Rainbow Rare Earths acquire option to invest US$50m in Phalaborwa
Rainbow Rare Earths Limited and TechMet have entered into an option agreement, granting TechMet the right to invest $50 million to fund a significant part of the equity component required for the project financing for Rainbow's Phalaborwa project in South Africa.
Under the terms of the agreement, the $50 million investment will give TechMet between a 15% and 33% direct equity interest in the project, underpinning a valuation of the project equity at between $151.5 million and $333.3 million, depending on final project economics.
TechMet is a critical metals champion with a mission to develop world-class projects across the critical minerals supply chain. The company counts the United States International Development Finance Corporation as a major backer.
TechMet's extensive due diligence process has confirmed Phalaborwa's potential to be one of the lowest cost producers of separated rare earth oxides in development, leading to economic resilience across all anticipated future pricing scenarios.
Rainbow Rare Earths is pleased with the confidence shown by its long-term strategic investor, TechMet, following their due diligence on Phalaborwa. The company believes that the TechMet Option is a significant de-risking for the financing requirements. This validates the company's focus on the development of rare earths from secondary sources, as well as supporting the company's belief that Phalaborwa is a strong and unique project.
The overall capital expenditure for the project set out in the Preliminary Economic Assessment released in October 2022 was $295 million, which is expected to be financed predominantly via debt.
George Bennett, CEO of Rainbow, commented: "We expect Phalaborwa to continue to attract funding, especially from US-sources of capital, due to the focus on the critical role of these rare earth metals in the technology-driven industrial and clean energy age."
Brian Menell, Chairman and CEO of TechMet, said: "Phalaborwa has the potential to become one of the most environmentally friendly and lowest-cost rare earth projects anywhere in the world. Thanks to Rainbow's proprietary separation technology, Phalaborwa provides a significant opportunity to fast-track production of the four most economically important rare earth elements which are essential for future supply chains for electric vehicles, wind turbines and other products vital to the energy transition and the global economy."
