Preliminary Results for Year-end 30 June 2024

18 October 2024

Rainbow Rare Earths Limited

("Rainbow" or "the Company")

Preliminary Results for the Year ended 30 June 2024

Rainbow Rare Earths is pleased to announce its preliminary results for the year ended 30 June 2024 ("FY 2024" or the "Year").  The financial information in this release does not constitute the Financial Statements.  The Group's Annual Report, which includes the audit report and audited Financial Statements for the year ended 30 June 2024, will be available on the Company's website at www.rainbowrareearths.com.

Highlights

·    The market for rare earth permanent magnets nearly doubled between 2020 to 2024, and demand is forecast to continue to grow strongly by ca. 7% per annum over the next 10 years, according to Argus Media, driven by the unstoppable global megatrend of the green energy transition, as well as exciting new markets such as robotics and advanced air mobility.

·    The supply chain for rare earth elements ("REE") is almost entirely dominated by one country, China, leading to concerted efforts by Western and aligned governments to create supply chain diversification in order to mitigate the inherent risks and vulnerabilities.

·   Pilot operations at Rainbow's Phalaborwa project have produced two saleable products: a mixed rare earth carbonate, and separated neodymium and praseodymium oxide ("Nd/Pr") of ca. 96% purity, paving the way for the first commercial recovery of rare earths from phosphogypsum. Once optimisation of the Nd/Pr oxide separation is complete, focus will turn to the separation of the heavy rare earths: dysprosium ("Dy") and terbium ("Tb").

·    Phalaborwa's status as a near-term, low-cost and strategic source of all four critical rare earths used in permanent magnets confirmed further to a proposed US$50 million investment from the U.S. International Development Corporation (the "DFC") via strategic shareholder TechMet Limited ("TechMet").

·    Strong project validation also received via the royalty and share placement agreement announced post Year end with Ecora Resources plc ("Ecora"), raising US$10 million.

·    Significant optimisation and simplification of the Phalaborwa primary plant flowsheet achieved, boding well for the updated economics of the project to be released in an Interim Report before the end of 2024.

·    The honing of this technology will unlock a global opportunity for low-cost and responsible magnet rare earth supply from similar secondary sources, such as the partnership with the Mosaic Company ("Mosaic") at Uberaba in Brazil.

·   Responsible production is at the heart of Rainbow's business model and the Company continues to embed environmental, social and governance ("ESG") standards and practices within its corporate and project development.

Investor Meet Company Presentation - Tuesday 22 October

Rainbow is pleased to announce that CEO George Bennett will provide a live presentation via Investor Meet Company on 22 October 2024 at 10:00 BST.

The presentation is open to all existing and potential shareholders. Questions can be submitted pre-event via your Investor Meet Company dashboard up until 21 Oct 2024, 09:00 BST, or at any time during the live presentation.

Investors can sign up to Investor Meet Company for free and add to meet RAINBOW RARE EARTHS LIMITED via: https://www.investormeetcompany.com/rainbow-rare-earths-limited/register-investor

Investors who already follow RAINBOW RARE EARTHS LIMITED on the Investor Meet Company platform will automatically be invited.

Certain information contained in this announcement would have been deemed inside information for the purposes of Article 7 of Market Abuse Regulation (EU) No 596/2014 ("MAR") which has been incorporated into UK law by the European Union (Withdrawal) Act 2018 until the release of this announcement.

For further information, please contact:

Notes to Editors:

About Rainbow:

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

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

The Phalaborwa Preliminary Economic Assessment has confirmed strong base line economics for the project, which has a base case NPV₁₀ of US$627 million^[1], an average EBITDA operating margin of 75% and a payback period of less than two years. Pilot plant operations commenced in 2023, with the project expected to reach commercial production in 2026, just five years after work began on the project by Rainbow.  More information is available at www.rainbowrareearths.com.

Chairman's Statement

Dear Shareholder,

Rare earth elements lie at the intersection of two global megatrends: decarbonisation and geopolitics. In the former: rare earth elements 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., the 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 during 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 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 DFC committed to investment of US$50 million to Phalaborwa, via 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, 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

CEO's Statement

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 signed with 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. and Mohammed VI Polytechnic University 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

Financial Review

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.

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 the Directors' 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 Directors are confident that this funding will be secured based on its history of successful fundraising.

Pete Gardner

Chief Financial Officer

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 30 June 2024

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 June 2024