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RAINBOW RARE EARTHS LIMITED

ANNUAL REPORT 2023

RAINBOW

RARE EARTHS

A STRATEGIC SOURCE

OF RARE EARTH MINERALS

FOR A GROWING MARKET

CONTENTS

OVERVIEW

01 About Rare Earth Elements

02 Why Invest

STRATEGIC REPORT

06 Chairman’s Statement

09 Business Model

10 Q&A with CEO

14 Market Review

16 Operations Review

22 Sustainability Report

34 Financial Review

35 Payments to Governments

CORPORATE GOVERNANCE

38 Board of Directors

40 Senior Mangement

41 Corporate Governance Statement

46 Principal Risks and Uncertainties

48 Directors’ Report

FINANCIAL STATEMENTS

52 Independent Auditors’ Report

58 Consolidated Statement

of Comprehensive Income

59 Consolidated Statement

of Financial Position

60 Consolidated Statement

of Changes in Equity

61 Consolidated Cash Flow Statement

62 Notes to the Financial Statements

IBC Shareholder Information

A STRATEGIC SOURCE OF THE

RARE EARTH ELEMENTS DRIVING

DECARBONISATION

Rainbow Rare Earths (“Rainbow” or the “Company” or the “Group”) aims to be

a forerunner in the establishment of an independent and ethical supply chain

of the rare earth elements that are driving the green energy transition.

It is doing this successfully via the identification and development

of secondary rare earth deposits that can be brought into production

quicker and at a lower cost than traditional hard rock mining projects,

with a focus on the rare earth elements used to make permanent

magnets, namely neodymium and praseodymium (“NdPr”),

dysprosium (“Dy”) and terbium (“Tb”).

Rainbow is listed on the main market of the

London Stock Exchange under the ticker RBW.

Front cover image:

The first batch of mixed rare earth sulphate

was produced at the front-end pilot plant

in Johannesburg in September 2023

ABOUT RARE EARTHS ELEMENTS

OVERVIEW

RARE EARTH ELEMENTS ARE FUNDAMENTAL

TO LIFE IN THE 21ST CENTURY

A group of 17 elements in the periodic table, including the 15 in the Lanthanide series plus

two additional elements. Rare earths are categorised into light elements and heavy elements,

with the latter being less common.

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

Nd, Pr, Tb, Dy are critical elements of the global energy transition

Light Rare Earths Heavy Rare Earths

Electric Cars Wind Turbines Smart Phones Speakers Computer Drives Defence

Classifications

Applications

Due to their unique electrical and magnetic properties, rare earth

elements (“REEs”) allow for miniaturisation and much lighter, stronger,

resilient, and efficient components. To date, they have transformed the

consumer electronics market, enabling the high-tech products so integral

to our lives and which still account for ca. 50% of the rare earth market.

However, REEs have an even more important role to play as enablers

of the transition to the green economy. REEs are vital components of

the type of permanent magnets used within electric vehicles and wind

turbines, with both of these markets forecast to continue rapid growth

as global efforts play out to reach net zero.

Currently China controls ca. 70% of rare earth mining, but over 90% of

the downstream rare earth processing and manufacturing. This reliance

on one country creates supply chain vulnerability which, combined with

a forecast deficit of supply compared with rising demand, has driven

countries around the world to officially recognise REEs as critical minerals.

Adding to the criticality of REEs is their growing use in high tech

and strategic defence applications, such as guided missiles,

drones, electronic displays, sonar and jet fighter engines.

Global demand for magnet rare earth oxides (“REOs”)

(Nd, Pr, Dy, Tb)

Wind power demand growth at a CAGR of ca. 15% p.a.

requires 0.2Mt additional magnet REOs by 2040

Source: Argus Media

EV sales growth at a CAGR of ca. 10% p.a.

requires ca. 1.2Mt additional magnet REOs by 2040

Other uses of rare earths demand growth at a CAGR of ca ca. 3% p.a.

requires ca. 3Mt additional magnet REOs by 2040

2022 global

demand ca. 163,150kt

2040 global demand

potential ca. 289,500kt

100

150

200

250

300

2022 2024 2026 2028 2030 2032 2034 2036 2038 2040

A UNIQUE INVESTMENT

OPPORTUNITY IN RARE EARTHS

Uberaba – Brazil

•

Major new opportunity to replicate Phalaborwa

at a potentially larger scale

•

Phosphogypsum stack with same type of source

material (hardrock carbonatite)

•

MOU with the Mosaic Company (“Mosaic”) in place

•

Sample results confirmed 0.58% TREO and

all four magnet REEs

Back-end Pilot Plant – USA

•

Production of separated rare earth oxides

•

Uses K-Tech’s patented CIX and CIC

separation technology

•

Flexibility to establish back-end separation process

permanently in the USA could establish Rainbow

as one of the first producers of separated rare earth

oxides in the country

OCP - Morocco

•

Testwork underway to develop the optimal

technique for the extraction

of rare earth elements from sedimentary-

sourced phosphogypsum

•

Collaboration with OCP S.A. (“OCP”) and

Mohammed VI Polytechnic University (“UM6P”)

EXPERIENCED TEAM

Rainbow’s team has a history of delivering

multiple processing plants, feasibility

studies and mine developments.

Read more on pages 22 to 27

Phalaborwa – South Africa

•

NPV of US$627 million

•

Annual production of ca. 1,850t of magnet

rare earths

•

Annual EBITDA of ca. US$192 million

•

Creation of 275-300 direct jobs

•

Clean-up of site with legacy environmental issues

Front-end Pilot Plant – South Africa

•

Production of a mixed rare earth sulphate

•

Technology developed jointly by Rainbow

and K-Technologies, Inc. (“K-Tech”)

WHY INVEST CONTINUED

OVERVIEW

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

LCM - UK

World-leader in the manufacture of alloys

for permanent magnets - agreement to

purchase seperated rare earth oxides

from Rainbow

$Graphics$

STRATEGIC REPORT

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

DEVELOPING A

RESPONSIBLE RARE

EARTHS SUPPLY

CHAIN

The International Energy Agency forecasts

that wind electricity capacity will need

to increase from ca. 75 GW in 2022

to ca. 350 GW by 2030 in order to

stay on track with the Net Zero

Emissions 2050 Scenario

STRATEGIC REPORT

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

STRATEGIC REPORT

06 Chairman’s Statement

09 Business Model

10 Q&A with CEO

14 Market Review

16 Operations Review

22 Sustainability Report

34 Financial Review

35 Payments to Governments

CHAIRMAN’S STATEMENT

STRATEGIC REPORT

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

“RAINBOW HAS BECOME

ONE OF THE ONLY RARE EARTH

DEVELOPMENT COMPANIES IN THE

WORLD WITH MULTIPLE NEAR-TERM

PRODUCTION OPPORTUNITIES”

CHAIRMAN’S STATEMENT CONTINUED

STRATEGIC REPORT

Dear Shareholder,

The world is currently in the midst of a new

industrial revolution – the transition to a

sustainable green energy system. This shift is

set to drive a huge increase in the requirements

for the minerals needed to power clean energy

technologies. Of these minerals, REEs are

recognised as amongst those with the highest

risk for supply shortages, as well as displaying

considerable supply chain vulnerability due to

China’s dominant position in the market.

REEs are essential components of permanent

magnets, which are found in a plethora of high

tech products, including smartphones, camera

lenses, plasma screens, hard drives and even

artificial joints. However, it is their use in electric

vehicles (“EVs”) and wind turbines that is

driving major future market growth, with Argus

Media Ltd estimating that supply of the

magnet rare earths, NdPr, Dy and Tb, will need

to grow by ca. 8% per annum by 2032 in order

to match demand. Read more in Market

Review on pages 14 to 15.

Rainbow’s aim is to be a forerunner in the

establishment of an independent, sustainable

and ethical supply chain of REEs and I am

delighted to note that we made excellent

progress towards this aim in the year to 30

June 2023 (“FY 2023” or the “Year”) via the

advancement of the Phalaborwa project in

South Africa and, post Year end, via the MOU

entered into with Mosaic to jointly develop the

Uberaba project in Brazil.

Both projects target secondary sources of rare

earths, being phosphogypsum stacks that are

the residue of phosphoric acid production.

These stacks sit at surface, thereby eliminating

the traditional geological risk and cost of

mining, and are therefore expected to have a

significantly lower capital intensity and

operating expenditure (“opex”) than traditional

rare earth mining projects. Furthermore they

can be considered “near-term” production

opportunities – for example, the Phalaborwa

project is expected to commence operations

in 2026, which is just five years after Rainbow

secured the project.

The outstanding economics of the

Phalaborwa project were confirmed via the

publication of its Preliminary Economic

Assessment (“PEA”) in October last year, which

noted a base case NPV10 of US$627 million ,

an average EBITDA operating margin of 75%

and a payback period of less than two years.

This very high margin sets Phalaborwa apart

from other development projects in our space

as it can withstand significant pricing volatility.

Post Year-end, the Phalaborwa project

recorded a major milestone with the recovery

of the first mixed rare earth sulphate from the

front-end pilot plant in Johannesburg.

This material is considered to be a commercially

saleable product that could be a standalone

revenue stream for the project, with an

estimated sales value of ca. 60% of the global

price for separated rare earth oxides. The

mixed rare earth sulphate will be used as the

feed stock to produce separated rare earth

oxides at the back end pilot plant at K-Tech's

facility in Florida.

Responsible supply

Rainbow’s business model is driven by the

shift to cleaner energy, in that we will produce

the materials required to make permanent

magnets needed for EVs and wind turbines -

with this comes a responsibility to operate

in a sustainable manner - read more about

our approach to sustainability on page 22.

We have the opportunity at Phalaborwa to

clean up legacy environmental issues on site,

the main one being acid water which has

accumulated over the unlined gypsum stacks.

The acid water will be neutralised and used as

process water, with the remnant gypsum then

deposited on new lined stacks according

to International Finance Corporation (“IFC”) /

Equator Principles. This gypsum is intended

to be further on-sold as a clean and benign

feed for the cement and other industries,

leaving the site rehabilitated to its original

state over time.

Phalaborwa’s potential to be a near-term

source of ethical magnet rare earth supply

was recognised by Lesser Common Metals Ltd

(“LCM”), with whom we have entered into a

strategic supply agreement for Phalaborwa

production. LCM is currently the only rare earth

metal and alloy manufacturing facility in the

UK and one of the only facilities in the EU.

Its location is of strategic importance to

Rainbow as the Group’s aim is to play

an important part in the establishment

of a Western supply chain for critical REEs

outside of Chinese control.

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

CHAIRMAN’S STATEMENT CONTINUED

STRATEGIC REPORT

Portfolio development

Post Year-end, the agreement with Mosaic

represents a major opportunity for Rainbow

to replicate Phalaborwa at a potentially larger

scale. The Uberaba phosphogypsum material

is similar to Rainbow’s Phalaborwa project in

South Africa in that the original feedstock was

based on a hardrock carbonatite phosphate

deposit. Initial assay analysis from samples

have indicated an average grade of 0.58%

total rare earth oxides (“TREO”), which is

more than 30% higher than the 0.44% TREO

for Phalaborwa, and confirmed that the

Uberaba basket contains all four of the most

economically important rare earths, NdPr

at ca. 25% of the basket and includes the

two “heavy” permanent magnet rare earths,

Dy and Tb. Read more in “Uberaba” on page 20.

Further to the acquisition of the

Phalaborwa project in December 2020

and the subsequent development of

processing technology to recover REEs

from phosphogypsum as a by-product of

phosphoric acid production, the Directors

have re-focused the business on secondary

sources of REEs where they consider higher

returns are available. As such, the Directors

no longer intend to invest significant capital

at the Gakara asset in Burundi to convert the

existing resource target to a reserve status.

This resulted in an impairment review being

carried out for the Gakara assets in the year

ended 30 June 2023 and led to the net assets

being written down to nil as at 30 June 2023.

Read more in the “Financial Review” on page 34.

Corporate development

Rainbow’s successful development in FY 2023

was rewarded by continued strong backing

for the Company in the market, with a placing

to raise US$9.5 million in May 2023 achieved

at a premium of 30% to the share price,

and a placing post Year-end in September

2023 to raise US$4.5 million achieved at a

minor discount of 3% to the share price.

Both fundraisings included cornerstone

participation by TechMet Limited (“TechMet”),

a private investment company developing

world class projects across the critical metals

for the global energy transition, and which

counts the US International Development

Finance Corporation (“DFC”) as a major backer.

Pursuant to the nomination right held by

TechMet, Darryll Castle (currently Director

of Operations for TechMet) joined the Rainbow

Board in June 2023. Through his extensive

career Darryll has served as an executive

director of a number of mining and production

companies and has first-hand operations and

projects experience globally. We welcome

Darryll to the Board.

Responsible production is a core component

of our business model and Rainbow has made

good progress this year with setting up the

structural aspects that will ensure ESG is

integrated into our operations. Post Year-end,

the Board approved a new Sustainability Policy

for the Group and we have committed to a

number of United Nations Sustainable

Development Goals (“SDGs”), which will

provide a focal point for our sustainability

strategy and plans. Read more in Sustainability

on pages 22 to 27.

We have been working with carbon and

climate change advisors to further understand

Phalaborwa’s potential environmental impacts

and have provided our first annual disclosure

in line with the recommendations of the Task

Force on Climate-related Financial Disclosures

(“TCFD”).

Poised for success

I believe Rainbow offers a compelling

investment opportunity in our space.

Further to the MOU with Mosaic in Brazil,

Rainbow has become one of the only rare

earth development companies in the world

with multiple near-term production

opportunities, as well as occupying a unique

position in the pipeline given our ability to

utilise innovative and proprietary technology

to take the processing of our material all the

way through to separated rare earth oxides.

Read more in “Our Business Model” on page 9.

This is an exciting time for the Group and

I look forward to the imminent production

of separated rare earth oxides in Q4 calendar

year (“CY”) 2023, bearing in mind Rainbow will

be one of the first companies to do this on US

soil, which further validates our vision to be an

integral part of an independent and Western

supply chain of rare earths.

I would like to thank the host countries in

which we operate and all our staff who have

worked so diligently in laying the platform for

delivering one of the most exciting rare earth

stories in the world.

ADONIS POUROULIS

NON-EXECUTIVE CHAIRMAN

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

BUSINESS MODEL

STRATEGIC REPORT

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

BUSINESS MODEL

Developing a

responsible supply of

critical rare earths

PROJECT

IDENTIFICATION

Focus on secondary sources of

supply that can be brought into

production quicker and at a lower

cost and carbon intensity than rare

earth mine development projects

INNOVATIVE

TECHNOLOGY

Application of proprietary

separation technologies including

CIX and CIC in order to deliver

separated magnet rare earth oxides

more efficiently than traditional solvent

extraction methods

RESPONSIBLE PRODUCTION

Rainbow will contribute to a

responsible supply chain for rare earths

by integrating strong environmental

and social practices into its

project development and

management

UNIQUE POSITION IN PIPELINE

Rainbow will be one of the few

companies outside of Asia to

produce separated rare earth

oxides, including the

“heavies” Dy and Tb

With our strong project development and operating experience,

unique intellectual property and diversified portfolio, Rainbow will

develop a responsible, independent rare earths supply

chain to drive the green energy transition.

“

THE LONG-TERM OUTLOOK

FOR RARE EARTHS IS POSITIVE AS

THERE IS A MANDATED SHIFT TO THE

ELECTRIFICATION OF OUR TRANSPORT

SYSTEM, AS WELL AS THE EXPONENTIAL

ROLL-OUT OF OFFSHORE WIND CAPACITY

TO FACILITATE GLOBAL DECARBONISATION

”

Q&A WITH CEO

STRATEGIC REPORT

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

Q&A

WHAT DO YOU CONSIDER TO BE THE

KEY ACHIEVEMENTS OF FY 2023?

FY 2023 has been a period of further rapid

development for Rainbow and the progression

of our aim to be a forerunner in the

establishment of an independent and ethical

supply chain of the rare earth elements driving

the green energy transition.

The publication of the Phalaborwa PEA in

October last year demonstrated that this was

one of the lowest cost rare earth projects in

development today and, not only that, it could

be brought into production at much quicker

pace than traditional projects, as it involves the

processing of gypsum stacks already sitting at

surface, thereby eliminating the cost and risk

of mining.

Phalaborwa will use a unique processing

flowsheet that was developed by and in

conjunction with our partner K-Tech and which

incorporates continuous ion exchange (“CIX”)

and continuous ion chromatography (“CIC”).

While this technology was proven at lab-scale,

we wanted to demonstrate that it is

commercially viable and this was achieved

both during the Year and post Year-end via the

successful operation of our pilot plant and the

production of the mixed rare earth sulphate.

This validates Rainbow’s business model

and has allowed us to target other

phosphogypsum resources globally.

Post Year-end, we signed an MOU with

Mosaic in Brazil with regards to the Uberaba

phosphogypsum stack, which is expected

to have comparable characteristics to

Phalaborwa due to the similarities of the host

rock. This deal has opened up the future for

Rainbow to become a multi-asset producer of

rare earth elements from secondary sources.

Read more in “Uberaba” on page 20.

Post Year-end, we also entered into a strategic

supply agreement with LCM, the UK-based

world leader in the manufacture and supply

of complex alloy systems and metals. Securing

a buyer of our separated rare earth oxides that

shares our values and aspirations was of

strategic importance to Rainbow, especially as

the vast majority of rare earth processing and

manufacturing companies are based in China.

The intention is for the separated rare

earth oxides produced by Phalaborwa to

be manufactured by LCM into metal in order

to create an alloy, which is then supplied to

permanent magnet manufacturers in the EU

and the USA, with the ultimate customer of

the rare earth permanent magnets being

clearly defined and in alignment with the

positioning of both Rainbow and LCM

in a Western supply chain.

“

Q&A WITH CEO CONTINUED

STRATEGIC REPORT

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

Q &

AND WHAT WERE THE KEY

CHALLENGES?

We continued to see turbulence in the

global geopolitical landscape, which had

ramifications for economies worldwide,

particularly with the ongoing disruption to

supply chains and the rising cost of various

inputs and commodities. This compounded

the issue of slower global economic activity

and growth that was already an issue further

to the impacts of the Covid-19 pandemic.

We have found that this has played out with

investors taking a “risk-off” approach,

especially with regards to smaller companies in

the resources sector. In spite of these external,

macro-economic challenges, we continue to

be greatly encouraged by the progress we

have been able to make internally and

fortunately we have a host of catalyst points

over the next six months to two years, as we

deliver on the various milestones that bring

Phalaborwa closer to first production in 2026.

Another challenge relates to volatility in the

pricing of rare earths experienced during the

Year, albeit Rainbow is not in production as

of yet. Pricing performed strongly in the year

ended 30 June 2022 (“FY 2022”) due to

surging demand, especially following a rush

to install offshore wind capacity in China to

take advantage of government subsidies,

combined with the continued adoption

of EVs worldwide. Pricing was also positively

impacted by supply disruptions due to the

COVID-19 pandemic and the start of the

conflict between Ukraine and Russia.

However, in FY 2023 we saw a correction in

pricing as China increased supply, set against

a backdrop of softer economic conditions.

At the time of this Report, pricing has

recovered from the lows and expectations

are for further improvements into 2024.

We remain confident that the long-term

outlook for rare earth demand and pricing

is positive as there is a mandated shift to the

electrification of our transport system, as well

as the exponential roll-out of offshore wind

capacity worldwide in order to meet global

decarbonisation and net zero targets. Read

more in “Market Review” on pages 14 to 15.

CAN YOU GIVE AN UPDATE ON THE

PHALABORWA PROJECT?

Work at Phalaborwa has continued apace

and we are underway with all the various

workstreams required for the Definitive

Feasibility Study (“DFS”), which we plan

to complete by the end of H2 CY 2024

subject to funding.

A major component of this was the

construction, commissioning and operation

of the pilot plant to prove up our proprietary

separation technology, both at scale and

on a continuous basis, as well as to produce

sufficient quantities of separated permanent

magnet rare earth oxides for testing and

marketing purposes.

During the Year, the decision was made to split

the pilot plant, so that the front-end, which will

produce a high-value mixed rare earth

sulphate, would remain in South Africa close

to the Phalaborwa project, while the back-end,

which will produce separated rare earth

oxides, would be built and run at the premises

of our partner, K-Tech. This would deliver cost

and time efficiencies as a result of removing

the logistics involved in transporting pilot-scale

equipment from the USA, where it is designed,

fabricated, and tested, to South Africa, where it

would have to be reassembled and

commissioned, as well as ensuring that key

K-Tech personnel would be available on site to

oversee and optimise the process in real-time.

Post Year-end, we achieved a major

milestone with the production of the first

mixed rare earth sulphate from Phalaborwa

phosphogypsum material at the pilot plant

front-end pilot plant in Johannesburg.

This was a significant de-risking event for

the project and the Group, as it confirms

Phalaborwa as a rare earth producer and can

provide a standalone revenue stream for

the project.

This material will be used as feed for the

back-end pilot plant and will be processed

further to produce separated rare earth oxides

in Q4 CY 2023. Read more in “Phalaborwa”

on pages 16 to 19.

“

Q&A WITH CEO CONTINUED

STRATEGIC REPORT

“ “

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

HOW DOES THE PHALABORWA

PROJECT COMPARE TO OTHER

RARE EARTH DEVELOPMENT

PROJECTS GLOBALLY?

Phalaborwa is a unique project with

exceptional economics, as demonstrated

by the PEA. One of the main aspects that

attracted me to the project was its

comparatively low cost base, which provides

resilience against pricing volatility:

• firstly, as this is not a traditional mining

project there are no costs associated

with drilling, blasting, crushing, milling

and flotation to produce a mixed rare

earth concentrate;

• secondly, the phosphogypsum material

has already been chemically “cracked”

because it is the by-product of phosphoric

acid production, meaning it has already

been subjected to heat and sulphuric acid

– the cracked material allows for a simpler

hydrometallurgical process to produce

separated and purified rare earth oxides;

and

• thirdly, the CIX / CIC separation

technology developed by K-Tech replaces

traditional solvent extraction (“SX”)

technology, which uses toxic and

flammable solvents and diluents and

requires many different stages, thereby

delivering a process that is safer and more

environmentally responsible, as well as

reduced capital and operating costs due

to a simplified flowsheet.

The project also has exceptional sustainability-

related opportunities as it is founded on the

principles of circularity. We will be taking

a waste product (the existing phosphogypsum

stacks), cleaning it and extracting value from

it – both via the recovery of the REEs and then

via the sale of the benign gypsum that is

produced as the by-product of the process.

Our operations will see the clean-up of the

legacy environmental issues, namely the acid

water on site, and will fully deplete the gypsum

stacks over time, thereby allowing for a full-

circle environmental rehabilitation of the site.

Finally, a key benefit of targeting a secondary

source of rare earths in this manner is that the

project can be brought into production in a

much quicker manner than traditional mining

projects. In fact, we are targeting for the

project to begin production just five years

after we commenced work on site.

WHAT ARE THE KEY RISKS TO ITS

DEVELOPMENT?

As the process developed with and by

K-Tech is a novel process, albeit using

existing technologies and equipment,

investors undoubtedly saw technology risk

as a key hurdle to investment. This was why

the successful production of a mixed rare

earth sulphate from the front-end pilot plant

in August 2023 was an important milestone;

however, we expect to see the benefit of a

“de-risked” investment case once the back-

end pilot plant produces the separated rare

earth oxides – expected in Q4 2023.

Management has always had a high level of

confidence in the technology. For us, it is more

about timing of the project development and

what could impact that. Permitting in South

Africa is a factor, which is why we are running

the various workstreams required already,

alongside or incorporated with the DFS

requirements. The fact that the project will be

cleaning up the legacy issue of acid water on

site I think incentivises the permitting process

to stay on track as it is to the benefit of the

local environment and communities.

In terms of financing, we believe that

Phalaborwa will continue to be of interest

to strategic investors, especially since it will

produce all four of the critical rare earths for

permanent magnets, including the heavies

Dy and Tb, which are of even scarcer supply.

In fact, McKinsey released a report in 2023

noting that of all the critical minerals it

surveyed, Dy could see the most

severe imbalances of supply with potential

“shortages of up to 70% of demand”. These

heavy rare earths are essential to produce

the kind of high-performance permanent

magnets needed for EVs and wind turbines.

Read more in “Importance of the Heavies”

on page 19.

Our job is to ensure that Phalaborwa maintains

its position in an independent and responsible

supply chain. This will open the door to

investment from the various US initiatives that

have been set up to fund US interests in the

green transition. We have already seen this via

the involvement of TechMet, which has a 12%

stake in Rainbow, and, indirectly, their major

shareholder the DFC.

Q&A WITH CEO CONTINUED

STRATEGIC REPORT

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

WHAT ARE THE PRIORITIES

FOR FY 2024?

The production of the separated rare earth

oxides in the back-end pilot plant will be the

most important milestone in the project to date

and it is even more exciting and symbolic that

they will be produced in the US. This favourable

position has led us to consider permanently

basing our oxide separation process in the

US and we will continue to evaluate this.

We will maintain the pace of the project

development to date with the continued

progress with the environmental and social

impact assessment (“ESIA”) and publication

of the DFS by the end of FY 2024 and that will

set the scene to commence project finance

and on to construction.

We will look to gain a better understanding

of the mineralogy of the Uberaba stack, which

will inform the future work programme around

resource delineation and development of a

flowsheet adapted to the Uberaba material.

We will continue to work with OCP and UM6P

to evaluate the optimal technique for the

extraction of REEs from sedimentary-sourced

phosphogypsum. While this is a longer-term

project, it represents an exciting opportunity

for Rainbow due to the scale of the opportunity

if test work can achieve favourable results, as it

will unlock the enormous potential of rare

earths contained in sedimentary-sourced

phosphogypsum material. Read more in “OCP”

on page 21.

Finally we will also be continuing to develop

our sustainability approach and practices

within the Group, bearing in mind these are

an essential part of our future success, and are

conducting a life cycle assessment (“LCA”) at

Phalaborwa to understand the environmental

impacts associated with the lifecycle of rare

earths production.

It’s an exciting period ahead. I would like

to thank the Rainbow team, as well as our

various partners and contractors, for working

tirelessly to deliver the results we have to date.

GEORGE BENNETT

CHIEF EXECUTIVE OFFICER

EVOLVING REGULATORY

LANDSCAPE

REEs are considered integral to decarbonisation, as well as having

many highly strategic uses in advanced technologies, including in

defence applications.

Currently China controls ca. 70% of rare earth mining, but ca. 90%

of the downstream rare earth processing and manufacturing.

This reliance on one country creates supply chain vulnerability,

which is exacerbated by geopolitical tensions.

As such, the world has woken up to REEs as “critical minerals”,

i.e. minerals that are considered essential to economic or national

security and which have a supply chain vulnerable to disruption.

The race is on to access new sources of raw material supply from

countries outside of China aligned with Western interests, as well

as to develop downstream processing and manufacturing

capabilities.

“

SIGNIFICANT GOVERNMENT SUPPORT

FOR RARE EARTHS

Inflation Reduction Act

US$400bn directed to funding clean energy, including

securing rare earth supply chains

Critical Minerals Strategy

Building resilience of supply chains for critical minerals,

including the acceleration of domestic capabilities

Critical Raw Materials Act

Building resiliance of supply chains for critical minerals,

including rare earths, to enable EU to meet 2030

objectives

Critical Minerals Strategy

A national framework to grow Australia’s critical minerals

sector and the ability to process minerals domestically

National Security Strategy

Rare earths included in strategy to reduce Japan’s

dependence on countries to secure stable supply

for critical goods

Relevance to Rainbow: Rainbow aims to be a forerunner

in the establishment of an independent and ethical supply

chain of REEs.

Due to their unique electrical and magnetic properties, rare earth elements

have become integral to many of the high tech products that we rely on

today, especially consumer electronics such as laptops, smart phones and

flat screen TVs, as well as being used across diverse applications such as

lasers, glass, magnetic materials and industrial processes.

However, the shift to a clean energy system is set to drive a huge increase

in the requirements for REEs and other critical minerals, meaning that the

energy sector is emerging as a major force in mineral markets.

The four REEs that are particularly important to the green energy

transition are Nd Pr, Dy and Tb, due to their role in the rare earth

permanent magnets (“REPMs”) critical for use in EVs and wind turbines.

The competitive advantage of REPMs is their very high strength to

weight ratio, meaning they can deliver a higher power output from a

more compact magnet size than other magnets. The most powerful

REPM on the market currently is the neodymium magnet, also known

as an NdFeB magnet, which is renowned for having the best magnetic

properties, as well as being easy to process into the special shapes

required for innovative technologies.

REPMs are also integral to the defence industry, where they are used for

integrated electronic displays, sonar, laser and advanced guiding systems.

REPMs are by far the most economically important use of rare earths,

accounting for ca. 26% by volume in 2022, but ca. 74% by value;.

however, they are forecast to account for +99% by value by 2040,

according to Argus Media.

Relevance to Rainbow: The Phalaborwa project is well placed

to capitalise on the demand for REPMs, as its rare earth basket

contains all four of the most important rare earths (NdPr, Dy and Tb)

in economic quantities.

Uses of REEs by volume and value

Source: Argus Media

Demand drivers

Currently, ca. one third of global REPM demand is driven by EV

drivetrains and wind turbines applications. The remaining ca. two thirds

is driven by consumer electronics, traditional automotive, HVAC, disk

drives, speakers, robotics and a variety of consumer/industrial/defence

applications. However, growth in the clean energy sector is expected

to see its share of the REPM market rise to ca. 56% by 2028, according

to Canaccord Genuity and Adamas Intelligence.

REPM demand by end-user 2016 – 2028

Source: Adamas Intelligence actuals, Canaccord Genuity estimates

Within the clean energy space, there are two major drivers of demand

for REPMs, being EVs and wind turbines.

The EV market is forecast to grow ca. 13% per annum from 2023 to 2033,

with global sales of EVs expected to rise to ca. 49 million units in 2033.

Global EV sales by type 2019 – 2033

The increasing use of REPM direct drive generators (efficiency

benefits over traditional gearbox-based designs) used in wind turbines

is expected to be another key demand driver, as wind generation is one

of the fastest growing forms of energy. Nearly 400GW of capacity is

expected to be installed from 2021 to 2031, which will require growth

of ca. 20% per annum.

Global offshore wind capacity additions 2022 – 2031 (GW)

MARKET REVIEW

STRATEGIC REPORT

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

Magnets

Categories By Volume By Value

Batteries

Catalysts

Glass Industry

Phosphors

Ceramics

Metal Alloys

Other

26%

11%

17%

25%

74%

2022 2023 2024 2025 2026 2027 2028 2029 2030 2031

150

225

300

375

450

100

2016 2018 2020 2022 2024 2026 2028

10m

20m

30m

40m

50m

2019 2021 2023 2025 2027 2029 2031 2033

Auto accessories EV drive trains Other

Wind turbine generators Consumer electronics

BEV (Mn units) PHEV (Mn units)

Europe Other Asia

North America Cumulative total capacity (right axis)

Source: Argus Media

CLEAN ENERGY IS

DRIVING A HUGE

INCREASE IN DEMAND

FOR REEs

Supply Outlook

Rare earth supply grew 19% from ca. 236Kt in 2021 to ca. 280Kt in 2022,

driven by higher output from China and Myanmar. China updates its REE

mining and smelting/separation quotas twice a year. The production

quota increased by 25% to 210kt TREO in 2022 and a more moderate

increase of 14% to 230kt TREO was set for 2023. This increase was

deemed appropriate in order to support global demand growth and in

light of uncertainty surrounding output from Myanmar, where production

at certain assets was temporarily shut down during the year.

Rare earth supply by source 2019 - 2023 (tonnes)

While there are a number of new REE projects outside of China in

development today, there are multiple challenges in bringing new supply

to market. Due to the nature of REE mineral deposits, they often involve

complex mineralogy with associated radioactive elements. This can lead

to processing challenges, as well as permitting difficulties, and is

associated with higher capital requirements and ongoing operating costs.

Relevance to Rainbow: The Phalaborwa project will recover REEs

from phosphogypsum stacks that sit at surface, thereby eliminating

the mining cost and risk associated with traditional development

projects, as well as the longer lead time required to bring a new

project into production.

While REE supply is forecast to continue to grow, it is not expected

to be able to keep pace with the fast-growing demand for REPMs, which

would need supply of the permanent magnet REEs to grow by nearly 9%

per annum to satisfy the demand for the green energy transition.

Supply vs demand outlook 2021 - 2032

Supply & Demand, kt REO (left axis) Phalaborwa basket price, US$/t gypsum (right axis)

Source: Argus Media

The chart above forecasts a supply deficit to emerge from 2025 onwards,

with a total deficit of ca. 27,000t of magnet REEs forecast by 2032.

Relevance to Rainbow: The Phalaborwa project will produce

ca. 1,850t of magnet rare earths per annum, which is equivalent to

ca. 7% of the forecast supply deficit by 2032.

Rare earth pricing

Rare earth pricing performed very strongly in FY 2022, with 10-year

highs hit in Q1 2022 due to surging demand, especially following a record

year in the roll-out of global offshore wind capacity, according to the

Global Wind Energy Council, with a quadrupling in additions from 2020

as a result of a rush to install offshore wind in China to take advantage

of government subsidies, combined with the continued adoption

of EVs worldwide.

Pricing was also positively impacted by supply disruptions, particularly

due to the COVID-19 pandemic and the start of the conflict between

Ukraine and Russia.

It has been a different picture in FY 2023, with pricing of NdPr down

ca. 50% due to the increased supply, set against weaker demand due

to softer economic conditions in China and globally. At the time of this

Report, pricing has recovered from the lows and expectations are for

further improvements into 2024.

While there could be continued pricing volatility in the short-term,

industry commentators agree that the longer-term outlook for REE

pricing is supportive given the forecast supply/demand deficit that

will be driven by global decarbonisation.

Phalborwa basket price performance and forecast

Relevance to Rainbow: The Phalaborwa PEA indicated an

operating cost of US$33.86 per kilo of separated magnet REO,

which is believed to be one of the lowest operating costs

globally. By contrast, many of the rare earth projects in development

today are estimated by Canaccord Genuity to require spot pricing

of >US$100/kg for NdPr in order to be economic.

MARKET REVIEW CONTINUED

STRATEGIC REPORT

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

150

200

250

300

350

400

450

500

550

2021 2022 2023f 2024f 2025f 2026f 2027f 2028f 2029f 2030f 2031f 2032f

Phalaborwa basket price - US$/t gypsum

Nd demand Pr demand Dy demand

Phalaborwa basket price Tb demand Total supply

Source: Argus Media

100

120

140

160

2021 2022 2023f 2024f 2025f 2026f 2027f 2028f 2029f 2030f 2031f 2032f

150

200

250

300

350

400

450

500

550

50,000

100,000

150,000

200,000

250,000

300,000

350,000

2019 2020 2021 2022 2023

China-based production Lynas

Mountain Pass New projects

OPERATIONS REVIEW

STRATEGIC REPORT

Overview

The Phalaborwa project in South Africa

represents an exciting, near-term production

opportunity of all four of the magnet rare

earths required for the green energy transition.

The operation will involve the processing of

phosphogypsum stacks, which are the by-

product of historic phosphoric acid production

on the site, which ceased in 2014. This

resource sits at surface, thereby eliminating

the cost and risk of traditional mining projects.

Rainbow will be using proprietary separation

technology developed by, and in conjunction

with, its partner K-Tech, which will allow for the

material to be processed into separated rare

earth oxides of 99.95% purity. Annual

production is estimated to be ca. 1,850 tonnes

of the magnet rare earths NdPr, Dy and Tb.

Apart from delivering products that are vital to

global efforts of decarbonisation, Phalaborwa

has strong environmental credentials in terms

of reducing legacy risks from the previous

operations on site to an environmentally

sensitive area. Furthermore, consideration of

sustainability-related risks and opportunities

are an integral part of the Phalaborwa

development and operating plan.

Rainbow currently owns 85% of the project,

with an option to acquire the remaining 15%

from Bosveld for US$7 million of equity in the

Company - read more on page 34.

Background to Phalaborwa

Phosphogypsum

The original source rock for the phosphoric

acid operations was a hardrock carbonatite,

which was mined to initially produce a

phosphate slurry feed that was then

processed into phosphoric acid. While the

hardrock carbonatite did not contain rare

earths in sufficient quantities to be mined for

these elements alone, the processing it

underwent served to concentrate the quantity

of rare earths contained therein, resulting in

higher concentrations of rare earths than were

in the original hardrock.

This processing also subjected the material

to sulphuric acid and heat, which effectively

led to “cracked” chemical phosphogypsum

material at Phalaborwa. The benefit of this is

that it has rendered the rare earths associated

with the phosphogypsum amenable to direct

acid leaching, which allows for a simpler

hydrometallurgical process to produce

separated and purified rare earth oxides.

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

Phalaborwa magnet rare earth

basket value

61%

16%

15%

PERMITTING

UPDATED

DEFINITIVE

FEASABILITY STUDY

PRODUCTION

EXPECTED 2026

PILOT PLANT

Project timeline

PHALABORWA

SOUTH AFRICA

ESTIMATED TO BE ONE OF THE

LOWEST COST RARE EARTH PROJECTS

IN DEVELOPMENT TODAY

OPERATIONS REVIEW CONTINUED

STRATEGIC REPORT

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

Annual EBITDA $192m

75%

Operating Margin

Post-tax NPV

US$627.4m

Stellar economics

The PEA was based on processing 2.2 million

tonnes per annum of phosphogypsum over

a 14-year project life to deliver 26,208 tonnes

of separated rare earth magnet oxides at an

average cost of US$33.86/kg. This delivers an

exceptional 75% operating margin at the base

case basket price of US$137.92 per kg for the

rare earth oxides.

The base case financial model set out

in the PEA delivered:

• post-tax NPV10 of US$627.4 million,

representing more than double the

US$295.5 million total capital cost ;

• post-tax IRR of 40%; and

• post-tax payback of upfront capital costs

after two years of operations.

EBITDA sensitivity to pricing

EBITDA sensitivity to Argus market

forecast pricing over the life of mine

Phalaborwa’s comparatively low operating

cost is due to the fact that its material has

already been mined and deposited at surface,

which eliminates the cost and risk associated

with traditional rare earth development

projects. It also gives the project exceptional

resilience against pricing volatility, which was

experienced in FY 2023.

The PEA generates a strong EBITDA

at all pricing scenarios, with our sensitivity

analysis showing that at US$60/kg for Nd and

Pr oxides, which is below the weakest prices

seen in 2023, Phalaborwa would produce

US$82 million per annum EBITDA – rising to

an average of US$504 million per annum over

the project life using long term forecast pricing

from Argus Media published in April 2023.

Update on operations

Rainbow is well progressed on a number of

workstreams required to deliver the project’s

DFS, which is due by the end of H1 2024.

METC Engineering has commenced work

to fully define the engineering scope required

for the project and will play a central role

in coordinating the different operational

aspects of the DFS. Paragon Tailings has

been engaged to advise on the work

around reclamation of the gypsum stacks

in accordance with strict safety and

environmental standards, and will be assisted

by the US-based global gypsum experts

Ardaman and Associates, Inc., a Tetra Tech

company (“Ardaman”). Ardaman are

conducting tests and the design work for the

new stacks upon which the benign gypsum

will be deposited.

Full ESIA workstreams are underway with WSP

Golder for the DFS and permitting process.

OPERATIONS REVIEW CONTINUED

STRATEGIC REPORT

PHALABORWA

CONTINUED

78.46 101.47 124.48 147.50 170.51 193.52 216.54

100

150

200

250

300

350

2026 2028 2030 2032 2034 2036 2038

100

150

200

250

300

350

400

100

200

300

400

500

600

700

800

Revenue/kg magnet REO produced Average EBITDA - US$m/annum

Average cost/kg magnet REO produced

Magnet REO basket price - US$/kg (left axis) EBITDA - US$m (right axis)

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

Source of forecast rare earth oxide pricing from 2026 - 2032: Argus Media

Magnet REO basket price - US$/kg

OPERATIONS REVIEW CONTINUED

STRATEGIC REPORT

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

A key workstream that forms part of the

project’s DFS is the operation of a pilot plant

in order to optimise the flowsheet and

demonstrate the efficacy of the separation

technology developed by and with K-Tech.

Phase one of the pilot plant comprises

a front end situated at the facilities of Mintek

in Johannesburg, South Africa. The front-end

process incorporates the front-end gypsum

washing, acid leach, fluoride removal via CIX,

rare earth precipitation and a sulphuric acid

agitated bake to produce a high-value mixed

rare earth sulphate. This was successfully

achieved in Q3 CY 2023, with the product

being in line with management expectations

in terms of purity, grade, reagent consumption

and overall recoveries of ca. 65%.

Phase two of the pilot plant comprises

a back end situated at the facilities of K-Tech

in Lakeland, Florida, USA. The back-end

process will water leach the mixed rare earth

sulphate into a pregnant leach solution,

perform a cerium rejection step to minimise

flows downstream (thereby further reducing

operating costs and capital expenditure) into

the CIX circuit for loading onto the cation resin

before stripping and going into the final CIC

step, which will produce the separated rare

earth oxides using K-Tech’s patented

CIX/CIC technology.

Rainbow is currently exploring the option

of permanently establishing its back-end rare

earth oxide separation process in the USA and

has identified a potential site for a commercial

scale plant.

Mineral Resource Estimate (“MRE”)

During the Year, the Group published an

updated JORC compliant MRE for the project,

which upgraded a portion of the Inferred

Resource to Measured and Indicated and

confirmed a total Resource of 30.4 Mt at 0.44%

TREO, with the high-value, permanent magnet

elements Nd and Pr representing 29% of the

TREO in the rare earths basket, as well as

economic quantities of Dy and Tb. The full MRE

can be accessed at

https://www.rainbowrareearths.com/

project/phalaborwa/.

The technical team is currently focused on

evaluation and confirmation of the bulk density

at depth of the gypsum stacks, also with input

from Ardaman. It is probable, based on

Ardaman’s experience and techniques used

to evaluate the resource of similar

phosphogypsum stacks, that the in-situ dry

density for the stacks below the water table

is higher than that for the upper dry material.

This may result in an increase in the MRE.

Sustainability-related opportunities

Rainbow’s operations at Phalaborwa will serve

to clean up a legacy environmental issue –

namely the build-up of acid water associated

with the historic gypsum stacks, which are

currently unlined.

Rainbow’s front-end plant process will

neutralise the acid water and the plant’s

by-product will be a cleaner “benign” gypsum

which no longer contains any acid water

residue. The neutralised water will be used

in the closed-circuit plant process, thereby

eliminating the need to draw on an external

water source.

The benign gypsum will be deposited

on new stacks which are lined according to

International Finance Corporation standards

and Equator Principles. Post Year-end,

Rainbow signed a letter of intent to enter

into an offtake agreement with NEXUS,

under which NEXUS will acquire the benign

gypsum and on-sell it to both South Africa

and neighbouring countries.

This agreement will see the stacks at

Phalaborwa eventually fully depleted, allowing

for a complete environmental rehabilitation of

the site, as well as having a positive socio-

economic effect on local industry.

An important part of an independent

and ethical rare earths supply chain

Phalaborwa is a unique project in that it offers

a near-term source of responsible production

of the critical rare earths NdPr, Dy and Tb,

all of which can be delivered as separated

oxides, unlike most projects which produce

a mixed rare earth product.

These credentials are demonstrated by the

backing for Rainbow and Phalaborwa by

TechMet, the critical minerals champion which

is itself partially funded by the US DFC, and the

strategic supply agreement with UK-based

LCM, which is looking to negotiate a binding

offtake agreement for Phalaborwa’s

separated rare earth oxides.

THE IMPORTANCE OF HEAVY RARE

EARTH ELEMENTS (“HREES”)

Heavy rare earth metals are defined by

their higher atomic weights relative to light

rare earths. They are less common, and

some elements within the group are facing

shortages as demand outpaces supply.

The incorporation of Dy and Tb into REPMs

delivers enhanced operating performance

by enabling them to operate at higher

temperatures (magnets with HREE can

operate up to 240°C as compared to 60°C

for those magnets without HREE), without

losing their magnetic properties (high

coercivity). This makes them essential to

the REPMs used in EVs, wind turbines and

military applications.

Of all the critical minerals, McKinsey

assesses that Dy and Tb are amongst

the highest risk for supply shortages

and it was telling that China actually

decreased its production quota for

HREEs in H1 2023, which is considered

likely due to resource scarcity.

While there are some processing projects

in the development pipeline, there are

currently no facilities producing separated

HREE oxides outside of Asia.

Relevance to Rainbow: The Phalaborwa

project will produce all four of the critical

REPM REEs, including Dy and Tb. If the

Group decides to establish the plant back-

end process permanently in the USA, this

could establish Rainbow as one of the first

producers of separated rare earth oxides

in the country.

OPERATIONS REVIEW CONTINUED

STRATEGIC REPORT

Uberaba

The Uberaba project in Brazil is the subject

of an MOU between Rainbow and its owner

Mosaic, which was announced post Year-end.

The project is similar to Phalaborwa in that it

will entail the processing of a phosphogypsum

stack that is the by-product of phosphoric acid

production which was originally based on a

hard rock carbonatite.

Mosaic’s phosphoric acid operations are

ongoing, meaning that new phosphogypsum

is deposited on the stacks annually.

Due to the similarities of the feedstock, the

Uberaba stack was expected to have a similar

grade and rare earth element make-up as

those of Phalaborwa and this was confirmed

by initial assay analysis, which indicated:

• an average grade of 0.58% TREO;

• the basket contains all four of the magnet

rare earths NdPr, Dy and Tb, with NdPr

representing ca. 25% of the basket.

Rainbow and its partner Mosaic are very

encouraged by these results and are therefore

planning additional test work at SGS

Laboratories in Toronto around the mineralogy

to identify the rare earth phases and facilitate

the development of a processing test

programme. The costs for this initial work

programme will be shared by both parties 50:50.

Under the terms of the MOU, Rainbow and

Mosaic will look to jointly develop a process

flowsheet to extract the rare earth elements

from the Uberaba stack. Due to the similarity

of the Phalaborwa and Uberaba projects,

Rainbow anticipates that the majority of the

Phalaborwa front-end process flowsheet

(jointly developed by Rainbow and K-Tech

to deliver a mixed rare earth sulphate) will be

applicable, as well as the Phalaborwa back-

end process flowsheet (the patented K-Tech

IP which uses CIX and CIC to deliver separated

rare earth oxides), which Rainbow has

exclusive rights to in Brazil.

Following the production of the process

flowsheet, Rainbow and Mosaic will collaborate

on the production of a PEA for this opportunity

to extract rare earths.

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

UBERABA

BRAZIL

THE OPPORTUNITY TO REPLICATE

PHALABORWA AT A POTENTIALLY

LARGER SCALE

“

This agreement with

Mosaic represents a major opportunity

to become a multi-asset producer

of rare earth elements from

secondary sources.

”

GEORGE BENNETT

CHIEF EXECUTIVE OFFICER

OPERATIONS REVIEW CONTINUED

STRATEGIC REPORT

OCP

In August 2022, Rainbow entered into

a master agreement with OCP, the Moroccan

world-leading producer of phosphate

products, and UM6P, a Moroccan university

with a strong focus on science, technology

and innovation, to further investigate and

develop the optimal technique for the

extraction of rare earth elements from

sedimentary-sourced phosphogypsum.

As at Phalaborwa and Uberaba, the OCP

phosphogypsum material is generated

as a by-product from their phosphoric acid

production operations; however, it differs in

that the original source rock is a sedimentary

phosphate rock. Sedimentary ores are typically

lower grade in rare earths than hardrock

carbonatites, but they make up the bulk

of phosphoric acid production worldwide

(estimated at ca. 90%). Therefore, these

sedimentary ores represent a significant,

and as yet untapped, potential global

resource of rare earths.

Test results of initial upgraded samples of the

OCP phosphogypsum material, carried out by

SGS Laboratories in Johannesburg, indicated

the following:

• an average grade of 0.40% TREO; and

• the OCP basket contains all four of the

magnet rare earths, NdPr, Dy and Tb, with

NdPr representing ca. 14.3% of the basket.

Rainbow, OCP and UM6P will continue

to jointly run a test programme aimed at

developing an economically viable process

to extract rare earths from sedimentary-

sourced phosphogypsum. This collaborative

effort will evaluate possible economic process

routes to upgrade and extract rare earths from

the relatively low grade feedstock.

This test programme will require a longer

timeframe than that required for the

Phalaborwa project, as there are more steps

to the process that must each be shown to

be economically viable.

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

OCP

MOROCCO

A LONGER-TERM OPPORTUNITY

TO UNLOCK THE POTENTIAL OF RARE

EARTHS IN SEDIMENTARY-SOURCED

PHOSPHOGYPSUM

“

The combined skills of OCP

and UM6P, as well as our technical

team and partner K-Tech, offers

unparalleled expertise in the recovery

of rare earths from phosphogypsum.

”

GEORGE BENNETT

CHIEF EXECUTIVE OFFICER

Our approach to sustainability

By focusing on the production of critical rare earths from secondary sources, integrating environmental considerations into decision making,

taking a responsible approach to business and concentrating on stakeholder value creation, Rainbow is a crucial contributor to a responsible,

independent rare earths supply chain that we believe will drive the global green energy transition.

A focus on responsible production is central to our business model. We seek to minimise to the greatest extent possible any potential,

adverse impacts of our operations as well as to maximise the Group’s ability to positively affect the economy, environment and society.

In FY 2023, we have concentrated on advancing our sustainability strategy. We believe in the importance of a systematic approach and are laying strong

foundations from which to embed sustainability in project development as well as to manage, measure and report on our sustainability performance.

Rainbow’s approach to sustainability is founded upon the following four pillars:

SUSTAINABILITY

STRATEGIC REPORT

Developing

a responsible

supply of critical

rare earths

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

DEVELOPING A RESPONSIBLE

SUPPLY OF CRITICAL RARE EARTHS

RESPONSIBLE

BUSINESS

CREATING

VALUE

FOCUS ON

SECONDARY

SOURCES

ENVIRONMENTAL

INTEGRATION

Current focus

• Progress Phalaborwa ESIA

• Implement internal systems

to measure and monitor key

envrionmental and social

metrics

• Phalaborwa LCA

Key achievements

• Developing and formalising

sustainability approach

• Reviewing and updating policies

• Calculating office-based

emissions

• Publication of first

disclosures under

TCFD framework

Future aims

• Continued integration of sustainbility

in overall strategic development

• Conduct a comprehensive

materiality assessment

• Development of

sustainability reporting

• Implement

sustainability

targets

SUSTAINABILITY CONTINUED

STRATEGIC REPORT

Sustainable Development Goals

We recognise the role that business and industry can play in advancing

the United Nations SDGs – the blueprint to achieve a better and more

sustainable future for all. In FY 2023, we have analysed the 169

underlying targets of the 17 goals to identify initial areas where we

believe Rainbow can make a clear contribution. In global terms, clearly all

the SDGs are important (and indeed interconnected), however, we think

a focused approach at this stage of the Group’s development will enable

us to take proactive steps to contribute to their achievement – both by

optimising our positive impact as well as implementing the correct

practices to minimise any negative impact. Therefore, we have chosen 8,

9 and 12 as our current core goals and, as our business grows, we will

continue to assess our performance against these, as well as look to

add additional goals over time.

Sustainability governance and management

Sustainability is an important agenda point at Rainbow’s Board meetings

and the Company has a Sustainability Committee. This was previously

the Board-level Safety, Health and Environment Committee, which has

been amended post-Year end with updated terms of reference.

The Sustainability Committee is responsible for overseeing on behalf

of the Board, and making recommendations to the Board, on:

• the Group's initiatives, including policies, compliance systems,

monitoring processes and strategies, to manage sustainability-

related business practices and performance;

• promoting the Group's long-term success and viability by seeking

opportunities to strengthen the Group's licence to operate,

recognising the role Rainbow has to play in taking a responsible

approach to managing its environmental and social impacts as

well as prioritising ethical business practices; and

• oversight of the implementation of the Group’s sustainability

strategy, helping to ensure that Rainbow is a responsible, resilient

and sustainable business.

Rainbow’s Sustainability Policy guides the Groups’s approach and sets

out clear commitments to operating in a safe, ethical, sustainable and

responsible way. This is approved by the Board and is available on our

website here: https://www.rainbowrareearths.com/about/corporate-

governance/company-policies/.

The policy covers a range of topics such as governance and ethics,

human rights, health and safety, employment, environmental impacts

(including, but not limited to, those related to climate change, emissions,

pollution, water stewardship, responsible waste management,

biodiversity), communities and our supply chain.

It is fundamental to our business model that sustainability

considerations are integrated into all strategic decision making.

Sustainability risks and opportunities are considered as part of the

Group’s overall risk management processes and frameworks.

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

With its innovative approach to producing critical

rare earths in an environmentally responsible

manner from secondary sources, Rainbow aims

to create economic value, with a focus on local

supply chain support and job creation, thereby

supporting growth and development.

Rainbow leverages its technological expertise,

and that of its partners, to effectively process

rare earths, which are an essential building block

for permanent magnets used in critical

sustainable infrastructure and environmentally

sound technologies, such as wind turbines and

EV motors.

The Group focuses on the production

of rare earths from secondary sources, aiming

to integrate a circular economy approach and

avoid some of the carbon emissions and other

environmental impacts often associated with

rare earths mining business models.

By processing material from waste, Rainbow

looks to rehabilitate historical environmental

degradation.

SUSTAINABILITY CONTINUED

STRATEGIC REPORT

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

RESPONSIBLE BUSINESS

Key achievements

All existing Group policies reviewed and updated

Sustainability Policy implemented

Supplier Code of Conduct implemented

Governance, ethics and values

Rainbow is committed to good governance, transparency,

accountability, effective risk management and to conducting business

in an ethical and responsible manner. This is guided by our policies,

including the Group Code of Conduct, which is available on our

website: www.rainbowrareearths.com/about/corporate-

governance/company-policies/. The policies are reviewed on an

annual basis and approved by the Board.

As part of our work to advance our approach to sustainability

and ensure the Group has the appropriate internal frameworks to

guide this approach, we have reviewed and further developed our

policies in FY 2023. This involved updating existing policies and also

implementing two key new policies – our Sustainability Policy and our

Supplier Code of Conduct.

Rainbow has an Anti-Bribery Policy that sets out the key principles of

ethical and responsible conduct and standards of behaviour to which

all employees and stakeholders are expected to adhere. We also have

a clear Whistleblowing Procedure in place, with explicit detail on how

we process and investigate concerns- read more on page 44.

As our business continues to grow, we will focus on further maturing

our procedures and developing our policies to encourage effective

corporate governance.

Human rights

Rainbow is aware of its responsibility to respect and protect the

internationally recognised human rights of our people, business

partners and, where this is within our control, the human rights

of those within our supply chain and communities.

We are committed to the prevention, mitigation and, where

appropriate, remediation of any adverse human rights impacts with

which the Group is involved. Our approach is guided by the UN Guiding

Principles on Business and Human Rights and the UN Declaration of

Human Rights and is contained within our Code of Conduct (as well as

within our Supplier Code of Conduct – see “Responsible supply chain”

on page 25).

Purpose and values

Rainbow’s purpose is to produce the critical rare earths required

to progress the global green technology revolution in an efficient

and responsible manner. By integrating sustainable development

considerations into corporate strategy and decision-making

processes, we believe we can operate in a manner which

creates long-term shared value and benefits for our

stakeholders and reflects our core values of:

• Zero harm

• Integrity

• Respect

• Accountability

• Transparency

• Courage

Health and safety

Our primary objective is to achieve a zero-harm working environment

and we are committed to supporting employee health.

We prioritise the safety of our workforce and will implement

and maintain strong health and safety management systems

at our operations.

Our approach to safety prioritises a commitment to identifying and

taking appropriate action to avoid or mitigate workplace incidents,

injuries and illnesses. We will also provide appropriate training on

health and safety management to our workforce and promote a

culture of responsibility for keeping ourselves and each other safe

from harm.

Fair employment

Rainbow is committed to responsible and fair employment practices,

with due consideration to diversity, wherever we operate. We look

to provide a working environment in which everyone is treated

with respect and dignity.

We aim to provide training and skills development opportunities,

contributing to an effective and engaged workforce.

Rainbow is an equal opportunity employer and does not tolerate

discrimination against, or harassment of, any of our employees

on any grounds (including race, ethnicity, national origin, age, religion,

gender, sexuality) or retaliation. Any such instances of discrimination

are treated as serious misconduct, in line with our Code of Conduct.

OPERATING IN A SAFE, ETHICAL,

SUSTAINABLE AND RESPONSIBLE WAY

Related SDGs

SUSTAINABILITY CONTINUED

STRATEGIC REPORT

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

CREATING VALUE

Key achievements

Phalaborwa ESIA work progressing

Supplier Code of Conduct implemented

We aim to positively contribute to the communities in which

we operate through the provision of local employment opportunities,

the support of local supply chains, community support and the

transparent payment of taxes and royalties - read more in our

Payments to Governments Report on page 35.

Phalaborwa will create numerous employment opportunities over its

life, with priority being given to the local workforce. The Group will also

work closely with local contractors and suppliers to build long-term

supply chain solutions from the local area, contributing to socio-

economic development.

We are aware that effective stakeholder engagement

will be fundamental to the long-term success of Phalaborwa

and are focused on building mutual trust and respect with our

local communities and integrating stakeholder considerations

into project development decisions to create long-term value

for all our stakeholders.

As part of the ESIA process, we will be commencing stakeholder

consultations in FY 2024. The Group has a Whistleblowing Policy

which can be used by local communities to raise any concerns

ahead of the development of a specific grievance mechanism

for Phalaborwa which will be developed at this time.

Responsible supply chain

Rainbow is committed to developing a responsible rare earths supply

chain and, as such, we have been working during the Year to build the

correct internal frameworks to manage this. We have put in place

a Supplier Code of Conduct to encourage the companies within our

supply chains also to apply the same high standards that we expect

at Rainbow.

Our Supplier Code of Conduct includes some of the following

key expectations of our suppliers:

• the provision of safe working conditions and responsible

employment practices, including a minimum requirement to pay

statutory wages and to follow applicable working time legislation;

• taking adequate measures for the prevention, mitigation and,

where appropriate, remediation of any adverse human rights; and

• environmentally responsible operating practices.

Following the development of our Supplier Code of Conduct, going

forward when working with suppliers for the first time, Rainbow will

supply them with the Code and ask them to confirm that they have

read, understood and will comply with the commitments. We expect

suppliers to implement or develop appropriate internal processes

and/or corrective actions to achieve compliance with the Supplier

Code of Conduct.

In the event of failure to uphold commitments and in the case

of a serious breach of practices, Rainbow may end a contractual

relationship.

As our business grows, responsible supply chain management

will continue to be an area of significant focus and we will develop

our policy and approach accordingly.

CONTRIBUTING TO A RESPONSIBLE

SUPPLY CHAIN, PROMOTING

SOCIO-ECONOMIC DEVELOPMENT AND

PROVIDING LOCAL OPPORTUNITIES

Related SDGs

SUSTAINABILITY CONTINUED

STRATEGIC REPORT

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

FOCUS ON SECONDARY SOURCES

Key achievements

MoU signed with Mosaic to jointly develop a process flowsheet

to extract rare earth elements from secondary source in Brazil

Kicking off LCA for Phalaborwa

By focusing on the production of rare earths from secondary sources,

Rainbow aims to integrate a circular economy approach into business

decisions, where possible, and avoid some of the carbon emissions and

other environmental impacts usually associated with many elements

of a traditional mining business model, which are not required when

processing secondary source material as opposed to mining primary ore.

Using our unique processing technology, our intention at Phalaborwa is

to process material from historical waste in the form of phosphogypsum

stacks in an efficient and responsible way, operating on a brownfield site

therefore not impacting land use. We believe this will provide us with the

opportunity to rehabilitate environmental degradation brought about by

previous operations on site. Rainbow will work closely with previous

owners of the property to accelerate the rehabilitation of unused areas

in accordance with the closure plans and funding already in place.

An important element of Rainbow’s opportunity to rehabilitate the site

will be neutralising the acidic solution currently on top of the gypsum

stacks for use in a closed circuit in the processing plant. In addition

to this, Rainbow will then dispose clean, benign gypsum on stacks,

which are built according to IFC Performance Standards and Equator

Principles. Where possible, the Group will seek to identify uses

for waste and by-products of its processing activities.

Demonstrating our focus on the circular economy approach

and the responsible use of natural resources, Rainbow has

signed an offtake agreement with NEXUS to acquire the

benign gypsum from Phalaborwa.

Rainbow expects Phalaborwa to use a lower amount of energy

and reagents (due to the material already having been “cracked”)

when compared to traditional hard rock mining deposits. In order

to better understand Phalaborwa’s environmental impact, we are

conducting a LCA.

The LCA will quantify and analyse the GHG emissions associated

with the entire life cycle of rare earth elements production, including

mining, processing, manufacturing, product use, and disposal.

This will assist us in identifying opportunities for reduction to minimise

the Group’s carbon footprint by optimising energy use, improving

efficiency and exploring alternative materials and processes.

Other portfolio opportunities

Leveraging our proprietary technology, we continue to explore

opportunities to deliver separated rare earth oxides from secondary

phosphogypsum sources around the world, which currently include

the below:

• Rainbow has signed an MOU with Mosaic to jointly develop

a process flowsheet to extract rare earth elements from the

Uberaba stack in Brazil - read more on page 20.

• Rainbow has a master agreement with OCP and UM6P

to investigate and develop the optimal technique for the

extraction of rare earth elements from phosphogypsum material

generated as a by-product of OCP’s phosphoric acid production -

read more on page 21.

APPLY OUR UNIQUE PROCESSING

TECHNOLOGY TO HISTORICAL WASTE IN

THE FORM OF PHOSPHOGYPSUM STACKS

Related SDGs

SUSTAINABILITY CONTINUED

STRATEGIC REPORT

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

ENVIRONMENTAL INTEGRATION

Key achievements

Office-based Scope 1 & 2 emissions calculated

First disclosures in line with TCFD recommendations

Phalaborwa ESIA work progressing

We are committed to integrating environmental considerations

into strategic decision-making at the highest level of the business

(i.e. Board and Sustainability Committee level) in order to create

a responsible and sustainable supply of critical rare earths. We aim

to achieve continuous improvement in environmental practices

and performance and to minimise, or where possible avoid, negative

impacts from our operations on the natural environment, including

those relating to climate change (see our TCFD Report for more

information), water usage, waste management and biodiversity.

The ESIA at Phalaborwa is being conducted by consultants WSP

in accordance with IFC Performance Standards and work is

progressing well, with many of the reports and specialist studies

required for regulatory processes and to obtain environmental

authorisations either at an advanced stage or in progress.

This work will inform the implementation of a robust

environmental management system for the project.

As Phalaborwa progresses to development, our aim will be to

implement sound environmental management practices around

resource use, energy, water and waste management, air quality and

carbon emissions and biodiversity. Given the site’s brownfield nature,

we will look to maximise our potential for positive impacts through

rehabilitation and remediation.

Phalaborwa is founded on the principles of circularity via the

extraction of value from ‘waste’ products. As part of this, the intention

to sell the benign gypsum by-product produced at the project is

expected to see the phosphogypsum stacks at Phalaborwa eventually

fully depleted, which would allow for a complete environmental

rehabilitation of the site.

We have made significant progress in understanding Phalaborwa’s

potential environmental impacts through the carbon accounting work

we have commenced in FY 2023 which will feed into the LCA.

TCFD report

Rainbow is focused on achieving responsible, near-term and efficient

rare earths production from secondary sources. With demand for the

rare earths required in permanent magnets largely driven by global

decarbonisation efforts, Rainbow’s business model itself is linked

to climate-related opportunities. As such, we acknowledge the

importance of integrating climate-related risks and opportunities

into our strategy and have initiated the first phase of carbon disclosure

in our annual reporting, representing a significant step forward in our

sustainability workstreams.

We are committed to embedding environmental considerations

into Phalaborwa’s development and are therefore intent on putting

the right foundations in place from the outset from which to build our

sustainability strategy. Developing climate change-related strategies

and commitments is a key element of this approach. Rainbow’s

climate-related reporting will mature as we move through project

development and construction and into production. We intend

to publish a standalone disclosure report in line with the

recommendations of the TCFD in due course.

In preparation for such a disclosure, we have published

information on pages 28 to 33, which is presented according

to the TCFD key themes and recommendations for the period

1 July 2022 to 30 June 2023.

INTEGRATING ENVIRONMENTAL

CONSIDERATIONS INTO STRATEGIC

DECISION-MAKING

Related SDGs

SUSTAINABILITY CONTINUED

STRATEGIC REPORT

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

ENVIRONMENTAL INTEGRATION CONTINUED

The TCFD was created by the Financial Stability Board in 2015 to develop guidance for consistent climate-related financial risk disclosures

for use by companies, banks, and investors in providing information to stakeholders. One of the Financial Stability Board’s key aims was to

enable stakeholders to better understand the “concentrations of carbon-related assets in the financial sector and the financial system’s

exposure to climate-related risks”

Ultimately, increasing the amount of reliable information on exposure to climate-related risks and opportunities will strengthen the stability

of the global financial system, contribute to a greater understanding of climate risks, and facilitate financing the transition to a more stable

and sustainable economy.

Accordingly, the TCFD developed a set of recommendations in 2017 to assist companies in identifying and disclosing the financial impacts

of climate change risks and opportunities on their business in their mainstream reports, including their annual reports and financial filings.

The latest TCFD guidance on implementing the recommendations was published in 2021, which includes supplemental guidance for

insurance companies and asset owners.

The TCFD recommendations are categorised according to four thematic areas that represent core elements of how organisations operate:

Governance, Strategy, Risk Management and Metrics and Targets. These elements are outlined in Figure 1 below.

Figure 1: TCFD framework.

1 FSB Proposal for a Disclosure Task Force on Climate-Related Risks, 2015.

TCFD FRAMEWORK

Governance

Disclose the Group’s

governance around climate-

related risks and opportunities.

Strategy

Disclose the actual and

potential impacts of climate-

related risks and opportunities

on the Group’s businesses,

startegy and financial planning

where such information is

material.

Risk management

Disclose how the Group

identifies, assesses and

manages cliate-related risks.

Metrics and targets

Disclose the metric and targets

used to assess and manage

relevant climate-related risks

and opportunities where such

information is material.

The following table provides a summary of Rainbow’s first climate disclosures aligned with the TCFD recommendations associated with the four

thematic areas: Governance, Strategy, Risk Management and Metrics and Targets.

SUSTAINABILITY CONTINUED

STRATEGIC REPORT

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

GOVERNANCE

ENVIRONMENTAL INTEGRATION CONTINUED

Recommendation

a. Describe the board’s

oversight of climate-

related risks and

opportunities

b. Describe

management’s role in

assessing and

managing climate-

related risks and

opportunities

Compliance

Partially compliant

Response

Rainbow’s Board comprises the Chairman, one executive director, and five

independent non-executive directors. The Board is responsible for regularly

assessing and reviewing key business risks in the Group’s operations and met

eight times in the last financial year.

Notably, in the last year the Board has overseen and approved the development

of the Group’s Sustainability Policy, which can be found on our website here:

https://www.rainbowrareearths.com/about/corporate-governance/company-

policies/. The policy states our commitment to sound environmental

management and minimising the impacts of our operations on the environment,

including those relating to climate change, water usage, waste management

and biodiversity.

The Board delegates sustainability-related responsibilities to management.

Accordingly, the Directors and management regularly assess and discuss the

principal risks facing the Group. In addition, senior management regularly discuss

material developments (normally weekly) and consider the financial and reporting

implications of any matters arising.

A key element of risk within Rainbow’s operations is environmental management,

which is overseen by the Board and Audit Committee, in liaison with the

Sustainability Committee (formerly the Safety, Health, and Environment Committee).

The Sustainability Committee has oversight of the Group’s compliance

with applicable environmental laws and regulations. Rainbow is currently working

with WSP to carry out an ESIA at Phalaborwa. The Sustainability Committee met

once during the 2023 financial year to discuss the discuss the development

of the Group’s ESG strategy, both over the short-and longer-term and

regulatory developments.

TCFD REPORT

SUSTAINABILITY CONTINUED

STRATEGIC REPORT

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

TCFD REPORT CONTINUED

STRATEGY

Recommendation

a. Describe the climate-

related risks and

opportunities the

organisation has

identified over the

short, medium, and

long term.

b. Describe the impact

of climate-related

risks and

opportunities on the

organisation’s

businesses, strategy,

and financial

planning.

Compliance

Partially compliant

Response

Rainbow’s strategy is to develop a responsible supply of rare earth minerals

to meet the escalating demand for these critical minerals needed for global

decarbonisation.

Phalaborwa is still in the preliminary stages of development; however, in order

to build strong foundations at the earliest stage, the following key workstreams

have been initiated to assess and help inform a robust view of the physical and

transitional climate-related risks and opportunities that may impact our

operations and the environment.

• We are in the process of quantifying and assessing expected operation

emissions based on the PEA at Phalaborwa. This is the starting point

from which Rainbow will measure the actual performance of the Group’s

Greenhouse Gas (“GHG”) emitting activities once in production.

• We are commencing work with external consultants to develop a LCA for

Phalaborwa to assess the GHG emissions associated with producing and

using rare earth metals. This will enable Rainbow to identify emission hotspots

and opportunities for reduction, supporting the development of the Group’s

decarbonisation strategy.

• We have embarked on developing scenario analyses to evaluate future

climate change-related risks and opportunities for the business over the

short, medium and long term.

Climate-related opportunities are some of the material drivers behind our

business model and growth strategy. Rainbow is contributing to the green energy

transition with the responsible production of rare earths, with a specific focus on

neodymium (Nd), praseodymium (Pr), dysprosium (Dy), and terbium (Tb).

These metals are fundamental in the production of permanent magnets used

in wind turbines and EVs, with their demand projected to escalate with the

transition to renewable energy - read more in Market Review on pages 14 to 15.

The financial impacts of the climate risks and opportunities facing the business

will be further explored and articulated following results from the LCA and

scenario analysis testing (as described above). These measures will inform

Rainbow’s business, strategy, and financial planning in relation to climate-related

risks and opportunities.

Rainbow is committed to integrating environmental considerations into

strategic decision-making and sound environmental management, with

a focus on environmental protection and the responsible use of natural

resources. This includes a focus on energy efficiency and the investigation

of the commercial viability of using renewable energy sources.

ENVIRONMENTAL INTEGRATION CONTINUED

SUSTAINABILITY CONTINUED

STRATEGIC REPORT

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

TCFD REPORT CONTINUED

STRATEGY CONTINUED

Recommendation

c. Describe the

resilience of the

organisation’s

strategy, taking into

consideration

different climate-

related scenarios,

including a 2°C or

lower scenario.

Compliance

Partially compliant

Response

Rainbow’s focus on processing separated rare earth oxides from historical waste

gypsum contributes to the underlying strength and resilience of our business

model, as many of the costly, energy-intensive steps, associated with traditional

rare earths mining projects, are removed. Further, Rainbow has the opportunity

to reduce its negative environmental impact by utilising reclaimed acid water

from the phosphogypsum stacks in a closed circuit.

Leveraging our proprietary technology, we continue to explore opportunities

to deliver separated rare earth oxides from secondary phosphogypsum sources

around the world, which will remove significant time, risk and cost from the overall

project timeline. Rainbow announced a Memorandum of Understanding with

Mosaic shortly after Year-end to jointly develop a process flowsheet to extract

rare earth elements from the Uberaba stack in Brazil - read more on page 20.

In addition, Rainbow intends to use climate change scenario analyses

to fully investigate the resilience of the Group’s strategy to climate change

risks and opportunities. The outcomes of these assessments will be published

once available.

The setting of a baseline carbon footprint in the future will assist us in managing

the performance of meeting emission reduction targets and other related

sustainability metrics.

ENVIRONMENTAL INTEGRATION CONTINUED

SUSTAINABILITY CONTINUED

STRATEGIC REPORT

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

TCFD REPORT CONTINUED

RISK MANAGEMENT

Recommendation

a. Describe the

organisation’s

processes for

identifying and

assessing climate-

related risks;

b. Describe the

organisation’s

processes for

managing climate-

related risks, and

c. Describe how

processes for

identifying,

assessing, and

managing climate-

related risks are

integrated into the

organisation’s overall

risk management.

Compliance

Partially compliant

Response

Rainbow is in the process of estimating and assessing expected emissions from

planned operations at Phalaborwa based on projections in the PEA, as a first-pass

carbon footprint assessment. Alongside the LCA and proposed scenario analysis

workstreams, the first-pass carbon footprint will be critical in identifying and

assessing climate-related risks and identifying carbon reduction opportunities.

The emissions calculations will assist Rainbow in informing, understanding,

and optimising project development and subsequent operations.

The relatively small size of Rainbow’s management and finance team allows

the team to retain tight control over the identification and management of risks,

and related financial impacts, currently facing the business. The Board therefore

does not currently consider it appropriate to have a separate internal audit

function. Accordingly, the Board and the Audit Committee are responsible

for ensuring that the risks inherent to operating the Group, across numerous

jurisdictions, are identified, assessed, and managed. Rainbow’s Sustainability

Committee is also responsible for liaising with the Audit Committee, as

appropriate, on matters relevant to the Group’s management of sustainability-

related risks and opportunities. In addition to formal Audit Committee meetings,

the Chief Financial Officer has regular interaction with the Chairman of the Audit

Committee to discuss control and reporting matters in more detail. The Audit

Committee and Chief Financial Officer are supported by senior management,

who regularly discuss material developments (normally weekly) and consider

financial and reporting implications of any matters arising.

As the Group matures, Rainbow may consider formalising the processes

for identifying, assessing, and managing climate-specific risks, which may

be integrated into the organisation’s overall risk management.

Using the outcomes of the ESIA, which is currently being undertaken

for Phalaborwa, Rainbow will introduce a robust environmental and

social management system to the project.

ENVIRONMENTAL INTEGRATION CONTINUED

1 Emissions were calculated by multiplying the activity data by the appropriate emission factor to get the tonnes (t) of carbon dioxide (CO2) equivalent (e).

The activity emissions are reported in line with the GHG Protocol Corporate Standard (GHG Protocol).

SUSTAINABILITY CONTINUED

STRATEGIC REPORT

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

TCFD REPORT CONTINUED

Recommendation

a. Disclose the metrics

used by the

organisation to

assess climate-

related risks and

opportunities in line

with its strategy and

risk management

process.

b. Disclose Scope 1,

Scope 2 and, if

appropriate, Scope 3

GHG emissions and

the related risks.

c. Describe the targets

used by the

organisation to

manage climate-

related risks and

opportunities and

performance against

targets.

Compliance

Partially compliant

Response

The first-pass carbon footprint will assist in selecting appropriate metrics for

monitoring our operation’s emissions. Importantly, the first-pass carbon footprint

will be critical in identifying carbon reduction opportunities and will assist Rainbow

in informing and optimising project development and subsequent operations.

As a first step in our emissions accounting and disclosure, we have calculated

Scope 1 and 2 emissions for office-related activities – demonstrating a step

forward in transparency and setting the Group on the right path for future

disclosure of more material operations emissions going forward.

Rainbow’s carbon footprint for our head office emissions is shown below.

This represents Rainbow’s actual emissions and first phase of annual carbon

disclosure.

Emissions

from office-related activity

Scope Emissions in tCO

Scope 1 0.15

Scope 2 5.85

Scopes 1 & 2 6.01

The office activity-related carbon footprint does not serve as a baseline for

benchmarking against operation-related emissions in future, as the Group’s

material carbon emissions will be associated with its processing activities when

production commences. Rainbow will establish a baseline emissions profile once

the operations are in progress.

As the Group matures, Rainbow will consider setting targets to manage climate-

related risks and opportunities. These targets will be informed by the culmination

of ongoing climate-related scenario analyses and the setting of a baseline carbon

footprint once the business is fully operating.

ENVIRONMENTAL INTEGRATION CONTINUED

METRICS AND TARGETS

FINANCIAL REVIEW

STRATEGIC REPORT

PROFIT AND LOSS

The loss for the Year reflects the impairment of the Gakara cash

generating unit and the ongoing administrative costs for the Group.

As noted above, due to the change in strategy an impairment review

was carried out for the Gakara cash generating unit during the Year,

which comprised both intangible and tangible fixed assets together

with cash, mineral concentrate, royalty receivables and consumables

held in stock. The liabilities associated with the Gakara project include

a loan, decommissioning, site rehabilitation and environmental costs, tax

liabilities and trade payables. Based on the assessment of both the legal

and political position in Burundi, the Directors were unable to foresee a

date when the operations at the project would be able to restart and

accordingly have written the net assets of the Gakara cash generating

unit to nil, with an impairment charge of US$9.6 million recognised.

Within administration expenses, the costs associated with maintaining

the Gakara project on care and maintenance totalled US$0.9 million (FY

2022: US$1.3 million) including US$0.3 million of non-cash depreciation

associated with the tangible fixed assets prior to the impairment (FY

2022: U$0.4 million). The Group continues to focus on minimising costs

associated with the asset.

The Group’s other corporate costs totalled US$2.6 million (FY2022:

US$2.3 million). This increase was driven primarily by an increase

in business development costs as the Group started to develop its

pipeline of growth opportunities including both Uberaba and OCP.

Net finance income of US$0.2 million (FY 2022: costs of US$0.3 million)

represents foreign exchange differences, primarily relating to movements

between the Burundian Franc (“BIF”) and US dollars, the functional

currency of the Group. Finance costs also include US$0.1 million (FY 2022:

US$0.1 million) associated with the FinBank loan in Burundi.

BALANCE SHEET

As set out above, the Gakara impairment has had a significant impact

on the Group balance sheet, with US$9.8 million of non-current assets

at 30 June 2022 relating to Gakara (US$8.6 million of exploration and

evaluation costs and tangible fixed assets with a net book value of

US$1.0 million) being written down to nil. The Gakara cash generating

unit now includes US$0.7 million of mineral concentrate inventory,

carried at cost, which is offset by the FinBank loan (US$0.4 million)

and other net liabilities of US$0.3 million dominated by tax and

government liabilities in Burundi which have not been settled whilst

the suspension of activities persists.

A total of US$2.9 million of exploration and evaluation assets were

capitalised in the Year relating to Phalaborwa, leaving a closing

capitalised cost of US$4.8 million. Expenditure accelerated following

completion of the PEA in October 2022 as pilot test work commenced

alongside other activities to develop a DFS. At the balance sheet date,

the Group has no tangible fixed assets and no obligations for

environmental closure at the Phalaborwa site.

At 30 June 2023, the Group held US$8.1 million of cash and cash

equivalents which is predominantly held with Barclays Bank in London,

having raised US$9.5 million in May 2023 at a price of 10.377 pence

per share.

GOING CONCERN

In July 2023, US$5 million was paid to Barak Fund SPC Limited on behalf

of Bosveld Phosphates (Pty) Limited to secure a path to 100% ownership

of Phalaborwa. As a result of the payment, the Group secured an

immediate 85% interest in Phalaborwa and was granted an option to

acquire the remaining 15% via the issue of US$7 million in shares. In

September 2023, the Company replenished the funds spent on the

Phalaborwa acquisition, raising US$5.5 million at a price of 15 pence per

share, of which US$0.7 million is subject to shareholder approval at the

forthcoming AGM.

Based on a review of cash flow forecasts for the period to 31 December

2024, at least US$3.4 million of additional funding will need to be raised

before 31 December 2024, the timing of which is dependent primarily on

the speed at which the Phalaborwa DFS is completed, which is within

management’s control. Whilst this funding requirement does represent a

material uncertainty which may cast significant doubt on the ability of the

Company to continue as a going concern, the Board is confident that this

funding will be secured based on its history of successful fundraising.

Rainbow’s strategic focus is to identify and develop secondary rare earth deposits that can be brought into production quicker and at a lower cost

than traditional hard rock mining projects. As a developer, Rainbow capitalises the costs of exploration and evaluation for each identifiable project

once the legal right to the project has been secured. During the Year, as a result of the successful PEA released for Phalaborwa and the growing

pipeline of growth opportunities from the associated processing technology, the Directors decided against investing significant amounts in Burundi

to develop a formal mineral resource. As a result an impairment review was carried out on the Gakara cash generating unit, which has been written

down to a net asset value of nil. As a result, the Financial Statements now reflect the updated business strategy, with the exploration and evaluation

assets on the balance sheet relating solely to Phalaborwa and the income statement dominated by the impairment charge against Gakara.

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

RAINBOW’S STRATEGIC FOCUS

IS TO IDENTIFY AND DEVELOP

SECONDARY RARE EARTH

DEPOSITS

FINANCIAL REVIEW CONTINUED

STRATEGIC REPORT

PAYMENTS TO GOVERNMENTS

Rainbow is committed to full payment of its tax and fiscal obligations wherever it operates, as this supports the Group's social licence to operate,

and ensures a fair contribution to local economies.

The table below sets out the key payments to governments for the Year arising as a result of Rainbow’s activity, including direct taxes

(such as royalties, land taxes and corporation tax) and indirect taxes (such as payroll taxes and VAT).

Payments disclosed in this Report are shown in US Dollars. Actual payments have been made in South African Rands and Burundian Francs.

FY 2023 FY 2022

US$’000 South Africa Burundi Total South Africa Burundi Total

Royalties - - - - - -

Permits and land taxes - - - - - -

Corporation tax - - - - 2 2

Total tax borne - - - - 2 2

Payroll tax 139 20 159 44 78 122

Net VAT 133 3 136 (22) (4) (26)

Total net payments to government 272 23 295 22 76 98

Royalty payments relate to the Government of Burundi royalty of 4% charged on the value of exports of rare earths mineral concentrate.

No royalties were paid during FY 2023 as operations in Burundi, including all exports, are suspended by the Government.

Permits and land taxes include annual taxes payable to the Government of Burundi under the terms of the Mining Convention for the

Mining Permit at Gakara. No payments were made during FY 2023 as the Burundi operations are suspended, with the annual cost accrued

in the Financial Statements.

Corporation Tax is payable in Burundi based on a minimum 1% of turnover whilst the local operating entity remains loss making.

No turnover was reported in FY 2023 as operations in Burundi, including all exports, are suspended by the Government.

Payroll taxes and VAT (net of recovered amounts) are included as they represent funds paid by the Group to the government either

directly or via suppliers.

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

EFFECTIVE CORPORATE

GOVERNANCE IS

ESSENTIAL TO THE

SUCCESS OF OUR

BUSINESS

CORPORATE GOVERNANCE

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

Rare earths are used in many of the latest

high tech applications, including aircraft

radar and touchscreens

CORPORATE GOVERNANCE

38 Board of Directors

40 Senior Mangement

41 Corporate Governance Statement

46 Principal Risks and Uncertainties

48 Directors’ Report

CORPORATE GOVERNANCE

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

BOARD OF DIRECTORS

CORPORATE GOVERNANCE

ADONIS POUROULIS

NON-EXECUTIVE CHAIRMAN

Appointment date:

August 2011

Committees:

Nomination (Chair)

Adonis is an entrepreneur whose

expertise lies in the discovery,

exploration and development of

natural resources across Africa,

as well as more recently

becoming an active investor and

developer of clean technologies

and sustainable energy projects.

Having worked in the African

natural resources sector for over

30 years he has extensive

experience and a wide network of

industry relationships across the

continent. Adonis is the founder

of Rainbow, which he listed in

2017. He is also founder and CEO

of Chariot Transitional Energy

(AIM: CHAR), founder and

Chairman of the Pella Resources

Group, and was the founder and

Chairman of Petra Diamonds

(LSE: PDL).

Qualifications:

BA (Hons) in Science and Mining

Engineer – University of

Witwatersrand.

External appointments:

CEO of

Chariot Transitional Energy plc

Interest in the Company

As at 27 October 2023:

84,108,870 shares / 13.5%

GEORGE BENNETT

CHIEF EXECUTIVE OFFICER

Appointment date:

August 2019

Committees:

SHEC

With over 25 years’ experience

in mining, finance and

management, George has led a

number of mining and energy

companies, including Shanta

Gold Ltd (which he successfully

listed on the London Stock

Exchange in 2005) and Orecorp

Ltd (which he seed funded, raised

the initial capital as a non-

executive director and listed

on the ASX).

In 2006, George established MDM

Engineering Ltd, a mining

engineering company building

mineral process plants and

mining infrastructure throughout

Africa, which he successfully

listed on the London Stock

Exchange in 2008. In 2014,

George was instrumental in

selling the business to Foster

Wheeler Limited for

US$120 million.

In addition, George has been

a partner and director with

a number of leading financial,

broking and advisory businesses

including Fergusson Bros,

Simpson McKie, and HSBC

Securities Africa (pty) Ltd.

Qualifications:

Member of the Johannesburg

Stock Exchange

External appointments:

N/A

Interest in the Company

As at 27 October 2023:

37,347,298 shares / 6.0%

ALEXANDER LOWRIE

INDEPENDENT

NON-EXECUTIVE DIRECTOR

Appointment date:

November 2016

Committees:

Remuneration (Chair), Audit, SHEC

Alex is an experienced director,

advisor, board observer and

investor with around 25 years’

experience, initially in financial

markets and subsequently with

a specific focus on the critical

metals mining, battery recycling

and technology sectors.

Concentrating on battery,

hydrogen and EV critical

materials, Alex advises

companies from seed stage

through to wider capital markets

exposure and is a non-executive

director to a number of these

entities. He is also the co-founder

of Telemark Capital LLP, a capital

advisory and asset management

partnership, which also provides

governance services as an

independent investment

committee member.

Prior to this Alex worked for 14

years in investment banking. He

was a director at Deutsche Bank

and then RBS, having started his

banking career originally with ABN

AMRO. Through these positions,

he gained extensive experience

in primary and secondary equity

offerings, bringing companies to

market through IPOs (including

structuring, marketing and

distribution).

Qualifications:

BA (Hons) in combined social

sciences – Durham University;

currently carrying out Executive

Masters of Business

Administration (“MBA”) – Henley

Business School

External appointments:

N/A

Interest in the Company

As at 27 October 2023:

6,838,124 shares / 1.1%

SHAWN MCCORMICK

INDEPENDENT

NON-EXECUTIVE DIRECTOR

Appointment date:

February 2016

Committees:

SHEC (Chair)

Shawn is an international affairs

specialist with more than 30

years of political and extractive

industries sector experience

having served in The White House

as Director for African Affairs on

the National Security Council

(Washington), Africa Regional

Director and Senior Global Affairs

Advisor at BP (London) and

Corporate Vice President for

International Affairs at TNK-BP

(Moscow). He is currently

Managing Director of a London-

based strategic consulting firm

focused on the natural resources

sector in Africa and beyond.

Qualifications:

BA (Hons) – University of

Southern California;

advanced coursework at Insead

External appointments:

Chairman of Trinity Metals Group,

Non-Executive Director

of Karo Mining Holdings

Interest in the Company

As at 27 October 2023:

9,316,571 shares / 1.5%

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

BOARD OF DIRECTORS CONTINUED

CORPORATE GOVERNANCE

ATUL BALI

INDEPENDENT

NON-EXECUTIVE DIRECTOR

Appointment date:

March 2017

Committees:

Audit (Chair), Nomination

Atul is a corporate CEO and board

member with extensive

experience in tech, government

contracting and regulated

industries operating on all six

continents. Over more than 25

years, he has led in excess of 50

M&A and JV transactions in over

25 countries and both managed

and served on the boards of

several highly regulated

businesses. Currently he advises

a number of high-growth

technology companies, is

Chairman of the Football Pools

and the Lead Independent

Director of Everi holdings, Inc

(NYSE: EVRI). He has previously

held divisional CEO or president

positions with International Game

Technology PLC (NYSE: IGT),

Aristocrat Leisure Limited (ASX:

ALL), and RealNetworks, Inc

(NASDAQ: RNWK), a venture

capital firm, as well as Deputy

Chair of Gaming Realms PLC

(LSE: GMR).

Qualifications:

BA (Joint Hons) in Law &

Economics, University of Keele

Chartered accountant – KPMG, UK

External appointments:

Non-Executive Director of

Everi holdings, Inc, Chairman of

The Football Pools; board

member and Finance Committee

Chair of The Bush School Seattle

Interest in the Company

As at 27 October 2023:

4,420,992 shares / 0.7%

J. PETER PHAM

INDEPENDENT

NON-EXECUTIVE DIRECTOR

Appointment date:

May 2021

Committees:

Nomination

J. Peter Pham is a scholar and

practitioner of international affairs

with more than 20 years’

experience in Africa. Most

recently, he served until January

2021 as first-ever United States

Special Envoy for the Sahel

Region with the personal rank of

Ambassador. He had previously

served as the US Special Envoy

for the Great Lakes Region of

Africa from 2018-2020.

Ambassador Pham is currently a

Distinguished Fellow at the

Atlantic Council, a preeminent

American foreign policy think

tank, where he was Vice

President for Research and

Regional Initiatives and Director of

the Council’s Africa Center before

his service in government. He is

the author of several books and

more than 300 articles, essays

and reviews on African politics,

security, and economic issues.

He is also a member of the board

of the Smithsonian National

Museum of African Art in

Washington, DC, serving between

2016-2021 as Vice Chair.

Qualifications:

BA (Hons) in Economics -

University of Chicago;

MA (Hons), LLM (Hons), PhD

(Hons) - Gregorian University

External appointments:

Non-Executive Chairman of High

Power Exploration (HPX)

Non-Executive Director, Africell

Global Holdings

Interest in the Company

As at 27 October 2023:

631,500 shares / 0.1%

DARRYLL CASTLE

INDEPENDENT

NON-EXECUTIVE DIRECTOR

Appointment date:

June 2023

Committees:

N/A

Darryll is Director of Operations for

TechMet, a strategic shareholder

with the right to nominate one

Director to the Rainbow Board for

so long as it holds at least 10% of

the issued shares in the

Company. Previously CEO of a

number of mining and production

companies including CEO of

Trafigura mining, CEO of PPC

Cement, CEO of Anvil Mining

(listed in Toronto and Australia),

as well as multiple board

memberships of listed and private

companies, and previously Chief

Operations Officer at Metorex

Group Limited.

First hand operations and

projects experience globally

including in Cuba, Spain, Peru,

and particularly on the African

continent, having run projects

and companies in the DRC,

Zambia, Angola, Zimbabwe,

Ethiopia, Rwanda and Tanzania.

Qualifications:

BSc in Civil Engineering –

University of KwaZulu-Natal;

Bachelor of Commerce –

University of South Africa; MBA –

University of Cape Town; past

Chartered Financial Analyst (CFA)

Charterholder.

External appointments:

Director of Operations for TechMet

Interest in the Company

As at 27 October 2023:

821,422 shares / 0.1%

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

SENIOR MANAGEMENT

CORPORATE GOVERNANCE

PETE GARDNER

CHIEF FINANCIAL OFFICER

Appointment date:

May 2020

Pete is a qualified chartered

accountant with a breadth

of experience in financial

management and corporate

finance in the natural resources

sector. He was the Finance

Director of Amara Mining Plc

from October 2009 managing

the corporate and financial

development of the company

culminating in its acquisition by

Perseus Mining, and former Chief

Finance Officer for Piran

Resources, Chaarat Gold Holdings

and Alexander Mining Plc.

Qualifications:

BSc (Hons) in Physics - University

of Birmingham

Chartered Accountant – ICAEW

External appointments:

N/A

Interest in the Company

As at 27 October 2023:

618,522 shares / 0.1%

DAVE DODD

TECHNICAL DIRECTOR

Appointment date:

January 2021

Dave has 45 years of extractive

metallurgy experience covering

research and development,

technical sales and

predominantly metallurgical

project development and

execution. He was Technical

Director and co-founder of MDM

Engineering between 1987-2014.

Dave has designed and

commissioned plants across

Africa and the rest of the world,

covering minerals from rare

earths to gold, platinum,

diamonds, copper, zinc,

phosphate, cobalt and many

others. He is a Fellow of the

Southern Africa Institute of

Mining and Metallurgy.

Qualifications:

BSc (Hons) in Chemical

Engineering – University of

Manchester Institute of Science

and Technology

External appointments:

N/A

Interest in the Company

As at 27 October 2023:

1,500,000 shares / 0.2%

ALBERTO BRUTTOMESSO

PROJECT DIRECTOR

Appointment date:

May 2023

Alberto has over 30 years’

experience in project and

engineering management,

delivering 80 multidisciplinary

mining, water treatment and

infrastructure projects to date

across the African continent.

Alberto has managed projects

incorporating all aspects of the

mining process across gold,

diamonds, chrome, platinum

and uranium, including extensive

experience in the delivery of

processing plants. He has a

proven track record of delivering

total turn key projects within

budget and on time, increasing

project value by reducing capital

and operating costs during

project life cycle from study

to execution.

Qualifications:

Mechanical Engineer – Technikon

Witwatersrand; post graduate,

National Higher Diploma in

Business Management -

Technikon Witwatersrand.

External appointments:

N/A

Interest in the Company

As at 27 October 2023: N/A

The Senior Managers listed

on this page have been

designated as persons

discharging managerial

responsibility (“PDMRS”).

In addition, Charles Graham,

the Project Director for

Phalaborwa, was a PDMR prior

to his replacement by

Alberto Bruttomesso.

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

CORPORATE GOVERNANCE

STATEMENT

CORPORATE GOVERNANCE

As a guernsey-registered company, trading on the standard list

of the main market of the London Stock Exchange, the UK Corporate

Governance Code published by the Financial Reporting Council does not

apply to the Company. However, the Directors recognise the importance

of effective corporate governance and have implemented corporate

governance practices having consideration to the recommendations

and principles of the UK Corporate Governance Code as far as is

appropriate bearing in mind the size and nature of the Company.

The Board oversees the performance of the Group’s activities. It

comprises experienced board members who have held senior positions

in a number of public and private companies. The Board is responsible

to shareholders for the proper management of the Group. The Non-

Executive Directors have particular responsibility to ensure that the

strategies proposed by the Executive Director are carefully considered.

The Board meets regularly and met eight times in FY 2023. Prior to such

meetings taking place, an agenda and board papers are circulated to the

Directors so that they are adequately prepared for the meetings.

To enable the Board to discharge its duties, all Directors have

full and timely access to all relevant information.

There is no agreed formal procedure for the Board (or members thereof)

to seek independent professional advice but, pursuant to their letters of

appointment, the Non-Executive Directors may, where appropriate, take

independent professional advice at the Group’s expense.

In accordance with the Company’s articles of associations, the Directors

submit themselves for re-election every three years at the Company’s

annual general meeting (“AGM”).

The composition of the Board will be reviewed regularly to ensure

that the Board has the appropriate mix of expertise and experience.

The articles provide that the number of Directors that may be appointed

may not be fewer than two. Two Directors present at a board meeting

constitutes a quorum.

The Board ensures it is aware of the views of major and other

shareholders through regular meetings in person (where appropriate),

feedback via the Company’s investor relations manager or via the review

of investor relations board reports, as well as through discussions with

the Company’s brokers and market analysts. Where such information

has been obtained by the CEO, this information is disseminated to the

rest of the Board in a timely manner.

Review of internal control and risk management systems

The Board has reviewed the Group’s internal control and risk

management systems.

Rainbow has a relatively small team of management and financial staff

and is therefore able to retain a tight control over its financial reporting

activities. The Board does not consider it appropriate to have a separate

internal audit function, however a number of internal controls and

reviews have been put in place to provide the Board (and the audit

committee) with assurance that the risks inherent to operating a natural

resource company in more than one jurisdiction are managed

appropriately.

These controls include the following:

• Budgets and forecasts are prepared by finance staff in conjunction

with operating teams and are reviewed and approved by senior

management (and in the case of the budget, by the Board).

• Actual results are reported against budget and forecast, and

variances examined.

• All banking transactions must be initiated and authorised by at least

two staff members, one of whom is a senior manager (CEO or CFO).

Since the retirement of the general manager in Burundi, all payments

are approved by the CEO or CFO prior to payment being made locally.

For international payments, all payments are approved in the online

banking system by the CFO following sign-off by the CEO.

• Financial operations in Burundi are reviewed regularly by the CFO,

both on visits to Burundi and online. During the FY 2023, reviews

were primarily conducted in an online environment and in-country

visits limited to discussions with the Burundi government.

• The Group uses a central financial reporting system (xero) which

records all transactions, capturing third party documents (e.g.

invoices) which are reviewed by head office on a monthly basis.

• Senior management regularly discuss material developments

(normally weekly) and consider financial and reporting implications

of any matters arising.

In addition to formal audit committee meetings, the CFO has regular

interaction with the audit committee chairman to discuss control and

reporting matters in more detail.

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

CORPORATE GOVERNANCE

STATEMENT CONTINUED

CORPORATE GOVERNANCE

Board of Directors

The Company had one Executive Director and six Non-Executive Directors at 30 June 2023. All major decisions relating to the Group are made

by the Board as a whole. Operations are conducted by the subsidiaries of the Company. In Burundi, the Company is represented on the Board

of Rainbow Mining Burundi SM by the CEO and CFO.

The Board reviews key business risks regularly, including the financial risks facing the Group in the operation of its business.

These matters include, but are not limited to, the following:

• determining the strategy for the Company;

• approving the annual budget;

• discussing and approving financing, including new debt and equity;

• setting the dividend policy;

• developing the appropriate ESG standards and practices;

• mergers and acquisitions activity and significant transactions;

• risk management; and

• considering and, if appropriate, approving the recommendations of board committees.

The following table lists the names, positions and ages of the Directors as at 30 June 2023, the year they were appointed, and current committee

memberships:

Name Age Position Audit Remuneration Nomination SHEC

Adonis Pouroulis 53 Non-Executive Chairman - Member Chair -

George Bennett 62 CEO - - - Member

Alexander Lowrie 48 Independent Non-Exec Member Chair - Member

Shawn McCormick 56 Independent Non-Exec Member Member - Chair

Atul Bali 52 Independent Non-Exec Chair - Member -

J. Peter Pham 52 Independent Non-Exec - - Member -

Darryll Castle 54 Non-Exec - - - -

The Company does not consider Adonis Pouroulis to be independent by virtue of being a significant shareholder. The other Non-Executive Directors

are considered to be independent (with the exception of Darryll Castle) in terms of character and judgment, notwithstanding the following:

• all the independent Non-Executives are shareholders in the Company see Board of Directors on pages 38 to 39 for further information).

• all the independent Non-Executives held share options during the Year (see note 22 for details).

Darryll Castle is not independent because he is the Director of Operations for TechMet, a strategic shareholder with the right to nominate one Director

to the Rainbow Board for so long as it holds at least 10% of the issued shares in the Company.

The table below shows the attendance at board and committee meetings during FY 2023:

Name Board Audit Remuneration Nomination SHEC

Adonis Pouroulis 8/8 N/A 1/1 0/0 N/A

George Bennett 8/8 N/A N/A N/A 1/1

Alexander Lowrie 8/8 3/3 1/1 N/A 1/1

Atul Bali 8/8 3/3 N/A 0/0 N/A

J. Peter Pham 6/8 N/A N/A 0/0 N/A

Shawn Mccormick 7/8 0/3 1/1 N/A 0/1

Darryll Castle

1/1 N/A N/A N/A N/A

1 Darryll Castle was appointed on 12 June 2023.

The table of board committee attendance is based on the board committee appointments at the time of the relevant meeting. The Board is regularly

informed of developments outside of formal board meetings, through update calls and meetings, reports and one-to-one discussions with the CEO

and other management.

The deliberations of the various committees, referred to on page 44, do not reduce the individual and collective responsibilities of board members

with regard to their fiduciary duties and responsibilities, and they must continue to exercise due care and judgment in accordance with their

statutory obligations.

These terms of reference are subject to the provisions of the articles and any other applicable law or regulatory provision in force in Guernsey,

and the listings rules.

In addition to the audit, remuneration, nomination and SHEC (now renamed the Sustainability Committee) committees which have formally delegated

duties and responsibilities within written terms of reference, the Board may set up additional committees as appropriate.

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

CORPORATE GOVERNANCE

STATEMENT CONTINUED

CORPORATE GOVERNANCE

Diversity

The Board of Rainbow understands that diversity and inclusion are important in providing a broad range of perspectives in the workplace,

fostering innovation, encouraging collaboration and enabling businesses to deliver better results for their stakeholders.

As the Company progresses on its development path, it will continue to consider the appropriate mix of skills, culture and qualities,

as well as the diversity represented, that will allow Rainbow to deliver on its strategy.

Rainbow is committed to developing a diverse workforce and to providing a work environment in which everyone is treated fairly and with respect.

The Company does not currently have a formal Board diversity policy which is mainly a reflection of the small size of the Rainbow business to date.

However, as part of its future development plans, in FY 2024 the Company aims to commence the planning work required to put a diversity and

inclusion policy in place that will set out its commitment to ensuring an equitable, diverse and inclusive workplace.

As part of this work, we will be looking at all elements of diversity and considering a broad definition of difference, including but not limited to:

experience, skills, expertise, ethnicity, nationality, gender, cultural and socio-economic background, geographic location, age, education, religious

beliefs, language, neurodiversity, disability, sexuality and family responsibilities.

Rainbow Board Diversity

Diversity of skills and experience Gender diversity Ethnic diversity

Gender diversity

The Company has not met the UK’s Financial Conduct Authority’s (“FCA”) diversity targets that at least 40% of the board members should be female

and that at least one of the senior board positions should be held by a woman, and the reason for this mainly relates to the historically lower proportion

of women in the resources and industrial industries. However, the Company is aware that much progress has been made in order to increase female

representation in these sectors and will be looking to improve its gender diversity statistics as the Company continues with its corporate development

path. This will be a focus for the Company’s Nomination Committee in FY 2024.

The following table sets out the Company’s current gender diversity at senior levels of the business as at 30 June 2023:

Number

of senior

positions on Number Percentage

Number of Percentage the board (CEO, in executive of executive

board members of the board CFO, SID, Chair) management management

Men 7 100 2 1 100

Women 0 0 0 0 0

Ethnic diversity

The Company has met the FCA’s diversity target that at least one member of the board should be from an ethnic minority background excluding

white ethnic groups (as set out in categories used by the Office for National Statistics).

The following table sets out the Company’s current ethnic diversity at senior levels of the business as at 30 June 2023:

Number

of senior

positions on Number Percentage

Number of Percentage the board (CEO, in executive of executive

board members of the board CFO, SID, Chair) management management

White British or other White 5 71 2 1 100

Mixed / Multiple Ethnic Groups 0 0 0 0 0

Asian / Asian British 2 29 0 0 0

Black / African / Caribbean / Black British 0 0 0 0 0

Other ethnic group, including Arab 0 0 0 0 0

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

012345678

Emerging markets

Operations

Capital markets

Sustainability

Public poloicy

Corporate governance

Male

Female

White British or other White

Asian/Asian British

CORPORATE GOVERNANCE

STATEMENT CONTINUED

CORPORATE GOVERNANCE

Audit committee

The Board has established an audit committee with formally delegated

duties and responsibilities. The audit committee is chaired by Atul Bali

and its members are Alexander Lowrie and Shawn McCormick.

The members of the audit committee are considered to possess the

appropriate skills and experience to monitor and ensure the integrity

of the Group’s financial reporting, Internal Audit, internal financial control

and risk management systems and to support Rainbow’s governance.

The audit committee should meet not less than two times a year

and is responsible for ensuring the financial performance of the Group

is properly reported on and monitored, including reviews of the annual

and interim accounts, results announcements, internal control systems

and procedures and accounting policies. It is also responsible for keeping

the categorisation, monitoring and overall effectiveness of the Group’s

risk assessment and internal control processes under review.

The audit committee met three times during the Year. During these

meetings, the following matters were considered:

• the audit of the year ended 30 June 2022 was planned and the

key areas of audit risk were discussed ahead of the relevant audit

procedures being undertaken. The audit planning meeting for FY

2023 occurred after the financial year end.

• the financial statements for the year ended 30 June 2022, and the

interim financial statements for the six months ended 31 December

2022, were reviewed. The audit committee met with the auditors at

the conclusion of the FY 2022 audit to discuss their findings and,

following due consideration, recommended to the Board that these

financial statements be approved.

The audit committee also considered the conduct of the external audit

by BDO LLP, which was considered to be appropriate. The committee

therefore resolved to propose BDO LLP for reappointment at the next

AGM for a period of 12 months. It was noted that BDO LLP had been

auditors of the Company since October 2016.

The audit committee also considered the independence and objectivity

of BDO LLP. The committee considered the composition of the BDO

audit team, together with the duration of service of the partner and

senior audit team members on the Group’s audit and concluded that

BDO LLP was sufficiently independent to conduct the audit. The only

non-audit service during the Year was the informal review of the interim

financial statements for the six months to 31 December 2022.

Nomination committee

The nomination committee is chaired by Adonis Pouroulis and its

members are Atul Bali and J. Peter Pham. The nomination committee is

normally expected to meet only as required. The nomination committee

is responsible for reviewing, within the agreed terms of reference, the

structure, size, and composition of the Board, undertaking succession

planning, leading the process for new Board appointments, and making

recommendations to the Board on all new appointments and re-

appointments of existing Directors. The nomination committee did not

meet during FY 2023.

Remuneration committee

The remuneration committee is chaired by Alexander Lowrie and its

members are Adonis Pouroulis and Shawn McCormick. It is expected to

meet at least once a year. The remuneration committee has responsibility

for determining, within agreed terms of reference, the Group’s policy

on the remuneration of senior executives and specific remuneration

packages for Executive Directors and the Non-Executive Chairman. The

remuneration of Non-Executive Directors is a matter for the Board. No

Director may be involved in any discussions as to their own remuneration.

The remuneration committee met once during FY 2023 to discuss and

approve Board and Senior Management remuneration, as well as the

Company’s share option scheme and the award of share options to

Directors and Senior Management.

Safety, health, and environment committee

The SHEC is chaired by Shawn Mccormick and its members

are George Bennett and Alexander Lowrie.

The SHEC is responsible for developing and reviewing the Group’s

framework, policies and guidelines on safety, health and environmental

management, monitoring key indicators on accidents and incidents

within the Group’s operations and considering developments in relevant

safety, health and environmental practices and regulations.

The SHEC met once during FY 2023 to discuss the development

of the Group’s sustainability strategy, both over the short-and longer-

term, and an action plan and budget were subsequently approved in

order to deliver on this strategy. Post year-end, the SHEC was renamed

the Sustainability Committee - see page 23 for details.

Share dealing policy

The Company has a share dealing policy requiring all Directors

and Senior Executives to obtain prior written clearance from either

the Chairman or the Chief Executive Officer to deal in linked shares.

The Chairman requires prior written clearance from the chairman of the

audit committee. Close periods (as defined in the share dealing policy)

are observed as required by market abuse regulations and other rules

that apply to the Company by virtue of the market on which its shares

are listed. During these periods, the Company's Directors, Senior

Managers and inside employees are not permitted to deal in the

Company’s securities. Additional close periods are enforced when

the Company or its applicable employees are in possession

of inside information.

Anti-bribery policy

As part of our work during the Year to strengthen our policies,

we have updated the Group’s Anti-bribery Policy. The Policy includes

clear guidance on expected behaviour and procedures (including

whistleblowing), which apply to the Group, its officers and staff

anywhere in the world. The Policy and procedures have been developed

following an assessment of the risks applicable to the Group’s business

and include clear definitions as well as a process for reporting suspicious

conduct, financial limits on gifts and hospitality, procedures for financial

record-keeping and for dealing with contracts with third parties, and a

prohibition on charitable or political donations without Board approval.

Guidance and expectations around conflicts of interest are included in

the Group’s Code of Conduct.

Pete Gardner, CFO, acts as the Group’s Anti-bribery Officer, overseeng

the day-to-day operation of the Policy and procedures. He reports

to the Board on any specific issues that might arise and the Board also

regularly reviews the operation of the Policy and related procedures.

All personnel are required to receive guidance and training in relation

to the Group’s Policy and procedures.

The anti-bribery officer also undertakes due diligence on third parties

as appropriate that are to be engaged by the Group to do business

on its behalf. The Group requires third parties to take account of the

Anti-bribery Policy and to act in accordance with its provisions.

The Group’s Anti-Bribery Policy, along with its Code of Conduct

and Ethics, its Whistleblowing Procedure and its Share Dealing Code,

can be found on the Company’s website at

https://www.rainbowrareearths.com/about/corporate-

governance/company-policies/.

Signed on behalf of the Board of Directors on 27 October 2023.

GEORGE BENNETT

CHIEF EXECUTIVE OFFICER

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

PRINCIPAL RISKS AND

UNCERTAINTIES

THE DIRECTORS

REGULARLY ASSESS

AND DISCUSS THE

PRINCIPAL RISKS

FACING THE GROUP

The Phalaborwa front-end pilot plant

in Johannesburg

CORPORATE GOVERNANCE

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

PRINCIPAL RISKS AND

UNCERTAINTIES

CORPORATE GOVERNANCE

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

The Directors regularly assess and discuss the principal risks facing the Group, including those that would threaten its business model,

future performance, solvency or liquidity.

The key risks affecting the Group are set out below:

Risk

Project definition

risk

Comment

At Phalaborwa, PEA published in October

2022 confirmed a processing flowsheet

capable of economically extracting the

magnet rare earth metals from the gypsum

stacks in a low capital and low operating cost

environment.

Pilot test work to confirm the efficacy

of the processing flowsheet is underway with

the production of a mixed rare earth sulphate

in South Africa which will be used for pilot

testing of the final separation process

in the USA. As a result of the pilot test work,

changes may be required to the proposed

processing flowsheet which could have a

detrimental impact on the economics

of the project as set out in the PEA.

A DFS will need to be completed

to provide sufficient confidence for project

development, which may not deliver results

in line with the PEA.

Business impact

High

Mitigation

The Group’s technical team has designed

and commissioned numerous commercial

plants in Africa, including completion

of feasibility studies for rare earth projects,

and are therefore familiar with alternative

technical options that may need to be

deployed if the original strategies prove

uneconomic.

The results of the pilot test work programme

to date, comprising the production of an

initial batch of mixed rare earth sulphate,

have been in line with the PEA. This includes

both metal recoveries of ca. 65% and reagent

consumption in the process.

Permitting risk New and updated permits and licences

will be required to develop the Phalaborwa

project including, but not limited to, a water

use licence, waste management licence

and air emissions licence.

High Rainbow is working with specialist consultants

to compile the technical reports required for

the permitting process and is aiming to make

the relevant applications in parallel with work

on the DFS.

Whilst the timeframe for the issuance of

permits is difficult to predict, the Phalaborwa

project will clean up legacy environmental

issues at the site, including treating the acid

water currently associated with the unlined

gypsum stacks and re-stacking the

processed gypsum on new lined stacks

designed in accordance with IFC

Performance Standards and the Equator

Principles. Accordingly, the Group is

confident that the relevant permits will be

issued to allow the project to proceed.

Financing risk The Group’s ability to continue to develop the

Phalaborwa project and other new business

opportunities will rely upon its continued

ability to access financing, both

at the corporate and project level.

High The strong economic returns set out in the

PEA for Phalaborwa are expected to ensure

funding is available to deliver the DFS and,

ultimately, the development of the

Phalaborwa project.

Management maintains strong relationships

with key sources of finance. Rainbow has a

history of securing funding required for the

Group’s growth plans, including support from

its cornerstone investors, and management

expects to be able to secure additional

funding as required.

PRINCIPAL RISKS AND

UNCERTAINTIES CONTINUED

CORPORATE GOVERNANCE

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

Risk

Rare earth prices

Comment

Rainbow is focused on the identification

and development of secondary rare earth

deposits that can be brought into production

quicker and at a lower cost than traditional

hard rock mining projects, with a focus on

the permanent magnet rare earth elements

neodymium and praseodymium, dysprosium

and terbium.

Whilst analysts are predicting strong growth

in demand for rare earths, prices have been

volatile in the past. If the underlying rare earth

basket price of the Group’s development

projects fall, this reduces potential revenue

that will impact the long-term profitability

of the projects and could impact the

commercial viability of any development.

Business impact

High

Mitigation

The Phalaborwa PEA confirmed a low-cost

operation due to the nature of the rare earth

mineral resource contained in a chemical

form in two gypsum stacks, which will not

require many of the processes associated

with a primary mineral ore body for the

extraction of rare earths. The resulting

operating margin will allow Phalaborwa

to be resilient against rare earth pricing

volatility as the project is expected to

generate strong returns even in a lower

rare earth price environment.

The Group aims to negotiate offtake

arrangements to ensure a commercial

development is viable in the interests

of all stakeholders.

Co-development risk The Group’s assets include projects that

will be conducted in joint arrangements

or with associates, which reduces the

Group’s ability to control and manage

risk and places reliance on partners not

controlled by the Group.

At Phalaborwa, Bosveld Phosphates (Pty)

Limited has a 15% interest in the project and,

as current owner of the site, their assistance

is required to ensure the assets necessary

for the project development are transferred

at the necessary time into the joint venture

vehicle and they remain liable for the historic

environmental liabilities associated with the

project site.

The Group’s development pipeline,

including the Uberaba property in Brazil and

the opportunity with OCP in Morocco, are at a

much earlier stage of development. The legal

framework for the development of a

commercial operation for these opportunities

has not been fully defined and terms may

not be agreed with the owners of these

assets to allow a development to occur.

Medium For Phalaborwa, Rainbow has the option

to acquire the 15% minority interest from

Bosveld by issuing US$7 million of equity

in Rainbow Rare Earths Limited. This will

enable the Group to fully control that project

and creates a strong incentive for Bosveld

Phosphates (Pty) Limited to ensure it takes

the necessary steps to allow the project to

be developed.

For the earlier stage projects, Rainbow’s rare

earths processing expertise and ownership,

directly or under licence in the relevant

territories, of the IP rights to develop an

economic processing flow sheet similar

to Phalaborwa is expected to ensure that

suitable commercial terms can be agreed for

the long term development of these assets.

Political risk in

Burundi

On 12 April 2021, the Government of Burundi

suspended the export of concentrate

produced at Gakara. This was followed

on 29 June 2021 with a suspension of all trial

mining and exploration activity. All operations

remain on care and maintenance.

Low

Due to the re-focus of Rainbow’s business

on the Phalaborwa asset and growth

opportunities from the associated processing

technology, the Directors do not envisage

investing significant amounts in Burundi

to develop a formal mineral resource and

therefore the net assets of the Gakara cash

generating unit have been impaired to nil in

the 2023 Annual Report and Accounts.

DIRECTORS’ REPORT

CORPORATE GOVERNANCE

The Directors present their Annual Report and the Financial

Statements of the Group for the year ended 30 June 2023.

General

Rainbow Rare Earths Limited, the parent company of the Group,

was established in Guernsey on 5 August 2011. On 30 January 2017,

its shares were listed on the standard segment of the Main Market

of the London Stock Exchange.

Principal activity

The Company’s principal activity is the development of rare earth

minerals projects in South Africa and Brazil.

Business model

The basis on which the Company seeks to preserve and generate value

is through the identification and development of secondary rare earth

deposits that can be brought into production quicker and at a lower

cost than traditional hard rock mining projects, with a focus on the

permanent magnet rare earth elements neodymium and

praseodymium, dysprosium and terbium. Once operational, the net

cash generated from the Group’s projects will be used to service the

Company’s financing, re-invested in further rare earth project

development opportunities, or (where appropriate) repaid to investors

in the form of dividends.

In the short term, this strategy is focused on the Phalaborwa rare earths

project in South Africa, where a measured and indicated mineral

resource has been defined contained within gypsum stacks derived

from historic phosphate hard rock mining. The PEA has confirmed that

Phalaborwa represents an economically attractive potential source of

rare earth oxides.

The Uberaba project in Brazil represents a longer-term prospect; the

Company is currently carrying out initial test work with its partner Mosaic

to understand the mineralogy of the deposit better.

Business review

A review of the business during the Year is included in the Chairman’s

Statement, the CEO’s Q&A, and in the Operating and Financial Reviews.

The Group’s business and operations and the results thereof are

reflected in the attached Financial Statements.

Business risks

A review of the key risks to the Company is set out on pages 46 to 47.

Advisers

The Company’s advisers are set out on the inside back cover.

Financial results

During the 12 months ended 30 June 2023, the Company reported

a net loss of US$12,865k (30 June 2022: net loss of US$3,985k).

No dividends have been declared in respect of the years ending

30 June 2023 or 2022.

Directors

A list of the Directors of the Company is set out on pages 38 to 39.

No Director shall be requested to vacate office at any time by reason

of any specific age attained. The Board considers that there is a balance

of skills within the Board and that each of the Directors contributes

effectively.

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

Directors’ remuneration

Salary/fees (US$’000) Bonus (US$’000) Total (US$’000)

June 2023 June 2022 June 2023 June 2022 June 2023 June 2022

Executive Directors

George Bennett 335 325 163 134 498 459

Non-Executive Chairman

Adonis Pouroulis 115 93 - - 115 93

Non-Executive Directors

Alexander Lowrie 50 53 - - 50 53

Atul Bali 50 49 - - 50 49

J Peter Pham 44 47 - - 44 47

Shawn McCormick 50 53 - - 50 53

Darryll Castle

- N/A - - - N/A

Robert Sinclair

N/A 30 N/A - N/A 30

Total 644 650 163 134 807 784

1. Darryll Castle was appointed on 12 June 2023.

2. Robert Sinclair retired on 18 January 2022.

DIRECTORS’ REPORT CONTINUED

CORPORATE GOVERNANCE

Directors’ responsibility statement

The Companies (Guernsey) Law, 2008 requires the Directors to prepare

financial statements for each financial period, which give a true and fair

view of the state of affairs of the Group for that period and of the profit

or loss of the Group for that period. Under that law they have elected

to prepare the financial statements in accordance with International

Financial Reporting Standards as adopted by the EU and applicable law.

In preparing those financial statements the Directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgments and estimates that are reasonable and prudent;

• state whether applicable accounting standards have been followed,

subject to any material departures disclosed and explained in the

financial statements; and

• prepare the financial statements on the going concern basis unless

it is inappropriate to presume that the Group will continue in business.

The Directors are responsible for keeping proper accounting records

which disclose with reasonable accuracy at any time the financial

position of the Group and to enable them to ensure that the financial

statements have been properly prepared in accordance with the

Companies (Guernsey) Law, 2008. They are also responsible for

safeguarding the assets of the Group and hence for taking reasonable

steps for the prevention and detection of fraud and other irregularities.

The Directors confirm that they have complied with the above

requirements in preparing the financial statements.

So far as each of the Directors are aware, there is no relevant audit

information of which the Group’s auditor is unaware; having taken

all the steps the Directors ought to have taken to make themselves

aware of any relevant audit information and to establish that the

Group’s auditor is aware of that information.

Principal shareholders

A list of shareholders who beneficially hold more than 5% of the

Company’s shares at 27 October 2023 is as follows:

Key Shareholders Number Percent

Adonis Pouroulis 84,108,870 13.5

TechMet 75,206,112 12.0

George Bennett 37,347,298 6.0

Caden Holdings 36,967,805 5.9

Interests of Directors and Senior Managers

The interests (all of which are beneficial and include related parties)

of the Directors and Senior Managers in the Company’s issued share

capital at 27 October 2023 are as follows:

Key Shareholders Number Percent

Adonis Pouroulis 84,108,870 13.5

George Bennett 37,347,298 6.0

Shawn McCormick 9,316,571 1.5

Alexander Lowrie 6,838,124 1.1

Atul Bali 4,420,992 0.7

Dave Dodd 1,500,000 0.2

Darryll Castle 821,422 0.1

J. Peter Pham 631,500 0.1

Pete Gardner 618,522 0.1

Total 145,603,299 23.3

Website publication

The Directors are responsible for ensuring that the Annual Report

and the Financial Statements are made available on a website.

Financial statements are published on the Company’s website

(www.rainbowrareearths.com) in accordance with applicable legislation

in Guernsey governing the preparation and dissemination of financial

statements, which may vary from legislation in other jurisdictions.

The maintenance and integrity of the Company’s website is the

responsibility of the Directors. The Directors’ responsibility also extends

to the ongoing integrity of the financial statements contained therein.

Going concern

The Directors have reviewed the Group’s cash flow forecasts for at

least 12 months following the reporting date, together with appropriate

sensitivities and mitigating actions. A full analysis of the Directors’

analysis of the going concern status of the Group Is set out in note 2

to the Financial Statements.

After considering available cash, loan facilities anticipated to remain

available, forecast cash flows and anticipated fundraising activities

the Directors consider that the Group will have adequate resources

to continue its operational existence for the foreseeable future. However,

the cash flow forecast includes additional fundraising which is not yet

in place. The Directors believe that the need to raise further funds

represents a material uncertainty that casts doubt on this assumption.

Nevertheless, the Directors continue to adopt the going concern basis

in preparing the consolidated financial statements.

Auditor

BDO LLP has expressed its willingness to continue in office as auditors

and a resolution to re-appoint BDO LLP will be proposed at the

forthcoming AGM.

Signed on behalf of the Board of Directors on 27 October 2023

GEORGE BENNETT

CHIEF EXECUTIVE OFFICER

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

PAGE TITLE

RARE EARTHS

ARE USED IN THE

COMPONENTS OF

MANY DEVICES

USED DAILY

FINANCIAL STATEMENTS

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

Rare earths have transformed the consumer

electronics market, enabling the high-tech

products so integral to our lives

PAGE TITLE

FINANCIAL STATEMENTS

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

FINANCIAL STATEMENTS

52 Independent Auditors’ Report

58 Consolidated Statement of Comprehensive Income

59 Consolidated Statement of Financial Position

60 Consolidated Statement of Changes in Equity

61 Consolidated Cash Flow Statement

62 Notes to the Financial Statements

IBC Shareholder Information

INDEPENDENT AUDITOR’S REPORT

TO THE MEMBERS OF RAINBOW RARE EARTHS LIMITED

FINANCIAL STATEMENTS

Opinion on the financial statements

In our opinion, the financial statements of Rainbow Rare Earths Limited (“the Group”):

• give a true and fair view of the state of the Group’s affairs as at 30 June 2023 and of its loss for the year then ended;

• have been properly prepared in accordance with IFRSs as adopted by the European Union; and

• have been properly prepared in accordance with the requirements of the Companies (Guernsey) Law, 2008.

We have audited the financial statements of Rainbow Rare Earths Limited (“the Group”) for the year ended 30 June 2023 which comprise the Consolidated

Statement of Comprehensive Income, Consolidated Statement of Financial Position, Consolidated Statement of Changes in Equity, Consolidated Cash Flow

Statement and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been

applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards

are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have

obtained is sufficient and appropriate to provide a basis for our opinion. Our audit opinion is consistent with the additional report to the Audit Committee.

Independence

Following the recommendation of the Audit Committee, we were appointed by the Audit Committee on the 03 October 2016 to audit the financial statements

for the year ending 30 June 2016 and subsequent financial periods. The period of total uninterrupted engagement including retenders and reappointments is 8

years, covering the years ended 30 June 2016 to 30 June 2023. We remain independent of the Group and the Parent Company in accordance with the ethical

requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities,

and we have fulfilled our other ethical responsibilities in accordance with these requirements. The non-audit services prohibited by that standard were not

provided to the Group or the Parent Company.

Material uncertainty relating to going concern

As stated in note 2 the Group has forecasted that it will need to raise additional funding before 31 December 2024, the timing of which is dependent

on the speed at which the Phalaborwa Definitive Feasibility Study is completed and the amount of funds required to progress the Uberaba opportunity.

These conditions, along with the other matters set out in Note 2 indicate the existence of a material uncertainty which may cast significant doubt over

the Group’s ability to continue as a going concern. These financial statements do not include any adjustments that may be necessary if the group was

not a going concern. Our opinion is not modified in respect of this matter.

We identified going concern as a key audit matter based on our assessment of the significance of the risk and the effect on our audit strategy.

Our evaluation of the Directors’ assessment of the entity’s ability to continue to adopt the going concern basis of accounting and in response

to the key audit matter is described below:

• Critically assessing the Director’s cash flow forecast and the underlying assumptions which have been approved by the Board. This included stress testing

and applying sensitivities to the base cashflow forecast. Our testing included testing the integrity of the model, comparing forecast costs to historical

actuals, evaluating the consistency of the forecast capital and exploration expenditure within the Group’s strategic plans, and considering the

reasonableness of the sensitivities applied and outcome of the stress testing;

• Verifying cash balances used in the forecast close to the date of sign off of these financial statements, by tracing cash positions against bank statements;

• Agreeing the receipt of US$4.7m of the total US$5.4m of funds raised in the September 2023 private placement to bank statements;

• Agreeing future cash outflows in respect of loans to underlying agreements. This included assessing the timing of the interest and capital repayments

on the Finbank loan was appropriately reflected in cashflows commencing from July 2023;

• Assessing the reasonableness of the cash outflows for the corporate overhead, which included some contingency and considering the completeness

of the costs included in the forecast;

• Assessing the level of cash outflows assumed for the Gakara mine, which was assumed to remain on care and maintenance for the entire forecast period.

This involved comparing forecast cash outflows to prior year actuals and considering the completeness of the costs included in the forecast;

• Considering the reasonableness of the assumptions in the model regarding the cost and timing of completing the Phalaborwa Definitive Feasibility Study

(DFS) and pilot plant testing by 30 June 2024;

• Considering the ability of the group to secure additional funds in the future based on its history of successful fundraising; and

• Reviewing Board minutes and project reports for any indications of unexpected costs, claims or disputes.

Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

Overview

Coverage 100% (2022: 93%) of Group loss before tax

100% (2022: 96%) of Group total assets

Key audit matters 2023 2022

1. Accuracy and completeness of the impairment of Burundi assets

2. Material uncertainty relating to going concern

Materiality Group financial statements as a whole

2023: US$210k based on 1.5% of total assets.

2022: US$160k based on 4% of loss before tax.

An overview of the scope of our audit

Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group’s system of internal control, and assessing

the risks of material misstatement in the financial statements. We also addressed the risk of management override of internal controls, including assessing

whether there was evidence of bias by the Directors that may have represented a risk of material misstatement.

Whilst Rainbow Rare Earths Limited is a Company registered in Guernsey and listed on the Standard Segment of the London Stock Exchange in the UK,

the Group’s principal operations are located in South Africa and Burundi. In approaching the audit, we considered how the Group is organised and managed.

We assessed the business as being two projects comprising of the Gakara and the Phalaborwa Projects, and a corporate head office function.

Our Group audit scope focused on the Group’s principle operating entities, Rainbow Rare Earths Limited, Rainbow Mining Burundi, Rainbow International

Resources and Rainbow Rare Earths (Pty) Ltd. We identified these entities as significant components for the purposes of our financial statement audit, based on

their relative share of total assets. The significant components accounted for 100% of total assets and were subject to full scope audits conducted by the group

engagement team, with the exception of fixed assets verification and inventory counts in Rainbow Mining Burundi which were carried out by BDO member firm.

The remaining component of the Group, being a dormant entity, was considered non-significant, and this component was principally subject to analytical

review procedures with specific procedures for any significant balances impacting the Group financial statements.

All audit work (full scope audit or analytical review procedures) was conducted by the group engagement team, with the exception of the fixed assets

verification and inventory count as detailed above.

Climate change

Our work on the assessment of potential impacts on climate-related risks on the Group’s operations and financial statements included:

• Enquiries and challenge of management to understand the actions they have taken to identify climate-related risks and their potential impacts

on the financial statements and adequately disclose climate-related risks within the annual report;

• Performing our own qualitative risk assessment taking into consideration the sector in which the Group operates and how climate change affects

this particular sector; and

• Review of the minutes of Board and Audit Committee meeting and other papers related to climate change to assist us in performing our risk

assessment as to how the impact of the Group’s commitment as set out in the Annual Report may affect the financial statements and our audit.

We challenged the extent to which climate-related considerations, including the expected cash flows from the initiatives and commitments

have been reflected, where appropriate, in management’s going concern assessment and viability assessment.

We also assessed the consistency of managements disclosures included as Statutory Other Information’ on pages 28 - 33 with the financial statements and

with our knowledge obtained from the audit.

Based on our risk assessment procedures, we did not identify there to be any Key Audit Matters materially impacted by climate-related risks and related

commitments.

INDEPENDENT AUDITOR’S REPORT

TO THE MEMBERS OF RAINBOW RARE EARTHS LIMITED

FINANCIAL STATEMENTS

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

INDEPENDENT AUDITOR’S REPORT

TO THE MEMBERS OF RAINBOW RARE EARTHS LIMITED

CONTINUED

FINANCIAL STATEMENTS

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period

and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified, including those which had the greatest

effect on the overall audit strategy, the allocation of resources in the audit, and directing the efforts of the engagement team. These matters were addressed in

the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

In addition to the matter described in the “material uncertainty relating to going concern” section above, we have determined the matter below to be the key

audit matter to be communicated in our report.

Key audit matter: Accuracy and completeness of the impairment of Burundi Assets (Exploration Assets,

Property plant and Equipment, Inventory and the Royalty Receivable)

Refer to Note 3, 12, 14 & 15

In 2021 the Burundian Government put a suspension on trial mining operations and introduced an export ban. The exploration licence has not

been withdrawn, and the Directors believe that the licence area has significant rare earth mineral potential. However, due to the ongoing suspension

of mining operations and re-focus of Rainbow’s business on the Phalaborwa asset, the Directors do not envisage investing significant amounts in

Burundi in the future to develop the resource.

Accordingly, the Directors have written the net assets of the Gakara cash generating unit to US$nil, resulting in a US$9,575k impairment

charge being recorded in the year.

The assets associated with the Gakara project include both intangible and tangible fixed assets together with cash, mineral concentrate,

royalty receivables and consumables held in stock. The liabilities associated with the Gakara project include a loan, decommissioning,

site rehabilitation and environmental costs, tax liabilities and trade payables.

Given the judgements and estimates involved in assessing the accuracy of the impairment charge and recoverability of the unimpaired

Burundi assets, this is a key audit matter.

How the scope of our audit addressed the key audit matter

To determine the accuracy of the impairment charge and recoverability of the unimpaired Burundi assets we have undertaken the following procedures:

Exploration and evaluation assets, carrying value of nil after a U$8.6m impairment charge.

• We have considered management’s assessment of impairment indicators under IFRS 6 (Exploration and Evaluation of Mineral Resources)

and have confirmed against Board approved budgets that no substantive expenditure is either budgeted or planned to further explore the

area which is an impairment trigger; and

• We have tested the completeness and accuracy of the US$8.6m impairment of exploration assets by confirming no changes were made

to the exploration assets balance between 2022 and 2023 before impairment

Property plant and equipment (PP&E) carrying value of nil after a US$0.7m impairment charge.

• A BDO member firm under our direction and supervision physically verified the existence of a sample of PP&E;

• We considered the requirements of IAS 36 (Impairment of assets) which details PP&E should be held at the higher of value in use and fair value

less cost to sell, and:

- in considering value in use, we reviewed correspondence between management and the Burundi government which gives no indication of when

the suspension will be lifted; and we corroborated management’s change of focus from Burundi to Phalaborwa by reviewing internal budgets.

Based on these procedures we concurred with management that the value in use of PP&E is nil; and

- in considering fair value less cost to sell, we considered management’s ability to sell PP&E, which included consideration of the remote location

of the mine, the suspension of all mining activities in Burundi, and management’s ability to export the PP&E which also requires government

approval. Based on these procedures we concurred with management that fair value less cost to sell is nil.

Inventory Carrying value of US$0.7m after a US$0.1m impairment charge.

The impaired inventory of US$0.1m relates to spares and equipment held at a government warehouse awaiting import clearance.

Neither management nor ourselves have been able to confirm the existence of this inventory and we concur that it is appropriate to impair it to nil.

The remaining inventory on hand is made up of 420 tonnes of rare earth minerals.

• A BDO member firm attended an inventory count at the year-end and tested a sample of volumes and grades of the rare earth minerals;

• We assessed the rare earth minerals were appropriately held at the lower of cost and net realisable value. This included challenging management

over the timing of when the export ban will be lifted, as until this is lifted the inventory has no realisable value. In the event that the export ban is not

lifted, and the inventory is not able to be sold, management would use this to asset to partially settle any remaining in country liabilities.

Royalty receivable carrying value of nil after a US$0.1m impairment charge.

• We assessed Management’s assumptions to determine the recoverable amount of the receivable, including considering the time that has elapsed

with no payments having been received.

Key observations:

Based on procedures performed, we consider that the impairment charges and recoverable values of the remaining Burundi assets to have been

appropriate determined given the current facts and circumstances, and that the disclosures included within the financial statements that detail

the significant judgements and estimates arising from the suspension from mining operations to be appropriate.

INDEPENDENT AUDITOR’S REPORT

TO THE MEMBERS OF RAINBOW RARE EARTHS LIMITED

CONTINUED

FINANCIAL STATEMENTS

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

Our application of materiality

We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider materiality to be the

magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on the basis of the financial

statements.

In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level, performance

materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily be evaluated as immaterial

as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect

on the financial statements as a whole.

Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality as follows:

Group financial statements

2023 2022

US$’000 US$’000

Materiality 210,000 160,000

Basis for determining materiality 1.5% of total assets 4% of loss before tax

Rationale for the benchmark applied Total Assets was determined as an appropriate basis as the principal focus of the Group

remains the advancement and development of its projects.

As such, we consider the users of the financial statements will focus on the statement

of financial position and total assets of the Group in order to understand the level of

investment being made.

In the prior year, materiality was based on 4% of loss before tax. We considered loss before

tax to be the most significant determinant of the Group’s financial performance given the

increased focus on Phalaborwa which made up a lower proportion of the group’s total assets,

and the costs incurred to keep Gakara on care and maintenance were being expensed in the

period. Therefore, loss before tax was considered to be a more appropriate materiality base

as this represents the costs incurred to fund the group in the pre-revenue phase of operation.

Performance materiality 147,000 112,000

Basis for determining performance materiality Performance materiality was set at 70% (2022: 70%) of the materiality level based on our

assessment of a number of factors including the expected total value of known and likely

misstatements (based on past experience), our knowledge of internal control and

management’s attitude towards proposed adjustments.

Component materiality

We set materiality for each component of the Group based on Group materiality to ensure that the risk of errors exceeding component materiality

was appropriately mitigated; this was capped due to aggregation risk in line with the ISAs (UK). Component materiality was US$105,000 for each

component (2022: US$106,000). In the audit of each component, we further applied performance materiality levels of 70% (2022: 70%) of the

component materiality to our testing to ensure that the risk of errors exceeding component materiality was appropriately mitigated.

Reporting threshold

We agreed with the Audit Committee that we would report to them all individual audit differences in excess of US$4,200 (2022: US$3,200).

We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds.

Other information

The Directors are responsible for the other information. The other information comprises the information included in the Annual Report, other than the financial

statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise

explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so,

consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise

appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this

gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material

misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Other Companies (Guernsey) Law, 2008 reporting

We have nothing to report in respect of the following matters where the Companies (Guernsey) Law, 2008 requires us to report to you if, in our opinion:

• proper accounting records have not been kept by the Company; or

• the financial statements are not in agreement with the accounting records; or

• we have failed to obtain all the information and explanations which, to the best of our knowledge and belief,

are necessary for the purposes of our audit.

INDEPENDENT AUDITOR’S REPORT

TO THE MEMBERS OF RAINBOW RARE EARTHS LIMITED

CONTINUED

FINANCIAL STATEMENTS

Responsibilities of Directors

As explained more fully in the Directors’ responsibilities statement within the Directors Report, the Directors are responsible for the preparation of the financial

statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the

preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Directors are responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable,

matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Company or to cease

operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due

to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that

an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and

are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis

of these financial statements.

Extent to which the audit was capable of detecting irregularities, including fraud

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above,

to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including

fraud is detailed below:

Non-compliance with laws and regulations

Based on:

• Our understanding of the Group and the industry in which it operates;

• Discussion with management and those charged with governance and also consider legal counsel; and

• Obtaining and understanding of the Group’s policies and procedures regarding compliance with laws and regulations.

We considered the significant laws and regulations to be the applicable accounting framework, Companies (Guernsey) Law 2008, Tax regulations

and the Listing Rules of the Financial Conduct Authority.

The Company is also subject to laws and regulations where the consequence of non-compliance could have a material effect on the amount or disclosures in

the financial statements, for example through the imposition of fines or litigations. We identified such laws and regulations to be Task Force on Climate-Related

Financial Disclosures (TCFD), local health and safety law, compliance with the rights for Phalaborwa as per the earn-in-agreement, the mining permits and

export ban of Burundi and the Prevention of Corruption (Bailiwick of Guernsey) Law, 2003.

Our procedures in respect of the above included:

• Review of minutes of meeting of those charged with governance for any instances of non-compliance with laws and regulations;

• Review of correspondence with tax authorities for any instances of non-compliance with laws and regulations;

• Review of financial statement disclosures and agreeing to supporting documentation; and

• Review of legal expenditure accounts to understand the nature of expenditure incurred.

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

INDEPENDENT AUDITOR’S REPORT

TO THE MEMBERS OF RAINBOW RARE EARTHS LIMITED

CONTINUED

FINANCIAL STATEMENTS

Fraud

We assessed the susceptibility of the financial statements to material misstatement, including fraud. Our risk assessment procedures included:

• Enquiry with management and those charged with governance regarding any known or suspected instances of fraud;

• Obtaining an understanding of the Company’s policies and procedures relating to:

- Detecting and responding to the risks of fraud; and

- Internal controls established to mitigate risks related to fraud.

• Review of minutes of meeting of those charged with governance for any known or suspected instances of fraud;

• Discussion amongst the engagement team as to how and where fraud might occur in the financial statements; and

• Performing planning analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material

misstatement due to fraud.

Based on our risk assessment, we considered the areas most susceptible to fraud to be management override of controls and areas of judgement

due to level of subjectivity involved with them.

Our procedures in respect of the above included:

• Fraud enquiries were held with management and those charged with governance to identify whether any instances of fraud were noted in the period.

• Testing the financial statement disclosures to supporting documentation, performing testing on account balances which were considered to be a greater

risk of susceptibility to fraud. These balances relate to our key audit matters as disclosed above.

• Making enquiries of management as to whether there was any correspondence with regulators and the Government, in so far as the correspondence

related to the financial statements and reviewed this correspondence.

• Performing targeted journal entry testing based on identified characteristics the audit team considered could be indicative of fraud to address

the presumed risk of management override of controls, including bribery. For example, we tested capitalisation to property plant and equipment

or exploration assets with the opposite entry being processed against bank and cash accounts and not against liability accounts.

• Reviewing the Group’s year end unadjusted entries, consolidated entries and investigating any that appear unusual as to nature or amount

by agreeing to supporting documentation; and

• Assessing significant estimates made by management for bias.

We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members who were all deemed to have

appropriate competence and capabilities and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.

Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of not detecting a material

misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery,

misrepresentations or through collusion. There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws

and regulations is from the events and transactions reflected in the financial statements, the less likely we are to become aware of it.

A further description of our responsibilities is available on the Financial Reporting Council’s website at:

https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

Use of our report

This report is made solely to the Company’s members, as a body, in accordance with Section 262 of the Companies (Guernsey) Law, 2008. Our audit work

has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other

purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members

as a body, for our audit work, for this report, or for the opinions we have formed.

Peter Acloque

For and on behalf of BDO LLP,

Chartered Accountants and Recognised Auditor,

London, United Kingdom

27 October 2023

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

CONSOLIDATED STATEMENT OF

COMPREHENSIVE INCOME

FOR THE YEAR ENDED 30 JUNE 2023

FINANCIAL STATEMENTS

Year ended Year ended

30 June 2023 30 June 2022

Notes US$’000 US$’000

Revenue - -

Cost of sales - -

Gross profit - -

Administration expenses (3,509) (3,585)

Impairment of Gakara assets (9,575) (69)

Loss from operating activities 4 (13,084) (3,654)

Finance income 6 377 216

Finance costs 7 (158) (543)

Loss before tax (12,865) (3,981)

Income tax expense 10 - (4)

Total loss after tax and comprehensive expense for the year (12,865) (3,985)

Total loss after tax and comprehensive expense for the year is attributable to:

Non-controlling interest 24 (881) (105)

Owners of parent (11,984) (3,880)

(12,865) (3,985)

The results of each year are derived from continuing operations

Loss per share (cents)

Basic 11 (2.23) (0.76)

Diluted 11 (2.23) (0.76)

Notes on pages 62 to 84 form part of these financial statements.

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

CONSOLIDATED STATEMENT OF

FINANCIAL POSITION

AS AT 30 JUNE 2023

FINANCIAL STATEMENTS

Year ended Year ended

30 June 2023 30 June 2022

Notes US$’000 US$’000

Non-current assets

Exploration and evaluation assets 12 4,830 10,588

Property, plant and equipment 13 27 1,043

Right of use assets 19 39 108

Total non-current assets 4,896 11,739

Current assets

Inventory 14 718 858

Trade and other receivables 15 365 401

Cash and cash equivalents 16 8,107 4,134

Total current assets 9,190 5,393

Total assets 14,086 17,132

Current liabilities

Trade and other payables 17 (1,250) (909)

Borrowings 18 (201) (235)

Lease liabilities 19 (23) (32)

Total current liabilities (1,474) (1,176)

Non-current liabilities

Borrowings 18 (285) (518)

Lease liabilities 19 (21) (81)

Provisions 20 (55) (61)

Total non-current liabilities (361) (660)

Total liabilities (1,835) (1,836)

Net assets 12,251 15,296

Equity

Share capital 21 50,937 41,442

Share-based payment reserve 23 1,719 1,467

Other reserves 23 - -

Retained loss (38,483) (26,572)

Equity attributable to the parent 14,173 16,337

Non-controlling interest 24 (1,922) (1,041)

Total equity 12,251 15,296

These financial statements were approved and authorised for issue by the Board of Directors on 27 October 2023 and signed on its behalf by:

GEORGE BENNETT

DIRECTOR

Notes on pages 62 to 84 form part of these financial statements.

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

CONSOLIDATED STATEMENT OF

CHANGES IN EQUITY

FOR THE YEAR ENDED 30 JUNE 2023

FINANCIAL STATEMENTS

Share- Share Attributable Non-

Share based warrant Other Accumulated to the controlling

capital payments reserve reserves losses parent interest Total

Note US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

Balance at 1 July 2021 32,465 1,295 - 60 (22,878) 10,942 (936) 10,006

Total comprehensive expense

Loss and total comprehensive loss for year - - - - (3,880) (3,880) (105) (3,985)

Transactions with owners

Shares placed during the year for cash consideration 21 8,779 - - - - 8,779 - 8,779

Share placing transaction costs 21 (240) - - - - (240) - (240)

Non-cash issue of shares during the period, net of costs 21 157 - - - - 157 - 157

Eliminate historic discount on extinguishment of interest

free bridge loan - - - (60) 60 - - -

Fair value of employee share options in year 22 - 298 - - - 298 - 298

Share options exercised in the year, net of costs 21 281 (126) - - 126 281 - 281

Balance at 30 June 2022 41,442 1,467 - - (26,572) 16,337 (1,041) 15,296

Total comprehensive expense

Loss and total comprehensive loss for year - - - - (11,984) (11,984) (881) (12,865)

Transactions with owners

Shares placed during the year for cash consideration 21 9,485 - - - - 9,485 - 9,485

Share placing transaction costs 21 (115) - - - - (115) - (115)

Fair value of employee share options in year 22 - 325 - - - 325 - 325

Share options cancelled in year 22 - (13) - - 13 - - -

Share options exercised in the year, net of costs 21 125 (60) - - 60 125 - 125

Balance at 30 June 2023 50,937 1,719 - - (38,483) 14,173 (1,922) 12,251

Notes on pages 62 to 84 form part of these financial statements.

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

CONSOLIDATED CASH FLOW

STATEMENT

FOR THE YEAR ENDED 30 JUNE 2023

FINANCIAL STATEMENTS

Year ended Year ended

30 June 2023 30 June 2022

Notes US$’000 US$’000

Cash flow from operating activities

Loss from operating activities (13,084) (3,654)

Adjustments for:

Depreciation 382 380

Impairment 9,575 69

Share-based payment charge 22 325 297

Operating loss before working capital changes (2,802) (2,908)

Net decrease in inventory 14 - 5

Net increase decrease in trade and other receivables 15 (31) (29)

Net decrease in trade and other payables 17 (94) (100)

Cash used by operations (2,927) (3,032)

Realised foreign exchange gains 156 186

Finance income 6 - -

Finance costs 7 - -

Taxes paid 10 - (2)

Net cash used in operating activities (2,771) (2,848)

Cash flow from investing activities

Purchase of property, plant & equipment 13 (28) (42)

Exploration and evaluation costs 12 (2,510) (837)

Net cash used in investing activities (2,538) (879)

Cash flow from financing activities

Repayment of borrowings 18 (61) (1,009)

Interest payments on borrowings 18 (78) (138)

Payment of lease liabilities 19 (42) (24)

Proceeds from the issuance of ordinary shares 21 9,610 9,077

Transaction costs of issuing new equity 21 (115) (275)

Net cash generated by financing activities 9,314 7,631

Net increase in cash and cash equivalents 4,005 3,904

Cash & cash equivalents at the beginning of the year 4,134 573

Foreign exchange loss on cash and cash equivalents (32) (343)

Cash & cash equivalents at the end of the year 16 8,107 4,134

Notes on pages 62 to 84 form part of these financial statements.

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2023

FINANCIAL STATEMENTS

1. GENERAL INFORMATION

Reporting entity

Rainbow Rare Earths Limited (“the Company”) is a company domiciled in Guernsey and incorporated on 5 August 2011, with company

registration number 53831, and is a company limited by shares. The Company’s registered office is Connaught House, St Julian’s Avenue,

St Peter Port, Guernsey, GY1 1GZ. The consolidated financial statements of the Company for the years ended 30 June 2023 and 30 June 2022

comprise the Company and its subsidiaries.

2. ACCOUNTING POLICIES

Basis of preparation

The Financial Statements of the Company and its subsidiaries (“the Group”) are prepared in accordance with International Financial Reporting Standards

(“IFRS”) (IFRS and IFRIC Interpretations) issued by the International Accounting Standards Board (“IASB”), as adopted by the European Union.

The consolidated financial statements have been prepared on a historical cost basis, except for financial instruments measured at fair value through

profit or loss. Given the development status of the Group’s assets, management do not consider sustainability and climate change as key risks requiring

significant judgement for the Year. The Group has prepared sustainability disclosures on pages 22 to 33 in line with the requirements set out in the

listing rules to the extent relevant for a Group without producing assets.

Going Concern

As at 30 June 2023, the Group had total cash of US$8.1 million. During Q3 CY 2023 the Group paid out a total of US$7.3 million including costs

of US$5.7 million to secure an immediate 85% interest in the Phalaborwa project as set out in note 29. On 27 September 2023 the Company

announced a private placement raising £4.5 million (approximately US$5.5 million) before costs estimated at US$0.1 million, of which £3.9 million had

been received at 27 October 2023 as set out in note 29. Going forward the Group expects further cash income of £0.6 million from the equity fund raise

that is subject to shareholder approval, which is expected to be received at the Company’s AGM on 20 November 2023, and has no commitments.

The Board have reviewed a range of potential cash flow forecasts for the period to 31 December 2024, including reasonable possible downside

scenarios. This has included the following assumptions:

Corporate:

The forecast includes US$3.2 million of ongoing general and administrative costs of the Group over the 18-month period from 1 July 2023

to 31 December 2024 (the “Period”), based on the current administrative costs of the Group. This includes US$0.2 million in respect of pursuing

new business opportunities, which will cover only the initial test work at the opportunities identified to date including the opportunity with OCP

in Morocco and the opportunity with the Mosaic Company in Brazil.

Management’s reasonably plausible downside scenario includes a 10% contingency for unexpected costs plus a further US$0.25 million per annum

for business development costs.

Phalaborwa:

The forecast includes US$5.7 million of costs relating to the acquisition of the 85% ownership in Phalaborwa, including relevant transaction costs,

which was announced on 28 June 2023 and paid in Q3 2023 as noted above. The forecast also includes all costs required for the completion of the

Phalaborwa DFS, estimated at US$5.9 million, inclusive of a 10% contingency. This includes all costs associated with the ongoing pilot test work

campaign underway in both South Africa and USA.

The forecast also includes salary and consultant costs of US$0.6 million for the core project team tasked with advancing the project. No further

contingency on the costs associated with the DFS was considered necessary for management’s reasonably plausible downside scenario as the base

case forecast includes relevant contingencies. Management’s reasonably plausible downside scenario includes a 10% contingency on the costs of the

core project team.

Uberaba:

As set out in note 29, a memorandum of understanding was signed on 17 July 2023 with Mosaic to jointly develop a process flowsheet and conduct

a preliminary economic assessment related to the extraction of rare earth elements from Mosaic's phosphogypsum stack in the Uberaba area of

Minas Gerais in Brazil. At the date of this Report, the Group has no commitments in respect of this project. A detailed budget for the anticipated work

stream is not yet available and will need to be agreed with Mosaic, but it is noted that management’s reasonably plausible downside scenario would

not be sufficient for a resource to be defined and a PEA to be developed and further funding may be required to allow for the Uberaba opportunity

to be de-risked, the timing of which cannot be accurately predicted at this time.

Gakara:

The cash flow forecasts assume ongoing care and maintenance costs totalling US$0.6 million including amounts payable under the FinBank loan

facility in Burundi. The Group has determined that no additional cash outflows will be incurred on Gakara until the export ban and mining suspension

has been lifted. In the event that the Gakara project did return to operations, stock of rare earth concentrates with a current estimated gross sales

value of US$1.0 million would be sold to provide the funds to re-commence operations. The re-start would be conditional on the Gakara project not

requiring additional financial support from Rainbow Rare Earths Limited at then current rare earth prices.

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2023

CONTINUED

FINANCIAL STATEMENTS

2. ACCOUNTING POLICIES CONTINUED

Going Concern continued

Conclusion

The base case forecast includes a total cash outflow over the Period of US$16.1 million. Management’s reasonably plausible downside scenario,

which includes a 10% contingency for corporate costs, fixed costs at Phalaborwa and Gakara costs, together with a further allowance for

business development opportunities, includes a total cash outflow of US$16.9 million.

At 30 June the Group had US$8.1 million of available cash which together with US$5.4 million of net funds raised in September 2023 provides

US$13.5 million of available resources, which confirms that the Group will need to raise additional funds before 31 December 2024, the timing of which

is dependent primarily on the speed at which the Phalaborwa DFS is completed, which is within managements control. Management’s reasonably

plausible downside scenario suggests that at least US$3.4 million will need to be raised, along with any funds required to progress the Uberaba

opportunity in Brazil.

The Board is confident that this funding will be secured, based on its history of successful fundraising. However, it also acknowledges that this funding

is not, at the present time, in place. Accordingly, the Board acknowledges that the need for additional funding represents a material uncertainty which

may cast significant doubt on the ability of the Group to continue as a going concern and, therefore, that it may be unable to realise its assets and

discharge its liabilities in the normal course of business. The financial statements do not include any adjustments that would result if the Group was

unable to continue as a going concern.

New and amended standards and interpretations adopted by the Group

No material changes to accounting policies arose as a result of new standards applied by the Group from 1 July 2022.

New standards, interpretations, and amendments not yet effective

Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2023 reporting periods and have

not been early adopted by the Group. These standards include:

• IAS 1 – Presentation of Financial statements – The classification of liabilities as current or non-current basing the classification on contractual

arrangements at the reporting date. These amendments are effective for periods beginning on or after 1 January 2024.

• IAS 1 and IFRS Practise Statement 2 – Disclosure of Accounting Policies – Amendments to “Presentation of Financial Statements” and an

update to “Making Materiality Judgements” to help assist with providing useful accounting policy disclosures. The amendments are effective

from 1 January 2023 but may be applied earlier.

• IAS 8 Amendments – Definition of Accounting Estimate - The amendments introduce a new definition for accounting estimates: clarifying

that they are monetary amounts in the financial statements that are subject to measurement uncertainty. The amendments also clarify the

relationship between accounting policies and accounting estimates by specifying that a company develops an accounting estimate to achieve

the objective set out by an accounting policy. The amendments are effective for periods beginning on or after 1 January 2023, with earlier

application permitted, and will apply prospectively to changes in accounting estimates and changes in accounting policies occurring on or

after the beginning of the first annual reporting period in which the company applies the amendments.

• Amendments to IAS 12 Income Taxes - Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction. These amendments

are effective for periods beginning on or after 1 January 2023.

• Amendments to IAS 12 - International Tax Reform; Pillar Two Model Rules. These amendments are effective for periods beginning on or after

1 January 2023.

• Amendments to IFRS 16 - Lease Liability in a Sale and Leaseback. The amendments are effective from 1 January 2024 but may be applied earlier.

• Amendments to IAS 1 - Non-current Liabilities with Covenants. The amendments are effective from 1 January 2024 but may be applied earlier.

These amendments are not expected to have a material impact on the Group.

Basis of consolidation

Where the Company has control over an investee, it is classified as a subsidiary. The Company controls an investee if all three of the following elements

are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those

variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.

The consolidated financial statements present the results of the Company and its subsidiaries as if they formed a single entity. Intercompany

transactions and balances between Group companies are therefore eliminated in full.

The results of undertakings acquired or disposed of are consolidated from or to the date when control passes to or from the Group. The results

of subsidiaries acquired or disposed of during the year are included in the Consolidated Statement of Comprehensive Income from the date that

control commences until the date that control ceases.

Where necessary, adjustments are made to the results of subsidiaries to bring the accounting policies they use into line with those used by the Group.

Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group’s equity. Non-controlling interests

consist of the non-controlling shareholder’s share of changes in equity. The non-controlling interests’ share of losses, where applicable, are attributed

to the non-controlling interests irrespective of whether the non-controlling shareholders have a binding obligation and are able to make an additional

investment to cover the losses. On acquisition of a non-controlling interest the relevant non-controlling interest share of equity is extinguished and the

difference between the fair value of consideration paid and the relevant carrying value of the non-controlling interest is recorded in retained earnings.

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2023

CONTINUED

FINANCIAL STATEMENTS

2. ACCOUNTING POLICIES CONTINUED

Foreign currency

The consolidated financial statements are presented in US dollars, which is also the functional currency of the Company and all of its subsidiaries.

The Group’s strategy is focused on developing an ethical supply chain for rare earth elements from secondary sources, with its principal project based

in South Africa and a global pipeline of earlier stage opportunities being developed. All such opportunities will ultimately generate revenue in United

States Dollars, which is the currency in which rare earth elements are traded internationally. All support services are charged between group

companies in United States Dollars. The Group is funded by various financial liabilities which are principally denominated in United States Dollars

and shareholder equity.

Transactions in foreign currencies are translated to the functional currency of the Group entity at the rates of exchange prevailing on the dates

of the transactions. At each reporting date, monetary assets and liabilities that are denominated in foreign currencies are retranslated to the functional

currency at the rates prevailing on the reporting date. Exchange differences on all transactions are recognised in the consolidated statement of

comprehensive income in the year in which they arise.

Revenue recognition

The Group plans to produce and sell separated rare earth oxides from the Phalaborwa project in South Africa and other secondary rare earth

sources via a mixture of long term off-take contracts and spot sales to global customers. The Group’s Gakara project in Burundi produces a mixed

rare earth mineral concentrate which was previously sold under a long-term offtake contract with ThyssenKrupp Metallurgical Products GmbH.

Revenue is recognised on transfer of control of the relevant rare earth product, which can occur at the project site, at a port in transit to the customers

premises or at the customers premises.

Rare earth exploration and evaluation assets

All exploration and evaluation costs incurred are accumulated in respect of each identifiable project area. Costs which are classified as intangible

fixed assets are only carried forward to the extent that they are expected to be recovered through the successful development of the area or where

activities in the area have not yet reached a stage which permits reasonable assessment as to whether the deposit is commercially viable and

technically feasible for extraction. Costs associated with exploration and evaluation include costs related to trial mining and processing when such

activity is focused on improving the understanding of the ore body. Such costs include the cost of mining, processing and sales costs for concentrate

produced as a result of trial mining activities, excluding any costs associated with year-end inventory.

Costs incurred prior to the legal right to a mineral project being obtained are written off immediately. Accumulated cost in relation to an abandoned

area are written off in full to the statement of comprehensive income in the year in which the decision to abandon the area is made.

Exploration and evaluation assets associated with an identifiable project area are transferred from intangible fixed assets to tangible fixed assets

as “project development costs” when the commercial viability and technical feasibility of extracting the deposit has been established. This includes

consideration of a variety of factors such as whether the requisite permits have been awarded, whether funding required for development is

sufficiently certain of being secured, whether an appropriate project development plan is established and the results of exploration and evaluation

data including internal and external assessments.

Property, plant and equipment

Property, plant and equipment consists of plant and machinery, project development costs, motor vehicles, computer equipment, and office furniture

and fittings.

Property, plant and equipment is initially recognised at cost and subsequently stated at cost less accumulated depreciation and any impairment.

The cost of acquisition is the purchase price and any directly attributable costs of acquisition or construction required to bring the asset to the location

and condition necessary for the asset to be capable of operating in the manner intended by management.

The Group assesses the stage of a development project to determine when it has reached commercial production, at which point the relevant assets

begin to be depreciated. The criteria used to assess the date at which commercial production is achieved, being the point at which the project is ready

for its intended use and operating in the manner intended by management, include completion of a reasonable period of testing, the ability to sustain

commercial levels of production, and engineering sign off on the plant performance. In the case of new project sites, commercial production is

deemed to have been met when the site has received all necessary permits and approvals (including a certificate of environmental conformity)

and is in operation. Prior to this period, any costs associated with the project site are capitalised.

Depreciation

Property, plant and equipment is depreciated on a straight-line basis over the estimated useful life of the asset. Residual values and useful lives

are reviewed on an annual basis and changes are accounted for over the remaining lives.

The applicable depreciation rates are as follows:

Description Useful life

Plant, machinery, and mine infrastructure 5 years

Vehicles 5 years

Computer equipment 3 years

Office furniture and fittings 7 years

Depreciation incurred on equipment used in exploration is capitalised to exploration and evaluation costs.

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2023

CONTINUED

FINANCIAL STATEMENTS

2. ACCOUNTING POLICIES CONTINUED

Impairment of non-financial assets including exploration and evaluation assets

Exploration and evaluation assets are reviewed regularly for indicators of impairment following the guidance in IFRS 6 “Exploration for and Evaluation

of Mineral Resources” and tested for impairment where such indicators exist. In addition, these assets are tested for impairment prior to transfer to

project development costs. In accordance with IFRS 6 the Group considers the following facts and circumstances in their assessment of whether the

Group’s exploration and evaluation assets may be impaired:

• whether the period for which the Group has the right to explore in a specific area has expired during the period or will expire in the near future,

and is not expected to be renewed;

• whether substantive expenditure on further exploration for and evaluation of mineral resources in a specific area is neither budgeted nor planned;

• whether exploration for and evaluation of reserves in a specific area have not led to the discovery of commercially viable quantities of mineable

material and the Group has decided to discontinue such activities in the specific area; and

• whether sufficient data exists to indicate that although a development in a specific area is likely to proceed, the carrying amount of the exploration

and evaluation assets is unlikely to be recovered in full from successful development or by sale.

If any such facts or circumstances are noted, the Group performs an impairment test in accordance with the provisions of IAS 36. In such

circumstances the aggregate carrying value of the exploration and evaluation asset, together with any associated property, plant and equipment held

within the relevant cash generating unit, is compared against the expected recoverable amount of the cash generating unit. The recoverable amount

is the higher of value in use and the fair value less costs to sell.

Where the carrying amount of an asset or cash generating unit exceeds its recoverable amount, the asset or cash generating unit is considered

impaired and is written down to its recoverable amount. Impairment losses are recognised in the Income Statement. Impairment losses recognised

for a cash generation are recognised against goodwill (if any) and then to identifiable assets on a pro-rata basis.

A previously recognised impairment loss is reversed if the recoverable amount increases as a result of a reversal of the conditions that originally

resulted in the impairment. This reversal is recognised in the Income Statement and is limited to the carrying amount that would have been

determined, net of depreciation, had no impairment loss been recognised in prior years.

Leases

At inception the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control

the use of an identified asset, for a period of time, in exchange for consideration. To assess whether a contract conveys the right to control the use of

an identified asset, the Group assesses whether:

• the contract involves the use of an identified asset. This may be specified explicitly or implicitly and should be physically distinct or represent

substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified;

• the Group has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and

• the Group has the right to direct the use of the asset. The Group has the right when it has the decision-making rights that are most relevant to

changing how and for what purposes the asset is used. In rare cases where the decision about how and for what purpose the assets is used is

predetermined, the Group has the right to direct the use of the asset if either:

- the Group has the right to operate the asset; or

- the Group designed the asset in a way that predetermines how and for what purpose it will be used.

At inception or on reassessment of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease

component on the basis of their relative stand-alone prices.

The right-of-use asset is initially measured at the present value of the remaining lease payments, discounted using the incremental borrowing rate.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term.

In addition, impairment indictors for the right-of-use asset is assessed annually and will be adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the remaining lease payments, discounted using the incremental borrowing rate.

The liability is subsequently measured at amortised cost using the effective interest method. Lease payments are apportioned between the finance

charges and reduction of the lease liability using the incremental borrowing rate implicit in the lease to achieve a constant rate of interest on the

remaining balance of the liability.

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2023

FINANCIAL STATEMENTS

2. ACCOUNTING POLICIES CONTINUED

Environmental rehabilitation costs

An obligation to incur restoration, rehabilitation and environmental costs arises when environmental disturbance is caused by the development or

ongoing production of a project. Such costs arising from the decommissioning of plant and other site preparation work, discounted to their net present

values, are provided for in full as soon as the obligation to incur such costs arises and can be quantified. On recognition of a full provision, an addition is

made to tangible or intangible fixed assets of the same amount. Upon commercial production this addition is then charged against profits over the life

of the project. Closure provisions are updated annually for changes in cost estimates as well as for changes to the anticipated life of the project, with

the resulting adjustments made to both the provision balance and the net book value of the associated non-current asset.

Inventory

Stockpiles of ore (including but not limited to Run of Mine (“RoM”) ore (where applicable), pre-shipment rare earth finished or partially processed

product stockpiles, or rare earth products in transit but not yet sold) are valued at the lower of historic cost and net realisable value. Historic cost is

based on an allocation of all relevant costs incurred in bringing the stockpiles to their present condition at the period end (including as appropriate

mining or reclamation costs, processing costs and transportation costs). Realisable value is based on an estimate of selling price less applicable further

costs to be incurred to the point of revenue recognition (including as appropriate further expected processing costs, shipment costs, royalties, and

other fees to be incurred in the course of the sales process). Inventory stockpile costs do not include an allocation of support costs.

Inventory spares (including tools, parts for equipment, and stocks of consumables) are also valued at the lower of historic cost and realisable value,

where material. Spares are reviewed at each period end for obsolescence, with provisions applied to those stock lines where realisable value is

considered to be lower than historic cost.

Taxation

Current tax is based on the estimated taxable profit for the period. Taxable profit differs from net profit as reported in the income statement because

it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible.

In Burundi, when no taxable profit arises, current tax includes a minimum tax charge calculated as 1% of revenue.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities for financial

reporting purposes and the corresponding tax bases used in the computation of taxable profit. It is accounted for using the balance sheet liability

method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is

probable that taxable profits will be available against which deductible temporary differences can be utilised. The carrying amount of deferred tax

assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to

allow all or part of the asset to be recovered.

Financial instruments

Financial assets and financial liabilities are recognised on the statement of financial position when the Group becomes a party to the contractual

provisions of the instrument.

- Financial assets

Cash and cash equivalents comprise cash held by the Group and short-term bank deposits with a maturity of three months or less.

Trade and other receivables, to the extent they represent financial assets, are measured at initial recognition at fair value and are subsequently

measured at amortised cost using the effective interest method. A provision is established when there is objective evidence that the Group will

not be able to collect all amounts due.

In applying the general model, the Group monitors on a forward-looking basis the expected credit loss, defined as the difference between the

contractual cash flows and the cash flows that are expected to be received, associated with its assets carried at amortised cost. The impairment

methodology applied depends on whether there has been a significant increase in credit risk. For trade receivables only, the simplified approach

permitted by IFRS 9 is applied, which requires expected lifetime losses to be recognised from initial recognition of the receivables.

Losses are recognised in the income statement. When a subsequent event causes the amount of impairment loss to decrease, the decrease

in impairment loss is reversed through the income statement.

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2023

FINANCIAL STATEMENTS

2. ACCOUNTING POLICIES CONTINUED

Financial instruments continued

- Financial liabilities

Loans, borrowings and trade and other payables are initially measured at fair value and are subsequently measured at amortised cost using the

effective interest rate method. They are classified as current liabilities unless the company has an unconditional right to defer settlement of the

liability for at least 12 months after the statement of financial position date.

A financial liability is removed from the balance sheet when it is extinguished, being when the obligation is discharged, cancelled, or expired.

On extinguishment of a financial liability, any difference between the carrying amount of the liability and the consideration paid, including

any non-cash assets transferred or liabilities assumed, is recognised in profit or loss. A modification or exchange of a financial liability is either

accounted for as an extinguishment of the original financial liability or a renegotiation of the original financial liability. An extinguishment or

substantial modification of a financial liability results in de-recognition of the original financial liability and any unamortised transaction costs

associated with the original financial liability are immediately expensed to the profit and loss account. Where the change in the terms of the

modified financial liability are not substantial, it is accounted for as a modification of the original liability, with the modified financial liability

measured at amortised cost using the original effective interest rate. To determine whether the terms of the modified liability are substantially

different from those of the original one, a qualitative assessment is performed. If it is not already clear from a qualitative assessment that a

modification has resulted in a substantial change, then quantitative assessment is performed. This includes consideration whether the

discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using

the original effective interest rate, is at least 10% different from the discounted present value of the remaining cash flows of the original

financial liability.

Share capital

Ordinary shares are classified as equity and are recorded at the proceeds received, net of any direct issue costs.

The nature of the Company’s reserves is set out in note 23.

Share options

Equity-settled share-based payments to employees and Directors are initially measured at the fair value of the equity instrument. The fair value

of the equity-settled transactions with employees and Directors is recognised as an expense over the vesting period. The fair values of the equity

instruments are determined at the date of grant, considering market-based vesting conditions.

The fair values of share options are measured at fair value at the date of grant. Where the share options only contain service conditions or non-market

conditions and the options are issued with a relevant strike price, a Black – Scholes model is used. Where the share options contain market conditions,

a Monte Carlo simulation model is used and reflected in the fair value of the options granted. Where the share options contain no market conditions

and do not include a strike price the fair value is assessed by reference to the share price on the date of issue. Details of the assumptions used are

included in note 22 Share based payments.

The expected life used in the models is adjusted, based on management’s best estimate of the effects of non-transferability, exercise restrictions

and behavioural considerations.

The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance

and/or service conditions are fulfilled, ending on the date on which the relevant employees (or other beneficiaries) become fully entitled to the award

(“the vesting date”).

The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which

the vesting period has expired and the Company’s best estimate of the number of equity instruments that will ultimately vest.

The income statement charge or credit for a period represents the movement in cumulative expense recognised as at the beginning

and end of that period.

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are

treated as vesting irrespective of whether the market condition is satisfied, provided that all other performance and/or service conditions are satisfied.

Warrants

Warrants issued are recognised at fair value at the date of grant. The fair value is measured using the Black-Scholes model. Where warrants

are issued in respect of services provided, the fair value is expensed on a straight-line basis over the vesting period (if applicable). Where warrants

are considered to represent a transaction cost attributable to a liability recorded at amortised cost the fair value is deducted from the liability and

amortised subsequently through the effective interest rate. Where a fixed number of warrants are issued, and the exercise price is in the functional

currency of the issuer, the warrant fair value is credited to equity. Where the number of warrants is fixed but the exercise price is in a currency other

than the functional currency of the issuer the instrument fails the “fixed-for-fixed” criteria and is recognised as a financial liability at fair value through

profit and loss.

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2023

CONTINUED

FINANCIAL STATEMENTS

3. ACCOUNTING JUDGMENTS AND ESTIMATIONS

The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect

the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based

on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis

of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ

from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period

in which the estimate is revised if the revision affects both current and future periods. Key sources of judgment and estimation uncertainty are:

Accounting treatment of exploration and evaluation costs

Significant accounting judgement

Judgment was required in determining how to treat costs incurred during the Year for the Group’s development projects in South Africa and Burundi.

For the Phalaborwa asset management note that the project is based on a JORC compliant mineral resource estimate contained within gypsum

stacks at the Phalaborwa site. The Group has an 85% economic interest in the project. Accordingly, all costs associated with defining the technical

feasibility and commercial viability of the project are being capitalised under IFRS6.

For the Gakara asset, management note that the project has been on care and maintenance throughout the Year. Accordingly, none of the costs

incurred have been focused on improving the understanding of the ore body, and as such all costs have been recognised in the income statement

in the Year.

Impairment indicator assessment for exploration and evaluation assets and associated assets (notes 12, 13 and 14)

Significant accounting judgement

Judgment was required in determining whether indicators of impairment existed at 30 June 2023 for the Group’s exploration and evaluation assets.

The Board assessed factors including the remaining licence term, the plans for future exploration and the results of activities to date, together with

the strategic plans for the asset against the criteria set out in IFRS 6.

Phalaborwa

For the Phalaborwa asset, management note the PEA released in October 2022 confirmed a processing flow sheet capable of economically extracting

the magnet rare earth metals from the gypsum stacks in a low capital and low operating cost environment with strong economic returns. Recent pilot

test work has confirmed that the rare earth elements are capable of being extracted from the phosphogypsum and upgraded in line with the flow

sheet set out in the PEA to produce a mixed rare earth sulphate. The mixed rare earth sulphate will be shipped to the USA where the back-end pilot

plant for the separation of the magnet rare earths recently finished commissioning. Accordingly, management do not consider there to be any

indicators of impairment for the Phalaborwa asset.

Gakara

The assets associated with the Gakara project include both intangible and tangible fixed assets together with cash, mineral concentrate,

royalty receivables and consumables held in stock. The liabilities associated with the Gakara project include a loan, decommissioning,

site rehabilitation and environmental costs, tax liabilities and trade payables.

Despite the ongoing suspension, the Directors note that the Government of Burundi has not suggested that the licence will be withdrawn.

The Directors also continue to believe that the licence area represents a significant area of rare earth mineral potential. However, the Directors

do consider that an indicator of impairment exists at 30 June 2023 due to the re-focus of Rainbow’s business on the Phalaborwa asset and

growth opportunities from the associated processing technology. As such, the Directors do not envisage investing significant amounts

in Burundi to develop a formal mineral resource and therefore an impairment review is required under IFRS 16 paragraph 20.

Based on the assessment of both the legal and political position in Burundi, the Directors were unable to foresee a date when the operations

at the project would be able to restart, and accordingly have written the net assets of the Gakara cash generating unit to nil. In making this judgement,

the Directors have made the key judgements and estimates detailed below.

Carrying value of Gakara tangible and intangible assets (notes 12 and 13)

Significant accounting judgement

The impairment review of the intangible and tangible fixed assets associated with the Gakara project required an estimate of the value in use and fair

value less costs to sell for the assets. In making this decision, the Directors were unable to assign any value for the potential sale of the project or the

separate sale of the tangible fixed assets associated with the project given the nature of the situation, which is subject to political constraints not in

accordance with Burundi law. Accordingly, the intangible and tangible fixed assets were fully impaired at 30 June 2023 in accordance with IAS36.

A change in the situation in Burundi could allow the operations to restart in the future, or permit the sale of the project to a third party, which could

allow the impairment to be fully or partially reversed.

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2023

CONTINUED

FINANCIAL STATEMENTS

3. ACCOUNTING JUDGMENTS AND ESTIMATIONS CONTINUED

Valuation of available for sale mineral concentrate (note 14)

Significant accounting estimate

Operations at the Gakara project in Burundi are currently on care and maintenance at the request of the Government of Burundi. At 30 June 2023

the operation has 421 tonnes of available for sale mineral concentrate with an estimated sale value of US$1.0 million carried at cost of US$717k on

the Group balance sheet as set out in note 14. This concentrate cannot be sold due to an export ban imposed by the Government of Burundi.

Management note that in the two years since the export ban was imposed the mineral concentrate has not degraded in any way and, due to the lack

of a ready market for the concentrate in Burundi, the risk of loss through theft was very low. Management assess that it is probable that the current

export ban will be lifted in due course, although the timing of future sales cannot be accurately predicted. In the event the export ban is lifted, the

proceeds from the sale of mineral concentrate will either be used to restart operations or to settle existing liabilities.

Recoverability of royalty receivable (note 15)

Significant accounting estimate

Rainbow Mining Burundi SM (“RMB”) has historically overpaid royalties arising from the sale of rare earth concentrate. Whilst the Government has

accepted in writing that the overpaid royalties are recoverable, no repayment has been received to date. The Directors have made a judgement that

the royalty receivable is unlikely to be recovered in the near term due to the political situation in Burundi. Given the significant uncertainty of the timing

and quantum of any future recovery the asset has been fully impaired at 30 June 2023 with a further impairment charge of US$109k recognised in

impairment of Gakara assets in the Year. Future recovery may differ from management’s best estimate.

Decommissioning, site rehabilitation and environmental costs (note 20)

Significant accounting estimate

The Group’s mining and exploration activities are subject to various laws and regulations governing the protection of the environment. Estimation

and experience are used in determining the expected timing, closure, and decommissioning methods, which can vary in response to changes in the

relevant legal requirements or decommissioning technologies. No provision was recorded for the Group’s Phalaborwa project as on-site activities have

not yet commenced and there is no legal obligation for restoration by the Group with historical environmental liabilities associated with the site

contractually remaining with the previous owners.

The discounted provision recognised for the Group’s Gakara project represents management’s best estimate of the rehabilitation costs that will be

incurred, discounted from the period in which they are judged to be incurred. Actual costs incurred in future periods could differ materially from the

estimates. Additionally, future changes to environmental laws and regulations, life of mine estimates and discount rates could affect the carrying

amount of this provision.

4. LOSS FROM OPERATING ACTIVITIES

Operating loss includes:

Year ended Year ended

30 June 2023 30 June 2022

US$’000 US$’000

Employee remuneration (excluding share options) (1,517) (1,936)

Share-based payment charge (325) (298)

Audit of the Group financial statements

(173) (150)

Depreciation (382) (380)

Impairment of Gakara assets (9,575) (69)

1. Audit fees include US$179k for the current year and US$6k foreign exchange differences from the prior year.

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2023

CONTINUED

FINANCIAL STATEMENTS

5. SEGMENTAL INFORMATION

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker.

The chief operating decision maker has been identified as the Chief Executive Officer. It is considered that the Group has two reportable segments:

• Phalaborwa – a gypsum stack re-treatment project for the recovery of rare earths in South Africa.

• Gakara – a high-grade rare-earth project in Burundi.

Unallocated costs include corporate costs, which are not reported by entity to the Board.

Year ended 30 June 2023:

Phalaborwa Gakara Unallocated Total

US$’000 US$’000 US$’000 US$’000

Revenue - - - -

Production and sales costs - - - -

Impairment - (9,575) - (9,575)

Administration expenses - (562) (2,565) (3,127)

Depreciation - (368) (14) (382)

Loss from operating activities - (10,505) (2,579) (13,084)

Finance income - 191 186 377

Finance costs - (115) (43) (158)

Loss before tax - (10,429) (2,436) (12,865)

Income tax expense - - - -

Loss after tax - (10,429) (2,436) (12,865)

Segmental assets 4,868 916 8,302 14,086

Exploration and evaluation assets 4,830 - - 4,830

Property, plant and equipment - - 27 27

Other assets - 37 2 39

Current assets 38 879 8,273 9,190

Segmental liabilities (202) (916) (717) (1,835)

Capital expenditure 2,877 - 28 2,905

Year ended 30 June 2022:

Phalaborwa Gakara Unallocated Total

US$’000 US$’000 US$’000 US$’000

Revenue - - - -

Production and sales costs - - - -

Administration expenses - (993) (2,284) (3,277)

Depreciation - (375) (2) (377)

Loss from operating activities - (1,368) (2,286) (3,654)

Finance income - 22 194 216

Finance costs - (97) (446) (543)

Loss before tax - (1,443) (2,538) (3,981)

Income tax expense - (4) - (4)

Loss after tax - (1,447) (2,538) (3,985)

Segmental assets 2,198 10,985 3,949 17,132

Exploration and evaluation assets 1,953 8,635 - 10,588

Property, plant and equipment - 1,042 1 1,043

Other assets - 108 - 108

Current assets 245 1,200 3,948 5,393

Segmental liabilities (133) (1,232) (471) (1,836)

Capital expenditure 837 - 1 838

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2023

CONTINUED

FINANCIAL STATEMENTS

6. FINANCE INCOME

Year ended Year ended

30 June 2023 30 June 2022

US$’000 US$’000

Change in fair value of warrant liability (notes 18 and 22) 73 -

Foreign exchange gains 304 216

Total 377 216

Foreign exchange gains in the current and prior periods mainly relate to gains on translation of funds from US dollars to Burundian Francs (“BIF”)

plus the settlement of liabilities in Burundi denominated in BIF.

7. FINANCE COSTS

Year ended Year ended

30 June 2023 30 June 2022

US$’000 US$’000

Change in fair value of warrant liability (notes 18 and 22) - 109

Interest on Pipestone bridge loan (note 18) - (52)

Interest on bank borrowing (note 18) (78) (86)

Interest on lease liabilities (11) (13)

Interest on outstanding taxes (30) -

Foreign exchange losses (39) (501)

Total (158) (543)

Foreign exchange losses in the current period arise principally from GBP and ZAR bank accounts, which the Group holds to match future expected

cash outflows, which depreciated in value against the US dollar during the year. The change in fair value of the warrant liability in the Year represents

a gain and has therefore been disclosed in finance income.

8. REMUNERATION OF KEY MANAGEMENT PERSONNEL

Key management personnel are defined as being Executive and Non-executive Directors and Persons Discharging Managerial Responsibility

(“PDMRs”), who are set out on pages 38 to 40. Directors’ emoluments are set out on page 48.

Their remuneration for the 12 months ended 30 June 2023 and 30 June 2022 is summarised as follows:

Year ended Year ended

30 June 2023 30 June 2022

US$’000 US$’000

Wages and salaries 1,070 1,330

Bonus 248 218

Benefits 14 8

Share - based payments 291 274

Total remuneration of key management personnel 1,623 1,830

Benefits paid to key management personnel include pension contributions. In addition to salary and benefits payments to companies associated

with key management personnel are set out in note 26.

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2023

CONTINUED

FINANCIAL STATEMENTS

9. TOTAL EMPLOYEE REMUNERATION (INCLUDING KEY MANAGEMENT PERSONNEL)

Year ended Year ended

30 June 2023 30 June 2022

US$’000 US$’000

Wages and salaries 1,596 1,914

Bonus 248 218

Benefits 26 43

Share-based payments 325 287

Total employee remuneration 2,195 2,462

Benefits paid to employees include healthcare and pension contributions.

Staff costs include US$352k capitalised within Exploration and Evaluation assets in the Year (2022: US$239k) relating to the Phalaborwa project.

The average number of employees during the period were made up as follows

Year ended Year ended

30 June 2023 30 June 2022

Directors 6 7

Management and administration 32 28

Total 38 35

10. INCOME TAX EXPENSE

Year ended Year ended

30 June 2023 30 June 2022

US$’000 US$’000

Current tax expense - -

Prior year tax adjustment - 4

Total tax expense for the year - 4

The difference between the total tax expense shown above and the amount calculated by applying the standard rate of corporation tax to the loss

before tax is as follows:

Year ended Year ended

30 June 2023 30 June 2022

US$’000 US$’000

Loss for the year before tax (12,865) (3,981)

Income tax using the Guernsey rate of 0%: - -

Effects of:

Differences in tax rates (2,669) (337)

Differences in capital allowances 32 (289)

Impact of Burundi impairment 2,472 3

Tax losses carried forwards 165 623

Adjustment of Burundi tax in respect of prior years - 4

Total - 4

Rainbow Rare Earths Limited and Rainbow International Resources Limited are subject to 0% income tax in Guernsey. Rainbow Rare Earths

(Proprietary) Limited is subject to income tax rate in South Africa at 27%. Rainbow Burundi SPRL and Rainbow Mining Burundi SM are subject

to corporation tax in Burundi at 30%.

No deferred tax asset has been recognised in respect of the tax losses carried forward as the recoverability of this benefit is dependent on the future

profitability of the individual entities within the Group, the timing of which is considered insufficiently certain. The total unrecognised potential deferred

tax assets in respect of losses carried forward in Rainbow Rare Earths (Proprietary) Limited are US$43k (30 June 2022: US$17k).

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2023

CONTINUED

FINANCIAL STATEMENTS

11. LOSS PER SHARE

The earnings per share calculations for 30 June 2023 reflect the changes to the number of ordinary shares during the Year.

At the start of the Year, 524,405,810 shares were in issue. During the Year, a total of 74,452,846 new shares were allotted (see note 21 Share Capital)

and on 30 June 2023, 598,858,656 shares were in issue. The weighted average of shares in issue in the Year was 536,805,149.

The loss per share has been calculated using the weighted average number of ordinary shares in issue. The Group was loss making for all periods

presented, therefore the dilutive effect of share options has not been accounted for in the calculation of diluted earnings per share, since this would

decrease the loss per share for each reporting period.

Basic and diluted

2023 2022

Loss for the year (US$’000) attributable to ordinary equity holders (11,984) (3,880)

Weighted average number of ordinary shares in issue during the Year 536,805,149 508,566,911

Loss per share (cents) (2.23) (0.76)

12. EXPLORATION AND EVALUATION ASSETS

Gakara Phalaborwa Total

US$’000 US$’000 US$’000

At 1 July 2021 8,635 1,116 9,751

Additions - 837 837

At 30 June 2022 8,635 1,953 10,588

Additions - 2,877 2,877

Impairment (8,635) - (8,635)

At 30 June 2023 - 4,830 4,830

Only costs relating to the Phalaborwa Project were capitalised during the Year. The Burundi Project has been under care and maintenance throughout

the Year and, accordingly, none of the costs meet the requirements under the Group’s accounting policy for capitalisation.

On 12 April 2021, RMB received notification from the Ministry of Hydraulics, Energy and Mines of the Republic of Burundi of a temporary suspension

on the export of concentrate produced from the trial mining and processing operations at the Gakara Project. On 29 June 2021, a further notification

was received temporarily suspending all trial mining and processing operations pending negotiations on the terms of the Gakara mining convention

signed in 2015.

The Directors have confirmed from independent legal advisors that the mining convention in place between RMB and the Government of Burundi

remains legally binding on both parties, and that the actions of the Government of Burundi have not been in accordance with that legally binding

agreement. However, despite ongoing engagement with the Government of Burundi since the export ban was initially imposed, RMB has not

received permission to re-start operations and is unable to reliably estimate when such a re-start may be possible.

Since acquiring the Phalaborwa project in December 2020 and the subsequent development of processing technology to recover rare earth elements

from phosphogypsum as a by-product of phosphoric acid production, the Directors have re-focused the business on secondary sources of rare earth

elements where they consider higher returns are available. As such, as set out in note 3, the Directors no longer intend to invest significant amounts at

Gakara to convert the existing resource target to a reserve capable of supporting long term commercial production, resulting in an impairment review

being carried out for the Gakara exploration and evaluation assets in the year ended 30 June 2023.

As set out in note 3, based on an assessment of both the legal and political position in Burundi, the Directors consider that the fair value of the Gakara

exploration and evaluation assets calculated in accordance with IAS 36 is nil and an impairment loss has been recognised.

FinBank SA hold security over the fixed and floating assets of RMB which include the impaired exploration and evaluation assets associated

with the Gakara mining permit in Burundi.

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2023

CONTINUED

FINANCIAL STATEMENTS

13. PROPERTY, PLANT AND EQUIPMENT

Mine

development Plant and Office

US$’000 costs machinery Vehicles equipment Total

Cost

At 1 July 2021 183 2,847 1,582 45 4,657

Additions - 42 - - 42

At 30 June 2022 183 2,889 1,582 45 4,699

Additions - - 24 4 28

At 30 June 2023 183 2,889 1,606 49 4,727

Depreciation

At 1 July 2021 73 2,667 539 24 3,303

Charge for year 26 1 316 10 353

At 30 June 2022 99 2,668 855 34 3,656

Charge for the year 25 5 317 2 349

Impairment 59 216 410 10 695

At 30 June 2023 183 2,889 1,582 46 4,700

Net Book Value at 30 June 2023 - - 24 3 27

Net Book Value at 30 June 2022 84 221 727 11 1,043

Net Book Value at 30 June 2021 110 180 1,043 21 1,354

As set out in notes 3 and 12, the Directors recognise that the ongoing suspension of all activities of RMB in Burundi and the subsequent decision not

to commit investment for the conversion of the Gakara resource target to reserves requires an impairment review for the tangible fixed assets relating

to the project in accordance with IAS36. Based on an assessment of both the legal and political position in Burundi, the Directors consider that the fair

value of the property, plant and equipment associated with the Gakara project calculated in accordance with IAS 36 is nil and an impairment loss has

been recognised.

FinBank SA hold security over the fixed and floating assets of RMB which include the impaired property, plant, and equipment in Burundi.

14. INVENTORY

Year ended Year ended

30 June 2023 30 June 2022

US$’000 US$’000

Finished goods 717 717

Consumables 1 141

Total inventory 718 858

Finished goods represents 421 tonnes (2022: 421 tonnes) of mixed rare earth concentrate available for export at the Gakara processing plant.

Notwithstanding the current export ban in Burundi, the Directors note that the stock of concentrate held for sale has not deteriorated over the period

of suspension and the estimated sale value remains higher than the original cost. Notwithstanding the uncertainty relating to the likely timing of the

future sale of the concentrate, the Directors consider that the future increases in forecast rare earth prices will ensure that the present value of the

realisable price for the concentrate will remain above the cost of production and accordingly no provision for impairment has been made at 30 June

2023 (2022: US$Nil). The Directors recognise that the uncertainty relating to the future sale of the concentrate could impact the carrying value of the

stock of concentrate, which comprises all of the inventory held at the balance sheet date. Notwithstanding the uncertainty relating to the likely timing

of the future sale of the concentrate, the inventory is included within current assets on the basis that dialogue to lift the export ban is continuing and

the sale is expected to occur within 12 months.

As set out in notes 3, 12 and 13, the Directors recognise the ongoing suspension of all activities of RMB in Burundi and the re-focus of the Rainbow

business to secondary sources of rare earths. Accordingly, the value of goods in transit held in the port of Bujumbura has been written down to an

estimated net realisable value of nil during the year ended 30 June 2023 in line with the fixed assets associated with the Gakara project.

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2023

CONTINUED

FINANCIAL STATEMENTS

15. TRADE AND OTHER RECEIVABLES

Year ended Year ended

30 June 2023 30 June 2022

US$’000 US$’000

VAT recoverable 263 214

Prepayments 97 70

Royalty receivables - 109

Deposits paid 3 5

Sundry debtors 2 3

Total trade and other receivables 365 401

VAT recoverable relates to the input VAT recoverable in Burundi (US$137k, 2022: US$194k) and South Africa (US$126k, 2022: US$20k).

During the year ended 30 June 2023 a revaluation of the Burundi Franc has resulted in the reduction in the US dollar value of the VAT recoverable

in Burundi. During the year ended 30 June 2021 a tax audit was undertaken in Burundi over the local operating subsidiary, RMB, covering the period

from 2017 to 2019. The audit concluded that reverse VAT totalling BIF302 million (US$106k) had not been correctly accounted for on several invoices

received for services supplied to RMB from international suppliers. The reverse VAT is recoverable under Burundi legislation and, accordingly,

both the asset and liability are recognised at 30 June 2023.

During the Year an impairment of US$109k was recognised against the royalty receivable as set out in note 3.

Expected credit losses were assessed at 30 June 2023 considering various potential scenarios, information regarding the counterparty credit risk,

the historical payment profiles, and forward-looking factors. On the basis that the primary credit risk relates to the reverse VAT recoverable in Burundi,

which is expected to be paid only on resolution of all matters relating to the suspension of activity in Burundi, no expected credit loss provision was

considered necessary in the Year (2022: US$Nil).

16. CASH AND CASH EQUIVALENTS

Year ended Year ended

30 June 2023 30 June 2022

US$’000 US$’000

Cash at bank and in hand 8,107 4,134

Total cash at bank and in hand 8,107 4,134

No cash amounts were restricted at 30 June 2023 (30 June 2022: nil).

17. TRADE AND OTHER PAYABLES

Year ended Year ended

30 June 2023 30 June 2022

US$’000 US$’000

Trade payables 124 174

Accrued expenses 736 255

Taxes and social security 290 360

Burundi land taxes payable 100 60

Provision for employment disputes - 60

Total trade and other payables 1,250 909

Tax and social security payables include BIF737 million (US$260k) for taxes provided as a result of a tax audit undertaken in Burundi over the local

operating subsidiary, RMB, covering the period from 2017 to 2019. Reverse VAT totalling BIF302 million and withholding tax totalling BIF148 million

had not been correctly accounted for on a number of invoices received for services supplied to RMB from international suppliers. A further BIF20

million of payroll taxes were found not to have been paid on salaries for casual staff. Penalties totalling BIF182 million on the unpaid taxes have

also been provided for in accordance with Burundi legislation together with interest up to the balance sheet date totalling BIF85 million.

The Directors consider the carrying value of trade and other payables approximate to their fair value.

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2023

CONTINUED

FINANCIAL STATEMENTS

18. BORROWINGS

Year ended Year ended

30 June 2023 30 June 2022

US$’000 US$’000

FinBank Loan 363 557

Warrant liability 123 196

Total borrowings 486 753

Borrowings fall due:

Due within one year 201 235

Due between 2 to 5 years 285 518

Total 486 753

The following table analyses the movement in borrowings:

Year ended 30 June 2023 Year ended 30 June 2022

US$’000 US$’000 US$’000 US$’000

Borrowings brought forward 753 1,893

Cash flows from borrowings

Drawdown of borrowings - -

Repayment of borrowings (61) (834)

Interest paid (78) (138)

(139) (972)

Non-cash movement in borrowings

Interest charge on borrowings 78 138

Settlement of borrowings in shares - (175)

Valuation of warrant liability (73) (109)

Revaluation of BIF loan (133) -

Other - (22)

(128) (168)

Borrowings carried forward 486 753

FinBank Loan

The FinBank loan facility in Burundi is expressed in BIF and carries an interest rate of 15%. Interest on the loan was paid throughout the Year.

Updated repayment terms were agreed from February 2023, with BIF30 million per month paid until April 2027 (previously BIF50 million per month

payable until March 2025) covering both principal and interest on a reducing balance basis. This is not a substantial modification of the loan as the

impact on the net present value of the loan from the modification is less than 10%. During the Year the devaluation of the BIF from US$1:BIF2,062.63

at 30 June 2022 to US$1:BIF2,840.54 at 30 June 2023 has reduced the US dollar value of the liability by US$133k.

Under the terms of this loan, FinBank has security over the fixed and floating assets of RMB, the shares of RMB, and the cash held in RMB’s

FinBank bank accounts. Interest on the loan amounted to US$78k (2022: US$98k).

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2023

CONTINUED

FINANCIAL STATEMENTS

19. LEASES

Year ended Year ended

30 June 2023 30 June 2022

US$’000 US$’000

Lease liabilities fall due:

Due within one year 23 32

Due between 2 to 5 years 21 35

After 5 years - 46

Total 44 113

The following table analyses the movement in lease liabilities:

Year ended 30 June 2023 Year ended 30 June 2022

US$’000 US$’000 US$’000 US$’000

Lease liabilities brought forward 113 83

Cash flows from leases

Payment of lease liabilities (31) (23)

Interest paid (10) (13)

(41) (36)

Non-cash movement in leases

Recognition of lease liabilities - 110

Interest charge on leases 10 13

Revaluation on termination (38) (57)

Change in lease term - -

(28) 66

Lease liabilities carried forward 44 113

Right of use assets

Land and buildings

US$’000

Balance as at 1 July 2021 70

Right of use asset recognised in the year 110

Amendment to expected life (48)

Depreciation in year (24)

Balance as at 30 June 2022 108

Right of use asset recognised in the year -

Amendment to expected life (36)

Depreciation in year (33)

Balance as at 30 June 2023 39

During the year ended 30 June 2022, a new office lease was entered into in South Africa and the leases for two properties in Burundi initially

recognised at 1 July 2020 were formally terminated.

In the year ended 30 June 2023 notice of termination was given on the South African office lease and the applicable amendments to the Lease

Liability and Right of Use Asset were recorded in the Year to reflect the new termination date.

The remaining leasehold property in Burundi is subject to an annual agreement, with right of use assets and lease liabilities calculated by reference

to the Group’s anticipated long-term intentions to renew the lease agreements.

There are no other lease commitments.

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2023

CONTINUED

FINANCIAL STATEMENTS

20. PROVISIONS

Rehabilitation provision

US$’000

At 1 July 2021 61

Discount -

At 30 June 2022 61

Discount (6)

At 30 June 2023 55

The rehabilitation provision relates to the anticipated cost of restoring the operating sites at the Gakara project in Burundi, discounted to reflect

management’s best estimates of the timing of future estimated cashflows.

No provision was recorded for the Group’s Phalaborwa project as on-site activities have not yet commenced and there is no legal obligation

for restoration by the Group with historical environmental liabilities associated with the site contractually remaining with the previous owners.

21. SHARE CAPITAL

Year ended Year ended

30 June 2023 30 June 2022

US$’000 US$’000

Share Capital 50,937 41,442

Issued Share Capital 50,937 41,442

The table below shows a reconciliation of share capital movements:

Number of shares US$’000

At 30 June 2021 476,411,434 32,465

July 2021 - Exercise of share options (cash receipts) 2,500,000 182

October 2021 - Share placing – Cash receipts net of costs 32,900,000 6,557

November 2021 - Share placing – Cash receipts net of costs 10,000,000 1,982

December 2021 – Pipestone Loan repayment shares 875,389 175

April 2022 - Exercise of share options (cash receipts) 1,718,987 116

Costs associated with exercise of share options and loan settlement - (35)

At 30 June 2022 524,405,810 41,442

November 2022 - Exercise of share options (cash receipts) 2,000,000 125

May 2023 - Share placing (cash receipts) 72,452,846 9,485

Costs associated with exercise of share options and share placing - (115)

At 30 June 2023 598,858,656 50,937

On 13 July 2021, the Australian Special Opportunity Fund, LP exercised options over 2.5 million shares at an exercise price of 5.28p per share,

raising gross cash proceeds of US$182k.

On 13 October 2021, the Company issued 32.9 million shares at a price of 15 pence per share, raising gross cash proceeds of US$6.8 million

(before costs of $221k).

On 15 November 2021, the Company issued a further 10.0 million shares at a price of 15 pence per share, raising gross cash proceeds

of US$2.0 million (before costs of $18k).

On 25 April 2022, the Australian Special Opportunity Fund, LP exercised options over 1,718,987 million shares at an exercise price of 5.28p per share,

raising gross cash proceeds of US$116k.

On 10 November 2022, the Australian Special Opportunity Fund, LP exercised options over 2,000,000 shares at an exercise price of 5.28p per share,

raising gross cash proceeds of US$125k.

On 9 May 2023, the Company issued 72,452,846 shares at a price of 10.377 pence per share, raising gross cash proceeds of US$9.5 million

(before costs of US$0.1 million).

As set out in note 29 on 5 October 2023 a further 26,412,257 shares were issued at a price of 15 pence per share.

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2023

CONTINUED

FINANCIAL STATEMENTS

22. SHARE OPTIONS AND WARRANTS

Employee share options

The total share-based payment charge for the Year was US$325k (2022: US$287k).

At 30 June 2023, the following employee share options were exercisable and outstanding:

30 June 2023 30 June 2022

Average Average

weighted weighted

exercise exercise

Number price (pence) Number price (pence)

Share option plan

Outstanding as at 1 July 11,791,400 13.43 7,991,400 12.19

Granted in the year - - 3,800,000 16.03

Lapsed in the year 250,000 18.00 -

Outstanding as at 30 June 11,541,400 13.33 11,791,400 13.43

Exercisable as at 30 June 9,508,068 12.07 8,491,400 12.53

Long Term Incentive Plan

Outstanding as at 1 July 3,708,000 - 3,708,000 -

Granted in the year 4,550,000 - - -

Outstanding as at 30 June 8,258,000 - 3,708,000 -

Exercisable as at 30 June 3,708,000 - 1,236,001 -

During the Year, 250,000 options lapsed due to an employee leaving the Group. No employee share options were exercised in the Year. The market

based vesting conditions attached to 1,236,000 nil priced options issued in 2021 were judged at 30 June 2023, with the calculated shareholder return

for the Company (-23%) being below the median for the basket of investments specified (-22%). The Directors considered the strong post Year-end

share price performance and waived the market based vesting conditions allowing the options to vest as set out in the table above. The modification

did not result in an increase in the fair value of the share options due to the share price at the date of the modification being below the share price on

the original date of grant.

The options outstanding at 30 June 2023 across both the share option plan and long-term incentive plan had a weighted average remaining

contractual life of 6.9 years (2022: 6.7 years).

During the Year, 4,550,000 options were issued as follows:

• 3,150,000 issued to the Directors and PDMR’s on 19 May 2023, pursuant to its Long Term Incentive Plan (LTIP approved in January 2021).

The options are nil priced share options and will vest in equal tranches over three years: one third after 12 months, one third after 24 months

and one third after 36 months.

• 1,400,000 issued to staff and PDMR on 6 June 2023, pursuant to its Long Term Incentive Plan (LTIP approved in January 202). The options

are nil priced share options and will vest in equal tranches over three years: one third after 12 months, one third after 24 months and one third

after 36 months.

The fair value of the options was judged to be the share price on the date of grant (19 May 2023: £0.086/share; 6 June 2023: £0.09/share).

Lind Share Options

In November 2022, 2,000,000 share options were exercised and new ordinary shares allotted to the Australian Special Opportunity Fund,

LP at a price of 5.28 pence per share. This exercise represents the final share options held by the Australian Special Opportunity Fund, LP.

Lind also exercised share options during the 2022 financial year as follows:

• 29 April 2022 - 1,718,987 share options at 5.28 pence per ordinary share allotted.

• 14 July 2021 – 2,500,000 share options at 5.28 pence per ordinary share allotted.

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2023

CONTINUED

FINANCIAL STATEMENTS

22. SHARE OPTIONS AND WARRANTS CONTINUED

Warrants

Number Exercise price

Outstanding and exercisable at 30 June 2022 and 2023 2,000,000 £0.0455

Weighted average exercise price calculated for US$ based warrants on US$:GBP exchange rate ruling on 30 June 2020.

On 21 February 2020, 2,000,000 warrants were issued to Pipestone Capital Inc (“Pipestone”), in which George Bennett, the Company’s CEO,

has a beneficial interest. The warrants were issued in lieu of interest on a US$1 million bridging loan provided to the Company as set out in note 18.

The warrants have a contractual life of four years at an exercise price of 4.55 pence per warrant. The Pipestone warrants are recognised as a

financial liability at fair value through profit and loss with changes in value in the Year included under Finance Income as set out in note 6.

As noted above, the Pipestone warrants are classified as a financial liability and are revalued at each period end using a Black-Scholes model,

which is categorised as a level 3 fair value measurement in accordance with IFRS 13. The inputs into the model were:

At 30 June At 30 June

2023 2022

Share price (GBP pence) 9.50 12.38

Exercise price (GBP pence) 4.55 4.55

Expected volatility 44.44% 52.07%

Risk free rate 4.35% 1.87%

Rate of Exchange 1.22 1.22

Time to exercise (years) 0.58 1.50

Expected volatility was determined by reference to the annual volatility of the Company’s closing mid-market share price on the London Stock

Exchange.

The expected life used in the model has been on management’s best estimate for the effects of exercise restrictions and behaviour.

23. RESERVES

Reserve Purpose

Share capital Value of shares issued less costs of issuance

Share-based payment reserve Fair value of share options issued

Other reserves Fair value adjustments for interest free loans

Accumulated losses Cumulative net losses recognised in the statement of comprehensive income

Non-controlling interest Amounts attributable to the 10% interest the State of Burundi has in RMB and 3% interest Gilbert

Midende has in Rainbow Burundi SPRL at 30 June 2023. Refer to note 24 for further details and

non-controlling interests for earlier periods

Details in the movements of these reserves are set out in the Statement of Changes in Equity.

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2023

CONTINUED

FINANCIAL STATEMENTS

24. NON-CONTROLLING INTERESTS

The Group has subsidiaries with non-controlling interests ("NCI") as follows:

• The State of Burundi has a non-dilutable 10% interest in RMB

• Gilbert Midende has a 3% interest in Rainbow Burundi SPRL

Summarised financial information in relation to these subsidiaries, before intra-group eliminations, is presented below together with the attributable NCI.

Name of subsidiary Rainbow Burundi SPRL Rainbow Mining Burundi SM

Country Burundi Burundi Total Group

Effective non-controlling interest 3% 10%

Year ended Year ended Year ended Year ended Year ended Year ended

30 June 2023 30 June 2022 30 June 2023 30 June 2022 30 June 2023 30 June 2022

US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

Income statement

Administrative expenses - - (276) (541) (276) (541)

Impairment - - (8,242) (60) (8,242) (60)

Depreciation - - (368) (375) (368) (375)

Net finance income/(costs) - - 76 (75) 76 (75)

Ta x - - (4) - (4)

Loss and total comprehensive loss for the period - - (8,810) (1,055) (8,810) (1,055)

Total comprehensive loss attruted to NCI - - (881) (105) (881) (105)

Dividends paid to NCI - - - - - -

Cashflows

Cashflow from operating activities - - (357) (548) (357) (548)

Cashflow from investing activities - - - - - -

Cashflow from financing activities - - (78) (86) (78) (86)

Net cashflows - - (435) (634) (435) (634)

Balance Sheet

Non-current assets - - 37 8,403 37 8,403

Current assets 1 1 878 1,200 879 1,201

Non-current liabilities - - (361) (425) (361) (425)

Current liabilities - - (572) (806) (572) (806)

Intra-group loans (295) (295) (19,117) (18,696) (19,412) (18,991)

Net assets (294) (294) (19,135) (10,324) (19,429) (10,618)

Accumulated non-controlling interest (9) (9) (1,913) (1,032) (1,922) (1,041)

25. CAPITAL COMMITMENTS

There were no capital commitments on 30 June 2023 (2022: nil). Under the terms of the Gakara Mining Convention there are no minimum

expenditure commitments in respect of exploration and evaluation activities.

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2023

CONTINUED

FINANCIAL STATEMENTS

26. RELATED PARTY TRANSACTIONS

Year to 30 June 2023 Year to 30 June 2022

Balance as at Balance as at

Charged in year Settled in year 30 June 2023 Charged in year Settled in year 30 June 2022

US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

Gilbert Midende

- - - 50 (50) -

Benzu Minerals (Proprietary) Limited

1 (1) - 48 (48) -

Pipestone Capital Inc

- - - 52 (1,061) -

MPD Consulting Limited

5 (4) 1 13 (13) -

Magna Capital (Guernsey) Limited

73 (73) - - - -

Total 79 (78) 1 163 (1,172) -

1. In the year ended 30 June 2022 Gilbert Midende received a retirement settlement of US$50k. Gilbert Midende continues to hold 3% of Rainbow Burundi SPRL as set out in note 27.

2. Benzu Minerals (Proprietary) Limited is connected to Cesare Morelli who is currently engaged as the acting General Manager of Rainbow Mining Burundi. In addition to the amounts disclosed, which relate to costs associated

with the drilling programme at Phalaborwa, salary was paid to Cesare Morelli via Benzu Minerals (Proprietary) Limited and is included in remuneration disclosures in note 9.

3. Pipestone Capital Inc, in which George Bennett, the Company’s CEO, had a beneficial interest, provided a bridging loan to the Group which totalled US$1,009k at 1 July 2021 on which interest totalling US$52k accrued during

the year ended 30 June 2022. The loan was fully settled via a mixture of cash and shares in December 2021.

4. MPD Consulting Limited, in which Pete Gardner, the Company’s CFO, has a beneficial interest, has recharged certain costs relating to travel to Burundi and UK support incurred on behalf of the Group.

5. Magna Capital (Guernsey) Limited (“Magna”), in which Adonis Pouroulis, the non-executive Chairman of the Board of Directors, has a beneficial interest, was engaged in December 2022 to assist the Company with its strategy

to consolidate ownership of the Phalaborwa project and lift the notarial bonds in South Africa issued in favour of third parties which may have impacted the ability of Bosveld Phosphates (Pty) Limited to transfer the rights

to the Phalaborwa project to a new entity as envisaged. The transaction was concluded in July 2023 as set out in note 29. In addition to the amounts disclosed a success fee of £500k was paid to Magna in July 2023.

27. INVESTMENT IN SUBSIDIARIES

The shareholdings in the Group’s subsidiaries for each year are set out below:

% Share Capital Held

Name of Company Principal Activity Country of Incorporation 2023 2022

Rainbow International Resources Rare earth exploration Guernsey 100% 100%

Rainbow Burundi SPRL Rare earth exploration Republic of Burundi 97% 97%

Rainbow Mining Burundi SM Rare earth mining Republic of Burundi 90% 90%

Rainbow Rare Earths Zimbabwe (Private) Limited Rare earth exploration Zimbabwe 100% 100%

Rainbow Rare Earths (Proprietary) Limited Group support services South Africa 100% 100%

a. Rainbow International Resources Limited is 100% owned by Rainbow Rare Earths Limited.

b. Gilbert Midende holds a 3% interest in Rainbow Burundi SPRL.

c. 97% of shares in Rainbow Burundi SPRL and 90% of shares in Rainbow Mining Burundi SM are held by Rainbow International Resources Limited.

d. The government of Burundi has a 10% interest in Rainbow Mining Burundi SM granted in accordance with the Mining Code of Burundi.

e. Rainbow Rare Earths Zimbabwe (Private) Limited is dormant and not trading.

f. Rainbow Rare Earths (Proprietary) Ltd is 100% owned by Rainbow Rare Earths Limited.

28. CONTINGENT LIABILITIES

There were no contingent liabilities at 30 June 2023 (30 June 2022: nil).

29. POST BALANCE SHEET EVENTS

On 28 June 2023, the Company announced an agreement with Bosveld Phosphates (Pty) Limited (“Bosveld”) to secure a path to 100% ownership

of the Phalaborwa project. As a result, in July 2023 the Company paid US$5 million to Barak Fund SPC Limited on behalf of Bosveld as a result of

which the Company secured an immediate 85% interest in the Phalaborwa project and was granted an option to acquire the remaining 15% via the

issue of US$7 million in shares. As a result of the transaction a success fee of £500,000 was paid to Magna in July 2023 as set out in note 26.

On 17 July 2023, the Company announced that it had entered into a memorandum of understanding with Mosaic to jointly develop a process

flowsheet and conduct a preliminary economic assessment related to the extraction of rare earth elements from Mosaic's phosphogypsum

stack in the Uberaba area of Minas Gerais in Brazil.

On 27 September 2023, the Company announced the successful completion of a private placement raising £4.5 million (approximately US$5.5 million)

via the issue of 30 million new Ordinary Shares of no par value at an issue price of £0.15 per share. The initial tranche of 25,786,541 shares was allotted

and admitted to trading on 5 October 2023 under the disapplication of pre-emption rights granted at the Company’s last Annual General Meeting held

on 22 November 2022. The final tranche of 4,213,459 shares are subject to the approval of shareholders at the next Annual General Meeting to be held

in November 2023.

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2023

CONTINUED

FINANCIAL STATEMENTS

30. FINANCIAL RISK MANAGEMENT

The Group’s financial liabilities at each period end consist of bank borrowings, leases, unsecured loans and trade and other payables (including

accrued expenses). The warrants issued in lieu of interest for the Pipestone Loan, as set out in note 18, are measured at fair value through profit

or loss. All other liabilities are measured at amortised cost. These are detailed in notes 17, 18 and 19.

The Group has various financial assets, being trade and other receivables and cash, which arise directly from its operations. To the extent that these

represent financial assets they are classified as assets held at amortised cost. These are detailed in notes 15 and 16.

The fair values of the Group’s cash, trade and other receivables, borrowings, unsecured loans, leases, trade and other payables and financial liabilities

at fair value through profit and loss are considered to approximate book value.

The risks arising from the Group’s financial instruments are credit risk, liquidity risk and market risk (including interest risk and currency risk).

The risk management policies employed by the Group to manage these risks are discussed below.

Credit risk

Credit risk refers to the risk that the Group’s financial assets will be impaired by the default of a third party. The Group is exposed to credit risk on its cash

and cash equivalents as set out in note 16. Credit risk is managed by ensuring that surplus funds are held in the UK with well-established financial

institutions of high-quality credit standing. At 30 June 2023, 99% of funds were held with a bank with a long-term A- credit rating (2022: 99%).

Market risk

Market risk arises from the Group’s use of interest bearing, tradable and foreign currency financial instruments. It is the risk that the fair value

or future cash flows of a financial instrument will fluctuate because of changes in interest rates (interest rate risk), foreign exchange rates

(currency risk) or other market factors (other price risk).

Currency risk

Currency risk refers to the risk that fluctuations in foreign currencies cause losses to the Group.

The Group is exposed to foreign exchange risk arising from various currency exposures primarily with respect to Sterling and the Burundian Franc.

Management monitors the exchange rate fluctuations on a continuous basis and acts accordingly. The financial assets and liabilities that include

significant foreign currency denominated balances are shown below.

Foreign exchange risk is managed by matching the currency profile of cash holdings to expected future cash outflows.

Minimal cash is held in Burundian Francs. The table below shows the currency profiles of cash and cash equivalents:

Year ended Year ended

30 June 2023 30 June 2022

Cash and cash equivalents US$’000 US$’000

US Dollars 7,212 1,623

GB Pounds 670 1,778

SA Rands 224 716

Burundi Francs 1 17

Total 8,107 4,134

The table below shows an analysis of the currency of the monetary liabilities in the functional currency of the Group (US dollars):

Year ended Year ended

30 June 2023 30 June 2022

US$’000 US$’000

US Dollars 503 336

GB Pounds 260 187

Burundi Francs 679 1,040

South African Rand 215 189

Australian Dollars - 22

Total 1,657 1,774

The largest monetary liability exposure and the least stable currency is the Burundi Franc. A 10% movement in the US$:BIF rate would have resulted

in a gain or loss of approximately US$0.1m (2022: approximately US$0.1m) in the income statement in relation to the cash and cash equivalents

and trade payables as at 30 June 2023.

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2023

CONTINUED

FINANCIAL STATEMENTS

30. FINANCIAL RISK MANAGEMENT CONTINUED

Interest rate risk

Interest rate risk refers to the risk that fluctuations in interest rates cause losses to the Group.

The Group and Company have no exposure to interest rate risk except on cash and cash equivalents which carry variable interest rates.

The Group has no material sensitivity to reasonable changes in variable interest rates. The group monitors the variable interest risk accordingly.

The Group’s borrowings bear fixed rates of interest.

Liquidity risk

Liquidity risk refers to the risk that the Group has insufficient cash resources to meet working capital requirements. The Group manages its liquidity

requirements by using both short and long-term cash flow projections. The following table sets out the contractual maturities (representing

undiscounted contractual cash-flows) of financial liabilities:

As at 30 June 2023 As at 30 June 2022

Due Due in Due in Due in Due Due in Due in Due in

within 1 1 to 2 2 to 5 5 to 10 within 1 1 to 2 2 to 5 5 to 10

years years years years years years years years

US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

Trade and other payables 1,250 - - - 909 - - -

Loans and borrowings 127 127 223 - 235 469 49 -

Lease liabilities 28 18 5 - 32 34 46 -

Total 1,405 145 228 - 1,176 503 95 -

Ultimate responsibility for liquidity risk management rests with the Directors, who have built an appropriate liquidity risk management framework for

the management of the Group’s short, medium, and long-term funding and liquidity management requirements. The Group closely monitors and

manages its liquidity risk. For further details on the Group’s liquidity position, please refer to the going concern paragraph in note 2 of these accounts.

Capital management

In managing the capital, the Group’s primary objective is to maintain a sufficient funding base, through debt and equity, to enable the Group to meet its

working capital and strategic investment needs. This includes ensuring sufficient funds are available to service the Group’s borrowings as they fall due.

No funds are held in restricted or designated accounts for future debt servicing requirements. In making decisions to adjust its capital structure to

achieve these aims the Group consider not only its short-term position but also its long term operational and strategic objectives.

The Group’s primary capital management measure is net debt (borrowings less cash) to total equity, measured as follows:

Net debt/(net cash) to equity Year ended Year ended

30 June 2023 30 June 2022

US$’000 US$’000

Total borrowings (note 18) 486 753

Less: Cash and cash equivalents (8,107) (4,134)

Net (cash) / debt (7,621) (3,381)

Total equity 12,251 15,345

Ratio (62.21%) (22.03%)

31. NON-CASH TRANSACTIONS

Material non-cash transactions were as follows:

Year end 30 June 2023

• Impairment of intangible fixed assets, tangible fixed assets, inventory and trade and other

receivables associated with the Gakara project in Burundi as set out in notes 12, 13, 14 and 15.

• Recognition of a right of use asset under a lease agreement as set out in note 19.

Year end 30 June 2022

• Settlement of the Pipestone Loan Balance in shares as set out in note 21.

• Recognition of a right of use asset under a lease agreement as set out in note 19.

32. ULTIMATE CONTROLLING PARTY

The Company does not have a single controlling party.

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

SHAREHOLDER INFORMATION

FINANCIAL STATEMENTS

Executive Director

George Bennett – Chief Executive Officer

Non-Executive Directors

Adonis Pouroulis – Chairman

Alex Lowrie

Shawn McCormick

Atul Bali

J Peter Pham

Darryl Castle

Company Secretary

Scorpio Secretarial Services Limited (Guernsey)

Registered office

Connaught House, St Julian’s Avenue

St Peter Port, Guernsey GY1 1GZ

Company website

www.rainbowrareearths.com

Registrars and transfer office

Computershare Investor Services PLC

PO Box 82, The Pavilions, Bridgwater Road

Bristol BS99 7NH

Bankers

Barclays Bank PLC (UK)

FinBank S.A (Burundi)

Standard Bank of South Africa Limited (South Africa)

Brokers

Joh. Berenberg, Gossler & Co. KG (UK)

Independent Auditors

BDO LLP (UK)

Solicitors

K&L Gates LLP (UK)

Legal Solutions Chambers (Burundi)

Cliffe Dekker Hoffmeyer Inc. (South Africa)

Rainbow Rare Earths Limited

Annual Report & Financial Statements 2023

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Rainbow Rare Earths Limited

Registered office

Trafalgar Court, Admiral Park, St Peter Port,

Guernsey GY1 3EL