THE ONLY RARE EARTHS MINE IN AFRICA March 2019
DISCLAIMER These Presentation Materials are for information purposes only and must not be used or relied upon for the purpose of making any investment decision or engaging in any investment activity and should not be construed as, an offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities of Rainbow Rare Earths Limited (the “Company”) . Whilst the information contained herein has been prepared in good faith, neither the Company, its subsidiaries (together, the “Group”) nor any of the Group’s directors, officers, employees, agents or advisers makes any representation or warranty in respect of the fairness, accuracy or completeness of the information or opinions contained in this presentation and no responsibility or liability will be accepted in connection with the same. The information contained herein is provided as at the date of this presentation and is subject to updating, completion, revision, verification and further amendment without notice. These Presentation Materials contain forward-looking statements in relation to the Group. By its very nature, such forward-looking information requires the Company to make assumptions that may not materialise or that may not be accurate. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond the control of the Company that could cause the actual performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Nothing in this presentation should be construed as a profit forecast. Past share performance cannot be relied on as a guide to future performance. 1 Rainbow Rare Earths Ltd.
STRONG FUNDAMENTALS THE FUNDAMENTALS OF THE GAKARA PROJECT REMAIN STRONG – FROM START UP IN LATE 2017 TO TARGETED BREAKEVEN IN LATE 2019 Grade RE demand set to increase Potential world-class deposit • With veins averaging a TREO of • Demand for magnet REs (NdPr) Maiden JORC Resource 47-67%, Gakara is by far the set to rise in response to increase announced Dec 2018 • highest-grade mine in the world in production of EVs Over 12,000 tonnes high grade • Limited production capacity in Resources from just 3 of 28 market medium-term, particularly prospects and over 1 million tonnes outside China of lower grade (2.2% TREO) Resource at Kiyenzi Asset in production Downstream separation Environmentally sound • Demand growth for RE ‘green Only producing mine in Africa, one planned with TechMet technologies’ yet most sources of RE of only two listed RE companies Will significantly reduce discount to that are producing commercially are environmentally damaging basket price and improve margins • outside China Gakara uses no chemicals/reagents and utilises local workforce 2 Rainbow Rare Earths Ltd.
WHY RARE EARTHS? ND & PR REPRESENT THE MOST SIGNIFICANT ELEMENTS IN THE LANTHANIDE GROUP BY VALUE Magnet Rare Earths are critical in these key booming markets amongst others Wind turbines: Electric vehicles: Smart phones : NdFeB magnets have allowed wind Forecast demand growth for NdPr is Neodymium gives your phone the power turbines to reduce costs and increase primarily driven by the anticipated uptake to vibrate. 2.87 billion smartphone users efficiencies worldwide predicted by 2020 of EVs as well as growth in all electric motor usage NdPr market balance NdFeB demand Source: Citic Securities via SMM Source: Citic Securities via SMM 3 Rainbow Rare Earths Ltd.
GAKARA PROJECT OVERVIEW PRODUCTION OF HIGH-GRADE RARE EARTH CONCENTRATE FROM THE ONLY PRODUCING RARE EARTHS MINE IN AFRICA Key Facts Location Processing Mining Areas: 35km by road from Simple efficient gravity separation Bujumbura, Burundi’s capital city processing facility Processing Plant: 13km South of Bujumbura by road Sales Interest 650t in six month period to 31 Dec 2018 90% with a non-dilutable 10% owned by the Republic of Burundi Offtake Partner Mining Licence 10-year offtake agreement signed with thyssenKruup Materials Trading for Granted March 2015; valid for 25 years 5ktpa of concentrate, and right of first and renewable thereafter refusal for additional 5ktpa Infrastructure JORC Resource Good road links to Dar es Salaam, JORC Resource outlined 12k high Tanzania and Mombasa, Kenya grade veins (TREO 55%), as well as 1.2m tonnes lower grade (TREO 2.2%) Product deposit at Kiyenzi High Grade Rare Earth Minerals Exploration upside Concentrate (47-67% TREO) Production Rate High Grade – 25 additional targets identified 550 tonnes exported in H1 FY19 Low Grade – more exploration work targeted for Kiyenzi and other areas 4 Rainbow Rare Earths Ltd.
ACHIEVEMENTS SO FAR KEY CHALLENGES HAVE BEEN SUCCESSFULLY ADDRESSED IN THE FIRST 18 MONTHS OF OPERATIONS Develop 1 st Recruit and Build Complete Secure access Embed safe Export Commence and 2 nd mining train local processing sales to cash to sales practices concentrate mining areas workforce plant cycle proceeds ACHIEVED ACHIEVED ACHIEVED ACHIEVED ACHIEVED ACHIEVED ACHIEVED ACHIEVED JORC Further increases to Increase production Open 2 new mining areas Resource to break-even Resource base Announced ONGOING Expected H2 2019 ONGOING Dec 2018 During 2019 5 Rainbow Rare Earths Ltd.
THE GAKARA RARE EARTHS PROJECT 6 Rainbow Rare Earths Ltd.
GASAGWE & MURAMBI MINING AREAS GASAGWE ▶ Initial mining area (commenced 2017) has contributed the bulk of ore tonnes to date and served to provide strong foundation for proof of concept ▶ Very high grade vein stockwork structure allows tight control of tonnes to be processed ▶ Likely to cease later in 2019 as initially planned, although new vein discoveries continually being made MURAMBI ▶ Vein structure very similar to Gasagwe ▶ Trenching suggests vein extension may be up to 200m, approximately twice the length at Gasagwe ▶ First tonnes delivered Q2 18-19, now increasing to full production following construction of haul road and waste dump 7 Rainbow Rare Earths Ltd. Gakara Mining Licence perimeter, mining areas and RE discoveries
GASAGWE & MURAMBI MINING AREAS SMALL MECHANICAL FLEET SUPPORTS MANUAL EXTRACTION OF HIGH GRADE VEINS 8 Rainbow Rare Earths Ltd.
AERIAL VIEW OF MURAMBI MINING AREA 9 Rainbow Rare Earths Ltd.
ADDITIONAL MINING AREAS FOR 2019 NEW PITS PLANNED AT KIYENZI AND GOMVYI TO PROVIDE SCALE AND CONSISTENCY ▶ Experience so far justifies expansion to multiple pit strategy ▶ Greater scale of operations caters for inevitable variability of ore tonnes from each site and KIYENZI therefore adds more consistency to production ▶ Exploration work already underway on Kiyenzi and Gomvyi suggests that both areas can be mined GOMVYI ▶ Both new pits expected to be in operation in H2 of calendar 2019, following necessary permitting and compensation process recently successfully undertaken for Murambi ▶ With multiple pits in operation the business is expected to reach breakeven and profitability in the second half of 2019 10 Rainbow Rare Earths Ltd. Gakara Mining Licence perimeter, mining areas and RE discoveries
FUNDAMENTAL GROWTH AND VALUE STRATEGY THREE ELEMENTS: NEAR-TERM PRODUCTION; RESOURCE GROWTH; AND DOWNSTREAM EXPANSION Develop separation capability 3 ▶ Investigate separation capability for Gakara concentrate with feasibility study to be Develop downstream completed with additional funding from TechMet separation ▶ Capex will depend on scale and technique but may be <US$50m ▶ Would reduce discount to metal content price considerably from c.70% levels at present 2 Resource expansion Expand resource base ▶ Identify large deposit or deposits to enable step change in production to 10,000tpa or more Current strategy 1 ▶ Operate multiple mine areas in parallel ▶ Optimise efficiency of operations Near-term production and cashflow maximisation ▶ Increase production and sales to 250-300tpm during 2019 to become EBITDA positive ▶ Expand operations into new permit areas 2018 2019 2020 2021 2022 2023 2024 11 Rainbow Rare Earths Ltd.
OPERATIONS UPDATE: Q2 2018-2019 BROADLY CONSISTENT PRODUCTION JUSTIFIES EXPANSION INTO NEW AREAS 300 ▶ 275t Concentrate exported and 300t sold – 250 broadly consistent with prior periods Tonnes exported 200 ▶ Marginal fall in grade and commodity prices 150 over the quarter gave lower sales price per 100 tonne 50 ▶ Strong demand from customers justifies 0 increase in producing areas Q2 2017- Q3 2017- Q4 2017- Q1 2018- Q2 2018- 2018 2018 2018 2019 2019 ▶ Cash flow breakeven/profitability expected in H2 calendar 2019 400 ▶ Flexible equity funding agreement with Lind 350 Partners announced for up to US$7.75 million, 300 Tonnes sold 250 allows investment for growth when required 200 150 100 50 0 Q2 2017- Q3 2017- Q4 2017- Q1 2018- Q2 2018- 2018 2018 2018 2019 2019 12 Rainbow Rare Earths Ltd.
KABEZI PROCESSING PLANT A SIMPLE EFFICIENT GRAVITY SEPARATION PROCESSING FACILITY Located next to Fully operational Capacity Sufficient asphalt road and available to throughput providing ease of commissioned increase capacity for production access for substantial throughput container trucks production without further increases capex 13 Rainbow Rare Earths Ltd.
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