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Rainbow Rare Earths Bounces On Phalaborwa News – Is The Strategy Viable Though?

Tim Worstall
Tim Worstall trader
Updated 19 Jan 2022

Key points:

  • Rainbow Rare Earths is another entrant into the rare earths for renewables space
  • There’s definitely demand for the product
  • The question is, which strategy of providing them is going to be most viable?
  • 12 Best Shares to Buy as a Beginner

Rainbow Rare Earths Ltd (LON: RBW) shares bounced then fell back this morning on news concerning Phalaborwa. This is the joint venture they have going with the phosphates producer, Bosveld. The JV news is that the final disposition of equity in that activity has been settled, with Rainbow Rare Earths taking 70%. Bosveld ends up with 30% for being, essentially, the current owner of the material to be processed.

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To evaluate Rainbow we’ve got to think a little bit about the rare earths market. Demand for them is rising because they’re essential for making electric motors work – the neodymium (and to a lesser extent, dysprosium and terbium) is necessary to make the magnets that make everything from electric cars to wind turbines work properly. There are substitutes but they’re not efficient enough to roll out the technology.

Also Read: The Best Lithium Stocks to Buy

So, as we all go EV and renewables we need much more of these rare earths. The race is on to find them. It’s possible to mine directly for them, that can be done as Chinese companies and others show. But one of the things about rare earths is that we can often find them as a byproduct of other processes. It’s possible to do this from zirconia and other mineral sands, tin slags (in small quantities) and so on, in fact all over the place.

One such possible source is phytogypsum, gangue, or waste product, of phosphates mining. As that’s a very large industry then there’s a lot of such waste around. This is what Rainbow Rare Earths is looking to do.

There’s an interesting wrinkle to this too. That phytogypsum can be processed into gypsum from plasterboard – doing so requires extracting the thorium from the material. A side effect of extracting the thorium is that the rare earths come out at the same time.

The problem with this is that the gypsum isn’t worth enough to make the processing worthwhile. Adding in the rare earths revenue might make it so.

That is, Rainbow has already leapt that first hurdle faced by any junior miner – is there any mineral there to process? The answer is yes, definitely. It’s well known that there are those rare earths in phytogypsum. So, on to the next question for any junior miner – does the company have the rights to it? That’s what this announcement is, yes, they do. It’s the next stage that then becomes crucial – is the process economic? At some gypsum price, some rare earths price, yes. That is also known.

For Rainbow Rare Earths this is now in spreadsheet territory. What are those processing costs, accurately, what are those likely revenues, accurately?

It’s possible to say that the Rainbow Rare Earths strategy is viable, yes, but subject to those details of the tactics. The target minerals – those rare earths – are there, they have the rights to them, but is it actually economic to extract them? That’s something that awaits further news.

Tim Worstall
Tim Worstall is a freelance writer specialising in economics and the financial markets.