Rainbow Rare Earths Ltd (LSE:RBW, OTC:RBWRF) has signed a US$8.5 million royalty agreement for the Phalaborwa project in South Africa while also raising US$1.5 million through an equity subscription, both with Ecora Resources.
The royalty will see Ecora entitled to 0.85% of gross revenues, rising to 0.95% if production does not start before October 2027 and 1.1% if production is delayed until after 1 July 2028.
Rainbow said it will use the money raised to carry out its definitive feasibility study at Phalaborwa, which is scheduled to be completed in the first half of next year, 2025.
An interim report is expected in this half year to reflect optimisation work carried out during a pilot study with a final investment decision to follow the feasibility study.
In addition to the royalty, Ecora will also subscribe for US$1.5 million worth of shares at 11.365p each.
George Bennett, Rainbow’s chief executive, 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.
“The Ecora DD process encompassed detailed reviews of all aspects of the project covering technical, environmental and legal. “
Marc Bishop Lafleche, Ecora’s CEO, added: “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.”