Rainbow Rare Earths Ltd (LSE:RBW, OTC:RBWRF) has said it is to take 100% ownership of the Phalaborwa project in South Africa after reaching an agreement with Bosveld Phosphates
Previously, Rainbow could earn a 70% stake on completion of a pre-feasibility study but under the new terms will take an 85% stake now through the payment of US$5mln cash.
Rainbow will also have a call option over the remaining 15% that can be exercised between October 2023 and 31 December 2025 by the issue of US$7mln worth of shares.
On completion of a definitive feasibility study (DFS) the joint venture will be transferred into an incorporated joint venture and, at Rainbow's election, Bosveld will transfer all assets required for the project into that company.
Activity at Phalaborwa will now be focused on a DFS, Rainbow added, with pilot operations underway to produce a high-value mixed rare earth sulphate in the coming quarter.
This will be shipped to the pilot plant's back end, which is being constructed in Florida, to produce high-purity separated magnet rare earth oxides.
Rainbow added that as part of any handover, and in addition to the gypsum stacks, the asset transfer will include a long-term notarial lease for the land required and a contractual indemnity against the historic environmental liabilities for the leased area.
In a statement, George Bennett, Rainbow’s chief executive, commented: "We have always wanted to consolidate our interest in the Phalaborwa project, given the exceptional economics highlighted by our preliminary economic assessment that confirmed an NPV10 of US$627m based on spot rare earth prices at the time of publication.
"We are therefore delighted to reach this agreement with Bosveld which offers a clear path to Rainbow owning 100% of the project.
"This is an exciting time for Rainbow and Phalaborwa, with the front end of the pilot plant operational in South Africa and the back end being constructed in the USA."
In early trading, Rainbow shares were nearly 3% higher at 8.75p.