor, board observer and
investor with around 25 years’
experience, initially in financial
markets and subsequently with
a specific focus on the critical
metals mining, battery recycling
and technology sectors.
Concentrating on battery,
hydrogen and EV critical
materials, Alex advises
companies from seed stage
through to wider capital markets
exposure and is a non-executive
director to a number of these
entities. He is also the co-founder
of Telemark Capital LLP, a capital
advisory and asset management
partnership, which also provides
governance services as an
independent investment
committee member.
Prior to this Alex worked for 14
years in investment banking. He
was a director at Deutsche Bank
and then RBS, having started his
banking career originally with ABN
AMRO. Through these positions,
he gained extensive experience
in primary and secondary equity
offerings, bringing companies to
market through IPOs (including
structuring, marketing and
distribution).
Qualifications:
BA (Hons) in combined social
sciences – Durham University;
currently carrying out Executive
Masters of Business
Administration (“MBA”) – Henley
Business School
Interest in the Company
As at 30 June 2024:
6,838,124 shares / 1.1%
1,250,000 share options
SHAWN MCCORMICK
INDEPENDENT
NON-EXECUTIVE DIRECTOR
Appointment date:
February 2016
Committees:
Sustainability (Chair), Audit,
Remuneration
Shawn is an international
affairs specialist with more than
30 years’ political and extractive
industries sector experience
having served in The White House
as Director for African Affairs
on the National Security Council
(Washington), Africa Regional
Director and Senior Global Affairs
Advisor at BP (London) and
Corporate Vice President for
International Affairs at TNK-BP
(Moscow). He is currently
Chairman of Trinity Metals Group,
a Non-Executive Director of Karo
Mining Holdings and the
Managing Director of a London-
based strategic consulting firm
focused on the natural resources
sector in Africa and beyond.
Qualifications:
BA (Hons) – University of
Southern California;
advanced coursework at Insead
Interest in the Company
As at 30 June 2024:
9,316,571 shares / 1.5%
1,850,000 share options
36
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
CORPORATE GOVERNANCE
STATEMENT
CORPORATE GOVERNANCE
Rainbow Rare Earths Limited is a Guernsey-registered company, trading
throughout the Year on the standard list of the main market of the
London Stock Exchange. Subsequent to the changes to the UK Listing
Regime, effective 29 July 2024, the Company’s shares are now in the
Equity shares (transition) Financial Conduct Authority listing category.
As a result of the Company’s listing category the UK Corporate
Governance Code published by the Financial Reporting Council does
not apply. However, the Directors recognise the importance of effective
corporate governance and have implemented corporate governance
practices with consideration to the recommendations and principles
of the UK Corporate Governance Code in so far as is appropriate
for a Company of Rainbow’s size and stage of development.
The Board oversees the performance of the Group’s activities.
It comprises experienced board members who have held senior
positions in a number of public and private companies. The Board is
responsible to shareholders for the proper management of the Group.
The Non-Executive Directors have particular responsibility to ensure that
the strategies proposed by the Executive Director are carefully considered.
To enable the Board to discharge its duties, all Directors have full and
timely access to all relevant information. The Board meets regularly
and met nine times in FY 2024. Prior to such meetings taking place,
an agenda and board papers are circulated in advance to the Directors
so that they are adequately prepared for the meetings. Two Directors
present at a board meeting constitutes a quorum.
The Board is invited to visit the Group’s operations and a number of site
visits to the Company’s pilot plant sites in both South Africa and the USA
were held in FY 2024 for the Chairman and other Directors. The Board is
also given regular updates by Technical Director Dave Dodd to ensure
they are up to speed on operational developments throughout the Year.
There is no agreed formal procedure for the Board (or members thereof)
to seek independent professional advice but, pursuant to their letters of
appointment, the Non-Executive Directors may, where appropriate, take
independent professional advice at the Group’s expense.
In accordance with the Company’s articles of associations, the number
of Directors that may be appointed may not be fewer than two and the
Directors submit themselves for re-election every three years at the
Company’s annual general meeting (“AGM”). The composition of the
Board is reviewed regularly to ensure that the Board has the appropriate
mix of expertise and experience.
The Board ensures it is aware of the views of major and other
shareholders through regular meetings in person (where appropriate),
feedback via the Company’s investor relations manager or via the review
of investor relations board reports, as well as through discussions with
the Company’s brokers and the analysts that write research on Rainbow.
Where such information has been obtained by the CEO, this information
is disseminated to the rest of the Board in a timely manner.
Review of internal control and risk management systems
The Board has reviewed the Company’s internal control and risk
management systems.
Rainbow has a relatively small team of management and financial staff
and is therefore able to retain a tight control over its financial reporting
activities. The Board does not consider it appropriate to have a separate
internal audit function, however a number of internal controls and reviews
have been put in place to provide the Board (and the audit committee)
with assurance that the risks inherent to operating a natural resource
company in more than one jurisdiction are managed appropriately.
These controls include the following:
•
Budgets and forecasts are prepared by finance staff in conjunction
with operating teams and are reviewed and approved by senior
management (and in the case of the budget, by the Board).
•
Actual results are reported against budget and forecast, and
variances examined.
•
All banking transactions must be initiated and authorised by at least
two staff members, one of whom is a senior manager (CEO or CFO).
•
The group uses a central financial reporting system (Xero) which
records all transactions, capturing third party documents (e.g.
invoices) which are authorised by relevant senior staff and reviewed
by senior management.
•
Senior management regularly discuss material developments
(normally weekly) and consider financial and reporting implications
of any matters arising.
In addition to formal audit committee meetings, the CFO has regular
interaction with the audit committee chair to discuss control and
reporting matters in more detail.
Board of Directors
At 30 June 2024 the Company had one Executive Director and six
Non-Executive Directors. All major decisions relating to the Group are
made by the Board as a whole. Operations are conducted by the
subsidiaries of the Company, with the Company represented
by the CEO and CFO on all subsidiary boards.
The Board reviews key business risks regularly, including the financial
risks facing the Group in the operation of its business. These matters
include, but are not limited to, the following:
•
Determining the strategy for the Company.
•
Approving the annual budget.
•
Discussing and approving financing, including new debt and equity.
•
Setting the dividend policy.
•
Developing the appropriate ESG standards and practices.
•
Mergers and acquisitions activity and significant transactions.
•
Risk management.
•
Considering and, if appropriate, approving the recommendations
of board committees.
39
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
SENIOR MANAGEMENT
CORPORATE GOVERNANCE
PETE GARDNER
CHIEF FINANCIAL OFFICER
Appointment date:
May 2020
Pete is a qualified chartered
accountant with a breadth
of experience in financial
management and corporate
finance in the natural resources
sector. He was the Finance
Director of Amara Mining Plc
from October 2009 managing
the corporate and financial
development of the company
culminating in its acquisition by
Perseus Mining, and former Chief
Finance Officer for Piran
Resources, Chaarat Gold Holdings
and Alexander Mining Plc.
Qualifications:
BSc (Hons) in Physics - University
of Birmingham
Chartered Accountant – ICAEW
Interest in the Company
As at 30 June 2024:
618,522 shares / 0.1%
2,400,000 share options
DAVE DODD
TECHNICAL DIRECTOR
Appointment date:
January 2021
Dave has over 45 years
of extractive metallurgy
experience covering research
and development, technical sales
and predominantly metallurgical
project development and
execution. He was Technical
Director and co-founder of MDM
Engineering between 1987-2014.
Dave has designed and
commissioned plants across
Africa and the rest of the world,
covering minerals from rare
earths to gold, platinum,
diamonds, copper, zinc,
phosphate, cobalt and many
others. He is a Fellow of the
Southern Africa Institute of
Mining and Metallurgy.
Qualifications:
BSc (Hons) in Chemical
Engineering – University of
Manchester Institute of Science
and Technology
Interest in the Company
As at 30 June 2024:
1,516,405 shares / 0.2%
1,650,000 share options
Along with the Board of Directors
the Senior Managers listed on this
page have been designated as
persons discharging managerial
responsibility (“PDMRs”) being
persons who have the authority
and responsibility for planning,
directing and controlling major
activities of the Group.
38
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
CORPORATE GOVERNANCE
STATEMENT CONTINUED
CORPORATE GOVERNANCE
Rainbow Board Diversity
Diversity of skills and experience
Gender diversity Ethnic diversity
Gender diversity
The Company has not met the UK’s Financial Conduct Authority’s (“FCA”) diversity targets that at least 40% of the board members should be female
and that at least one of the senior board positions should be held by a woman, and the reason for this mainly relates to the historically lower proportion
of women in the resources and industrial industries. However, the Company is aware that much progress has been made in order to increase female
representation in these sectors and improving Board diversity was noted to be a priority for the Nomination Committee in terms of its succession
planning in FY 2025 and beyond.
The following table sets out the Company’s current gender diversity at senior levels of the business as at 30 June 2024:
Number
of senior
positions on
Number
Percentage
Number of
Percentage the board (CEO,
in executive
of executive
board members
of the board CFO, SID, Chair) management
management
Men
7
100
2
1
100
Women
0
0
0
0
0
Ethnic diversity
The Company has met the FCA’s diversity target that at least one member of the board should be from an ethnic minority background excluding white
ethnic groups (as set out in categories used by the Office for National Statistics).
The following table sets out the Company’s current ethnic diversity at senior levels of the business as at 30 June 2024:
Number
of senior
positions on
Number
Percentage
Number of
Percentage the board (CEO,
in executive
of executive
board members
of the board CFO, SID, Chair) management
management
White British or other White
5
71
2
1
100
Mixed / Multiple Ethnic Groups
0
0
0
0
0
Asian / Asian British
2
29
0
0
0
Black / African / Caribbean / Black British
0
0
0
0
0
Other ethnic group, including Arab
0
0
0
0
0
Audit Committee
The Audit Committee is chaired by Atul Bali and its members are Alexander Lowrie and Shawn McCormick. The members of the Audit Committee
are considered to possess the appropriate skills and experience to monitor and ensure the integrity of the Group’s financial reporting, internal audit,
internal financial control and risk management systems and to support Rainbow’s governance.
The Audit Committee should meet not less than two times a year and is responsible for ensuring the financial performance of the Company is properly
reported on and monitored, including reviews of the annual and interim accounts, results announcements, internal control systems and procedures
and accounting policies.
It is also responsible for keeping the categorisation, monitoring and overall effectiveness of the company’s risk assessment and internal control
processes under review.
The Audit Committee met three times during the Year. During these meetings, the following matters were considered:
•
The audit of the financial statements for the year ended 30 June 2023 was planned and the key areas of audit risk were discussed ahead
of the relevant audit procedures being undertaken.
•
The financial statements for the year ended 30 June 2023, and the interim financial statements for the six months ended 31 December 2023,
were reviewed. The Audit Committee met with the auditors at the conclusion of the FY 2023 audit to discuss their findings and, following due
consideration, recommended to the Board that these financial statements be approved.
41
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
CORPORATE GOVERNANCE
STATEMENT CONTINUED
CORPORATE GOVERNANCE
Board of Directors continued
The following table lists the names, positions and ages of the Directors as at 30 June 2024, the year they were appointed, and current committee
memberships:
Name
Age Position Audit Remuneration Nomination Sustainability
Adonis Pouroulis 54 Non-Executive Chairman - Member Chair -
George Bennett 63 CEO - - - Member
Alexander Lowrie 49 Independent Non-Executive Member Chair - Member
Shawn McCormick 57 Independent Non-Executive Member Member - Chair
Atul Bali 53 Independent Non-Executive Chair - Member -
J. Peter Pham 53 Independent Non-Executive - - Member -
Darryll Castle 55 Non-Executive - - - -
The Company does not consider Adonis Pouroulis to be independent by virtue of being a significant shareholder.
The Company does not consider Darryll Castle to be independent by virtue of his role with TechMet Limited, a strategic shareholder with the right
to nominate one Director to the Rainbow Board for so long as it holds at least 10% of the issued shares in the Company.
All of the other Non-Executive Directors are considered to be independent in terms of character and judgment, notwithstanding the fact that all the
independent Non-Executives are shareholders in the Company and hold share options over the Company’s shares - read more on pages 36 to 37.
The table below shows the attendance at board and committee meetings during the year ended FY 2024:
Name
Board
Audit Remuneration
Nomination Sustainability
Adonis Pouroulis
10/10
n/a
2/2
1/1
n/a
George Bennett
9/10
n/a
n/a
n/a
1/2
Alexander Lowrie
10/10
3/3
2/2
n/a
2/2
Shawn McCormick
8/10
2/3
2/2
n/a
2/2
Atul Bali
10/10
3/3
n/a
1/1
n/a
J. Peter Pham
8/10
n/a
n/a
0/1
n/a
Darryll Castle
10/10
n/a
n/a
n/a
n/a
The Board is regularly informed of developments outside of formal board meetings, through update calls and meetings, reports and one-to-one
discussions with the CEO and other management.
The deliberations of the various committees, referred to on pages 41 to 42, do not reduce the individual and collective responsibilities of board
members with regard to their fiduciary duties and responsibilities, and they must continue to exercise due care and judgment in accordance with
their statutory obligations.
The terms of reference for the board committees are subject to the provisions of the articles and any other applicable law or regulatory provision
in force in Guernsey, and the listings rules.
In addition to the Audit, Remuneration, Nomination and Sustainability Committees, which have formally delegated duties and responsibilities
within written terms of reference, the Board may set up additional committees as appropriate.
Diversity
The Board of Rainbow understands that diversity and inclusion are important in providing a broad range of perspectives in the workplace,
fostering innovation, and enhancing company culture, thereby enabling businesses to deliver better results for their stakeholders.
As the Company progresses on its development path, it will continue to consider the appropriate mix of skills, culture and qualities,
as well as the diversity represented, that will allow Rainbow to deliver on its strategy.
Rainbow is committed to developing a diverse workforce and to providing a work environment in which everyone is treated fairly and with respect.
Furthermore, when evaluating diversity, Rainbow aims to consider a broad definition of difference, including but not limited to: experience, skills,
expertise, ethnicity, nationality, gender, cultural and socio-economic background, geographic location, age, education, religious beliefs, language,
neurodiversity, disability, sexuality and family responsibilities.
The Company does not currently have a formal diversity policy for its Board or its board committees, which is mainly a reflection of the small size of the
Rainbow business to date. This issue was considered by the Nomination Committee in FY 2024 and the Company has commenced the planning work
required to put a Group diversity and inclusion policy in place in due course that will set out its commitment to ensuring an equitable, diverse and
inclusive workplace at all levels of the business. As part of this work, a presentation given by an independent consultant was arranged for the
Nomination Committee and the wider Board in FY 2024, which provided an overview and an update on the diversity landscape for UK listed
companies, as well as key considerations prior to the implementation of a diversity and inclusion policy.
It should be noted that the Company will be able to report more fully on diversity as Phalaborwa moves towards becoming an operating business in
South Africa, with the opportunity to record and monitor the diversity of its workforce over time. The local operating company for Phalaborwa will be
subject to South Africa’s Employment Equity Act, which will offer the opportunity for Rainbow to actively contribute to the upliftment of previously
disadvantaged groups in the country, including those who were disadvantaged on the basis of ethnicity and/or gender.
40
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
0
1
2
3
4
5
6
7
Emerging markets
Operations
Capital markets
Sustainability
Public poloicy
Corporate governance
7
Male
Female
White British or other White
Asian/Asian British
5
2
THE DIRECTORS
REGULARLY ASSESS
AND DISCUSS THE
PRINCIPAL RISKS
FACING THE GROUP
The Phalaborwa front-end pilot plant
in Johannesburg
CORPORATE GOVERNANCE
43
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
CORPORATE GOVERNANCE
STATEMENT CONTINUED
CORPORATE GOVERNANCE
Audit Committee continued
The Audit Committee also considered the conduct of the external
audit by BDO LLP, which was considered to be appropriate. The Audit
Committee therefore resolved to propose BDO LLP for reappointment
at the next AGM for a period of 12 months. It was noted that BDO LLP
had been auditors of the Company since October 2016.
The Audit Committee also considered the independence and
objectivity of BDO LLP. The committee considered the composition of
the BDO audit team, together with the duration of service of the partner
and senior audit team members on the company’s audit and concluded
that BDO LLP was sufficiently independent to conduct the audit. BDO
did not provide any non-audit services during the Year.
Nomination Committee
The Nomination Committee is chaired by Adonis Pouroulis and its
members are Atul Bali and J. Peter Pham. The Nomination Committee is
normally expected to meet only as required. The Nomination Committee
is responsible for reviewing, within the agreed terms of reference, the
structure, size, and composition of the Board, undertaking succession
planning, leading the process for new Board appointments, and making
recommendations to the Board on all new appointments and re-
appointments of existing Directors.
The Nomination Committee met once in FY 2024 to discuss diversity,
both at Board level and throughout the Company, as well as succession
planning. It was agreed that it would aim to evaluate and improve the
Board and the Company’s diversity as part of the natural progression
of Rainbow Rare Earths Limited as it delivers on its strategy.
Remuneration Committee
The Remuneration Committee is chaired by Alexander Lowrie and its
members are Adonis Pouroulis and Shawn McCormick. It is expected
to meet at least once a year. The Remuneration Committee has
responsibility for determining, within agreed terms of reference, the
Group’s policy on the remuneration of senior executives and specific
remuneration packages for Executive Directors and the Non-Executive
Chairman. The remuneration of Non-Executive Directors is a matter for
the Board. No Director may be involved in any discussions as to their
own remuneration.
The Remuneration Committee met twice during FY 2024 to discuss
and approve Board and Senior Management remuneration, as well as
the Company’s share option scheme and the award of share options
to Directors and Senior Management.
Sustainability Committee
The Sustainability Committee is chaired by Shawn McCormick
and its members are George Bennett and Alexander Lowrie.
The Sustainability Committee is responsible for developing and
reviewing the Group’s framework, policies and guidelines around
sustainability-related business practices and performance, including
the responsible management of its environmental and social impacts,
and for overseeing the implementation of the Group’s Sustainability
Strategy, thereby helping to promote the long-term success and
viability of the business. It is expected to meet at least once a year.
During the Year, the committee reviewed the updated and new Group
policies and recommended that these should be approved by the Board
and made available on the Company website.
The Sustainability Committee also met during FY 2024 to review
the Company’s progress against the ESG strategy that was approved
in the prior year and a presentation was given to committee members
on Phalaborwa’s expected social obligations in South Africa, bearing in
mind its classification as a chemical processing project which is being
developed on an existing industrial site. The presentation considered the
differing expectations of the project’s unique stakeholder groups and the
forthcoming ramp-up in stakeholder engagement as part of the ESIA
work programme. The Sustainability Committee noted the strategic
benefits that effective social management policies and practices
would bring to the Company, which aims to develop its stature as a leading
company within an independent and responsible rare earths supply chain.
Share Dealing Policy
The Company has a share dealing policy requiring all Directors
and Senior Executives to obtain prior written clearance from either
the Chairman or the Chief Executive Officer to deal in linked shares.
The Chairman requires prior written clearance from the Chairman of the
Audit Committee. Close periods (as defined in the share dealing policy)
are observed as required by market abuse regulations and other rules
that apply to the Company by virtue of the market on which its shares
are listed. During these periods, the Company’s Directors, Executives
and inside employees are not permitted to deal in the Company’s
securities. Additional close periods are enforced when the Company
or its applicable employees are in possession of inside information.
Anti-Bribery Policy
The Company has adopted an Anti-Bribery Policy and procedures
(including whistleblowing), which apply to the Group, its officers and
staff anywhere in the world. The policy and procedures have been
developed following an assessment of the risks applicable to the Group’s
business and include clear definitions as well as a process for reporting
suspicious conduct, financial limits on gifts and hospitality, procedures
for financial record-keeping and for dealing with contracts with third
parties, and a prohibition on charitable or political donations without
Board approval. Guidance and expectations around conflicts of
interest are included in the Group’s Code of Conduct.
CFO Pete Gardner acts as the Group’s Anti-Bribery Officer. The Anti-
Bribery Officer oversees the day-to-day operation of the Anti-Bribery
Policy and procedures. The Board also regularly reviews the operation
of the Anti-Bribery Policy and procedures.
All personnel are required to receive guidance and training in relation
to the group’s anti-bribery policy and procedures.
The Anti-Bribery Officer also undertakes due diligence on third parties
as appropriate that are to be engaged by the Group to do business
on its behalf. The Group requires third parties to take account of the
Anti-Bribery Policy and to act in accordance with its provisions.
The Company’s Anti-Bribery Policy, along with its Code of Conduct and
Ethics, Supplier Code of Conduct, Sustainability Policy, Whistleblowing
Procedure and its Share Dealing Code, can be found on the Company’s
website at www.rainbowrareearths.com/about/
corporate-governance/company-policies/.
Signed on behalf of the Board of Directors on 17 October 2024.
GEORGE BENNETT
CHIEF EXECUTIVE OFFICER
42
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
PRINCIPAL RISKS AND
UNCERTAINTIES CONTINUED
CORPORATE GOVERNANCE
45
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
PRINCIPAL RISKS AND
UNCERTAINTIES
CORPORATE GOVERNANCE
44
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
Risk
Financing
Comment
The Company’s ability to continue
to develop the Phalaborwa project and other
new business opportunities will rely upon
its continued ability to access financing,
both at the corporate and project level.
The financing of Phalaborwa will be
dependent on the outcome of the definitive
feasibility study, which will be impacted by
a number of factors beyond the Company’s
control including but not limited to commodity
prices, the outcome of processing test work,
the issue of relevant permits, the ability
to resolve site access and environmental
matters set out separately below.
Business impact
High
Mitigation
The strong economic returns set out in the
PEA for Phalaborwa are expected to ensure
funding is available to deliver the definitive
feasibility study and, ultimately, the
development of the project.
Management maintains strong relationships
with key sources of finance. Rainbow has a
history of securing funding required for the
Company’s growth plans, including support
from its cornerstone investors. This includes
an option held by TechMet Limited to invest
US$50 million in equity for the development
of Phalaborwa. Accordingly, management
expects to be able to secure additional
funding as required.
The Directors regularly assess and discuss the principal risks facing the Group, including those that would threaten its
business model, future performance, solvency or liquidity.
The key risks affecting the Group are set out below:
Risk
Project definition
Comment
At Phalaborwa, the PEA published in October
2022 confirmed a processing flowsheet
expected to economically extract the
magnet rare earth metals from the gypsum
stacks in a low capital and low operating cost
environment with strong economic returns.
Test work is ongoing to confirm the optimal
processing flow sheet to deliver separated
rare earth oxides.
As a result of the ongoing test work changes
may be required to the proposed processing
flowsheet which could have a detrimental
impact on the economics of the project as
set out in the PEA. An updated economic
assessment of the project is planned for
before the end of 2024 demonstrating the
impact of changes resulting from the test
work results to date, which may not deliver
results in line with the PEA.
A definitive feasibility study is expected
to be completed in 2025 to provide sufficient
confidence for project development, including
financing, which may not deliver results in line
with the PEA.
Business impact
High
Mitigation
The Company’s technical team has designed
and commissioned numerous commercial
plants in Africa, including completion of
feasibility studies for rare earth projects,
and are therefore familiar with alternative
technical options that may need to be
deployed if the original strategies prove
uneconomic.
The results of the test work programmes
to date have confirmed that the rare earth
elements are capable of being extracted
from the phosphogypsum and upgraded
to produce a saleable mixed rare earth
carbonate. Separation test-work has shown
that this can be used to produce a 96% purity
Nd/Pr oxide via continuous ion
chromatography. Market feedback has
confirmed that both the mixed rare earth
carbonate and the 96% purity Nd/Pr oxide
would be saleable products subject to
normal market discounts compared to the
underlying prices of separated 99% purity
rare earth oxides.
Changes to the proposed processing flow
sheet to date have resulted in a proposed
process flowsheet requiring lower energy
and fewer operating steps than set out in
the PEA.
Permitting
New and updated permits and licences
will be required to develop the Phalaborwa
project including, but not limited to, a water
use licence, waste management licence
and air emissions licence.
High
Rainbow is working with specialist consultants
to compile the technical reports required for
the permitting process and is aiming to make
the relevant applications in parallel with work
on the definitive feasibility study.
Whilst the timeframe for the issuance
of permits is difficult to predict,
the reprocessing of the gypsum stacks
will clean up legacy environmental issues
at the site caused by the previous chemical
processing activities conducted by both
Sasol and Bosveld. This will include treating
the acid water currently associated with
the unlined gypsum stacks and re-stacking
the processed gypsum on new lined stacks
designed in accordance with the Equator
Principles. Accordingly, the Company
is confident that the relevant permits will
be issued to allow the project to proceed.
Rare earth prices
Rainbow is focused on the identification
and development of secondary rare earth
deposits that can be brought into production
quicker and at a lower cost than traditional
hard rock mining projects, with a focus
on the permanent magnet rare earth
elements neodymium and praseodymium,
dysprosium and terbium.
Rare earth prices are currently below the level
used as the base case for the Phalaborwa
PEA. Whilst analysts are predicting strong
growth in demand for rare earths, prices
have been volatile in the past and price
increases may not occur as predicted.
If the underlying rare earth basket price
of the Group’s development projects remain
at current levels or fall, this reduces potential
revenue that will impact the long-term
profitability of the project and could impact
the commercial viability of any development.
High
The Phalaborwa PEA confirmed a low-cost
operation due to the nature of the rare earth
mineral resource contained in a chemical
form in two gypsum stacks, which will not
require many of the processes associated
with a primary mineral ore body for the
extraction of rare earths. The resulting
operating margin will allow Phalaborwa
to be resilient against rare earth pricing
volatility as the project is expected to
generate strong returns even in a lower
rare earth price environment.
The Company aims to negotiate off-take
arrangements to ensure a commercial
development is viable in the interests
of all stakeholders.
PRINCIPAL RISKS AND
UNCERTAINTIES CONTINUED
CORPORATE GOVERNANCE
47
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
PRINCIPAL RISKS AND
UNCERTAINTIES CONTINUED
CORPORATE GOVERNANCE
46
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
Risk
Co-development
Comment
The Company’s assets include projects
that will be conducted in joint arrangements
or with associates, which reduces the
Company’s ability to control and manage
risk and places reliance on partners not
controlled by the Group.
At Phalaborwa, Bosveld has a 15% interest
in the project and, as current owner of the
site, their assistance is required to ensure the
assets necessary for the project development
are transferred at the necessary time into the
joint venture vehicle. Rainbow has the option
to acquire the 15% minority interest from
Bosveld by issuing 38,873,663 new ordinary
shares at any time up to 31 December 2025,
and Bosveld has a right to sell its 15% stake
under the same terms subject to the transfer
of the assets for the project having been
completed. In the event that the Group has
not finalised all issues relating to the transfer
of the assets prior to 31 December 2025,
including the site access risk noted, Rainbow
may need to negotiate an extension to this
long-stop date.
The Group’s development pipeline,
including but not limited to the Uberaba
property in Brazil, are at a much earlier stage
of development. The legal framework for the
development of a commercial operation
for these opportunities has not been fully
defined and terms may not be agreed with
the owners of these assets to allow a
development to occur.
Business impact
Medium
Mitigation
The option to acquire Bosveld’s 15% stake
in Phalaborwa will enable the Group to fully
control that project and creates a strong
incentive for Bosveld to ensure it takes the
necessary steps to allow the project to be
developed. This strong financial incentive
for Bosveld to assist as required to ensure
the long-term success of the project is also
expected to ensure that an extension to the
long-stop date for the option can be agreed
in the event of unforeseen delays to the
transfer of the assets.
For the earlier stage projects, Rainbow’s
rare earths processing expertise and
ownership, directly or under licence in the
relevant territories, of the IP rights to develop
an economic processing flow sheet similar
to Phalaborwa is expected to ensure that
suitable commercial terms can be agreed for
the long-term development of these assets.
Political risk in
Burundi
On 12 April 2021, the Government of Burundi
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.
Management assesses that the actions
of the Government of Burundi, which have
not been in accordance with the legally
binding mining convention in place, create
a situation where the re-start of operations
in the near term cannot be reasonably
assumed.
Low
Due to the re-focus of Rainbow’s business
on the Phalaborwa asset and growth
opportunities from the associated processing
technology, with the exception of cash
and VAT recoverable the assets of the Gakara
cash generating unit have been impaired
to nil. The VAT recoverable is not considered
to be impaired as it is directly related
to a recognised liability for VAT payable and,
whilst there is no legal right to net settlement,
it is expected that the liability will only be
settled in a negotiated off-set against
the recoverable asset.
Management continues to investigate
opportunities to monetise the Gakara asset,
either by way of formal arbitration
proceedings or through a corporate
transaction. Costs relating to the Gakara
asset have been minimised and do not
represent a significant element of the
Group budget.
Risk
Site access
Comment
The proposed site layout for Phalaborwa
incorporates an area of land within the
fenced area of the Bosveld industrial
complex for which the surface rights are
owned by the South Africa Department
of Public Works and Infrastructure. A failure
to obtain a lease to allow use of this land will
require the proposed site layout to be
amended, which could impact both the
timing and cost of the proposed
Phalaborwa development.
Business impact
Medium
Mitigation
Bosveld has received permission from the
South African authorities to commence work
on the relevant area of land for the purposes
of applying for environmental permits,
subject to an open and transparent bid
process for a lease. Given the location and
nature of the land in question it is not
expected that alternative parties would be
interested in obtaining a lease over this land.
Bosveld has an obligation under the co-
development agreement to transfer the
rights to a suitable area of land for the project
to the Phalaborwa operating company.
Bosveld has surface rights over alternative
areas of land in the area that could be used
for the Project if required.
Environmental
The gypsum stacks that comprise the
resource for the Phalaborwa project
represent an environmental disturbance
that requires remediation representing
an environmental liability as described
in the Phalaborwa PEA.
On transfer of the gypsum stacks to the
Phalaborwa operating company, the liability
associated with the remediation of historic
disturbance will not transfer to the Group.
Under South African law the responsibility
for a pre-existing decommissioning liability
remains with the historic owners of the site on
transfer to a new owner. In addition, Bosveld
have provided Rainbow with a contractual
indemnity against pre-existing environmental
liabilities associated with the site.
However, on transfer the Group will
take on responsibility for the day to day
management of the stacks, including the
associated polluted water. Failure to manage
the stacks in a responsible manner
to prevent further pollution to the
surrounding area could result in the Group
being liable for any resulting liabilities.
Medium
Development of the project will result in the
gypsum stacks being re-processed, which is
expected to reduce the liability relating to the
current status of the site. The Group has
engaged WSP to compile a baseline
environmental assessment of the pre-existing
liability associated with the site against which
future changes can be measured.
Prior to the transfer of the stacks the
Group will use suitably qualified personnel
and consultants to review Bosveld’s current
activities to manage the stacks and the
associated risks. An operational plan will
be put in place from the day of transfer
of ownership to ensure that the stacks
are properly managed.
DIRECTORS’ REPORT CONTINUED
CORPORATE GOVERNANCE
Directors’ responsibility statement
The Companies (Guernsey) Law, 2008 requires the Directors to prepare
financial statements for each financial period, which give a true and fair
view of the state of affairs of the Group for that period and of the profit
or loss of the Group for that period. Under that law they have elected
to prepare the financial statements in accordance with International
Financial Reporting Standards as adopted by the EU and applicable law.
In preparing those financial statements the Directors are required to:
•
Select suitable accounting policies and then apply them consistently.
•
Make judgments and estimates that are reasonable and prudent.
•
State whether applicable accounting standards have been followed,
subject to any material departures disclosed and explained in the
financial statements.
•
Prepare the financial statements on the going concern basis unless
it is inappropriate to presume that the Group will continue in business.
In accordance with Chapter 4 of the Disclosure and Transparency Rules
issued by the Financial Conduct Authority in the United Kingdom,
the Directors confirm to the best of their knowledge:
•
The Group’s Financial Statements, prepared in accordance with IFRS
as adopted by the European Union, give a true and fair view of the
assets, liabilities, financial position and profit and loss of the Group.
•
The Annual Report includes a fair review of the development and
performance of the business and the financial position of the Group,
together with a description of the principal risks and uncertainties
that it faces.
The Directors are responsible for keeping proper accounting records
which disclose with reasonable accuracy at any time the financial
position of the Group and to enable them to ensure that the financial
statements have been properly prepared in accordance with the
Companies (Guernsey) Law, 2008. They are also responsible for
safeguarding the assets of the Group and hence for taking reasonable
steps for the prevention and detection of fraud and other irregularities.
The Directors confirm that they have complied with the above
requirements in preparing the financial statements.
So far as each of the Directors are aware, there is no relevant audit
information of which the Group’s auditor is unaware; having taken
all the steps the Directors ought to have taken to make themselves
aware of any relevant audit information and to establish that the
Group’s auditor is aware of that information.
Principal shareholders
A list of shareholders who beneficially hold more than 5% of the
company’s shares at 30 June 2024 is as follows:
Key Shareholders Number Percent
Adonis Pouroulis 89,466,830 14.2
TechMet 75,206,112 11.9
George Bennett 38,805,298 6.2
Caden Holdings 36,967,805 5.9
Interests of Directors and Senior Managers
The interests (all of which are beneficial and include related parties)
of the Directors and Senior Managers in the Company’s issued share
capital at 30 June 2024 are as follows:
Number Percentage Number of
Key Shareholders of Shares Issued Shares Share Options
Adonis Pouroulis 89,466,830 14.2 1,902,000
George Bennett 38,805,298 6.2 2,500,000
Alexander Lowrie 6,838,124 1.1 1,250,000
Atul Bali 4,420,992 0.7 1,250,000
J. Peter Pham 631,500 0.1 750,000
Shawn McCormick 9,316,571 1.5 1,850,000
Darryll Castle 821,422 0.1 -
Pete Gardner 618,522 0.1 2,400,000
Dave Dodd 1,500,000 0.2 1,650,000
Website publication
The Directors are responsible for ensuring that the Annual Report
and the Financial Statements are made available on a website.
Financial statements are published on the Company’s website
(www.rainbowrareearths.com) in accordance with applicable legislation
in Guernsey governing the preparation and dissemination of financial
statements, which may vary from legislation in other jurisdictions.
The maintenance and integrity of the Company’s website is the
responsibility of the Directors. The Directors’ responsibility also extends
to the ongoing integrity of the financial statements contained therein.
Going concern
The Directors have reviewed the Group’s cash flow forecasts
for at least 12 months following the reporting date, together with
appropriate sensitivities and mitigating actions. A full analysis of the
Directors’ analysis of the going concern status of the Group is set out
in note 2 to the Financial Statements.
After considering available cash, loan facilities anticipated to remain
available, forecast cash flows and anticipated fundraising activities
the Directors consider that the Group will have adequate resources
to continue its operational existence for the foreseeable future.
However, the cash flow forecast includes additional fundraising which
is not yet in place. The Directors believe that the need to raise further
funds represents a material uncertainty that casts doubt on this
assumption. Nevertheless, the Directors continue to adopt the going
concern basis in preparing the consolidated financial statements.
Auditor
BDO LLP has expressed its willingness to continue in office as auditors
and a resolution to re-appoint BDO LLP will be proposed at the
forthcoming AGM.
Signed on behalf of the Board of Directors on 17 October 2024
GEORGE BENNETT
CHIEF EXECUTIVE OFFICER
49
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
DIRECTORS’ REPORT
CORPORATE GOVERNANCE
The Directors present their Annual Report and the Financial
Statements of the Group for the year ended 30 June 2024.
General
Rainbow Rare Earths Limited, the parent company of the Group,
was established in Guernsey on 5 August 2011. On 30 January 2017,
its shares were listed on the standard segment of the Main Market
of the London Stock Exchange. Subsequent to the year-end, as a result
of changes to the UK listing regime effective 29 July 2024, the shares
have been transferred to the Equity shares (transition) category.
Principal activity
The Company’s principal activity is the development of a rare earth
minerals project in South Africa and the opportunity to utilise the
associated processing technology at other global rare earth
opportunities including but not limited to opportunities in Brazil.
Business model
The basis on which the Company seeks to preserve and generate value
is through the identification and development of secondary rare earth
deposits that can be brought into production quicker and at a lower cost
than traditional hard rock mining projects, with a focus
on the permanent magnet rare earth elements neodymium
and praseodymium, dysprosium and terbium. Once operational,
the net cash generated from the Group’s projects will be used to service
the Company’s financing, re-invested in further rare earth project
development opportunities, or (where appropriate) repaid to investors
in the form of dividends.
In the short term, this strategy is focused on the Phalaborwa rare earths
project in South Africa, where a mineral resource has been defined
contained within gypsum stacks derived from historic phosphoric
acid production. The PEA announced in October 2022, supported
by subsequent test work, have confirmed that Phalaborwa represents
an economically attractive potential source of rare earth oxides.
Longer term, the Company expects that the technology to recover
critical rare earth elements from phosphogypsum will provide
opportunities to develop a long-term, scalable and sustainable business.
To this end, the Company is currently evaluating strategic partnership
opportunities in Saudi Arabia, Morocco, Canada and India along with
a memorandum of understanding signed with Mosaic for the Uberaba
project in Brazil.
Business review
A review of the business during the Year is included in the Chairman’s
Statement, the CEO’s Statement, and in the Operating and Financial
Reviews. The Group’s business and operations and the results thereof
are reflected in the attached Financial Statements.
Business risks
A review of the key risks to the Company is set out on pages 44 to 47.
Advisers
The Company’s advisers are set out on the inside back cover.
Financial results
During the 12 months ended 30 June 2024, the Company reported
a net loss of US$4,262k (30 June 2023: net loss of US$12,865k).
No dividends have been declared in respect of the years ending
30 June 2024 or 2023.
Directors
A list of the Directors of the Company is set out on pages 36 to 37.
No Director shall be requested to vacate office at any time by reason
of any specific age attained. The Board considers that there is a balance
of skills within the Board and that each of the Directors contributes
effectively.
48
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
Directors’ remuneration
Salary/fees (US$’000) Bonus (US$’000) Total (US$’000)
June 2024
June 2023
June 2024
June 2023
June 2024
June 2023
Executive Director
George Bennett
355
335
226
163
581
498
Non-Executive Chairman
Adonis Pouroulis
151
115
-
-
151
115
Non-Executive Directors
Alexander Lowrie
53
50
-
-
53
50
Shawn McCormick
53
50
-
-
53
50
Atul Bali
53
50
-
-
53
50
J. Peter Pham
47
44
-
-
47
44
Darryll Castle1
47
-
-
-
47
-
Total
759
644
226
163
985
807
1.
Darryll Castle was appointed on 12 June 2023.
FINANCIAL STATEMENTS
51
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
FINANCIAL STATEMENTS
RARE EARTHS ARE
USED IN THE
COMPONENTS OF
MANY DEVICES
USED DAILY
50
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
FINANCIAL STATEMENTS
52 Independent Auditors’ Report
58 Consolidated Statement of Comprehensive Income
59 Consolidated Statement of Financial Position
60 Consolidated Statement of Changes in Equity
61 Consolidated Cash Flow Statement
62 Notes to the Financial Statements
IBC Shareholder Information
Rare earths have transformed the consumer
electronics market, enabling the high-tech
products so integral to our lives
Overview
Coverage 89% (2023: 100%) of Group loss before tax
100% (2023: 100%) of Group total assets
Key audit matters 2024 2023
1. Accuracy and completeness of the impairment of Burundi assets
2. Material uncertainty relating to going concern
3. Carrying value of the Exploration and Evaluation Assets
Accuracy and completeness of the impairment of Burundi assets is no longer considered
to be a key audit matter following the impairment of the exploration and evaluation assets
in the previous financial year.
Materiality Group financial statements as a whole
£240k (2023:US$210k) based on 1.5% (2023: 1.5%) of total assets.
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group’s system of internal control,
and assessing the risks of material misstatement in the financial statements. We also addressed the risk of Management override of internal controls,
including assessing whether there was evidence of bias by the Directors that may have represented a risk of material misstatement.
Whilst Rainbow Rare Earths Limited is a Company registered in Guernsey and listed on the Equity Shares (Transition) Listing Category of the London
Stock Exchange in the UK, the Group’s principal operations are located in South Africa and Burundi. In approaching the audit, we considered how the
Group is organised and managed. We assessed the business as being two projects comprising of the Phalaborwa and the Gakara Projects, and a
corporate head office function.
Our Group audit scope focused on the Group’s principle operating entities, Rainbow Rare Earths Limited, Rainbow Mining Burundi, Rainbow
International Resources and Rainbow Rare Earths (Pty) Ltd. We identified these entities as significant components for the purposes of our financial
statement audit, based on their relative share of total assets. The significant components accounted for 100% of total assets and were subject to full
scope audits conducted by the group engagement team.
The remaining component of the Group, being a dormant entity, was considered non-significant, and this component was principally subject
to analytical review procedures with specific procedures for any significant balances impacting the Group financial statements.
All audit work (full scope audit or analytical review procedures) was conducted by the group engagement team.
Climate change
Our work on the assessment of potential impacts on climate-related risks on the Group’s operations and financial statements included:
•
enquiries and challenge of management to understand the actions they have taken to identify climate-related risks and their potential impacts
on the financial statements and adequately disclose climate-related risks within the Annual Report;
•
performing our own qualitative risk assessment taking into consideration the sector in which the Group operates and how climate change affects
this particular sector; and
•
review of the minutes of Board and Audit Committee meetings and other papers related to climate change to assist us in performing our risk
assessment as to how the impact of the Group’s commitment as set out in the Annual Report may affect the financial statements and our audit.
We challenged the extent to which climate-related considerations, including the expected cash flows from the initiatives and commitments have
been reflected, where appropriate, in management’s going concern assessment.
We also assessed the consistency of managements disclosures included as Statutory Other Information on pages 26 to 31 with the financial
statements and with our knowledge obtained from the audit.
Based on our risk assessment procedures, we did not identify there to be any Key Audit Matters materially impacted by climate-related risks
and related commitments.
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF RAINBOW RARE EARTHS LIMITED
CONTINUED
FINANCIAL STATEMENTS
53
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF RAINBOW RARE EARTHS LIMITED
FINANCIAL STATEMENTS
Opinion on the financial statements
In our opinion, the financial statements:
•
give a true and fair view of the state of the Group’s affairs as at 30 June 2024 and of its loss for the year then ended;
•
have been properly prepared in accordance with IFRS as adopted by the European Union; and
•
have been properly prepared in accordance with the requirements of the Companies (Guernsey) Law, 2008.
We have audited the financial statements of Rainbow Rare Earths Limited (“the Group”) for the year ended 30 June 2024 which comprise the
Consolidated Statement of Comprehensive Income, Consolidated Statement of Financial Position, Consolidated Statement of Changes in Equity,
Consolidated Cash Flow Statement and notes to the financial statements, including a summary of material accounting policies. The financial reporting
framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the
European Union.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our audit opinion is consistent with the additional report to
the Audit Committee.
Independence
Following the recommendation of the Audit Committee, we were appointed by the Audit Committee on 3 October 2016 to audit the financial
statements for the year ending 30 June 2016 and subsequent financial periods. The period of total uninterrupted engagement including retenders
and reappointments is nine years, covering the years ended 30 June 2016 to 30 June 2024. We remain independent of the Group and the Parent
Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical
Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
The non-audit services prohibited by that standard were not provided to the Group or the Parent Company.
Material uncertainty related to going concern
We draw attention to note 2 in the financial statements, which indicates that the Group is reliant on securing additional funding which is not
guaranteed. As stated in note 2, these events or conditions, along with other matters as set forth in note 2, indicate that a material uncertainty
exists that may cast significant doubt over the Group’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.
Given the material uncertainty noted above and our risk assessment we considered going concern to be a key audit matter.
Our evaluation of the Directors’ assessment of the Group’s ability to continue to adopt the going concern basis of accounting and in response
to the key audit matter included:
•
critically assessing the Directors’ cash flow forecast and the underlying assumptions which have been approved by the Directors. This included
stress testing and applying sensitivities to the base cash flow forecast. Our testing included testing the integrity of the model, comparing forecast
costs to historical actuals, evaluating the consistency of the forecast capital and exploration expenditure within the Group’s strategic plans, and
considering the reasonableness of the sensitivities applied and outcome of the stress testing;
•
verifying cash balances used in the forecast close to the date of sign off of these financial statements, by tracing cash positions against bank
statements;
•
agreeing the net receipt of US$9.8 million of funds received from Ecora to bank statements;
•
agreeing future cash outflows in respect of loans to underlying agreements. This included assessing the timing of the interest and capital
repayments on the Finbank loan were appropriately reflected in cash flows commencing from July 2024;
•
assessing the reasonableness of the cash outflows for the corporate overhead, which included some contingency and considering the
completeness of the costs included in the forecast;
•
assessing the level of cash outflows assumed for the Gakara mine, which was assumed to remain on care and maintenance for the entire
forecast period. This involved comparing forecast cash outflows to prior year actuals and considering the completeness of the costs included
in the forecast;
•
assessing the reasonableness of the assumptions in the model regarding the cost and timing of completing the Phalaborwa DFS and pilot plant
testing in 2025;
•
considering the ability of the Group to secure additional funds in the future based on its history of successful fundraising;
•
reviewing board minutes and project reports for any indications of unexpected costs, claims or disputes; and
•
assessing the reasonability of the disclosures relating to going concern and considering them in line with the applicable standards.
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation
of the financial statements is appropriate.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.
52
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF RAINBOW RARE EARTHS LIMITED
CONTINUED
FINANCIAL STATEMENTS
55
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF RAINBOW RARE EARTHS LIMITED
CONTINUED
FINANCIAL STATEMENTS
54
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider materiality
to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on the
basis of the financial statements.
In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level, performance
materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as
we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on
the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality as follows:
Group financial statements
2024 2023
US$’000 US$’000
Materiality 240 210
Basis for determining materiality 1.5% of total assets 1.5% of total assets
Rationale for the benchmark applied Total Assets was determined as an appropriate basis as the principal focus of the
Group remains the advancement and development of its projects.
As such, we consider the users of the financial statements will focus on the
statement of financial position and total assets of the Group in order to understand
the level of investment being made.
Performance materiality 168 147
Basis for determining performance materiality Performance materiality was set at 70% (2023: 70%) of the materiality level based
on our assessment of a number of factors including the expected total value of
known and likely misstatements (based on past experience), our knowledge of
internal control and management’s attitude towards proposed adjustments.
Component materiality
We set materiality for each component of the Group based on Group materiality to ensure that the risk of errors exceeding component materiality
was appropriately mitigated; this was capped due to aggregation risk in line with the ISAs (UK). Component materiality was US$115,000 for each
component (2023: US$105,000). In the audit of each component, we further applied performance materiality levels of 70% (2023: 70%) of the
component materiality to our testing to ensure that the risk of errors exceeding component materiality was appropriately mitigated
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual audit differences in excess of US$4,800 (2023: US$4,200).
We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds.
Other information
The Directors are responsible for the other information. The other information comprises the information included in the Annual Report, other than
the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except
to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the
other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge
obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based
on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Other Companies (Guernsey) Law, 2008 reporting
We have nothing to report in respect of the following matters where the Companies (Guernsey) Law, 2008 requires us to report to you if,
in our opinion:
•
proper accounting records have not been kept by the Company; or
•
the financial statements are not in agreement with the accounting records; or
•
we have failed to obtain all the information and explanations which, to the best of our knowledge and belief,
are necessary for the purposes of our audit.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the
current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified, including
those which had the greatest effect on the overall audit strategy, the allocation of resources in the audit, and directing the efforts of the engagement
team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters. In addition to the matter described in the “material uncertainty relating to going concern” section
above, we have determined the matter below to be the key audit matter to be communicated in our report.
Key audit matter: Impairment assessment of the Exploration and Evaluation Assets (Phalaborwa project)
Refer to notes 3 and 12
The Group holds one exploration and evaluation asset which is the Phalaborwa project in South Africa.
The accounting standards require management to carry out an impairment assessment annually to identify any indicators of impairment.
This assessment relies on management’s interpretation of the ongoing test work undertaken during the Year which confirmed that rare earth
elements are capable of being extracted from the phosphogypsum and upgraded to produce a saleable mixed rare earth carbonate. As test work
is still ongoing the indicators of impairment are based on the future economic viability of the asset which requires a significant amount of
judgement from management.
Therefore, we considered this to be a key audit matter.
How the scope of our audit addressed the key audit matter
• We reviewed and assessed management’s assessment in accordance with the requirements of IFRS 6.
• We challenged management’s assessment of the indicators of impairment for the Phalaborwa project in South Africa by performing the
following procedures:
-
We checked that the Group has the right to explore the specific area by inspecting the Group’s earn-in agreement with Bosveld Minerals.
-
We reviewed management’s plans and budgets to establish whether the Group is committed to the development of the project and
checked that expenditure on further exploration and evaluation of mineral resources in the area are budgeted and planned for.
-
We confirmed through inspection of the Group’s bank statements the existence of sufficient cash resources available at the Group’s
disposal in order to execute the forecasted development plan. In addition, we confirmed the consistency of the development plan against
the going concern forecast.
-
We reviewed Management’s assessment which confirms that there are no present indicators that the exploration for and evaluation of
mineral resources has not led to the discovery of commercially viable quantities of mineral resource.
-
We reviewed RNS announcements, minutes from the meetings of Directors and news articles to assess whether there were any other
potential impairment indicators.
Key observations:
Based on procedures performed, we consider the judgements made in the impairment indicators assessment of Exploration and Evaluation
Assets prepared by management to be reasonable.
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF RAINBOW RARE EARTHS LIMITED
CONTINUED
FINANCIAL STATEMENTS
Fraud
We assessed the susceptibility of the financial statements to material misstatement, including fraud. Our risk assessment procedures included:
•
enquiry with management and those charged with governance regarding any known or suspected instances of fraud;
•
obtaining an understanding of the Company’s policies and procedures relating to:
-
detecting and responding to the risks of fraud;
-
internal controls established to mitigate risks related to fraud;
•
review of minutes of meetings of those charged with governance for any known or suspected instances of fraud;
•
discussion amongst the engagement team as to how and where fraud might occur in the financial statements; and
•
performing planning analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement
due to fraud.
Based on our risk assessment, we considered the areas most susceptible to fraud to be management override of controls and areas of judgement
due to level of subjectivity involved with them.
Our procedures in respect of the above included:
•
Fraud enquiries were held with management and those charged with governance to identify whether any instances of fraud were noted
in the period.
•
Testing the financial statement disclosures to supporting documentation, performing testing on account balances which were considered
to be a greater risk of susceptibility to fraud. These balances relate to our key audit matters as disclosed above.
•
Making enquiries of management as to whether there was any correspondence with regulators and the Government,
in so far as the correspondence related to the financial statements, and reviewed this correspondence.
•
Performing targeted journal entry testing based on identified characteristics the audit team considered could be indicative of fraud to address
the presumed risk of management override of controls, including bribery. For example, we tested capitalisation to property plant and equipment
or exploration assets with the opposite entry being processed against bank and cash accounts and not against liability accounts.
•
Reviewing the Group’s year end unadjusted entries, consolidated entries and investigating any that appear unusual as to nature or amount
by agreeing to supporting documentation.
•
Assessing significant estimates made by management for bias.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members who were all deemed
to have appropriate competence and capabilities and remained alert to any indications of fraud or non-compliance with laws and regulations
throughout the audit.
Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of not detecting
a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by,
for example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit procedures performed and the further
removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely
we are to become aware of it.
A further description of our responsibilities is available on the Financial Reporting Council’s website at:
https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the Company’s members, as a body, in accordance with Section 262 of the Companies (Guernsey) Law, 2008.
Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company
and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
PETER ACLOQUE
FOR AND ON BEHALF OF BDO LLP, CHARTERED ACCOUNTANTS,
LONDON, UNITED KINGDOM
17 October 2024
57
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF RAINBOW RARE EARTHS LIMITED
CONTINUED
FINANCIAL STATEMENTS
Responsibilities of Directors
As explained more fully in the Directors’ responsibilities statement within the Directors’ Report, the Directors are responsible for the preparation
of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine
is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Company’s ability to continue as a going concern, disclosing,
as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the
Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of these financial statements.
Extent to which the audit was capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities,
outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable
of detecting irregularities, including fraud, is detailed below:
Non-compliance with laws and regulations
Based on:
•
our understanding of the Group and the industry in which it operates;
•
discussion with management and those charged with governance and also consider legal counsel; and
•
obtaining and understanding of the Group’s policies and procedures regarding compliance with laws and regulations.
We considered the significant laws and regulations to be the applicable accounting framework, Companies (Guernsey) Law 2008, Tax regulations
and the Listing Rules of the Financial Conduct Authority.
The Company is also subject to laws and regulations where the consequence of non-compliance could have a material effect on the amount
or disclosures in the financial statements, for example through the imposition of fines or litigations. We identified such laws and regulations
to be the Task Force on Climate-Related Financial Disclosures (TCFD), local health and safety law, compliance with the rights for Phalaborwa
as per the earn-in-agreement, the mining permits and export ban of Burundi and the Prevention of Corruption (Bailiwick of Guernsey) Law, 2003.
Our procedures in respect of the above included:
•
review of minutes of meetings of those charged with governance for any instances of non-compliance with laws and regulations;
•
review of correspondence with tax authorities for any instances of non-compliance with laws and regulations;
•
review of financial statement disclosures and agreeing to supporting documentation; and
•
review of legal expenditure accounts to understand the nature of expenditure incurred.
56
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
AS AT 30 JUNE 2024
FINANCIAL STATEMENTS
Year ended
Year ended
30 June 2024
30 June 2023
Notes
US$’000
US$’000
Non-current assets
Exploration and evaluation assets
12
15,716
4,830
Property, plant and equipment
13
21
27
Right of use assets
19
84
39
Total non-current assets
15,821
4,896
Current assets
Inventory
14
1
718
Trade and other receivables
15
374
365
Cash and cash equivalents
16
79
8,107
Total current assets
454
9,190
Total assets
16,275
14,086
Current liabilities
Trade and other payables
17
(1,850)
(1,250)
Borrowings
18
(245)
(201)
Lease liabilities
19
(48)
(23)
Total current liabilities
(2,143)
(1,474)
Non-current liabilities
Borrowings
18
(192)
(285)
Lease liabilities
19
(44)
(21)
Provisions
20
(55)
(55)
Total non-current liabilities
(291)
(361)
Total liabilities
(2,434)
(1,835)
Net assets
13,841
12,251
Equity
Share capital
21
56,362
50,937
Share-based payment reserve
23
1,839
1,719
Other reserves
23
-
-
Retained loss
(42,351)
(38,483)
Equity attributable to the parent
15,850
14,173
Non-controlling interest
24
(2,009)
(1,922)
Total equity
13,841
12,251
These financial statements were approved and authorised for issue by the Board of Directors on 17 October 2024 and signed on its behalf by:
GEORGE BENNETT
DIRECTOR
Notes on pages 62 to 84 form part of these financial statements.
59
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2024
FINANCIAL STATEMENTS
Year ended
Year ended
30 June 2024
30 June 2023
Notes
US$’000
US$’000
Revenue
-
-
Cost of sales
-
-
Gross profit
-
-
Administration expenses
(3,567)
(3,509)
Impairment of Gakara assets
14
(717)
(9,575)
Loss from operating activities
4
(4,284)
(13,084)
Finance income
6
141
377
Finance costs
7
(119)
(158)
Loss before tax
(4,262)
(12,865)
Income tax expense
10
-
-
Total loss after tax and comprehensive expense for the year
(4,262)
(12,865)
Total loss after tax and comprehensive expense for the year is attributable to:
Non-controlling interest
24
(87)
(881)
Owners of parent
(4,175)
(11,984)
(4,262)
(12,865)
The results of each year are derived from continuing operations
Loss per share (cents)
Basic
11
(0.67)
(2.23)
Diluted
11
(0.67)
(2.23)
Notes on pages 62 to 84 form part of these financial statements.
58
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
CONSOLIDATED CASH FLOW
STATEMENT
FOR THE YEAR ENDED 30 JUNE 2024
FINANCIAL STATEMENTS
Year ended
Year ended
30 June 2024
30 June 2023
Notes
US$’000
US$’000
Cash flow from operating activities
Loss from operating activities
(4,284)
(13,084)
Adjustments for non-cash transactions:
Depreciation
52
382
Impairment
14
717
9,575
Share-based payment charge
22
427
325
Operating loss before working capital changes
(3,088)
(2,802)
Net increase in trade and other receivables
15
(45)
(31)
Net increase/(decrease) in trade and other payables
17
372
(94)
Cash used by operations
(2,761)
(2,927)
Realised foreign exchange gains
123
156
Taxes paid
10
-
-
Net cash used in operating activities
(2,638)
(2,771)
Cash flow from investing activities
Purchase of property, plant & equipment
13
-
(28)
Exploration and evaluation costs
12
(10,637)
(2,510)
Net cash used in investing activities
(10,637)
(2,538)
Cash flow from financing activities
Repayment of borrowings
18
(77)
(61)
Interest payments on borrowings
18
(49)
(78)
Interest received
6
5
-
Payment of leases
19
(53)
(42)
Proceeds from the issuance of ordinary shares
21
5,501
9,610
Transaction costs of issuing new equity
21
(76)
(115)
Net cash generated by financing activities
5,251
9,314
Net increase in cash and cash equivalents
(8,024)
4,005
Cash & cash equivalents at the beginning of the year
8,107
4,134
Foreign exchange loss on cash and cash equivalents
(4)
(32)
Cash & cash equivalents at the end of the year
16
79
8,107
Notes on pages 62 to 84 form part of these financial statements.
61
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2024
FINANCIAL STATEMENTS
Share-
Attributable
Non-
Share
based
Accumulated
to the
controlling
capital
payments
losses
parent
interest
Total
Notes
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
Balance at 1 July 2022
41,442
1,467
(26,572)
16,337
(1,041)
15,296
Total comprehensive loss
Loss and total comprehensive loss for year
-
-
(11,984)
(11,984)
(881)
(12,865)
Transactions with owners
Shares placed during the year for
cash consideration
21
9,485
-
-
9,485
-
9,485
Share placing transaction costs
21
(115)
-
-
(115)
-
(115)
Fair value of employee share
options in year
22
-
325
-
325
-
325
Share options cancelled in the year
22
(13)
13
-
-
-
Share options exercised in the year,
net of costs
21
125
(60)
60
125
-
125
Balance at 30 June 2023
50,937
1,719
(38,483)
14,173
(1,922)
12,251
Total comprehensive loss
Loss and total comprehensive
loss for year
-
-
(4,175)
(4,175)
(87)
(4,262)
Transactions with owners
Shares placed during the year for
cash consideration
21
5,501
-
-
5,501
-
5,501
Share placing transaction costs
21
(76)
-
-
(76)
-
(76)
Fair value of employee share
options in year
22
-
427
-
427
-
427
Share options cancelled in the year
22
(106)
106
-
-
-
Share options exercised in the year,
net of costs
22
-
(201)
201
-
-
-
Balance at 30 June 2024
56,362
1,839
(42,351)
15,850
(2,009)
13,841
Notes on pages 62 to 84 form part of these financial statements.
60
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
CONTINUED
FINANCIAL STATEMENTS
2.
MATERIAL ACCOUNTING POLICIES CONTINUED
Going Concern continued
Conclusion
The base case forecast includes a total cash outflow over the Period of US$9.9 million. The Directors’ reasonably plausible downside scenario,
which includes a 10% contingency for corporate costs, fixed costs at Phalaborwa and Gakara costs, together with a further allowance for business
development opportunities and foreign exchange variances, includes a total cash outflow of US$11.2 million.
At 30 June 2024 the Group had US$9.7 million of available cash including the receipt from the fundraising with Ecora announced in July 2024,
of which the final US$8.2 million was received in September 2024. The forecast indicates that under all scenarios the Group will need to raise additional
funds before 31 December 2025, the timing of which is dependent primarily on the speed at which the Phalaborwa DFS is completed, which is within
the Directors’ control. In addition, further funds may be required to progress the Uberaba opportunity in Brazil or other new business opportunities.
As a result, the Group is reliant on securing additional funding which is not guaranteed. Based on the above, this indicates the existence
of a material uncertainty which may cast significant doubt over the Group’s ability to continue as a going concern and therefore,
it may be unable to realise its assets and discharge its liabilities in the ordinary course of business.
The Directors are confident that funding will be secured, based on the Group’s history of successful fundraising. The financial statements
do not include any adjustments that would result if the Group was unable to continue as a going concern.
New and amended standards and interpretations adopted by the Group
No material changes to accounting policies arose as a result of new standards applied by the Group from 1 July 2023.
New standards, interpretations, and amendments not yet effective
Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2024 reporting periods and have
not been early adopted by the Group. These standards include:
•
IAS 1 – Presentation of Financial Statements – The classification of liabilities as current or non-current basing the classification on contractual
arrangements at the reporting date. These amendments are effective for periods beginning on or after 1 January 2024.
•
Amendments to IFRS 16 - Lease Liability in a Sale and Leaseback. The amendments are effective from 1 January 2024 but may be applied earlier.
•
Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures – Supplier Finance Arrangements. Effective date
is 1 January 2024.
•
Lack of Exchangeability – Amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates. The effective date is 1 January 2025.
•
Amendments to the Classification and Measurement of Financial Instruments – Amendments to IFRS 9 Financial Instruments and IFRS 7
Financial Instruments: Disclosures. The effective date is 1 January 2026.
•
Annual Improvements to IFRS Accounting Standards – Amendments to:
-
IFRS 1 First-time Adoption of International Financial Reporting Standards;
-
IFRS 7 Financial Instruments: Disclosures and its accompanying Guidance on implementing IFRS 7;
-
IFRS 9 Financial Instruments;
-
IFRS 10 Consolidated Financial Statements; and
-
IAS 7 Statement of Cash Flows
The effective date is 1 January 2026.
•
IFRS 18 Presentation and Disclosure in Financial Statements. The effective date is 1 January 2027.
•
IFRS 19 Subsidiaries without Public Accountability: Disclosures. The effective date is 1 January 2027.
These amendments are not expected to have a material impact on the Group.
Basis of consolidation
Where the Company has control over an investee, it is classified as a subsidiary. The Company controls an investee if all three of the following elements
are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those
variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.
The consolidated financial statements present the results of the Company and its subsidiaries as if they formed a single entity. Intercompany
transactions and balances between Group companies are therefore eliminated in full.
The results of undertakings acquired or disposed of are consolidated from or to the date when control passes to or from the Group. The results
of subsidiaries acquired or disposed of during the year are included in the Consolidated Statement of Comprehensive Income from the date that
control commences until the date that control ceases.
Where necessary, adjustments are made to the results of subsidiaries to bring the accounting policies they use into line with those used by the Group.
Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group’s equity. Non-controlling interests
consist of the non-controlling shareholder’s share of changes in equity. The non-controlling interests’ share of losses, where applicable, are attributed
to the non-controlling interests irrespective of whether the non-controlling shareholders have a binding obligation and are able to make an additional
investment to cover the losses. On acquisition of a non-controlling interest, the relevant non-controlling interest share of equity is extinguished and the
difference between the fair value of consideration paid and the relevant carrying value of the non-controlling interest is recorded in retained earnings.
63
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
FINANCIAL STATEMENTS
1.
GENERAL INFORMATION
Reporting entity
Rainbow Rare Earths Limited (the “Company”) is a company domiciled in Guernsey and incorporated on 5 August 2011, with company registration
number 53831, and is a company limited by shares. The Company’s registered office is Connaught House, St Julian’s Avenue, St Peter Port, Guernsey,
GY1 1GZ. The consolidated financial statements of the Company for the years ended 30 June 2023 and 30 June 2022 comprise the Company and its
subsidiaries.
2.
MATERIAL ACCOUNTING POLICIES
Basis of preparation
The Financial Statements of the Company and its subsidiaries (the “Group”) are prepared in accordance with International Financial Reporting
Standards (“IFRS”) (IFRS and IFRIC Interpretations) issued by the International Accounting Standards Board (“IASB”), as adopted by the European
Union.
The consolidated financial statements have been prepared on a historical cost basis, except for financial instruments measured at fair value
through profit or loss. Given the development status of the Group’s assets, management do not consider sustainability and climate change as key risks
requiring significant judgement for the Year. The Group has prepared sustainability disclosures on pages 20 to 31 in line with the requirements set out
in the UK Listing Rules to the extent relevant for a Group without producing assets.
Going Concern
As at 30 June 2024, the Group had total cash of US$0.1 million prior to the announcement, on 1 July 2024, of a US$10 million financing with
Ecora Resources plc comprising US$1.5 million of equity and US$8.5 million proceeds for a 0.85% gross revenue royalty over future sales from
the Phalaborwa project. Following receipt of these funds, after associated costs, the Group has available cash resources of US$9.7 million.
The Directors have reviewed a range of potential cash flow forecasts for the period to 31 December 2025, including reasonable possible downside
scenarios. This has included the following assumptions:
Corporate
The forecast includes US$3.6 million of ongoing general and administrative costs of the Group over the 18-month period from 1 July 2024
to 31 December 2025 (the “Period”), based on the current administrative costs of the Group. This includes US$0.2 million in respect of pursuing
new business opportunities, which will cover only the initial low cost test work at the opportunities identified to date including the opportunity
with Mosaic in Brazil.
The Directors’ reasonably plausible downside scenario includes a 10% contingency for unexpected costs plus a further US$0.25 million per annum
for business development costs. Corporate cost includes costs incurred in British Pounds at an exchange rate of £1:US$1.25 and South African Rand
at an exchange rate of US$1:ZAR18.5. The Directors’ reasonably plausible downside scenario includes an adjustment to reflect a higher US Dollar cost
based on an exchange rate of £1:US$1.35 and US$1:ZAR17.5.
Phalaborwa Project
The forecast includes all costs anticipated for the completion of the Phalaborwa DFS, estimated at US$4.8 million, inclusive of a 10% contingency.
This includes all costs associated with the ongoing test work campaigns, including separation test work, ongoing costs associated with the DFS,
expected to be completed in 2025, and costs associated with the ongoing permitting process.
The forecast also includes salary and consultant costs of US$0.9 million for the core project team tasked with advancing the project. The Directors’
reasonably plausible downside scenario includes a further 10% contingency on all costs associated with the Phalaborwa project. Phalaborwa project
costs include costs incurred in South African Rand at an exchange rate of US$1:ZAR18.5. The Directors’ reasonably plausible downside scenario
includes an adjustment to reflect a higher US Dollar cost based on an exchange rate of US$1:ZAR17.5.
The forecast does not include costs related to a formal financing process for the Phalaborwa project, or any costs associated with the management
of the gypsum stacks, which will be transferred from Bosveld Phosphates (Pty) Limited to the Group under the Phalaborwa co-development
agreement at the Group’s election. The co-development agreement includes an option for the Group to obtain 100% of Phalaborwa via the issue
to Bosveld of 38,873,663 new ordinary shares at any time up to 31 December 2025. It is expected that the assets relating to Phalaborwa will be
transferred to the Group prior to the exercise of this option. The Group does not intend to arrange that transfer or exercise the option until the
funding needs for the management of the gypsum stacks have been defined and funds are available for the ongoing management thereof.
Uberaba Project
As set out in the operations review the opportunity relating to Mosaic’s phosphogypsum stack in Uberaba, Brazil is considered to present
an opportunity to replicate Phalaborwa at a potentially larger scale. At the date of this these financial statements the Group has no commitments in
respect of this project. Low-cost test work is expected to continue in the short term. A detailed budget to deliver a preliminary economic assessment,
as anticipated in the agreement with Mosaic, is not yet available and will need to be agreed with Mosaic before funds can be committed. It is noted
that the Directors’ reasonably plausible downside scenario would not be sufficient for a preliminary economic assessment to be developed, and
further funding may be required to allow for the Uberaba opportunity to be de-risked, the timing of which cannot be accurately predicted at this time.
Gakara Project
The cash flow forecasts assume ongoing care and maintenance costs totalling US$0.6 million, including amounts payable under the FinBank loan
facility in Burundi. The Group has determined that no additional cash outflows beyond the US$0.6 million care and maintenance budget will be
incurred on Gakara until the export ban and mining suspension has been lifted. A re-start of operations would be conditional on the Gakara project
not requiring additional financial support from Rainbow Rare Earths Limited at then current rare earth prices.
62
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
CONTINUED
FINANCIAL STATEMENTS
2.
MATERIAL ACCOUNTING POLICIES CONTINUED
Impairment of non-financial assets including exploration and evaluation assets
Exploration and evaluation assets are reviewed regularly for indicators of impairment following the guidance in IFRS 6 “Exploration for and Evaluation
of Mineral Resources” and tested for impairment where such indicators exist. In addition, these assets are tested for impairment prior to transfer
to project development costs. In accordance with IFRS 6 the Group considers the following facts and circumstances in their assessment of whether
the Group’s exploration and evaluation assets may be impaired:
•
whether the period for which the Group has the right to explore in a specific area has expired during the period or will expire in the near future,
and is not expected to be renewed;
•
whether substantive expenditure on further exploration for and evaluation of mineral resources in a specific area is neither budgeted nor planned;
•
whether exploration for and evaluation of reserves in a specific area have not led to the discovery of commercially viable quantities of mineable
material and the Group has decided to discontinue such activities in the specific area; and
•
whether sufficient data exists to indicate that although a development in a specific area is likely to proceed, the carrying amount of the exploration
and evaluation assets is unlikely to be recovered in full from successful development or by sale.
If any such facts or circumstances are noted, the Group performs an impairment test in accordance with the provisions of IAS 36. In such
circumstances the aggregate carrying value of the exploration and evaluation asset, together with any associated property, plant and equipment held
within the relevant cash generating unit, is compared against the expected recoverable amount of the cash generating unit. The recoverable amount
is the higher of value in use and the fair value less costs to sell.
Where the carrying amount of an asset or cash generating unit exceeds its recoverable amount, the asset or cash generating unit is considered
impaired and is written down to its recoverable amount. Impairment losses are recognised in the Income Statement. Impairment losses recognised
for cash generation are recognised against goodwill (if any) and then to identifiable assets on a pro-rata basis.
A previously recognised impairment loss is reversed if the recoverable amount increases as a result of a reversal of the conditions that originally
resulted in the impairment. This reversal is recognised in the Income Statement and is limited to the carrying amount that would have been
determined, net of depreciation, had no impairment loss been recognised in prior years.
Leases
At inception the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control
the use of an identified asset, for a period of time, in exchange for consideration. To assess whether a contract conveys the right to control the use of
an identified asset, the Group assesses whether:
•
the contract involves the use of an identified asset. This may be specified explicitly or implicitly and should be physically distinct or represent
substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified;
•
the Group has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and
•
the Group has the right to direct the use of the asset. The Group has the right when it has the decision-making rights that are most relevant
to changing how and for what purposes the asset is used. In rare cases where the decision about how and for what purpose the assets is used
is predetermined, the Group has the right to direct the use of the asset if either:
-
the Group has the right to operate the asset; or
-
the Group designed the asset in a way that predetermines how and for what purpose it will be used.
At inception or on reassessment of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease
component on the basis of their relative stand-alone prices.
The right-of-use asset is initially measured at the present value of the remaining lease payments, discounted using the incremental borrowing rate.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term.
In addition, impairment indictors for the right-of-use asset are assessed annually and will be adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the remaining lease payments, discounted using the incremental borrowing rate.
The liability is subsequently measured at amortised cost using the effective interest method. Lease payments are apportioned between the finance
charges and reduction of the lease liability using the incremental borrowing rate implicit in the lease to achieve a constant rate of interest on the
remaining balance of the liability.
65
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
CONTINUED
FINANCIAL STATEMENTS
2.
MATERIAL ACCOUNTING POLICIES CONTINUED
Foreign currency
The consolidated financial statements are presented in US Dollars, which is also the functional currency of the Company and all of its subsidiaries.
The Group’s strategy is focused on developing an ethical supply chain for rare earth elements from secondary sources, with its principal project
based in South Africa and a global pipeline of earlier stage opportunities being developed. All such opportunities will ultimately generate revenue
in US Dollars, which is the currency in which rare earth elements are traded internationally. All support services are charged between Group
companies in US Dollars. The Group is funded by various financial liabilities which are principally denominated in US Dollars and shareholder equity.
Transactions in foreign currencies are translated to the functional currency of the Group entity at the rates of exchange prevailing on the dates of
the transactions. At each reporting date, monetary assets and liabilities that are denominated in foreign currencies are retranslated to the functional
currency at the rates prevailing on the reporting date. Exchange differences on all transactions are recognised in the consolidated statement of
comprehensive income in the year in which they arise.
Revenue recognition
The Group plans to produce and sell separated rare earth oxides from the Phalaborwa project in South Africa and other secondary rare earth sources
via a mixture of long term off-take contracts and spot sales to global customers. The Group’s Gakara project in Burundi produces a mixed rare earth
mineral concentrate which was previously sold under a long-term offtake contract with ThyssenKrupp Metallurgical Products GmbH.
Revenue is recognised on transfer of control of the relevant rare earth product, which can occur at the project site, at a port in transit to the customers
premises or at the customers premises.
Rare earth exploration and evaluation assets
All exploration and evaluation costs incurred are accumulated in respect of each identifiable project area. Costs which are classified as intangible
fixed assets are only carried forward to the extent that they are expected to be recovered through the successful development of the area or where
activities in the area have not yet reached a stage which permits reasonable assessment as to whether the deposit is commercially viable and
technically feasible for extraction. Costs associated with exploration and evaluation include costs related to trial mining and processing when such
activity is focused on improving the understanding of the ore body. Such costs include the cost of mining, processing and sales costs for concentrate
produced as a result of trial mining activities, excluding any costs associated with year-end inventory.
Costs incurred prior to the legal right to a mineral project being obtained are written off immediately. Accumulated cost in relation to an abandoned
area are written off in full to the statement of comprehensive income in the year in which the decision to abandon the area is made.
Exploration and evaluation assets associated with an identifiable project area are transferred from intangible fixed assets to tangible fixed assets
as “project development costs” when the commercial viability and technical feasibility of extracting the deposit has been established. This includes
consideration of a variety of factors such as whether the requisite permits have been awarded, whether funding required for development is
sufficiently certain of being secured, whether an appropriate project development plan is established and the results of exploration and evaluation
data including internal and external assessments.
Property, plant and equipment
Property, plant and equipment consists of plant and machinery, project development costs, motor vehicles, computer equipment, and office furniture
and fittings.
Property, plant and equipment is initially recognised at cost and subsequently stated at cost less accumulated depreciation and any impairment.
The cost of acquisition is the purchase price and any directly attributable costs of acquisition or construction required to bring the asset to the
location and condition necessary for the asset to be capable of operating in the manner intended by management.
The Group assesses the stage of a development project to determine when it has reached commercial production, at which point the relevant assets
begin to be depreciated. The criteria used to assess the date at which commercial production is achieved, being the point at which the project is ready
for its intended use and operating in the manner intended by management, include completion of a reasonable period of testing, the ability to sustain
commercial levels of production, and engineering sign off on the plant performance. In the case of new project sites, commercial production is
deemed to have been met when the site has received all necessary permits and approvals (including a certificate of environmental conformity)
and is in operation. Prior to this period, any costs associated with the project site are capitalised.
Depreciation
Property, plant and equipment is depreciated on a straight-line basis over the estimated useful life of the asset. Residual values and useful lives
are reviewed on an annual basis and changes are accounted for over the remaining lives.
The applicable depreciation rates are as follows:
Description Useful life
Plant, machinery, and mine infrastructure 5 years
Vehicles 5 years
Computer equipment 3 years
Office furniture and fittings 7 years
Depreciation incurred on equipment used in exploration is capitalised to exploration and evaluation costs.
64
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
CONTINUED
FINANCIAL STATEMENTS
2.
MATERIAL ACCOUNTING POLICIES CONTINUED
Financial instruments continued
-
Financial liabilities
Loans, borrowings and trade and other payables are initially measured at fair value and are subsequently measured at amortised cost using
the effective interest rate method. They are classified as current liabilities unless the Company has an unconditional right to defer settlement
of the liability for at least 12 months after the statement of financial position date.
A financial liability is removed from the balance sheet when it is extinguished, being when the obligation is discharged, cancelled, or expired.
On extinguishment of a financial liability, any difference between the carrying amount of the liability and the consideration paid, including any
non-cash assets transferred or liabilities assumed, is recognised in profit or loss. A modification or exchange of a financial liability is either
accounted for as an extinguishment of the original financial liability or a renegotiation of the original financial liability. An extinguishment or
substantial modification of a financial liability results in de-recognition of the original financial liability and any unamortised transaction costs
associated with the original financial liability are immediately expensed to the profit and loss account. Where the change in the terms of the
modified financial liability is not substantial, it is accounted for as a modification of the original liability, with the modified financial liability measured
at amortised cost using the original effective interest rate. To determine whether the terms of the modified liability are substantially different from
those of the original one, a qualitative assessment is performed. If it is not already clear from a qualitative assessment that a modification has
resulted in a substantial change, then a quantitative assessment is performed. This includes consideration whether the discounted present value
of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective interest rate,
is at least 10% different from the discounted present value of the remaining cash flows of the original financial liability.
Share capital
Ordinary shares are classified as equity and are recorded at the proceeds received, net of any direct issue costs.
The nature of the Company’s reserves is set out in note 23.
Share options
Equity-settled share-based payments to employees and Directors are initially measured at the fair value of the equity instrument. The fair value
of the equity-settled transactions with employees and Directors is recognised as an expense over the vesting period. The fair values of the equity
instruments are determined at the date of grant, considering market-based vesting conditions.
The fair values of share options or restricted stock units (“RSUs”) are measured at fair value at the date of grant. Where the share options only contain
service conditions or non-market conditions and the options are issued with a relevant strike price, a Black–Scholes model is used. Where the share
options or RSUs contain market conditions, a Monte Carlo simulation model is used and reflected in the fair value of the options or RSUs granted.
Where the share options or RSUs contain no market conditions and do not include a strike price, the fair value is assessed by reference to the share
price on the date of issue. Details of the assumptions used are included in note 22 Share Options and Warrants.
The expected life used in the models is adjusted, based on management’s best estimate of the effects of non-transferability, exercise restrictions
and behavioural considerations. For RSUs, shares are automatically issued on vesting of the relevant tranche.
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance
and/or service conditions are fulfilled, ending on the date on which the relevant employees (or other beneficiaries) become fully entitled to the award
(the “vesting date”).
The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which
the vesting period has expired and the Company’s best estimate of the number of equity instruments that will ultimately vest.
The income statement charge or credit for a period represents the movement in cumulative expense recognised as at the beginning
and end of that period.
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are
treated as vesting irrespective of whether the market condition is satisfied, provided that all other performance and/or service conditions are satisfied.
Warrants
Warrants issued are recognised at fair value at the date of grant. The fair value is measured using the Black-Scholes model. Where warrants are issued
in respect of services provided, the fair value is expensed on a straight-line basis over the vesting period (if applicable). Where warrants are considered
to represent a transaction cost attributable to a liability recorded at amortised cost, the fair value is deducted from the liability and amortised
subsequently through the effective interest rate. Where a fixed number of warrants are issued, and the exercise price is in the functional currency of the
issuer, the warrant fair value is credited to equity. Where the number of warrants is fixed but the exercise price is in a currency other than the functional
currency of the issuer, the instrument fails the “fixed-for-fixed” criteria and is recognised as a financial liability at fair value through profit and loss.
67
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
CONTINUED
FINANCIAL STATEMENTS
2.
MATERIAL ACCOUNTING POLICIES CONTINUED
Environmental rehabilitation costs
An obligation to incur restoration, rehabilitation and environmental costs arises when environmental disturbance is caused by the development
or ongoing production of a project. Such costs arising from the decommissioning of plant and other site preparation work, discounted to their net
present values, are provided for in full as soon as the obligation to incur such costs arises and can be quantified. On recognition of a provision, an
addition is made to tangible or intangible fixed assets of the same amount. Upon commercial production this addition is then charged against profits
over the life of the project. Closure provisions are updated annually for changes in cost estimates as well as for changes to the anticipated life of the
project, with the resulting adjustments made to both the provision balance and the net book value of the associated non-current asset.
Inventory
Stockpiles of ore (including but not limited to Run of Mine (“RoM”) ore (where applicable), pre-shipment rare earth finished or partially processed
product stockpiles, or rare earth products in transit but not yet sold) are valued at the lower of historic cost and net realisable value. Historic cost
is based on an allocation of all relevant costs incurred in bringing the stockpiles to their present condition at the period end (including as appropriate
mining or reclamation costs, processing costs and transportation costs). Realisable value is based on an estimate of selling price less applicable
further costs to be incurred to the point of revenue recognition (including as appropriate further expected processing costs, shipment costs, royalties,
and other fees to be incurred in the course of the sales process). Inventory stockpile costs do not include an allocation of support costs.
Inventory spares (including tools, parts for equipment, and stocks of consumables) are also valued at the lower of historic cost and realisable value,
where material. Spares are reviewed at each period end for obsolescence, with provisions applied to those stock lines where realisable value is
considered to be lower than historic cost.
Taxation
Current tax is based on the estimated taxable profit for the period. Taxable profit differs from net profit as reported in the income statement because
it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible.
In Burundi, when no taxable profit arises, current tax includes a minimum tax charge calculated as 1% of revenue.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the corresponding tax bases used in the computation of taxable profit. It is accounted for using the balance sheet liability
method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which deductible temporary differences can be utilised. The carrying amount of deferred tax
assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available
to allow all or part of the asset to be recovered.
Financial instruments
Financial assets and financial liabilities are recognised on the statement of financial position when the Group becomes a party to the contractual
provisions of the instrument.
-
Financial assets
Cash and cash equivalents comprise cash held by the Group and short-term bank deposits with a maturity of three months or less.
Trade and other receivables, to the extent they represent financial assets, are measured at initial recognition at fair value and are subsequently
measured at amortised cost using the effective interest method. A provision is established when there is objective evidence that the Group will
not be able to collect all amounts due.
In applying the general model, the Group monitors on a forward-looking basis the expected credit loss, defined as the difference between the
contractual cash flows and the cash flows that are expected to be received, associated with its assets carried at amortised cost. The impairment
methodology applied depends on whether there has been a significant increase in credit risk. For trade receivables only, the simplified approach
permitted by IFRS 9 is applied, which requires expected lifetime losses to be recognised from initial recognition of the receivables.
Losses are recognised in the income statement. When a subsequent event causes the amount of impairment loss to decrease, the decrease
in impairment loss is reversed through the income statement.
66
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
CONTINUED
FINANCIAL STATEMENTS
3.
ACCOUNTING JUDGMENTS AND ESTIMATIONS CONTINUED
Valuation of available for sale mineral concentrate (note 14)
Significant accounting estimate
Gakara has 421 tonnes of available for sale mineral concentrate which has remained at the processing facility since the suspension of activities
in June 2021. This concentrate cannot be sold due to an export ban imposed by the Government of Burundi. Management notes that negotiations
with the Government of Burundi since the export ban was imposed, including substantive talks in 2024, have not resolved the situation. Due to the
actions of the Government of Burundi, which have not been in accordance with the legally binding mining convention in place, management are
no longer able to assess that it can be reasonably assumed that the current export ban will be lifted in due course. Accordingly, at 30 June 2024
the value of the available for sale mineral concentrate has been fully impaired. A change in the situation in Burundi could allow the concentrate
to be sold in the future or permit the sale of the project to a third party, which could allow the impairment to be fully or partially reversed.
Recoverability of royalty receivable (note 15)
Significant accounting estimate
Rainbow Mining Burundi SM (“RMB”) has historically overpaid royalties arising from the sale of rare earth concentrate. Whilst the Government has
accepted in writing that the overpaid royalties are recoverable, no repayment has been received to date. The Directors have made a judgement that
the royalty receivable is unlikely to be recovered in the near term due to the political situation in Burundi. Given the significant uncertainty of the timing
and quantum of any future recovery the asset was fully impaired at 30 June 2023. Future recovery may differ from management’s best estimate.
Decommissioning, site rehabilitation and environmental costs (note 20)
Significant accounting estimate
The Group’s mining and exploration activities are subject to various laws and regulations governing the protection of the environment. Estimation
and experience are used in determining the expected timing, closure, and decommissioning methods, which can vary in response to changes
in the relevant legal requirements or decommissioning technologies.
No provision was recorded for the Group’s Phalaborwa project as the Group has not yet acquired a beneficial interest in the land associated
with the site and on-site activities have not yet commenced. At 30 June 2024 the obligation for restoration of historical environmental liabilities
associated with the site legally and contractually remain with the previous owners of the site.
The discounted provision recognised for the Group’s Gakara project represents management’s best estimate of the rehabilitation costs that
will be incurred, discounted from the period in which they are judged to be incurred. Actual costs incurred in future periods could differ materially
from the estimates. Additionally, future changes to environmental laws and regulations, life of mine estimates and discount rates could affect
the carrying amount of this provision.
4.
LOSS FROM OPERATING ACTIVITIES
Operating loss includes:
Year ended
Year ended
30 June 2024
30 June 2023
US$’000
US$’000
Employee remuneration (excluding share options)
(1,713)
(1,517)
Share-based payment charge
(427)
(325)
Audit of the Group financial statements1
(174)
(173)
Depreciation
(52)
(382)
Impairment of Gakara assets
(717)
(9,575)
1.
Audit fees include US$180k for the current year and US$6k foreign exchange differences from the prior year.
69
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
CONTINUED
FINANCIAL STATEMENTS
3.
ACCOUNTING JUDGMENTS AND ESTIMATIONS
The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect
the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based
on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis
of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ
from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period
in which the estimate is revised if the revision affects both current and future periods. Key sources of judgment and estimation uncertainty are:
Accounting treatment of exploration and evaluation costs
Significant accounting judgement
Judgment was required in determining how to treat costs incurred during the Year for the Group’s development projects in South Africa and Burundi.
For the Phalaborwa asset, management note that the project is based on a JORC compliant mineral resource estimate contained within gypsum
stacks at the Phalaborwa site. The Group has an 85% economic interest in the project. Accordingly, all costs associated with defining the technical
feasibility and commercial viability of the project are being capitalised under IFRS 6.
For the Gakara asset, management note that the project has been on care and maintenance throughout the Year. Accordingly, none of the costs
incurred have been focused on improving the understanding of the ore body, and as such all costs have been recognised in the income statement
in the Year.
Impairment indicator assessment for exploration and evaluation assets and associated assets (notes 12, 13, 14 and 15)
Significant accounting judgement
Judgment was required in determining whether indicators of impairment existed at 30 June 2024 for the Group’s exploration and evaluation assets.
The Board assessed factors including the remaining licence term, the plans for future exploration and the results of activities to date, together with
the strategic plans for the asset against the criteria set out in IFRS 6.
Phalaborwa Project
For the Phalaborwa asset management note the PEA released in October 2022 confirmed a processing flow sheet expected to economically extract
the magnet rare earth metals from the gypsum stacks in a low capital and low operating cost environment with strong economic returns. The pilot
test work undertaken in the Year, together with subsequent test work, has confirmed that the rare earth elements are capable of being extracted from
the phosphogypsum and upgraded to produce a saleable mixed rare earth carbonate. Test work is ongoing focused on producing separated rare
earth oxides. An updated economic assessment of the project is planned for H2 2024, and it is expected that the definitive feasibility study for
Phalaborwa will be completed in 2025. Accordingly, management do not consider there to be any indicators of impairment for the Phalaborwa asset.
Gakara Project
The assets associated with the Gakara project include both intangible and tangible fixed assets together with cash, mineral concentrate, royalty and
VAT receivables and consumables held in stock. The liabilities associated with the Gakara project include a loan, decommissioning, site rehabilitation
and environmental costs, tax liabilities and trade payables.
The Gakara project has been suspended from operations by the Government of Burundi since June 2021. An impairment review was undertaken
in the year ended 30 June 2023 for the assets associated with the Gakara project following the re-focus of Rainbow’s business on the Phalaborwa
asset and growth opportunities from the associated processing technology. The Directors assessed that whilst the re-start of the project was likely
through ongoing dialogue with the Government of Burundi, they were unable to accurately predict when the operations would be able to re-start and,
accordingly, the Gakara cash generating unit was written down to a net asset value of nil in the year ended 30 June 2023. A further impairment review
was carried out in the Year due to management’s assessment of the deteriorating political environment in Burundi. Based on the updated assessment
of both the legal and political position in Burundi, the Directors can no longer reasonably assume that the operations at the project will be able to
restart and accordingly all assets associated with the Gakara cash generating unit have been written down to nil with the exception of cash and VAT
recoverable. The VAT recoverable is not considered to be impaired as it is directly related to a recognised liability for VAT payable and, whilst there is
no legal right to net settlement, it is expected that the liability will only be settled in a negotiated off-set against the recoverable asset. In making this
judgement, the Directors have made the key judgements and estimates detailed below.
Carrying value of Gakara tangible and intangible assets (notes 12 and 13)
Significant accounting judgement
The impairment review of the intangible and tangible fixed assets associated with the Gakara project required an estimate of the value in use and fair
value less costs to sell for the assets. In making this decision, the Directors were unable to assign any value for the potential sale of the project or the
separate sale of the tangible fixed assets associated with the project given the nature of the situation, which is subject to political constraints not in
accordance with Burundi law. Accordingly, the intangible and tangible fixed assets were fully impaired at 30 June 2023 in accordance with IAS 36.
A change in the situation in Burundi could allow the operations to restart in the future or permit the sale of the project to a third party, which could
allow the impairment to be fully or partially reversed.
68
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
CONTINUED
FINANCIAL STATEMENTS
6.
FINANCE INCOME
Year ended
Year ended
30 June 2024
30 June 2023
US$’000
US$’000
Change in fair value of warrant liability (notes 18 and 22)
-
73
Foreign exchange gains
141
304
Total
141
377
Foreign exchange gains in the current and prior periods mainly relate to gains on translation of funds from US Dollars to Burundian Francs (“BIF”)
plus the settlement of liabilities in Burundi denominated in BIF.
7.
FINANCE COSTS
Year ended
Year ended
30 June 2024
30 June 2023
US$’000
US$’000
Change in fair value of warrant liability (notes 18 and 22)
(32)
-
Interest on bank borrowing (note 18)
(49)
(78)
Interest on lease liabilities
(10)
(11)
Interest on outstanding taxes
(17)
(30)
Foreign exchange losses
(11)
(39)
Total
(119)
(158)
Foreign exchange losses in the current period arise principally from GBP and ZAR bank accounts, which the Group holds to match future expected
cash outflows, which depreciated in value against the US Dollar during the Year.
8.
REMUNERATION OF KEY MANAGEMENT PERSONNEL
Key management personnel are defined as being Executive and Non-Executive Directors and Persons Discharging Managerial Responsibility
(“PDMRs”), who are set out on pages 36 to 37. Directors’ emoluments are set out on page 48.
Their remuneration for the 12 months ended 30 June 2024 and 30 June 2023 is summarised as follows:
Year ended
Year ended
30 June 2024
30 June 2023
US$’000
US$’000
Wages and salaries
1,082
1,070
Bonus
345
248
Benefits
16
14
Share- based payments
339
291
Total remuneration of key management personnel
1,782
1,623
Bonuses for the Year were settled by the issue of 2,595,735 shares on 3 September 2024. The cost was accrued based on the share price
at 30 June 2024 of 10.5 pence per share.
Benefits paid to key management personnel include pension contributions. In addition to salary and benefits, payments to companies associated
with key management personnel are set out in note 26.
71
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
CONTINUED
FINANCIAL STATEMENTS
5.
SEGMENTAL INFORMATION
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.
The chief operating decision maker has been identified as the Chief Executive Officer. It is considered that the Group has two reportable segments:
•
Phalaborwa – a gypsum stack re-treatment project for the recovery of rare earths in South Africa.
•
Gakara – a rare-earth project in Burundi.
Unallocated costs include corporate costs, which are not reported by entity to the Board.
Year ended 30 June 2024:
Phalaborwa
Gakara
Unallocated
Total
US$’000
US$’000
US$’000
US$’000
Revenue
Production and sales costs
-
-
-
-
Impairment
-
(717)
-
(717)
Administration expenses
-
(413)
(3,102)
(3,515)
Depreciation
-
(21)
(31)
(52)
Loss from operating activities
-
(1,151)
(3,133)
(4,284)
Finance income
-
32
109
141
Finance costs
-
(70)
(49)
(119)
Loss before tax
-
(1,189)
(3,073)
(4,262)
Income tax expense
-
-
-
-
Loss after tax
-
(1,189)
(3,073)
(4,262)
Segmental assets
15,716
233
326
16,275
Exploration and evaluation assets
15,716
-
-
15,716
Property, plant and equipment
-
-
21
21
Right of use assets
-
24
60
84
Current assets
-
209
245
454
Segmental liabilities
(616)
(897)
(921)
(2,434)
Capital expenditure
10,886
-
-
10,886
Year ended 30 June 2023:
Phalaborwa
Gakara
Unallocated
Total
US$’000
US$’000
US$’000
US$’000
Revenue
-
-
-
-
Production and sales costs
-
-
-
-
Impairment
-
(9,575)
-
(9,575)
Administration expenses
-
(562)
(2,565)
(3,127)
Depreciation
-
(368)
(14)
(382)
Loss from operating activities
-
(10,505)
(2,579)
(13,084)
Finance income
-
191
186
377
Finance costs
-
(115)
(43)
(158)
Loss before tax
-
(10,429)
(2,436)
(12,865)
Income tax expense
-
-
-
-
Loss after tax
-
(10,429)
(2,436)
(12,865)
Segmental assets
4,868
916
8,302
14,086
Exploration and evaluation assets
4,830
-
-
4,830
Property, plant and equipment
-
-
27
27
Other assets
-
37
2
39
Current assets
38
879
8,273
9,190
Segmental liabilities
(202)
(916)
(717)
(1,835)
Capital expenditure
2,877
-
28
2,905
70
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
CONTINUED
FINANCIAL STATEMENTS
11. LOSS PER SHARE
The earnings per share calculations for 30 June 2024 reflect the changes to the number of ordinary shares during the Year.
At the start of the Year, 598,858,656 shares were in issue. During the Year, a total of 31,458,000 new shares were allotted (see note 21 Share Capital)
and on 30 June 2024, 630,316,656 shares were in issue. The weighted average of shares in issue in the Year was 621,094,938.
The loss per share has been calculated using the weighted average number of ordinary shares in issue. The Group was loss making for all periods
presented, therefore the dilutive effect of share options has not been accounted for in the calculation of diluted earnings per share, since this would
decrease the loss per share for each reporting period.
Basic and diluted
2024
2023
Loss for the year (US$’000) attributable to ordinary equity holders
(4,175)
(11,984)
Weighted average number of ordinary shares in issue during the Year
621,094,938
536,805,149
Loss per share (cents)
(0.67)
(2.23)
12. EXPLORATION AND EVALUATION ASSETS
Gakara
Phalaborwa
Total
US$’000
US$’000
US$’000
At 1 July 2022
8,635
1,953
10,588
Additions
-
2,877
2,877
Impairment
(8,635)
-
(8,635)
At 30 June 2023
-
4,830
4,830
Additions
-
10,886
10,886
At 30 June 2024
-
15,716
15,716
Only costs relating to the Phalaborwa Project were capitalised during the Year. The Gakara Project has been under care and maintenance throughout
the Year and, accordingly, none of the costs meet the requirements under the Group’s accounting policy for capitalisation.
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 temporarily suspending all trial mining and processing operations pending negotiations on the terms of the Gakara mining convention
signed in 2015.
The Directors have confirmed 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. However, due to the actions of the Government of Burundi, which have not been in accordance with the legally binding mining convention
in place, management assess that it cannot be reasonably assumed that the current suspension of activities will be lifted in due course.
Since acquiring the Phalaborwa project in December 2020 and the subsequent development of processing technology to recover rare earth elements
from phosphogypsum as a by-product of phosphoric acid production, the Directors have re-focused the business on secondary sources of rare earth
elements where they consider higher returns are available. As such, as set out in note 3, the Directors no longer intend to invest significant amounts at
Gakara to convert the existing resource target to a reserve capable of supporting long-term commercial production, resulting in an impairment review
being carried out for the Gakara exploration and evaluation assets in the prior year. In accordance with IAS 36, the Gakara exploration and evaluation
assets were impaired to a value of US$nil as per note 3.
FinBank SA hold security over the fixed and floating assets of RMB which include the impaired exploration and evaluation assets associated
with the Gakara mining permit in Burundi.
73
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
CONTINUED
FINANCIAL STATEMENTS
9.
TOTAL EMPLOYEE REMUNERATION (INCLUDING KEY MANAGEMENT PERSONNEL)
Year ended
Year ended
30 June 2024
30 June 2023
US$’000
US$’000
Wages and salaries
1,826
1,596
Bonus
345
248
Benefits
25
26
Share-based payments
427
325
Total employee remuneration
2,623
2,195
Benefits paid to employees include healthcare and pension contributions.
Staff costs include US$484k capitalised within Exploration and Evaluation assets in the Year (2023: US$352k) relating to the Phalaborwa project.
The average number of employees during the period were made up as follows
Year ended
Year ended
30 June 2024
30 June 2023
Directors
7
6
Management and administration
33
32
Total
40
38
10. INCOME TAX EXPENSE
Year ended
Year ended
30 June 2024
30 June 2023
US$’000
US$’000
Current tax expense
-
-
Prior year tax adjustment
-
-
Total tax expense for the year
-
-
The difference between the total tax expense shown above and the amount calculated by applying the standard rate of corporation
tax to the loss before tax is as follows:
Year ended
Year ended
30 June 2024
30 June 2023
US$’000
US$’000
Loss for the year before tax
(4,262)
(12,865)
Income tax using the Guernsey rate of 0%:
-
-
Effects of:
Differences in tax rates
(296)
(2,669)
Differences in capital allowances
-
32
Impact of Burundi impairment
215
2,472
Other adjustments
(37)
-
Tax losses carried forwards
118
165
Total
-
-
Rainbow Rare Earths Limited and Rainbow International Resources Limited are subject to 0% income tax in Guernsey. Rainbow Rare Earths
(Proprietary) Limited is subject to income tax rate in South Africa at 27%. Rainbow Burundi SPRL and Rainbow Mining Burundi SM are subject
to corporation tax in Burundi at 30%.
No deferred tax asset has been recognised in respect of the tax losses carried forward as the recoverability of this benefit is dependent on the future
profitability of the individual entities within the Group, the timing of which is considered insufficiently certain. The total unrecognised potential deferred
tax assets in respect of losses carried forward in Rainbow Rare Earths (Proprietary) Limited are US$91k (30 June 2023: US$43k).
72
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
CONTINUED
FINANCIAL STATEMENTS
15. TRADE AND OTHER RECEIVABLES
Year ended
Year ended
30 June 2024
30 June 2023
US$’000
US$’000
Accounts receivable
29
-
VAT recoverable
235
263
Prepayments
104
97
Deposits paid
5
3
Sundry debtors
1
2
Total trade and other receivables
374
365
VAT recoverable relates to the input VAT recoverable in Burundi (US$140k, 2023: US$137k) and South Africa (US$95k, 2023: US$126k). During the year
ended 30 June 2021 a tax audit was undertaken in Burundi over the local operating subsidiary, RMB, covering the period from 2017 to 2019. The audit
concluded that reverse VAT totalling BIF302 million (US$106k) had not been correctly accounted for on several invoices received for services supplied
to RMB from international suppliers. The reverse VAT is recoverable under Burundi legislation and, whilst there is no legal right to net settlement, it is
expected that the liability will only be settled in a negotiated off-set against the recoverable asset. Accordingly, both the asset and liability are
recognised at 30 June 2024.
During the Prior Year the royalty receivable was fully impaired as per note 3.
Expected credit losses were assessed at 30 June 2024 considering various potential scenarios, information regarding the counterparty credit risk,
the historical payment profiles, and forward-looking factors. On the basis that the primary credit risk relates to the reverse VAT recoverable in Burundi,
which is expected to be paid only on resolution of all matters relating to the suspension of activity in Burundi, no expected credit loss provision
was considered necessary in the Year (2023: US$nil).
16. CASH AND CASH EQUIVALENTS
Year ended
Year ended
30 June 2024
30 June 2023
US$’000
US$’000
Cash at bank and in hand
79
8,107
Total cash at bank and in hand
79
8,107
No cash amounts were restricted at 30 June 2024 (30 June 2023: nil).
17. TRADE AND OTHER PAYABLES
Year ended
Year ended
30 June 2024
30 June 2023
US$’000
US$’000
Trade payables
361
124
Accrued expenses
930
646
Taxes and social security
319
290
Burundi land taxes and community contributions payable
240
190
Total trade and other payables
1,850
1,250
Amounts payable under the Gakara mining convention to local communities, which have not settled during the period of suspension, have been
reclassified from accrued expenses to better reflect the nature of liabilities disclosed.
Tax and social security payables include BIF737 million (US$260k) for taxes provided as a result of a tax audit undertaken in Burundi over the local
operating subsidiary, RMB, covering the period from 2017 to 2019. Reverse VAT totalling BIF302 million and withholding tax totalling BIF148 million had
not been correctly accounted for on a number of invoices received for services supplied to RMB from international suppliers. A further BIF20 million of
payroll taxes were found not to have been paid on salaries for casual staff. Penalties totalling BIF182 million on the unpaid taxes have also been
provided for in accordance with Burundi legislation together with interest up to the balance sheet date totalling BIF133 million (2023: BIF85 million).
The Directors consider the carrying value of trade and other payables approximate to their fair value.
75
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
CONTINUED
FINANCIAL STATEMENTS
13. PROPERTY, PLANT AND EQUIPMENT
Mine
development
Plant and
Office
US$’000
costs
machinery
Vehicles
equipment
Total
Cost
At 1 July 2022
183
2,889
1,582
45
4,699
Additions
-
-
24
4
28
At 30 June 2023
183
2,889
1,606
49
4,727
Additions
-
-
-
-
-
At 30 June 2024
183
2,889
1,606
49
4,727
Depreciation
At 1 July 2022
99
2,668
855
34
3,656
Charge for year
25
5
317
2
349
Impairment
59
216
410
10
695
At 30 June 2023
183
2,889
1,582
46
4,700
Charge for the year
-
-
5
1
6
At 30 June 2024
183
2,889
1,587
47
4,706
Net Book Value at 30 June 2024
-
-
19
2
21
Net Book Value at 30 June 2023
-
-
24
3
27
Net Book Value at 30 June 2022
84
221
727
11
1,043
As set out in notes 3 and 12, the Directors recognise that the ongoing suspension of all activities of RMB in Burundi and the subsequent decision
not to commit investment for the conversion of the Gakara resource target to reserves requires an impairment review for the tangible fixed assets
relating to the project in accordance with IAS 36. Based on an assessment of both the legal and political position in Burundi, the Directors consider
that the fair value of the property, plant and equipment associated with the Gakara project calculated in accordance with IAS 36 is nil and an
impairment loss was recognised in the prior year.
FinBank SA hold security over the fixed and floating assets of RMB which include the impaired property, plant, and equipment in Burundi.
14. INVENTORY
Year ended
Year ended
30 June 2024
30 June 2023
US$’000
US$’000
Finished goods
-
717
Consumables
1
1
Total inventory
1
718
Finished goods represent 421 tonnes (2023: 421 tonnes) of mixed rare earth concentrate available for export at the Gakara processing plant which,
due to the current export ban in Burundi, cannot be sold. As set out in note 3 the Directors assess that due to the deterioration of the political situation
in Burundi they can no longer reasonably assume that the export ban will be lifted. Accordingly, at 30 June 2024 the value of the available for sale
mineral concentrate has been fully impaired.
As set out in notes 3, 12 and 13, due to the suspension of all activities of RMB in Burundi and the re-focus of the Rainbow business to secondary
sources of rare earths, the value of goods in transit held in the port of Bujumbura was written down to nil during the prior year in line with the fixed
assets associated with the Gakara project.
74
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
CONTINUED
FINANCIAL STATEMENTS
19. LEASES
Year ended
Year ended
30 June 2024
30 June 2023
US$’000
US$’000
Lease liabilities fall due:
Due within one year
48
23
Due between two to five years
44
21
After five years
-
-
Total
92
44
The following table analyses the movement in lease liabilities:
Year ended 30 June 2024 Year ended 30 June 2023
US$’000
US$’000
US$’000
US$’000
Lease liabilities brought forward
44
113
Cash flows from leases
Payment of lease liabilities
(43)
(31)
Interest paid
(10)
(10)
(53)
(41)
Non-cash movement in leases
Recognition of lease liabilities
91
-
Interest charge on leases
10
10
Revaluation on termination
-
(38)
101
(28)
Lease liabilities carried forward
92
44
Right of use assets
Land and buildings
US$’000
Balance as at 1 July 2022
108
Right of use asset recognised in the year
-
Amendment to expected life
(36)
Depreciation in year
(33)
Balance as at 30 June 2023
39
Right of use asset recognised in the year
91
Depreciation in year
(46)
Balance as at 30 June 2024
84
In the prior year notice of termination was given on the South African office lease and the applicable amendments to the Lease Liability and Right of
Use Asset were recorded in the Year to reflect the new termination date. The new office lease started during the current year, on 1 September 2023.
The leasehold properties in Burundi are subject to an annual agreement, with right of use assets and lease liabilities calculated by reference to the
Group’s anticipated long-term intentions to renew the lease agreements.
There are no other lease commitments.
77
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
CONTINUED
FINANCIAL STATEMENTS
18. BORROWINGS
Year ended
Year ended
30 June 2024
30 June 2023
US$’000
US$’000
FinBank Loan
282
363
Warrant liability
155
123
Total borrowings
437
486
Borrowings fall due:
Due within one year
245
201
Due between two to five years
192
285
Total
437
486
The following table analyses the movement in borrowings:
Year ended 30 June 2024 Year ended 30 June 2023
US$’000
US$’000
US$’000
US$’000
Borrowings brought forward
486
753
Cash flows from borrowings
Repayment of borrowings
(77)
(61)
Interest paid
(49)
(78)
(126)
(139)
Non-cash movement in borrowings
Interest charge on borrowings
49
78
Valuation of warrant liability
32
(73)
Foreign exchange gain on BIF loan
(4)
(133)
77
(128)
Borrowings carried forward
437
486
FinBank Loan
The FinBank loan facility in Burundi is expressed in BIF and carries an interest rate of 15%. Interest on the loan was paid throughout the Year.
Updated repayment terms were agreed from February 2023, with BIF30 million per month paid until April 2027, covering both principal and
interest on a reducing balance basis.
Under the terms of this loan, FinBank has security over the fixed and floating assets of RMB, the shares of RMB, and the cash held in RMB’s FinBank
bank accounts. Interest on the loan amounted to US$49k (2023: US$78k).
Warrant liability
On 15 February 2024, the period of Warrants issued to Pipestone Capital Inc. was extended to 20 February 2026 giving rise to a revaluation in the Year.
76
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
CONTINUED
FINANCIAL STATEMENTS
22. SHARE OPTIONS AND WARRANTS
Employee share options
The total share-based payment charge for the Year was US$427k (2023: US$325k).
At 30 June 2024, the following employee share options were exercisable and outstanding:
30 June 2024
30 June 2023
Average
Average
weighted
weighted
exercise
exercise
Number
price (pence)
Number
price (pence)
Share option plan
Outstanding as at 1 July
11,541,400
13.33
11,791,400
13.43
Lapsed in the year
(944,700)
10.00
(250,000)
18.00
Outstanding as at 30 June
10,596,700
13.62
11,541,400
13.33
Exercisable as at 30 June
9,580,034
13.30
9,508,068
12.07
Long Term Incentive Plan
Outstanding as at 1 July
8,258,000
-
3,708,000
-
Exercised during the year
(1,458,000)
-
-
-
Granted in the year
-
-
4,550,000
-
Outstanding as at 30 June
6,800,000
-
8,258,000
-
Exercisable as at 30 June
3,766,661
-
3,708,000
-
During the Year:
•
On 31 July 2023 944,700 options with an exercise price of 10p per share expired.
•
On 4 December 2023 1,458,000 nil value share options were exercised by George Bennett.
In addition, on 30 April 2024 1,000,000 nil priced share options previously issued to US citizens under the Long Term Incentive Plan were cancelled
prior to vesting to ensure compliance with s.409A of the United States Internal Revenue Code. The Directors replaced these options with 333,332
shares representing options that would have vested in the Year and 666,668 Restricted Share Units, issued on 3 September 2024. The Restricted
Share Units mirror the terms of the cancelled options but require the shares to be issued immediately on vesting (50% on 30 June 2025 and 50%
on 30 June 2026). This was treated as a modification of the share options with no additional value accruing to the option holders. The analysis above
includes these cancelled nil priced options at 30 June 2024 despite the replacement instruments not being issued until after the balance sheet date.
During the prior year:
•
250,000 options lapsed due to an employee leaving the Group.
•
The market based vesting conditions attached to 1,236,000 nil priced options issued in 2021 were judged at 30 June 2023, with the calculated
shareholder return for the Company (-23%) being below the median for the basket of investments specified (-22%). The Directors considered the
strong post Year-end share price performance and waived the market based vesting conditions allowing the options to vest as set out in the table
above. The modification did not result in an increase in the fair value of the share options.
•
4,550,000 options were issued as follows:
-
3,150,000 issued to the Directors and PDMR’s on 19 May 2023, pursuant to its Long Term Incentive Plan (LTIP approved in January 2021).
The options are nil priced share options and will vest in equal tranches over three years: one third after 12 months, one third after 24 months
and one third after 36 months.
-
1,400,000 issued to staff and PDMR on 6 June 2023, pursuant to its Long Term Incentive Plan (LTIP approved in January 202). The options
are nil priced share options and will vest in equal tranches over three years: one third after 12 months, one third after 24 months and one third
after 36 months.
-
The fair value of the options was judged to be the share price on the date of grant (19 May 2023: £0.086/share; 6 June 2023: £0.09/share).
The rules of the Long Term Incentive Plan have been amended further to accommodate Restricted Share Units.
The options outstanding at 30 June 2024 across both the share option plan and Long Term Incentive Plan had a weighted average remaining
contractual life of 5.7 years (2023: 6.9 years).
79
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
CONTINUED
FINANCIAL STATEMENTS
20. PROVISIONS
Rehabilitation provision
US$’000
At 1 July 2022
61
Discount
(6)
At 30 June 2023
55
Discount
-
At 30 June 2024
55
The rehabilitation provision relates to the anticipated cost of restoring the operating sites at the Gakara project in Burundi, discounted to reflect
management’s best estimates of the timing of future estimated cash flows. During the Year the impact of inflation, the revaluation of the BIF
and the expected timing of rehabilitation activities resulted in no change to the recognised liability.
No provision was recorded for the Group’s Phalaborwa project as on-site activities have not yet commenced and there is no legal obligation
for restoration by the Group with historical environmental liabilities associated with the site contractually remaining with the previous owners.
21. SHARE CAPITAL
Year ended
Year ended
30 June 2024
30 June 2023
US$’000
US$’000
Share Capital
56,362
50,937
Issued Share Capital
56,362
50,937
The table below shows a reconciliation of share capital movements:
Number of shares
US$’000
At 30 June 2022
524,405,810
41,442
November 2022 - Exercise of share options (cash receipts)
2,000,000
125
May 2023 - Share placing (cash receipts)
72,452,846
9,485
Costs associated with exercise of share options and share placing
-
(115)
At 30 June 2023
598,858,656
50,937
October 2023 - Share placing (cash receipts)
25,786,541
4,699
December 2023 - Share placing (cash receipts)
4,213,459
802
December 2023 – Exercise of share options (nil value)
1,458,000
-
Costs associated with exercise of share options and share placing
-
(76)
At 30 June 2024
630,316,656
56,362
On 5 October 2023 25,786,541 shares were issued at a price of 15 pence per share as a private placement, raising US$4.7 million
(before costs of US$57k).
The issue of additional shares without pre-emption rights was authorised by the shareholders at the annual general meeting in November 2024.
Subsequently, a further 5,671,459 shares were issued on 5 December 2023 of which:
•
4,213,459 shares were issued for cash proceeds of US$802k at a price of 15p per share.
•
1,458,000 shares were issued for no value, representing the exercise of nil value share options.
Costs relating to these share issues were US$19k.
During the prior year:
•
On 10 November 2022, the Australian Special Opportunity Fund, LP exercised options over 2,000,000 shares at an exercise price
of 5.28p per share, raising gross cash proceeds of US$125k.
•
On 9 May 2023, the Company issued 72,452,846 shares at a price of 10.377 pence per share, raising gross cash proceeds of US$9.5 million
(before costs of US$1k).
78
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
CONTINUED
FINANCIAL STATEMENTS
24. NON-CONTROLLING INTEREST
The Group has subsidiaries with non-controlling interests (“NCI”) as follows:
•
The State of Burundi has a non-dilutable 10% interest in RMB
•
Gilbert Midende has a 3% interest in Rainbow Burundi SPRL
Summarised financial information in relation to these subsidiaries, before intra-group eliminations, is presented below together with the attributable NCI.
Name of subsidiary Rainbow Burundi SPRL
Rainbow Mining Burundi SM
Country Burundi
Burundi
Total Group
Effective non-controlling interest 3%
10%
Year ended
Year ended
Year ended
Year ended
Year ended
Year ended
30 June 2024
30 June 2023 30 June 2024
30 June 2023 30 June 2024
30 June 2023
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
Income statement
Administrative expenses
-
-
(179)
(276)
(179)
(276)
Impairment
-
-
(717)
(8,242)
(717)
(8,242)
Depreciation
-
-
(20)
(368)
(20)
(368)
Net finance income / (costs)
294
-
(38)
76
256
76
Tax
-
-
(1)
-
(1)
-
Income / (loss) and total comprehensive
income / (loss) for period
294
-
(955)
(8,810)
(661)
(8,810)
Total comprehensive income / (loss) attributed to NCI
9
-
(96)
(881)
(87)
(881)
Dividends paid to NCI
-
-
-
-
-
-
Cash flows
Cash flow from operating activities
-
-
(568)
(357)
(568)
(357)
Cash flow from investing activities
-
-
-
-
-
-
Cash flow from financing activities
(1)
-
(130)
(78)
(131)
(78)
Net cash flows
(1)
-
(698)
(435)
(699)
(435)
Balance Sheet
Non-current assets
-
-
24
37
24
37
Current assets
-
1
151
878
151
879
Non-current liabilities
-
-
(252)
(361)
(252)
(361)
Current liabilities
-
-
(645)
(572)
(645)
(572)
Intra-group loans
-
(295)
(19,377)
(19,117)
(19,377)
(19,412)
Net assets
-
(294)
(20,099)
(19,135)
(20,099)
(19,429)
Accumulated non-controlling interest
-
(9)
(2,009)
(1,913)
(2,009)
(1,922)
25. CAPITAL COMMITMENTS
There were no capital commitments on 30 June 2024 (2023: nil). Under the terms of the Gakara Mining Convention there are no minimum
expenditure commitments in respect of exploration and evaluation activities.
81
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
CONTINUED
FINANCIAL STATEMENTS
22. SHARE OPTIONS AND WARRANTS CONTINUED
Warrants
Number Exercise price
Outstanding and exercisable at 30 June 2023 and 2024
2,000,000
£0.0455
Weighted average exercise price calculated for US$ based warrants on US$:GBP exchange rate ruling on 30 June 2020.
On 21 February 2020, 2,000,000 warrants were issued to Pipestone Capital Inc (“Pipestone”), in which George Bennett, the Company’s CEO,
has a beneficial interest. The warrants were issued in lieu of interest on a US$1 million bridging loan provided to the Company as set out in note 18.
The warrants initially had a contractual life of four years at an exercise price of 4.55 pence per warrant. During the year the expiry date was extended
to 20 February 2026 as set out in note 18. The Pipestone warrants are recognised as a financial liability at fair value through profit and loss with
changes in value in the Year included under Finance Income as set out in note 6.
As noted above, the Pipestone warrants are classified as a financial liability and are revalued at each period end using a Black-Scholes model,
which is categorised as a level 3 fair value measurement in accordance with IFRS 13. The inputs into the model were:
At 30 June
At 30 June
2024
2023
Share price (GBP pence)
10.25
9.50
Exercise price (GBP pence)
4.55
4.55
Expected volatility
54.47%
44.44%
Risk free rate
4.12%
4.35%
Rate of Exchange
1.27
1.22
Time to exercise (years)
1.50
0.58
Expected volatility was determined by reference to the annual volatility of the Company’s closing mid-market share price on the London Stock Exchange.
The expected life used in the model has been on management’s best estimate for the effects of exercise restrictions and behaviour.
23. RESERVES
Reserve Purpose
Share capital Value of shares issued less costs of issuance
Share-based payment reserve Fair value of share options issued
Other reserves Fair value adjustments for interest free loans
Accumulated losses Cumulative net losses recognised in the statement of comprehensive income
Non-controlling interest Amounts attributable to the 10% interest the State of Burundi has in RMB, and 3% interest Gilbert
Midende has in Rainbow Burundi SPRL at 30 June 2023. Refer to note 24 for further details and
non-controlling interests for earlier periods
Details in the movements of these reserves are set out in the Statement of Changes in Equity.
80
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
CONTINUED
FINANCIAL STATEMENTS
30. FINANCIAL RISK MANAGEMENT
The Group’s financial liabilities at each period end consist of bank borrowings, leases, unsecured loans and trade and other payables (including
accrued expenses). The warrants issued in lieu of interest for the Pipestone Loan, as set out in note 18, are measured at fair value through profit
or loss. All other liabilities are measured at amortised cost. These are detailed in notes 17, 18 and 19.
The Group has various financial assets, being trade and other receivables and cash, which arise directly from its operations. To the extent that these
represent financial assets they are classified as assets held at amortised cost. These are detailed in notes 15 and 16.
The fair values of the Group’s cash, trade and other receivables, borrowings, unsecured loans, leases, trade and other payables and financial liabilities
at fair value through profit and loss are considered to approximate book value.
The risks arising from the Group’s financial instruments are credit risk, liquidity risk and market risk (including interest risk and currency risk).
The risk management policies employed by the Group to manage these risks are discussed below.
Credit risk
Credit risk refers to the risk that the Group’s financial assets will be impaired by the default of a third party. The Group is exposed to credit risk
on its cash and cash equivalents as set out in note 16. Credit risk is managed by ensuring that surplus funds are held in the UK with well-established
financial institutions of high-quality credit standing. At 30 June 2024, 99% of funds were held with a bank with a long-term A- credit rating (2023: 99%).
Market risk
Market risk arises from the Group’s use of interest bearing, tradable and foreign currency financial instruments. It is the risk that the fair value
or future cash flows of a financial instrument will fluctuate because of changes in interest rates (interest rate risk), foreign exchange rates
(currency risk) or other market factors (other price risk).
Currency risk
Currency risk refers to the risk that fluctuations in foreign currencies cause losses to the Group.
The Group is exposed to foreign exchange risk arising from various currency exposures primarily with respect to Sterling and the Burundian Franc.
Management monitors the exchange rate fluctuations on a continuous basis and acts accordingly. The financial assets and liabilities that include
significant foreign currency denominated balances are shown below.
Foreign exchange risk is managed by matching the currency profile of cash holdings to expected future cash outflows.
Minimal cash is held in Burundian Francs. The table below shows the currency profiles of cash and cash equivalents:
Year ended
Year ended
30 June 2024
30 June 2023
Cash and cash equivalents
US$’000
US$’000
US Dollars
21
7,212
GB Pounds
4
670
SA Rands
51
224
Burundi Francs
3
1
Total
79
8,107
The table below shows an analysis of the currency of the monetary liabilities in the functional currency of the Group (US dollars):
Year ended
Year ended
30 June 2024
30 June 2023
US$’000
US$’000
US Dollars
988
503
GB Pounds
332
260
Burundi Francs
600
679
South African Rand
303
215
Total
2,223
1,657
The largest foreign currency monetary liability exposure and the least stable currency is the Burundi Franc. A 10% movement in the US$:BIF rate would
have resulted in a gain or loss of approximately US$0.1 million (2023: approximately US$0.1 million) in the income statement in relation to the cash and
cash equivalents and trade payables as at 30 June 2024.
83
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
CONTINUED
FINANCIAL STATEMENTS
26. RELATED PARTY TRANSACTIONS
Year to 30 June 2023 Year to 30 June 2022
Balance as at
Balance as at
Charged in year Settled in year 30 June 2024 Charged in year
Settled in year
30 June 2023
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
Benzu Minerals (Proprietary) Limited 1
-
-
-
1
(1)
-
MPD Consulting Limited 2
5
(4)
2
5
(4)
1
Magna Capital (Guernsey) Limited 3
647
(647)
-
73
(73)
-
Total
652
(651)
2
79
(78)
1
1.
Benzu Minerals (Proprietary) Limited is connected to Cesare Morelli who is currently engaged as the acting General Manager of Rainbow Mining Burundi. In addition to the amounts disclosed, which relate to costs associated
with the drilling programme at Phalaborwa, salary was paid to Cesare Morelli via Benzu Minerals (Proprietary) Limited and is included in remuneration disclosures in note 9.
2. MPD Consulting Limited, in which Pete Gardner, the Company’s CFO, has a beneficial interest, has recharged certain costs relating to third party UK administrative costs incurred on behalf of the Group.
3. Magna Capital (Guernsey) Limited (“Magna”), in which Adonis Pouroulis, the non-executive Chairman of the Board of Directors, has a beneficial interest, was engaged in December 2022 to assist the Company with its strategy
to consolidate ownership of the Phalaborwa project and lift the notarial bonds in South Africa issued in favour of third parties which may have impacted the ability of Bosveld Phosphates (Pty) Limited to transfer the rights
to the Phalaborwa project to a new entity as envisaged. The transaction was concluded in current year and a success fee of £500k was paid to Magna.
As set out in notes 18 and 22, the term of the warrants issued to Pipestone Capital, in which George Bennett, the Company’s CEO, has a beneficial
interest, was extended by two years to 20 February 2026. This led to a revaluation of the warrant liability, which is recognised at fair value through
profit and loss.
Related party transactions were made on terms equivalent to those that prevail in arm’s length transactions.
27. INVESTMENT IN SUBSIDIARIES
The shareholdings in the Group’s subsidiaries for each year are set out below:
% Share Capital Held
Name of Company Principal Activity Country of Incorporation
2024
2023
Rainbow International Resources Limited Rare earth exploration Guernsey
100%
100%
Rainbow Burundi SPRL Rare earth exploration Republic of Burundi
97%
97%
Rainbow Mining Burundi SM Rare earth mining Republic of Burundi
90%
90%
Rainbow Rare Earths Zimbabwe (Private) Limited Rare earth exploration Zimbabwe
100%
100%
Rainbow Rare Earths (Proprietary) Limited Group support services South Africa
100%
100%
a.
Rainbow International Resources Limited is 100% owned by Rainbow Rare Earths Limited.
b.
Rainbow Burundi SPRL is in the process of being deregistered.
c.
Gilbert Midende holds a 3% interest in Rainbow Burundi SPRL.
d.
97% of shares in Rainbow Burundi SPRL and 90% of shares in Rainbow Mining Burundi SM are held by Rainbow International Resources Limited.
e.
The Government of Burundi has a 10% interest in Rainbow Mining Burundi SM granted in accordance with the Mining Code of Burundi.
f.
Rainbow Rare Earths Zimbabwe (Private) Limited is dormant and not trading and in the process of being deregistered.
g.
Rainbow Rare Earths (Proprietary) Ltd is 100% owned by Rainbow Rare Earths Limited.
28. CONTINGENT LIABILITIES
There were no contingent liabilities at 30 June 2024 (30 June 20232: nil).
29. POST BALANCE SHEET EVENTS
On 1 July 2024, the Company entered into a binding agreement with Ecora Resources PLC to raise US$10 million by:
•
The issue of 10,442,427 new ordinary shares in the Company at a price of 11.3652p for cash consideration of US$1.5 million.
•
The sale of a 0.85% Gross Revenue Royalty over future rare earths sales from the Group’s Phalaborwa project in South Africa,
plus any other saleable products, for a cash consideration of US$8.5 million, which was completed and settled net of US$0.2 million
transaction costs in September 2024.
As set out in note 8, on 3 September 2024 the Company issued 2,595,735 shares as settlement of bonuses to key management personnel.
As set out in note 22, on 3 September 2024 the Company issued 333,332 shares as replacement of options cancelled on 30 April 2024 that
had been issued to US residents that were due to vest on 19 May 2024.
82
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
SHAREHOLDER INFORMATION
FINANCIAL STATEMENTS
DIRECTORS AND ADVISERS
Executive Director
George Bennett – Chief Executive Officer
Non-Executive Directors
Adonis Pouroulis – Chairman
Alexander Lowrie
Shawn McCormick
Atul Bali
J Peter Pham
Darryl Castle
Company Secretary
Scorpio Secretarial Services Limited (Guernsey)
Registered office
Connaught House, St Julian’s Avenue
St Peter Port, Guernsey GY1 1GZ
Company website
www.rainbowrareearths.com
Registrars and transfer office
Computershare Investor Services PLC
PO Box 82, The Pavilions, Bridgwater Road
Bristol BS99 7NH
Bankers
Barclays Bank PLC (UK)
FinBank S.A (Burundi)
Standard Bank of South Africa Limited (South Africa)
Brokers
Joh. Berenberg, Gossler & Co. KG (UK)
Stifel Nicolaus Europe Limited (UK)
Independent Auditors
BDO LLP (UK)
Solicitors
K&L Gates LLP (UK)
Legal Solutions Chambers (Burundi)
Cliffe Dekker Hoffmeyer Inc. (South Africa)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
CONTINUED
FINANCIAL STATEMENTS
30. FINANCIAL RISK MANAGEMENT CONTINUED
Interest rate risk
Interest rate risk refers to the risk that fluctuations in interest rates cause losses to the Group.
The Group and Company have no exposure to interest rate risk except on cash and cash equivalents which carry variable interest rates.
The Group has no material sensitivity to reasonable changes in variable interest rates. The group monitors the variable interest risk accordingly.
The Group’s borrowings bear fixed rates of interest.
Liquidity risk
Liquidity risk refers to the risk that the Group has insufficient cash resources to meet working capital requirements. The Group manages
its liquidity requirements by using both short and long-term cash flow projections. The following table sets out the contractual maturities
(representing undiscounted contractual cash flows) of financial liabilities:
As at 30 June 2024
As at 30 June 2023
Due
Due in
Due in
Due in
Due
Due in
Due in
Due in
within 1
1 to 2
2 to 5
5 to 10
within 1
1 to 2
2 to 5
5 to 10
years
years
years
years
years
years
years
years
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
Trade and other payables
1,850
-
-
-
1,250
-
-
-
Loans and borrowings (excluding warrants)
125
125
126
-
127
127
223
-
Lease liabilities
33
5
-
-
28
18
5
-
Total
2,008
130
126
-
1,405
145
228
-
Ultimate responsibility for liquidity risk management rests with the Directors, who have built an appropriate liquidity risk management framework
for the management of the Group’s short, medium, and long-term funding and liquidity management requirements. The Group closely monitors and
manages its liquidity risk. For further details on the Group’s liquidity position, please refer to the going concern paragraph in note 2 of these accounts.
Capital management
In managing capital, the Group’s primary objective is to maintain a sufficient funding base, through debt and equity, to enable the Group to meet
its working capital and strategic investment needs. This includes ensuring sufficient funds are available to service the Group’s borrowings as they fall
due. No funds are held in restricted or designated accounts for future debt servicing requirements. In making decisions to adjust its capital structure
to achieve these aims the Group considers not only its short-term position but also its long-term operational and strategic objectives.
The Group’s primary capital management measure is net debt (borrowings less cash) to total equity, measured as follows:
Net debt / (cash) to equity
Year ended
Year ended
30 June 2024
30 June 2023
US$’000
US$’000
Total borrowings (note 18)
437
486
Less: Cash and cash equivalents
(79)
(8,107)
Net debt / (cash)
358
(7,621)
Total equity
13,841
12,251
Ratio
2.59%
(62.21%)
31. ULTIMATE CONTROLLING PARTY
The Company does not have a single controlling party.
84
Rainbow Rare Earths Limited
Annual Report & Financial Statements 2024
Designed and produced by effektiv
+44 (0)20 7459 4266 / www.effektiv.co.uk
RAINBOW
RARE EARTHS
Rainbow Rare Earths Limited
Registered office
Trafalgar Court, Admiral Park, St Peter Port,
Guernsey GY1 3EL
www.rainbowrareearths.com