- Rainbow Rare Earths Limited NPV
- 01 July 2024 10:32:21
Source: Sharecast
Ecora is acquiring a 0.85% gross revenue royalty over the project for $8.5bn, and has subscribed for 10.44m shares in Rainbow for $1.5bn in cash. The royalty rates will increase if production doesn't occur before October 2027, Rainbow said.
The investment, which is Ecora's first in the rare earth sector, is part of its plan to diversify and grow its portfolio of "future-facing commodity royalties".
Rainbow said it will use the proceeds to complete the DFS in the first half of 2025 and cover all of its financing requirements up to June 2025.
"We are delighted to have concluded this royalty agreement with Ecora which allows us to take the Phalaborwa project all the way through to a completed DFS, without causing any significant dilution to shareholders," said chief executive George Bennett.
"This investment confirms Phalaborwa's status as a strategic and near-term source of all four of the magnet rare earths separated oxides so critical to the green energy transition. It is also a validation of the robust economics of the project, with its comparatively low capital and operating costs giving it resilience against rare earth pricing fluctuations."
Analysts at Canaccord Genuity said they see the deal as a "positive for both parties", giving Ecora the exposure to rare earths pricing with a high-quality project, while derisking Rainbow's funding profile. The broker estimates the royalty could generate up to $3m per annum in revenue for Ecora, depending on pricing.
Rainbow's shares were up 3% at 10.55p by 1018 BST, while Ecora gained 2% to 72.91p.