Rare earths producer Rainbow Rare Earths intends to raise between £2.6 million and £2.8 million (before expenses) through a placing of new ordinary shares arranged by Arden Partners and Hannam & Partners with new and existing investors at a price of not less than 14p per placing share.
The placing will allow Rainbow Rare Earths to bring forward its growth plans at its producing Gakara rare earth project in Burundi, including an exploration campaign and the expansion of the mining fleet, which the board believes will generate further shareholder value.
Rainbow Rare Earths believes that the funding will strengthen the company’s balance sheet, which will de-risk its expansion plans during the ramp-up of production from Gakara over the coming months.
Net proceeds from the placing, if fully subscribed, are expected to be approximately £2.6 million (US$3.5 million) and will be applied in the following principal areas:
- Approximately US$75 million to be deployed towards an expanded exploration programme:
- Rainbow Rare Earths will embark on its first ever drilling campaign, designed to investigate the geological anomalies identified by the recent the airborne survey (including Kiyenzi), as well as providing the foundation for the calculation of a potential maiden JORC Resource; and
- Additional ground based gravity surveys and geochemical analysis will also be undertaken.
- Approximately US$1 million to be deployed towards the development and establishment costs of new mining areas:
- The funding will accelerate the development of both Gashirwe and one other new area, potentially Kiyenzi, which would otherwise need to wait until sufficient funds were available from the gradual increase in production and sales from Gasagwe; and
- The bulk of the development and establishment costs at each new mining area, as with Gasagwe, relate to access road construction, site preparation and land compensation payments to local landowners.
- Approximately US$75 million to be deployed towards the purchase of additional mining fleet and vehicles:
- This funding will enable Rainbow Rare Earths to acquire machinery which will increase the efficiency and rate of production from the mine site, and which, in some cases, will replace similar equipment that is currently being rented, thereby reducing operating costs.
- Up to US$0 million to provide working capital during the company’s sales ramp up and to strengthen the balance sheet.
Under the terms of the placing, Rainbow Rare Earths intends to place the placing shares with eligible existing institutional shareholders and new institutional investors. Members of the public are not entitled to participate in the placing.
Admission is expected to take place on or around 8.00 am on 19 December 2017 and settlement is expected to occur on or around 19 December 2017.
On 5 December 2017, the company announced that it had successfully exported its first shipment of high grade rare earths mineral concentrate from Burundi and had commenced final commissioning of its processing plant. This achievement marked the culmination of the company’s strategy outlined in its IPO in January 2017.
As at 11 December 2107 the ‘basket price’ for Rainbow’s concentrate was estimated to be US$12.16/kg, which has increased 22% since 1 January 2017.