Rainbow Rare Earths Ltd (LSE:RBW, OTC:RBWRF) has completed a preliminary economic assessment (PEA) for the Phalaborwa rare earths project in South Africa.
The PEA demonstrates a long life and financially robust opportunity at Phalaborwa, which could become a significant supplier of high purity rare earth oxides to the rapidly expanding permanent magnet market.
In particularly, the product is likely to be used in electric vehicles and offshore wind turbines.
The study envisaged total production of 26,208 tonnes of separated magnet rare earth oxides, with a weighted average sales value of US$137.92/kg, generating US$3.6bn of revenue over 14.2 years.
Under the base case scenario, 2.2mln tonnes of material would be processed per year.
The project shows a post-tax net present value (NPV) of US$627mln, with an internal rate of return of 40%.
The average annual revenue is likely to ring in at US$254.8mln, with operating costs for separated magnet rare earth oxides expected to be one of the lowest of all Western rare-earth projects and current producers.
Average EBITDA is pegged at US$192.2mln per annum, delivering an EBITDA operating margin of 75%.
The capital required to get it all up and running is US$295.5mln.
At 2022 year-to-date average prices, which are around 28% higher than the base case, the economics show an NPV of US$934mln and a payback of 1.7 years.
“The successful completion of this PEA represents not only a breakthrough step in the development of Phalaborwa, demonstrating the viability of this opportunity, but also underscores the broader potential to use our unique IP and technology to extract separated rare earth oxides from other phosphogypsum sources on a global scale,” said Rainbow chief executive George Bennett.
“Leveraging the expertise we have built up at Phalaborwa, we aim to accelerate the shift in our business model to processing rare earths from secondary sources. At a time when governments around the world are designating rare earths as critical minerals, with the EU stating an anticipated fivefold increase in demand by 2030, our strategy aims to facilitate near-term access to these elements which are so fundamental to global decarbonisation.”