TIDMRBW
RNS Number : 5742O
Rainbow Rare Earths Limited
31 January 2019
FOR IMMEDIATE RELEASE
31 January 2019
Rainbow Rare Earths Ltd ('Rainbow' or 'the Company') (LSE:
RBW)
Operations Update for the Three Months to 31 December 2018
Rainbow, the rare earth element mining company, is pleased to
announce an operations update from its Gakara Project in Burundi
('Gakara') for the three months to 31 December 2018.
Results for Q2 2018-19 (Three Months to 31 December 2018)
Q2 2018-19 Q1 2018-19 FY 2017-18
(31 Dec 2018) (30 Sep 2018) (30 June 2018)
Concentrate sold (tonnes) 300 350 475
Concentrate exported (tonnes) 275 275(1) 575
Grade TREO per tonne concentrate 56% 59% 58%
US$/t US$/t US$/t
Gross sales price 1,884 2,147 2,263
Marketing and handling (94) (167) (175)
Net sales price 1,791 1,980 2,088
Transportation and royalty (387) (261) (381)
Production cost (2,827) (2,852) (2,430)
LTIFR 0.00 0.00 0.00
(1) Q1 exports previously reported at 350t, however have been
restated as 275t to reflect a more consistent recognition of sales
timing going forward
Martin Eales, CEO of Rainbow, said: "Production in the quarter
was broadly flat compared to the prior period, however we have now
put in place a plan to rapidly increase our scale of mining
operations by opening two further areas before the end of 2019
which is expected to transform our overall production profile and
financial performance to take us to breakeven and beyond.
"We have learned a huge amount about our mining operation from
the first full year of production and, given the natural
fluctuations within the veins in each mining area, it makes sense
to further de-risk our project and improve production consistency
by adding additional mining faces. This will put us in a strong
position to take advantage of the extremely strong current demand
for our mineral concentrate, allowing us to capitalise on our
status as one of only two listed commercial REE producers outside
of China. I look forward to providing further updates on our
expansion plans over the coming months as we progress towards
profitability."
Production update for quarter to 31 December 2018
Production for the three months to 31 December 2018 from the
Gakara mine measured in terms of exported concentrate remained in
line with the (adjusted) previous quarter at 275 tonnes. 300 tonnes
of concentrate were sold in the quarter (Q1 2018-19: 350 tonnes),
while average grade decreased slightly from 59% to 56% TREO.
The Company's partnership with thyssenkrupp Materials Trading
('TK') for the sale of concentrate is working extremely well and
the demand for Rainbow's concentrate product is significantly
higher than the current production.
Sales price and Production costs
Gross sales price per tonne achieved in the quarter was
approximately 9% below Q1 2018-19 at US$1,884/t compared to
US$2,147/t, with the difference principally caused by the effects
of a decrease in market prices for rare earths in the period (the
Company's indicative basket price decreased from US$11.91/kg to
US$11.33/kg during the quarter) as well as a reduction in average
TREO grade from 59% to 56%.
TK's marketing and handling costs fell to US$94/t from US$168/t
in the previous quarter as a result of some lower handling costs at
the destination port.
Transportation costs from the mine site to the port of Mombasa
increased from US$261/t in Q1 to US$387/t, which included some
standing charges as a result of the temporary exportation embargo
imposed by the Government of Burundi on all mineral companies
during October, as well as some true-up costs from previous quarter
which proved higher than initial estimates
Production costs of US$2,827/t were slightly lower than Q1 costs
(US$2,851/t), but remain significantly higher than expected due to
modest levels of ore produced in the quarter from Gasagwe and
Murambi (see below) and high costs for rented mining equipment
(which the Company is now proposing to purchase outright, subject
to financing).
Mining at Gasagwe and Murambi
Final permitting for Murambi, the Company's newest mining area,
was received in early December, which was later than planned and
therefore delayed the creation of a haul road and waste dump until
the New Year resulting in an impact on the rate of extraction from
the site. The current quarter is expected to provide significantly
more ore tonnes from this area as Murambi reaches full scale
operation. In addition, the concentrate yield from Murambi ore has
improved as more tonnes have been processed and suggests that this
deposit will approach similar yield levels to Gasagwe.
As explained in the previous quarter, production from the
Gasagwe pit has delivered at lower rates than had been initially
anticipated due to variations in vein structure and consequently
the Company has adjusted its production planning to incorporate
recent experience and better reflect the likely output of each
mining area on an average quarterly basis.
Production Expansion
Whilst the Company has achieved notable successes so far in
developing the Gakara Project and demonstrating that it can
consistently produce and sell rare earth concentrate, the revised
production expectations for Gasagwe and Murambi demonstrate that
the Company needs to be operating additional mining areas in order
to de-risk the fluctuations and uncertainty caused by operating at
a limited scale and to deliver profitability. The Company is
swiftly moving to develop mining operations at the Kiyenzi and
Gomvyi Centre areas, as previously announced, and expects both
areas to be in operation in the latter half of calendar 2019 with a
further new mining area planned to be in operation in early 2020,
to replace Gasagwe which, as originally planned, is expected to
reach the end of its life in late 2019.
Cash flow breakeven on a monthly basis is therefore anticipated
in the second half of calendar 2019 as production from the planned
new sites commences.
Financing
The funding agreement with Lind Partners of up to US$7.75
million as announced on 28 January 2019 provides Rainbow with
confidence over a base level of funding over the next two years but
also maximum flexibility during the forthcoming period of increased
development where mining production may vary from month to month
before it is anticipated to reach a more stable and cash generative
level.
In addition, Rainbow is working with its bankers and suppliers
of new fleet and equipment to take advantage of credit facilities
in the most efficient manner.
Exploration and maiden JORC Resource
On 17 December 2018, Rainbow announced its maiden JORC Resource
of over 1.2 million tonnes covering just a small fraction of the
Gakara Project. Three areas (Gasagwe, Murambi South and Gomvyi
Centre) are very high grade vein stockwork deposits totalling
12,491 tonnes of Total Mineral Resource at an average TREO grade of
55% representing at least two years' planned plant feedstock.
Additionally, Kiyenzi was found to have nearly 1.2 million tonnes
of Mineral Resource at an average grade of 2.2% TREO using a 1% cut
off.
These extremely positive maiden results demonstrate the huge
potential of the Gakara Project, whether through a continuation of
the low volume/high grade production or through eventual large
scale development of lower grade material.
Outlook
From a standing start, Rainbow has learned a great deal about
mining its high grade vein stockwork deposits during its first full
year of production in calendar 2018. Initial targets proved to be
challenging due to variability in vein deposition at differing
depths. The opening of multiple mining areas during 2019 will serve
to mitigate some of the normal production fluctuations from each
site.
The Company anticipates that both Kiyenzi and Gomvyi Centre will
start contributing ore tonnes in the second half of calendar 2019
(H1 19-20 financial year) and take the Company to at least
breakeven production. Concentrate production for the next six
months is dependent on tonnages from the existing pits, Gasagwe and
Murambi.
**S**
For further information, please contact:
Rainbow Rare Earths Ltd Martin Eales Tel: +44 (0) 20 3910
4550
St Brides Partners Ltd Priit Piip Tel: +44 (0) 20 7236
Susie Geliher 1177
---------------- ---------------------
Arden Partners plc Paul Shackleton Tel: +44 (0) 20 7614
Benjamin Cryer 5900
---------------- ---------------------
Notes to Editors:
Rainbow's focus is the Gakara Project in Burundi, one of the
highest-grade (47%-67% Total Rare Earth Oxide) rare earths projects
globally and the only African producer.
The Company began production of rare earth concentrates in Q4
2017 and has a ten-year distribution and offtake agreement with
multinational thyssenkrupp Materials Trading secured for the sale
of at least 5,000tpa of concentrate produced.
The Gakara basket is weighted heavily towards the magnet rare
earths, including neodymium and praseodymium, which are driving
demand and account for 70% of annual global REE sales due to their
use in vital components in motors, generators, wind turbines, and
electric vehicles.
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London Stock Exchange. RNS is approved by the Financial Conduct
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of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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