Royalty Agreement with Ecora & US$10m raise

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS DEFINED UNDER THE MARKET ABUSE REGULATION (EU) NO. 596/2014, AS AMENDED, AS IT FORMS PART OF UK LAW BY VIRTUE OF THE EUROPEAN (WITHDRAWAL) ACT 2018 ("MAR").  IT IS FOR INFORMATION PURPOSES ONLY AND IS NOT AN OFFER OF SECURITIES IN ANY JURISDICTION THIS ANNOUNCEMENT AND THE INFORMATION IN IT, IS NOT FOR PUBLICATION, RELEASE OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA, NEW ZEALAND, JAPAN, THE REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION WHERE TO DO SO MIGHT CONSTITUTE A VIOLATION OR BREACH OF ANY APPLICABLE LAW OR REGULATION.

NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES.

FOR IMMEDIATE RELEASE

1 July 2024

Rainbow Rare Earths Limited

("Rainbow" or "the Company")

LSE: RBW

Royalty Agreement and associated share placing signed with Ecora Resources PLC raising a total of US$10 million

·    Agreement endorses Phalaborwa as a stand-out rare earths opportunity, expected to be one of the highest margin rare earth projects in development globally

·    Funds raised will allow for completion of the Definitive Feasibility Study ("DFS") and will cover the Company's financing requirements up to June 2025

·    Funding agreement is largely non-dilutive to Rainbow shareholders compared with conventional equity funding

·    This royalty is the only revenue royalty payable for Phalaborwa due to the unique nature of the project, which does not attract royalties typically payable for hard rock mining projects

NEWS RELEASE

Rainbow is pleased to announce that it has entered into a binding agreement with Ecora Resources PLC ("Ecora") whereby Ecora will purchase a 0.85% Gross Revenue Royalty (the "Royalty") on future rare earths production from the Company's flagship Phalaborwa project in South Africa, plus any other saleable products, for a cash consideration of US$8.5 million.

Rainbow has also agreed to issue 10,442,427 new ordinary shares in the Company of no par value each ("Ordinary Shares") at a price of 11.3652p (based on a 20 day volume weighted average price) to Ecora to raise an additional US$1.5 million via an equity subscription. 

The Royalty financing and share subscription agreements therefore provide Rainbow with a total of US$10 million, being substantial funding on terms that are considerably less dilutionary than conventional equity funding.

The funds will be used to:

1.    deliver the completion of the DFS on the Phalaborwa project in H1 2025; and

2.    cover all other Company financing requirements up to June 2025.

George Bennett, CEO of Rainbow, commented: "We are delighted to have concluded this royalty agreement with Ecora which allows us to take the Phalaborwa project all the way through to a completed DFS, without causing any significant dilution to shareholders. This investment confirms Phalaborwa's status as a strategic and near-term source of all four of the magnet rare earths separated oxides so critical to the green energy transition. It is also a validation of the robust economics of the project, with its comparatively low capital and operating costs giving it resilience against rare earth pricing fluctuations. The Ecora DD process encompassed detailed reviews of all aspects of the project covering technical, environmental and legal. We look forward to working with Ecora as strong project partners going forward."

Marc Bishop Lafleche, CEO of Ecora, commented: "We are excited to announce our partnership with the Rainbow Rare Earths team on the Phalaborwa project. This project stands out as one of the lowest-cost prospective producers of rare earths outside of China. Notably, production will be principally weighted to rare earth elements essential in the production of permanent magnets, key components in renewable wind power turbines and electric vehicle motors. The transaction provides Ecora with a counter-cyclical entry point to further diversify our commodity exposure to include rare earth elements, whose end markets are forecast to see sustained demand growth over the coming decades."

Key Royalty Terms

US$8.5 million in cash in exchange for:

·    Ecora royalty entitlement of 0.85% at transaction close

·    Royalty rate increases to 0.95% if production does not occur prior to 1 October 2027

·    Royalty rate increases to 1.1% if production does not occur prior to 1 July 2028

Update on Phalaborwa project development

Rainbow is currently carrying out a DFS at Phalaborwa, which is on track to be completed in H1 2025. 

A key component of the DFS is the operation of a pilot plant to confirm and optimise the operating parameters for the unique flowsheet developed to deliver separated rare earth oxides from the Phalaborwa phosphogypsum. Rainbow announced an update with regards to the pilot plant operations in both South Africa and the USA on 19 June 2024, with the results to date supporting the Company's expectation that Phalaborwa will be a low-cost producer of separated rare earth oxides in comparison to the global peer group.

As previously announced, Rainbow plans to release an interim report in H2 2024 to update the economics of the Phalaborwa project reflecting the optimisations delivered from the pilot test work campaigns, footprinted against the Preliminary Economic Assessment, and to allow for commencement of project financing.

Following completion of the DFS, a Final Investment Decision will be made by the Board prior to construction and the expected commencement of operations in H1 2027.

Transaction Completion

Payment of the US$8.5 million royalty consideration by Ecora is conditional upon execution and delivery of certain security documents to Ecora and receipt of customary exchange control authorisation from the South African Reserve Bank Financial Surveillance Department for those security documents, which is expected within six to eight weeks of submitting the application.

In addition, Ecora has subscribed for 10,442,427 Ordinary Shares at a price of 11.3652 pence per share (calculated at the 20-day volume weighted average price as at 28 June 2024) for a consideration of US$1.5 million.  An application will be made for the 10,442,427 Ordinary Shares to be issued pursuant to the subscription to be admitted to the Official List (by way of a Standard Listing) and to trading on the London Stock Exchange Plc's Main Market for listed securities ("Admission").  It is expected that Admission will become effective and that dealing in the Ordinary Shares will commence on or around 5 July 2024.  The new Ordinary Shares will rank pari passu with the existing Ordinary Shares.  Following Admission, the Company will have 640,759,083 Ordinary Shares in issue.  This figure may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the Company under the FCA's Disclosure, Guidance and Transparency Rules.

IMPORTANT NOTICES

This announcement includes "forward looking statements" which include all statements other than statements of historical facts, including, without limitation, those regarding the Company's financial position, business strategy, plans and objectives of management for future operations, or any statements proceeded by, followed by or that include the words "targets", "believes", "expects", "aims", "intends", "will", "may", "anticipates", "would", "could" or similar expressions or negatives thereof.  Such forward looking statements involve known and unknown risks, uncertainties and other important factors beyond the Company's control that could cause the actual results, performance or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward looking statements.  Such forward looking statements are based on numerous assumptions regarding the Company's present and future business strategies and the environment in which the Company will operate in the future.  These forward-looking statements speak only as at the date of this announcement.  Except as required by the FCA, the London Stock Exchange or applicable law (including as may be required by the Listing Rules, the Prospectus Regulation, the Prospectus Rules, MAR and the Disclosure Guidance and Transparency Rules), the Company expressly disclaims any obligation or undertaking to disseminate or release publicly any updates or revisions to any forward looking statements contained in this announcement to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based.

Market Abuse Regulation Disclosure

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018, as amended ("MAR"), and is disclosed in accordance with the Company's obligations under Article 17 of MAR.

For further information, please contact:

Notes to Editors:

About Rainbow:

Rainbow Rare Earths aims to be a forerunner in the establishment of an independent and ethical supply chain of the rare earth elements that are driving the green energy transition. It is doing this successfully via the identification and development of secondary rare earth deposits that can be brought into production quicker and at a lower cost than traditional hard rock mining projects, with a focus on the permanent magnet rare earth elements neodymium and praseodymium, dysprosium and terbium.

The Company is focused on the development of the Phalaborwa Rare Earths Project in South Africa and the earlier stage Uberaba Project in Brazil. Both projects entail the recovery of rare earths from phosphogypsum stacks that occur as the by-product of phosphoric acid production, with the original source rock for both deposits being a hardrock carbonatite. Rainbow intends to use a continuous ion exchange / continuous ion chromatography separation technique, which simplifies the process of producing separated rare earth oxides (versus traditional solvent extraction), leading to cost and environmental benefits.

The Phalaborwa Preliminary Economic Assessment has confirmed strong base line economics for the project, which has a base case NPV10 of US$627 million, an average EBITDA operating margin of 75% and a payback period of < two years.

More information is available at www.rainbowrareearths.com.

About Ecora Resources

Ecora Resources is a leading royalty company focused on supporting the supply of commodities essential to creating a sustainable future.

Our vision is to be globally recognised as the royalty company of choice synonymous with commodities that support a sustainable future by continuing to grow and diversify our royalty portfolio in line with our strategy. We will achieve this through building a diversified portfolio of scale over high quality assets that drives low volatility earnings growth and shareholder returns. 

The mining sector has an essential role to play in the energy transition, with commodities such as copper, nickel and cobalt - key materials for manufacturing batteries and electric vehicles. Copper also plays a critical role in our electricity grids. All these commodities are mined and there are not enough mines in operation today to supply the volume required to achieve the energy transition.

Our strategy is to acquire royalties and streams over low-cost operations and projects with strong management teams, in well-established mining jurisdictions. Our portfolio has been reweighted to provide material exposure to this commodity basket and we have successfully transitioned from a coal orientated royalty business in 2014 to one that by 2026 will be materially coal free and comprised of over 90% exposure to commodities that support a sustainable future. The fundamental demand outlook for these commodities over the next decade is very strong, which should significantly increase the value of our royalty portfolio.

Ecora's shares are listed on the London and Toronto Stock Exchanges (ECOR) and trade on the OTCQX Best Market (OTCQX: ECRAF).

More information is available at www.ecora-resources.com.