“We’re going to create a vibrant economic hub here,” says Adonis Pouroulis, the chairman of Rainbow Rare Earths.
Rainbow is currently raising around US$7 mln with a view to securing a standard listing on the London Stock Exchange within the next couple of weeks.
The plan is to deploy that capital into the Gasagwe rare earths project in Burundi, to re-start an old high grade mine there and to set up an established yield play in rare earths just as the new upswing in the mining sector begins to gather steam.
It’s doable because the grade at Gasagwe is so unusually high.
According to a Competent Person’s Report compiled in October 2016 by South African consultants MSA, Gasagwe comprises an exploration target between 20,000 and 80,000 tonnes of material with an estimated grade of between 47% and 67% rare earths.
“That,” says Pouroulis, “is the highest grade rare earths deposit that we can see anywhere today and equates to around 30 gram per tonne rock for an open pit gold mine.”
Those who follow gold will know that that’s very good indeed.
It’s why German multinational ThyssenKrupp came knocking at Rainbow’s door not long ago and signed on to take all the product that the company can produce. And that, of course, changed things significantly.
Rainbow was transformed from a speculative developer of a mineralised patch of African earth, to a potential miner with signed orders from one of the richest companies in the world. ThyssenKrupp can’t go mining itself, according to Pouroulis, because it once got burned on a Brazilian iron ore deal.
But it can use all sorts of financial incentives to secure supply of the praseodymium, dysprosium and neodymium that it needs. Rainbow’s on the ground. ThyssenKrupp is the end user.
All that’s needed is a small amount of capital to get the project up and running in the first place.
And this is where the Standard listing comes in. Pouroulis is the man who built Petra Diamonds (LON:PDL) up into the billion dollar company it is today. He’s also behind Chariot Oil & Gas (LON:CHAR) and a host of other African-focused unlisted vehicles with resources all over the continent.
If anyone knows how to raise funds for an African project, he does. “I do these things because I love them,” he says. “I do it because I love Africa.”
He also does it because he can get the backing because he has a track record of making money.
A Standard Listing swerves round all those onerous Aim regulations, while still allowing for a certain fleetness of foot. It also allows the cornerstone investors that Pouroulis is bringing in some visibility as the progress and value of their investment.
As a low capex yield play, there is no need to make things unduly complicated. So the thinking is simply to get it listed and let chief executive Martin Eales get on with putting the nuts and bolts of the project together.
With a mining license already in place, the plan is to spend around US$2.3 mln on getting the plant and mining operations up and running, a process which should take around nine months.
During an initial two year trial phase the project will then produce around 3,900 tonnes of concentrate before ramping up to 5,000 tonnes per year.
“The upside,” says Pouroulis, “is in a doubling of production.” But that’s not the only upside. The plan is to keep this as a rare earths play and keep it in Central Africa. There’s a strong likelihood exploration will prove up more material in time, but overall investors will be expecting their reward in yield as much as in capital growth.
But the wild card is China. China controls the rare earths market, a dynamic which has hitherto been a disadvantage to those wishing to develop projects elsewhere. Now though, with Donald Trump raising the barriers of protectionism, it may be that China starts to use its position in rare earths as a bargaining tool – or, to put it another way, restricting supply.
If that happens, there could be a real uptick in demand and pricing. And since the ThyssenKrupp deal involves an undertaking to match the best other offer, Rainbow could be quids in.
It’s early stage, but there’s every chance this could become a sweet little earner.