Rainbow Rare Earths Share Discussion Threads

[dumbpunter] 09/11/2023 07:21

Yes that's spot on. Can you post that else where,like LSE?

Edit.
Posted it myself. Too good.

[vatnabrekk] 08/11/2023 22:46

Excellent write-up PC!

[perfect choice] 08/11/2023 22:38

There will be no change in shareholdings. For a start this is a future option yet to be invoked but now available to TechMet. The period to invoke the option is time bound and the RNS states "dependent on the net present value set out in the definitive feasibility study for the project" and "is executable for three months following receipt of a credit approved term sheet for construction debt". So that means the option can be applied when the DFS is completed (currently stated by the end of H2 CY 2024) and the funding requirements are fully defined ready for investment sources to secure that funding.

What TechMet are getting for this option is a direct holding of Phalaborwa itself, not shares in RBW , as per statement "US$50 million to take direct stake in the Phalaborwa project in South Africa"

That $50M is roughly half of the total equity element for funding construction of Phalaborwa, the equity element being around a third of total investment cost required, the rest being debt based funding to be paid back to financial providers from revenues gained, as is typical. GB states this in the brief interview you can see at where at 4 minutes into the video, he states debt will be "60 odd percent of the project, circa two thirds debt and the balance would be equity" for which TechMet in invoking this option would provide half of what is required (the $50M representing 16% of total $295M capital expenditure).

So with this option assumed to be invoked when the time comes to secure all project funding, RBW is only now looking for a further £50M, or about that, equity based funding, plus project debt financing (usually from banks, major financial provider, etc) for the balance.

Normally such equity based element of project funding may be through shares issued for that part of funding, but in this case it does not apply as TechMet are effectively buying part of Phalaborwa (so they will receive a future proportion of income as a result).

However there are 2 benefits, one being lower volume of further shares to be issued to get Phalaborwa underway, the other being it is only Phalaborwa, so other future RBW projects (like Uberaba in Brazil and the % of that RBW could own, I'm expecting 50%) do not feed into what TechMet will own.

Saying that, there is an option for TechMet to change direct ownership to shares, as the RNS states "Rainbow has also granted TechMet a put option to exchange the direct stake in the project for shares in the listed entity at the fair market value of the underlying Phalaborwa stake for a period of two years from the commercial completion of the Phalaborwa project, or at any time in the event of a change in control of Rainbow".

So multiple options here, but unusual to be around a year away from DFS and securing option commitments already for project funding, for what should be half of the equity part of the funding required.

That is just the financials, the strategic benefit of this is very significant and hugely de-risks Phalaborwa. I remain convinced RBW's plan is to set up in-country RE Sulphate production facilities, then ship output to a central RE Oxide facility, at a yet to be chosen location in the USA, which will be very strategic for RBW and for Western World Rare Earth metal supply. GB has as good as said this in his interviews and statements.

[bridggar] 08/11/2023 21:14

Wonder what the holding RNS will show given today's volume and that news is out

[dumbpunter] 08/11/2023 20:52

Techmet already are the largest sharehder, they are not going away. This fixes the dilution within s range and allows a loan to be raised for the bulk of the $295m.
Doing this protects and increases the valuation of Tecmets existing shareholding.
This is normal practice in VC type funding, increasing the value of each funding round, you end up paying more but ramp up the overall worth of your entire holding.

[bridggar] 08/11/2023 16:17

I think we need to break 19p before we see any meaningful upside here. Perhaps we might see this before xmas.

[goodday1] 08/11/2023 14:47

This is heading to a 20 per cent rise today.I bet it will go higher tomorrow & Friday.Gl all

[swanvesta] 08/11/2023 14:02

BTW George seemed to me quite tired in that interview, and slurring his words. Not quite his normal ebullient self. Hopefully just a hangover from celebrations last night!

[vatnabrekk] 08/11/2023 13:58

Yes, you are correct.

[swanvesta] 08/11/2023 13:57

vatnabrekk, your first paragraph seems somewhat beside the point. It's billed as an option, rather than as a binding commitment. Perhaps I should have said "market conditions" rather than just "market"? What if market conditions are such that they want 50% for $50m?

I think George said 60% debt in the Proactive interview.

[luffness] 08/11/2023 13:21

50m for between 15 and 33% so project cost range is 150 to 333

[vatnabrekk] 08/11/2023 13:03

swanvesta, the RNS states "TechMet granted option to invest US$50 million to take direct stake in the Phalaborwa project in South Africa." So they are talking about an equity stake in the Phalaborwa project, not in the company Rainbow Rare Earths Ltd. This implies that they intend to establish a separate subsidiary company/JV for this particular project, and to seek project funding for it.

In which case TechMet cannot buy the shares on the market.

I believe that George expects the equity portion of the project funding to be about 25-30% meaning that he expects to be able to find debt funding between 70-75% of the project capital cost. If the TechMet option is estimated at $50M for 15% equity, then the total project cost must be estimated at $333M.

Assuming RBW manages to find debt funding of 70% that means that the equity portion would be 30%, and if TechMet exercise their option, that would cover half of it. That leaves a further 15% ($50M) of equity to find, which will probably have to be put up by RBW.

Well that's the way I see it.

[napoleon 14th] 08/11/2023 10:26

Nice 10% jump in share price

[napoleon 14th] 08/11/2023 10:25

Today's RNS can only be positive.

GLA

[swanvesta] 08/11/2023 10:23

What commitment though? The fact it's an option suggests to me they could still walk away, or even buy in cheaper if the market allows them to!

[perfect choice] 08/11/2023 09:39

Agree luffness, they would surely want to know the K-Tech stage is proceeding OK before making such a commitment. Now that announcement is expected in due course and once they are happy with meeting performance thresholds for continuous flow output. But I would expect a "what is it at now" check to have been done before this announcement.

It is clear in my view RBW are aiming to operate RE Sulphate production in-country then ship that output to a central RE Oxide facility in the USA for final output.

[luffness] 08/11/2023 09:16

One would think (hope) that they have had some positive feedback from the back end pilot plant.....

[archie222] 08/11/2023 09:10

For me the important bit is the thoroughness of DD which preceeded TechMet's commitment (yes, I know it is stated as an option but would be very surprised if they didn't follow through). TechMet's backers have deep pockets and would not want to be disappointed.

"The TechMet Option agreement follows a period of extensive due diligence, as required by its own internal processes and as part of its commitments to the DFC and other shareholders. TechMet's mandate is to identify world-class projects across the critical minerals space, which are operated according to high standards of environmental, social and governance criteria, as well as showing the potential for excellent economic returns."

[perfect choice] 08/11/2023 08:58

If you listen to past presentations and Q&As from GB, Phalaborwa was always going to have a 25-30% equity element for funding. Basically this is it subject to the caveats and options in the RNS. Excellent to have this commitment at this stage of development, TechMet (and so USA government by implication of funding TechMet) want this to happen.

[lewis winthorpe] 08/11/2023 08:53

Agreed, you can set your watch by it. US open this afternoon could be interesting

[goodday1] 08/11/2023 08:48

Retail again selling in the first hour & the big & heavy buyers move in later on.Why do the retail sellers never learn?You can not make it up.Gl all

[vatnabrekk] 08/11/2023 08:39

It de-risks the project making it easier to obtain debt funding for a large part of the project.

[swanvesta] 08/11/2023 08:20

I suppose what they do get is a very engaged, high powered partner who will want to protect their interest in the project.

[swanvesta] 08/11/2023 08:10

I'm not entirely sure what Rainbow get out of this deal. They've essentially given Techmet a call on a slice of project funding. Has Techmet given anything in return?

[themaxhunter] 08/11/2023 07:57

TechMet option to invest US$50 million materially de-risks Phalaborwa equity financing



· Critical metals champion TechMet Limited ("TechMet") granted option to invest US$50 million to take direct stake in the Phalaborwa project in South Africa

· TechMet's mission is to develop world-class projects across the critical minerals supply chain and counts the United States International Development Finance Corporation ("DFC") 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 to announce that it has entered into an option agreement with TechMet (the "TechMet Option"), whereby TechMet has the right to invest US$50 million to fund a substantial part of the equity component required for the project financing for Rainbow's Phalaborwa project in South Africa.

Under the terms of the TechMet Option the US$50 million investment will, depending on final project economics, give TechMet between a 15% and 33% direct equity interest in the project, underpinning a valuation of the project equity at between US$151.5 million and US$333.3 million. Given the de-risking that the TechMet Option will bring to the overall funding requirement to develop Phalaborwa, Rainbow sees this as a significant validation of the robust economics of Phalaborwa.

The TechMet Option agreement follows a period of extensive due diligence, as required by its own internal processes and as part of its commitments to the DFC and other shareholders. TechMet's mandate is to identify world-class projects across the critical minerals space, which are operated according to high standards of environmental, social and governance criteria, as well as showing the potential for excellent economic returns.

The overall capital expenditure for the project set out in the Preliminary Economic Assessment released in October 2022 was US$295 million, which is expected to be financed predominantly via debt.

George Bennett, CEO of Rainbow, commented: "We are delighted with the confidence shown by our long-term strategic investor, TechMet, following their due diligence on Phalaborwa. We believe 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. 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. TechMet, is excited to be able to continue to support this outstanding project, which will produce rare earths in the most responsible manner possible."