With rare earth elements (REE) being vital to vital to both economic resilience and national security, the imposition of export controls by China in April, followed by further tightening proposed in October, has galvanised the West to act to secure independent and responsible supply of these critical minerals.

London-listed Rainbow Rare Earths says it is at the forefront of addressing these challenges, with its Phalaborwa project, in South Africa, recognised as a near-term and strategic source of both the light and heavy rare earths that are indispensable to the green energy transition, defence and many other advanced technologies.

In its preliminary results for the year ended June 30, Rainbow explains that it has received strong project backing for the Phalaborwa project from the US International Development Finance Corporation (DFC), which is an indirect shareholder through TechMet and which has committed $50-million in project equity funding.

The company also secured the backing of Ecora Resources which chose Phalaborwa as its first royalty in the REE space.

“Our world-class laboratory in Johannesburg, one of the most the most sophisticated mineral analysis facilities on the continent, is perfecting the process to extract REE from phosphogypsum. This technology offers unique environmental and social benefits by transforming legacy waste into critical inputs for society,” the company says.

As a chemical processing operation, with no mining, hauling or stockpiling required, it notes that Phalaborwa is positioned at the lowest end of the global industry cost curve and is expected to be one of the highest-margin projects in development at present.

Moreover, Rainbow says excellent technical progress has been made with the production of a high-purity, mixed rare earth product (MREP), which significantly exceeds average industry standards.

It says an evaluation is under way to define the optimal route to separation, with the final products expected to be a separated neodymium and praseodymium oxide and SEG+, a basket of medium and heavy rare earth products.

Rainbow says it will now run a pilot-scale plant to validate the updated primary flowsheet parameters, as well as incorporating and demonstrating the expected capital and operating cost savings from ongoing trade-off studies.

Phalaborwa’s definitive feasibility study (DFS) is expected to be finalised in 2026 and, upon its completion, finalisation of the permitting process will run in parallel with the project finance process, which is expected to lead to the start of construction in 2027.

Meanwhile, the company says its Uberaba project, in Brazil, also represents an exciting opportunity to replicate Phalaborwa at a potentially larger size, noting that it is working with partner the Mosaic Company to rapidly complete an economic assessment of this phosphogypsum project.

In the longer term, the company says it expects that the technology to recover critical REE from phosphogypsum will provide opportunities to develop a scalable and sustainable business.

To this end, Rainbow says it is currently evaluating strategic partnerships in Saudi Arabia, Morocco and Canada, along with a number of other prospects globally.

The company says responsible production is at the heart of its business model, adding that it continues to embed environmental, social and governance standards and practices within its corporate and project development.

FINANCIAL REVIEW

Meanwhile, Rainbow has reported that, during the 2025 financial year, the group invested $2.1-million to progress the Phalaborwa project.

The company says costs associated with the laboratory facility set up to develop the group’s intellectual property  (IP) for the recovery of REE’s from phosphogypsum totalled $800 000, including $500 000 for tangible fixed asset additions and $300 000 recognised as research costs.

A further $200 000 of business development costs were incurred relating to progressing the Uberaba opportunity in Brazil and broadening the group’s international pipeline of phosphogypsum opportunities.

General and administrative costs, including costs relating to the Gakara asset in Burundi, resulted in a cash outflow of $2.9-million.

In financial year 2025, the group raised $10-million of finance from Ecora, including $1.5-million through an equity placing and $8.5-million proceeds from the sale of a royalty over gross revenue from the future development of the Phalaborwa project.

The group reported a loss of $3.3-million for the financial year.

The company says the narrower loss was driven by a fair value gain of $1.2-million arising from the first-time revaluation of the Ecora royalty liability, offsetting the costs associated with that financing transaction, and the non-recurrence of the $700 000 impairment costs for the Gakara project recognised in financial year 2024.

It notes that the gain arising on the revaluation of the Ecora royalty liability was caused by a fall in forecast rare earth prices as at June 30 compared with the forecasts available on July 1, 2024, when the royalty agreement was entered into.

In the third quarter of this year, rare earth prices rose strongly, mirroring the early forecasts, suggesting that this gain will be reversed in financial year 2026.

The company says costs associated with the group’s rare earth laboratory in Johannesburg, totalling $300 000, were recognised in the income statement as research costs as they are considered to be incurred developing the group’s knowledge for the recovery of REE from phosphogypsum that will be applicable on a global basis, and are not solely related to the Phalaborwa asset.

Within administration expenses, costs totalling $200 000 were incurred on the group’s business development opportunities.

Costs associated with maintaining the Gakara project on care and maintenance totalled $300 000.

The group says it continues to focus on minimising costs associated with the asset while considering all options to try to realise the value associated with the REE mineral opportunity.

The group’s other corporate costs totalled $3.2-million, dominated by staff costs of $2-million.

Net finance income was $819 000 driven primarily by the $1.2-million recognised gain on revaluation of the Ecora royalty liability, offsetting the $400 000 in costs associated with that financing.

The group assets are dominated by the cumulative $17.4-million relating to the Phalaborwa asset which have been capitalised as an intangible asset in accordance with International Financial Reporting Standards (IFRS) 6, of which $1.6-million was incurred in financial year 2025.

At the balance sheet date, the group says it has tangible fixed assets of $500 000 relating primarily to the laboratory facilities in Johannesburg.

The group’s liabilities are dominated by the Ecora royalty liability, valued at $7.3-million at financial year 2025.

In addition, the group has a $200 000 loan with FinBank in Burundi, denominated in Burundi Francs, which is due to be repaid on a reducing balance basis by April 2027.

The company says there are no other significant borrowings or long-term cash settled liabilities.

With the exception of indirect taxes and contributions payable under the Gakara mining convention, which are not being settled during the ongoing suspension of the Gakara operations, the group continues to pay all trading liabilities as they fall due.

For the 2025 financial year, the group had a recognised environmental liability of $100 000 relating to the Gakara asset in Burundi.

The company says there are no obligations for environmental closure at the Phalaborwa project site as the group does not yet have legal ownership of the project site.

The group had $3.9-million of cash as at June 30.

Its base case forecast includes a total cash outflow for the 18-month period ending December 31, 2026, of $8.8-million. Management’s reasonably plausible downside scenario includes a total cash outflow of $11.5-million.

The company says the forecast confirms that the group will need to raise additional funds before December 31, 2026, under all scenarios, the timing of which is dependent primarily on the speed at which the Phalaborwa DFS is completed, which is within management’s control.

In addition, further funds may be required to progress the Uberaba opportunity in Brazil dependent on the outcome of the initial economic assessment and negotiations for a definitive agreement for the project with Mosaic.

The board says it is confident that this funding will be secured, based on its history of successful fundraising.

However, it also acknowledges that this funding is not, at the present time, in place.

Accordingly, the board says it acknowledges that the need for additional funding represents a material uncertainty which may cast significant doubt on the ability of the group to continue as a going concern and, therefore, that it may be unable to realise its assets and discharge its liabilities in the normal course of business.