Rainbow Rare Earths Limited (RBW) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the Rainbow Rare Earths Limited Investor Presentation. [Operator Instructions] The company may not be in a position to answer every question it receives during the meeting itself. However, the company will review all of the questions submitted today and publish responses where it's appropriate to do so. Before we begin, I would like to submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. And I'd now like to hand you over to CEO, George Bennett.

Good morning, and welcome to 2023 and let's hope it's going to be a fantastic year. I think it is going to be a good year for all of us compared to last year, and Rainbow certainly looks forward with what we've got on the cards for 2023. Just the disclaimer, and I'm going to go straight into our presentation about Rainbow and why I think it's a unique investment opportunity. As always, you may or may not be aware, in the last quarter of last -- in October last year, we released our PEA on the Phalaborwa flagship project that we have in Rainbow, and these numbers are unsurpassed for a project of this nature and size. We've got a post-tax NPV of $620-odd million, IRR of over 40%. EBITDA margin at spot pricing, I must stress spot pricing, lots of rare earths studies coming out over the last year that had been using forecast pricing to justify their returns. We had spot prices. We have an EBITDA [ over life of ] project of $195 million per annum, a margin of 75-plus percent. And based on our CapEx, which is below $200 million for this project, it's a payback of 2 years. As I said, this is a very strategic asset. It's near-term production compared to hard rock rare earth project. We believe it's been derisked by the release of the PEA. And I must stress, it was a very high-level PEA. In other words, it was closer to a feasibility study than a PEA, and those financial numbers confirm that. We're using a unique intellectual property developed with our partners, K-Tech, in the U.S. in Florida, which has been applied to other phosphogypsum projects around the world. These guys have got 20-odd years of phosphogypsum IP. And we also believe we've got a pathway to growing demand for these magnet rare earths [ as they're turned ], being neodymium, praseodymium, terbium and dysprosium, with the pipeline of other projects which I'll allude to later. And very importantly, we've got a very experienced team with a proven history of delivery. Now if we have a look at the investment opportunity for our viewers, and as I said, the Rainbow market cap at the moment, [ down ] about $65 million, $70 million. Yet we've got NPV at $627 million [ post NPV ] at spot pricing. And you've got to ask yourselves whether you think Rainbow will be able to close that gap: if we close that gap by 50%, it's a five bagger; and if we close that gap all the way to tenbagger, in fund manager's terminology. Well, I believe we do have the team that can deliver that. If we look at myself, successfully sold -- the part of the business we sold to HSBC is my -- early stage in my career as an investment banker, and then successfully listed Shanta Gold in London. Then I started MDM Engineering out of the bankrupt engineering business with my technical director. They have done the original [ D in ] MDM. And we listed MDM in 2008 very successfully, paid a dividend every 6 months we were listed, even during the 2008 financial crisis and subsequent years. And basically, over that period, Dave and myself combined have done over 100 feasibility studies. And in MDM Engineering alone, we [ built ] 22 mine projects around the world, process plants, and Dave, collectively, has done over 80 around the world successfully, design [ and built ]. And I must stress that at 2 of those mines we did at MDM Engineering or process plants we did with gold and uranium mines, we will be dealing with continuous ion exchange and materials of construction similar to what we see in this rare earth project and some of the technology that we're using in this rare earth project. So I think we've got a very experienced team. We also have Chris Le Roux [ next ], chief metallurgist at Gold Fields. He also worked for me at Rainbow. He's been involved in 2 rare earth studies we did at MDM Engineering, the [indiscernible] studies and the Peak Resources rare earth studies. So we have Chris' experience in uranium and rare earths with us. And Roux joined us in the last quarter from SENET engineering. And SENET were responsible for the bankable feasibility study for the Mkango rare earth project in Malawi, and Roux was the lead process engineer on that study. So we've got a very experienced team with lots of rare earths experience and relevant experience through uranium, as I've mentioned. And then our Chairman, Adonis Pouroulis, has successfully listed and developed a number of mining projects on the London and Toronto markets. He's got a long track record and strategic vision for growth. And then Pete Gardner, very importantly, our CFO, has been involved in a number of development projects, financing them, taking them through to production from a financial aspect; as well as been involved in the sale of Amara some years ago, a well-known gold mining company. So as I said, I think we've got the right team. And lots of junior miners out there will battle to find the track record, I believe, that we've got here. Now talking about the market now, we all know that rare earths are critical in what we call permanent magnets. There are 17 elements, but only 4 of those elements are really critical. The 2 main ones are neodymium and praseodymium, and to a lesser extent, dysprosium and terbium. They are regarded as permanent magnet rare earths. And in Phalaborwa, we've got all 4 of these rare earth elements. They account for 95% of global RE consumption in terms of value. And permanent magnets are the most important -- rare earth permanent magnets are the most important components in wind turbines to enable them to have a very high output from their motors. And then in electric cars, permanent magnets give the batteries further range because your motor is able to have greater output for less draw on your battery. So the less draw on your battery, the more range you've got for the same power output enabled by permanent magnets. And every electric vehicle has between 3 to 5 kilograms of rare earth magnets in their vehicles, and every 3-megawatt wind turbine has 2 tonnes of permanent magnets and 60% of those permanent magnets are neodymium and praseodymium. So very, very important. And if we're going to achieve, as we know, what the world is looking to achieve, net zero in 2050 in terms of carbon emission, that's only going to be driven by wind turbines, electric vehicle penetration and to a certain extent as -- or to a large extent, solar as well. And there are some components of rare earth elements that are used in solar panels as well. So we see very, very strong demand. And this has been legislated globally, or certainly by the major western economies in the world. And we also see government policy being driven by COP27, and this is going to continue to create demand for these rare earths magnets. Basically, as you can see from this chart here, forecast for the rare earth supply deficit, which is there's not one forecaster or analyst in the world right now who doesn't see a supply deficit of these rare earth magnets. And you can see the Rainbow basket there in the red line, which is we had a peak in 2022, which is last year, because there was extra wind turbine demand out of China which required a massive amount of permanent magnets of neodymium and praseodymium being installed in these wind turbines. And that's what you saw, the price jumped in 2022, came back as those wind turbines demand sort of tapered off. And now we see a continued forecast growth for these elements, and we see now the price of our basket continuing to grow. If we have a look in 2026 when we expect it to come into production, our baskets are still rising, and that drives us all the way through to 2020 -- sorry, to 2030, which where we see the price of our basket increasing quite significantly. But even at spot prices, we have a very, very robust project. Unfortunately, China controls this market. Some of you may or may not know that in 1992, Deng Xiaoping of China made an announcement that the Middle East has oil and China has rare earths. Already 30 years ago, the Chinese realized the strategic nature of rare earths, and they decided to try and dominate this market, which they successfully have done over the last 30 years. So we've got 60-odd percent of primary production being dominated by the Chinese and 90% of the downstream processing being dominated by the Chinese. And with the geopolitical forces at play, Russia, we don't need to talk about, and even with the stress around China, the whole Western world realizes that these critical rare earths, we can't rely on Chinese supply chain. And they've been looking for independent supply chain outside of China and the very, very few projects that are going to be able to deliver independent supply chain outside of China. And we believe Rainbow is one of those projects, especially the Phalaborwa project. There are long lead times for hard rock mining projects to come into production. If you look -- if you Google historically from discovery of assets to production, you're looking at anywhere between 12, 15 to 25 years for projects, and that's your typical time line. Now we only secured the Phalaborwa project in November 2020. I started -- Rainbow working on it in January '21. And so effectively, we've delivered a lot over the last 2 years, from January '21 to where we were at the end of last year, and we're forecasting to be in production in 2026. So that's a very, very short time line. It's the nature of the project because we're not mining hard rock [indiscernible]. We're processing existing gypsum tailings, and this is why our time line is far shorter than other rare earths projects. And you can see from our numbers that we have the ability to sustain lower rare earth pricing. And a lot of hard rock projects, to be honest with you, we don't believe have that ability to sustain lower pricing. As I said, most of them are using much higher forecast pricing in their feasibility studies to be able to justify their so-called returns on their projects. This is where Rainbow sits in this rare earth supply chain and rare earth magnet supply chain. So upstream, you've got mining, which entails drilling and crushing -- sorry, hard rock mining with drilling and blasting. Then you'll have to transport that to your process plant where you've got crushing. You've got milling. You've got floatation. Then you produce the rare earth concentrate. That rare earth concentrate then has to be floated and to -- and then it has to be cracked into chemical form. And once it's cracked into chemical form, it kind of go into separation, and these are often done in different plants. If you look at a couple of projects in Africa, they're talking about producing a mineral concentrate in their jurisdictions and then shipping that mineral concentrate to the U.K. where it has to be cracked in another plant. And then it has to go to a further plant for -- to go -- to separate rare earth oxides before you can supply magnet manufacturers. This midstream area is done mainly because a magnet -- sorry, before the magnet manufacturer, it has to go to metal and alloy plants, which then will turn the separated oxides into metal, then an alloy and that alloy then has to be fed into our magnet manufacturers before it goes further downstream to the OEMs, that is, to go into the motor vehicles or the wind turbines or the drone manufacturers of the world. China dominates this all the way down -- all the way through to the midstream. And as I say, Rainbow in a unique position. Because we're dealing with the cracked chemical concentrate, we don't have to do so many processes beforehand. We are just going straight into producing a solution, which we're then going to separate all the way into separated rare earth oxides. One of the few projects in the world right now are doing this. Lynas in Australia, one of the few hard rock operations that are operating in the world right now, they go through all the way to separating rare earths oxides. We are doing that without all the prerequisite processes. So that's why the Rainbow CapEx for a project of this size is far lower than a project you see to produce the same amount of separated rare earth oxides that we're going to be separating. And this gives us very, very strong fundamentals from a financial point of view that you've seen in our study. Now we'll go to look at the actual project in Phalaborwa. Now Phalaborwa is a mining town in the far north of South Africa. You can see the photograph there. These are the 2 gypsum stacks that we are going to be processing for the rare earths. Next door, in the top right-hand corner, you'll see the mothballed phosphoric acid plant that Sasol ran. Now the reason why this is unique is that you've got a phosphate mine next door run by Foskor, the government mining company that produce phosphate rock, which is then concentrated into a slurry. That slurry was then fed next door to a phosphoric acid plant where they added sulfuric acid and heat to enable them to produce phosphoric acid for the fertilizer industry. As a byproduct of that -- so the rare earths that were -- in the host rock that were mined by Foskor were concentrated, as I said, in the phosphate slurry. And then in the process of producing phosphoric acid, you produce a gypsum residue, and the rare earths were slightly upgraded further into gypsum residue. And this gypsum residue then created these 2 stacks that you see there, which are 30-odd million tonnes in size, which gives us a project life of just over 14-odd years for this project. What's important, as I said, is that when the phosphoric acid was created or produced, you use sulfuric acid and heat. Now if you go to a hard rock project and if you look at any hard rock process to crack your rare earth elements before you can go further downstream, produce a mixture of carbonate or a mixture of oxides, which you then have to go and to separate -- and to produce separated rare earths oxides, you need to add sulfuric acid and heat. And these 2 elements have been done in the project at 0 cost to the project, which is why we now have an OpEx that you can see there at USD 33.86 per kilogram, which is we believe probably the lowest OpEx for separated rare earth oxides in the world. You can look at the Lynas website. You'll see what their price is. It's a lot higher than this. And compared to our basket price per kilogram, revenue per kilogram of our basket price, you can see then why our EBITDA margin is so high. Another important point is that because this is in an existing mining town with 3 operating mines, we've got skilled labor available or the infrastructure associated with the phosphoric acid plant that has been -- that's mothballed. In other words, workshops, 2 train sidings, high-voltage switch yards, machine shops, laboratories, admin offices are still available to Rainbow to this project, which has kept our capital price for the project low. As I said, it's sub $300 million. And we believe that our bankable feasibility study that we are conducting this year in Rainbow, that we will possibly be able to optimize that CapEx number even lower, which makes -- will further enhance the project economics of this project. So to look at where we are and what we're looking at in 2023, so in the last quarter of '23, the highlights were the publication of our feasibility -- our PEA feasibility study, which delivered very strong numbers, as I've mentioned. And we also strengthened our technical team with the acquisition of Roux from SENET, where he's got very relevant uranium and rare earth experience. And now looking at 2023, what we're doing is that we -- in the first quarter of 2023, we will be coming up with a resource update. And we will also commence the bankable feasibility study, the work streams for our bankable feasibility study, and some of those have already started and I might get to talking about them a bit later. And then we're going to be basically building our pilot plant, which will be a continuous pilot plant to create design data for our final commercial plant. And like any project of this nature, it's important, we believe, to have a pilot plant. We know how -- we're very comfortable that our process has been proven at lab and -- sort of bench and lab scale, but we want to put it through a continuous pilot plant just to get design information. And then there'll be a [ permitting ] update, and we will be hopefully completing our bankable feasibility study at the end of 2023 or the latest, the first quarter of 2024. And then we, as I said, we're expecting production in 2026. In terms of the Rainbow's business model, we are -- as I said, we do have a -- just to talk about our project in Burundi, which the market -- as you know, we have a hard rock mining project in Burundi. It's a very high-grade project. I'm not talking about it because it's on care and maintenance because we've been suspended by the Burundi government. We are in negotiations with the Burundi government to get this project exporting our concentrate stockpile there as well as get our trial mining operation going again. But as I said, the time line with the Burundi government, I don't want to give the market a time line because we've been in negotiations with them for a number of months now. And as soon as we have clarity on resolution, we will inform the market. We do believe we will have resolution because the government has come to us and said, "We want to now resolve this," and they've -- we are -- we had discussions with them in November last year. But now we'll have to see how we can complete those in 2023. As I said, [ planning ] to talk further about Burundi because as I said, it's a much smaller project in the [ life ] of Rainbow. Burundi's got a long way to go to commercial production. And Phalaborwa project at spot prices will produce sort of circa $200 million of EBITDA and that's where our focus is. And there's also -- we also want to leverage the IP we've developed for other opportunities similar to Phalaborwa, and that's why I said we've got other near-term opportunities in different jurisdictions. So we're derisking Phalaborwa from further projects in different countries. But importantly, it's using our IP that we generate in the phosphogypsum to pursue these other opportunities. The one was the major chemical process in South Africa that has got a [ live ] phosphoric acid stream with rare earth elements in it because it's using the same feed rock that comes off -- or slurry that's produced by Foskor in Phalaborwa that are used for their phosphoric acid production. We're busy with conducting testing with K-Tech in Florida as we speak. And then we signed a master agreement with Morocco, the world's leading producer of phosphate projects, and UM6P university in Morocco to co-develop flow sheet to extract the rare earths that we know are present in their phosphogypsum. It's not only sedimentary phosphogypsum that we're targeting, but it's in their [ live ] upgraded phosphogypsum stream that we believe is the opportunity in Morocco. And as I said, Morocco is a very exciting opportunity for Rainbow. It creates project diversification -- country diversification. And we signed 2 NDAs with 2 other Phalaborwa lookalikes in another continent. I don't want to talk about which continent because we have signed these NDAs. I don't want to -- we can't talk much more than that. But we've signed NDAs initially with OCP and with chemical producers in South Africa, and that led to stronger agreements, which we now are pursuing. And likewise, we signed 2 NDAs. It's a very strong step into, hopefully, concluding 2 agreements to do JVs with these 2 Phalaborwa-type opportunities in another continent in the world. So we believe we've got a pipeline for growth. These other opportunities are much longer lead times. They're sort of 25-plus year life of projects. So Phalaborwa -- so Rainbow don't just have Phalaborwa as an exciting phosphogypsum opportunity, which is a 14-year [ life ]. We have got a number of other opportunities that are -- that have got very, very long life. So this is going to enable Rainbow, I believe, to become a significant producer of rare earth oxides in the world. Just to talk about the Phalaborwa production. If you look at the PEA we're going to produce, amongst the 4 separated rare earth oxides, about 2,000 tonnes per annum, which is currently 1/3 of the size of Lynas in Australia. And Lynas, producing circa 6,000-odd tonnes of these permanent magnet rare earths, they've got a market capital, I think, of about AUD 4 billion to AUD 6 billion. So we're going to be 1/3 of the size. So I don't need to explain to you what that means for our market cap down the line if we get this right. So as I said, I think Rainbow is uniquely positioned for growth in a growing market. We've got the right strategy. We've got the right technology, we believe, and the right skills, very importantly, because it's all very well having a great project. Then we've got the right skills to bring it online. We know how many disasters are out there in terms of projects not coming on -- not being brought to bear. We've got an exceptional flagship asset, as you can see from the PEA numbers. And as I say, we've got a pipeline for growth, and we've got strong institutional support, I believe, in Rainbow. So it makes us very excited about the year ahead. I believe it's going to be a very important year in Rainbow's life. We're going to be able to close that value gap between our market cap and the NPV of our Phalaborwa project and potentially some of the other projects that we'll be able to get further definition on as the year progresses. So just to conclude, if we look at the Phalaborwa forecast in terms of when we're in production, what those forecast numbers are for rare earth pricing. At forecast pricing, we've got an NPV post tax of over $1 billion and IRR of over 44%. We'll be generating $320 million of EBITDA at 2026 rare earth prices when we forecast again production. And we'll have a margin of over 83%, which would be phenomenal for any project of this nature. So I conclude that I think this is a great project. We're very, very confident that we'll be able to deliver this to the market, as I say, and we've got a track record of delivery. And we -- I don't believe we're going to let the market down, the team and myself. And as I said, the team is very important. I'm just the [indiscernible]. It's the clever guys behind me that will make sure we can deliver this. But I've got the right team, and that will be a good result for Rainbow. Thank you. I'll now hand over.

George, that's great. And thank you very much indeed for your presentation this morning. [Operator Instructions] But as well, George, it takes a few moments to review those questions that were submitted already. I would like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A, can be accessed via your Investor dashboard. George, we did receive a number of pre-submitted questions ahead of today's event. And as you can see there in the Q&A tab, we've also received a number of questions throughout your presentation itself this morning. So firstly, thank you to all of those on the call for taking the time to submit their questions. And Tara, perhaps I could hand over to you to chair the Q&A session with George and respond to those questions where it's appropriate to do so. And then I'll pick up from you at the end. Thank you.

Good Morning. We've received, as Jake has mentioned, a number of questions on across various factors. But to start with questions on Phalaborwa, George, how will the energy crisis in South Africa affects production, do you think?

Well Phalaborwa's quite lucky in the sense that compared to normal mining project where your energy as part of the OpEx is roughly 50%. And we are low energy consumer at Phalaborwa compared to typical rare earths mining project. And I'll stress it's not a mining project per se. This is a chemical processing project and it's a chemical processing plant we'll be building. And as a result, we don't have -- we will just be viewed as -- when all our license applications will be as a chemical producing company. But the -- so we consume -- our power consumption is about 21% compared to a normal project, as I say, so it's low in comparison. And importantly, we believe by 2026, the energy crisis will be resolved to a certain extent, I don't say it will be completely resolved. But we do have a power allocation at Phalaborwa because it's an existing brownfield site, it's an existing high voltage switch yard, which is still operating today. And basically, we also will be using solar power, and the Phalaborwa is one of the hottest places in Southern Africa in terms of solar radiation values, it's very, very high, and we will be looking at supplementing the grid power with solar and with battery power as well. So we are not too phased about it to be honest.

And can you give an indication as to when the pilot plant will be operational? Or -- and indeed, how long it will be operational for?

The pilot plant is forecast to be operational in the second quarter of this year and it will be roughly a 3-month pilot -- continuous pilot operation, 3 to 4 months, but it won't be longer than that.

And will there be a fundraise prior to the pilot plant being built?

There will be -- I've been very honest with the market. When I did my last fundraise 18-odd months ago that the money I raised in would not be to fund the pilot plant. Even then I said we will need a pilot plant once we've got this flow sheet finalized. We finalized the flow sheet and produced our PEA and in my presentations in October, November last year, I reiterated to the market that we would be needing to come to the market to finance the pilot plant.

And when do you think the feasibility study will commence?

Well, we've actually commenced the feasibility study already. We've got funds, as I also mentioned that for the feasibility study commencement, we started the certain EIA studies because the EIA permitting is on the critical path, and we've really started that as we speak this month. And -- so that has commenced.

Are you considering an offtake agreement from Phalaborwa?

We -- because these rares are very critical to western governments, we are going to be looking at a combination of debt and equity to finance the project. We've already had indications that we would be able to bear 70%, maybe even 75% debt on this project because the financial numbers are so strong. And we are looking at a number of ways of project finance for that. We've got strong interest out of the DFC in the U.S., which is a government financing institution in the U.S. for project finance as well as other debt financiers in South Africa as well as internationally. So -- and then there's also looking at the option we are -- we have -- we're talking to our OEMs or looking at some kind of strategic stockpile of rare earths and they could be part of the financing mix. So we are looking at all avenues. But there's lots of interest, as you can imagine, because there are very few rare earths projects coming into production in the time line that we are going to be coming into production at the top of the pricing that we will be able to come in that in terms of our production costs.

And then segues into when do you anticipate production to commence?

As I mentioned earlier in our presentation, we -- if -- for the -- was all my hurdles are -- time lines are met, which is the pilot plant, the bankable feasibility study, I would be looking at 2026.

Thank you. There's obviously significant risk and costs associated with development projects and how can you provide comfort on Rainbow's ability to succeed?

Well, I think you then have to look at your team and the team that I've got at Rainbow, we're all at MDM Engineering together. Over my 10 years in MDM engineering, I built 22 mines and process plants, not one of them was over budget. Other than number of fixed price contracts, which is known as EPC contracts in the mining world where you give the client a fixed price and you -- if you are over that fixed price, you lose money, if you're under that fixed price, you make money. I made many on all my fixed price contracts. So I've got a lot of experience in making sure that when our price -- a process point of the nature of that we'd be pricing at Phalaborwa that we will be on track to meet the CapEx budget for that project. And in terms of time lines, also got lots of experience, our team in terms of the [ fast track ] projects. We've built a number of large projects in 18 months in the middle of the jungle, where -- be the DRC, Ghana, Tanzania, and we've been -- say we've been on budget and on time. And we'll be building literally in South Africa, which with rare earths signings right into our project site, [indiscernible] road right to the project site, airports 5 minutes away. So to build a project in Phalaborwa by comparison will be a walk in the park. So I think we don't foresee why we won't be able to deliver this project on the time lines and on the budget once we finalize our budget and the bankable feasibility study process.

And one more on the pre-submitted questions on Phalaborwa. How confident are you in obtaining the outstanding permits?

Well, it's a brownfield site. It's really permitted. All we have to do is make amendments to those permits. There is one greenfield permits that we have to apply for and that's for a new stack site because what we have to do is we process one stack site, and we'll read their position on to a new clean stack sites. And then once that stack site is depleted, we'll make that state compliant with I've seen in equator principles in terms of linings and then we'll start processing the second stack and that second stack site will then go on to the on the stack site that we've cleared and we've done. So it's a brown -- it's a greenfield's permit. But because this is a big environmental cleanup, the one thing that I haven't mentioned is this has got huge environmental credits for any project of -- because you see the -- if I go back to this credit graph here, look, sorry there, the green, you see on a couple of those sites is actually acid water. We're going to be -- and that's a risk to the environment. That's why there's environmental management plan at site over these stacks with environmental management fund funded by Sasol to make sure that this can be cleaned up. We, in fact, are going to be doing this on behalf of Sasol, we will be -- and [indiscernible] engaged with to do our JV on this project, we've got 70% of it is that we're going to be neutralizing all the stack water and using it now in our process plant any -- so the gypsum that's redeposited will be clean, benign, it will be dry stacking. There will be no acid water associated with it and that immediately means that the environmental risk associated with the new stacks is totally negated, and it also means that we -- over the last of the project, we will reduce environmental liability associated with the site to 0. So it's got huge credits from that point of view. And it's a very, very huge environmental cleanup project, which, once again, as I said, at some stage, we'll start getting credit for that as well.

Thank you, George. And to move on to a few questions on the market. What is your view on the demand and supply dynamics of the rare earth sector?

Well, as I say, I'm very, very bullish on the rare earth sector, mainly because we all know that demand for permanent magnets, which are critical for, as I say, for electric cars, for their motors that create range for the electric cars, which means your battery can last longer and [indiscernible] chasing range EV batteries. And for your wind turbines, the reason why wind turbines need permanent magnet is because the new generation wind turbines or what's known as direct drive wind turbines, that means they have no gearboxes, that means they have minimal maintenance. And if all of these wind turbines are being situated 100, 200 kilometers out in the sea. And you can imagine the cost of trying to change a gearbox a 100 or 200 kilometers offshore. It's just the cost is phenomenal. So all the wind offshore turbines or direct drive wind turbines, they need those permanent magnets, they can get more power out of the motor for a smaller motor because of the power that you get from the permanent magnets. So this has been driven by legislation -- government legislation, EV manufacturers, you say, by 2025 or 2030 or 2040, we're not going to be making internal combustion engine motors. Governments are saying you won't be able to buy these internal combustion engine motors with these various timetables given to the world over the last 18 months. I believe those time tables will be moved out. But what we are sure about is that they are going to be in place and whether you think that there'll be no electric vehicles sold in 2030 or 2035,or even 2040. It doesn't matter. Eventually, there will be no electric vehicles sold in France, in Europe, in the U.K., in places like Scandinavia, Australia and so forth. So I think the demand is there. We know there's not enough supply, and we need new projects to come on stream. And there are a number of projects that are being developed only a few of those will be successful. So the demand curve is very strong. I don't believe that's going away. And my belief that, as I said, is also from spending 16 years in financial markets and training in [indiscernible] and dealing in gold assets and so forth. You know, if I ask you for a forecast on the gold price, 20 analysts will tell you it's going to go to $3,000 and 20 analysts will tell you it's going to go to $1,200 an ounce. There's not one forecast or one analyst will -- there's not an agreement that rare earths prices are going up. So I think we're very lucky that the macro market for the forecast pricing is very, very strong. It's legislated, it's not going away. So we're really lucky from that point of view in my opinion.

And with that in mind, how do you see Western governments and OEMs engaging in the rare earths sector in the coming years?

As I said, they are talking about engaging this. They have started an engagement. We've had a number of conversations with members of -- in the U.K. government responsible for this area as well as the U.S. government. And there's definitely an initiative to try and create a strategic supply outside of China. We believe Rainbow will be part of that solution. We -- as I said, we are -- we wanted a few projects that's going all the way through to separate rare earths oxides. And of course, that means that we can start talking to metal and -- metal manufacturers and guys who take that metal and alloy because they then have to feed the magnet manufacturers. And the magnet manufacturers in the Western world are expanding. There are a number of expansion plans. Some of those have been announced, some of them are going to be announced. So we see a strong sort of -- the strong dialogue with these various governments. And I think they will be -- hopefully part of the financing solution, as I say, for the project when we are ready to talk about that financing in 2024.

And are there replacements for your -- for the products today? And if not, what are the risks of those being developed on a 10- to 15-year time line?

To be honest with you, it's going to take 10, 15 plus years to find a replacement for permanent magnets. Permanent magnets, these things were first not -- the world came across them or the sciences came across them in 80s, 1980s, 1990s. We're now 50 years in and they are the best thing for this application available to the world. So also in the cost of magnetic vehicle, a permanent magnet is less than 1% of the cost of the electric vehicle. So even if the price of the permanent magnet to the electric vehicle manufacturers doubles, it's certainly only 2% of the cost. So we don't believe that there's much substitution taking place in the foreseeable future. If it becomes a significant price, then, yes, maybe. As I said, in wind turbines, I also see less risk because of the fact that these wind turbines are being situated so far out at sea they need direct drive motors and direct drive motors are the only sort of thing that creates their power for them or permanent magnets. So I don't see much substitution. I'm not saying it's impossible, but that substitution will take 15, 20-odd years to develop. We will have depleted Phalaborwa by the time there's a substitution for a permanent magnet. And also, I went to a rare earths conference in Las Vegas in November last year. So it's very recent. We had a very comprehensive presentation by Arnold Magnets and not -- one of the few permanent magnets manufacturers in the U.S., and they explain to us the difficulty in developing permanent magnet for applications in terms of how much research and development goes into that and how many years it takes. And once they design and agree on the compound for the permanent magnet that will drive F1 fighter jets and buying applications and buying airlines and so forth, they are then not going to change for many, many, many years. And so the [ trend ] of substitution, as we, right now, I believe, is very low. One can never say impossible, but I believe it's very low.

And moving on to a couple of questions on Rainbow and the company. Rare earths are, in fact, not that rare. So how does the company -- how does Rainbow differentiate itself from other developers? And how does the potential TREO compare with other companies and their assets?

It's a good question. You're right. Rare earths are not particularly rare, but where they are rare is to be found in economic exportable projects. So the -- if you look at -- in 2008, 2009, there's an explosion -- sorry, 2010 there's an explosion in rare earths earth pricing due to a spat between China and Japan, and that's what led to Japanese funding Lynas to create an independent source of separated rare earth oxides outside of China for their permanent magnets manufacturing capabilities in Japan. And something like over 1,000 rare earths projects were -- then suddenly came on to the market in terms of IPOs and 1 or 2 private projects were talked about between 2010 and 2012. Out of those 1,000 projects, there's only one that's in production and it's Lynas. Now -- so what I'm saying is that this is slightly different. This is rare earths because that was -- what's been driving the price rise in rare earths is the -- as I said, the government legislation and the COP26 targets. So the demand and the strong pricing for rare earths is not going to go away. So what killed all of those projects was the rare earths prices collapsed and those projects were not economically viable. So what I'm saying is that project economics for rare earths projects to be successful are very, very key. If you look at our project economics, very strong. We could sustain a halving of the price of current rare earths pricing and we'll still be profitable, which is one of the reasons which makes Rainbow, I believe unique. Secondly, you look at our grade, you can't compare it to a hard rock project because we do some residue stacks above the ground. You compare us to an ionic clay project, which is what the Chinese mine and a few other ionic clay projects around the world, when you compare us to ionic clay projects, we're between 6 and 10x the grade of ionic clays because ionic clay has a very low cost of mining. We have a very low cost of mining at Phalaborwa because we just are going to hydraulically mine the gypsum into the process plant, which is very low cost. It's less than $1 a ton. Mining cost, a hard rock project in terms of mining cost anywhere from between $15, $18 to $35 plus $40 a tonne to get to where we are at Phalaborwa. So we've got a very low cost of mining. And if it compares to ionic clay deposits, as I mentioned, we're 6 to 10x higher grade. So very important. We've got an ore mining projects greatest kiln, we all know that. And then thirdly, if you look at our rare earths basket, 30% of our -- or 29.1% of our rare earths basket is made up of 2 of the key -- 2 key rare earths elements, Neodymium and Praseodymium, two of the key permanent magnet rare earths and that's one of the highest percentages of any rare earths basket in the world. So if we put all those factors into account, I believe we have a unique position in Rainbow and that unique position in Rainbow I've identified with other phosphogypsum opportunities in the world. We've signed an agreement with OCP in Morocco, and we've got NDAs [indiscernible] 2 other similar Phalaborwa look alike projects. NDAs have been signed with the different continents around the world. It's not Africa, it's somewhere else. So yes, I think we're in a strong position.

Thank you for that. Sorry, just reading questions. How can Rainbow remain unique with the processing approach? And how easily can the flow sheet be replicated by upcoming companies? What are your thoughts on that particular question?

Well, that would mean that they would have to have access to other phosphogypsum opportunities in the world. And I can tell you there aren't many opportunities out there. The 3 biggest opportunities in the world, I have already identified, and we've got an agreement with one, and NDAs signed with 2 of them. I think that might give some color onto that question. But also importantly, the IP that Rainbow has developed, the back end of that IP is really patented by our K-tech. Its continuous ion exchange and continuous ion chromatography. K-tech -- the guys at K-tech have developed this are still there. They've got over 40 years of experience in phosphogypsum and they, in fact, were the inventors of continuous ion exchange, which we used in the Uranium plants around the world, and they're also the inventors of continuous ion chromatography. So we've got a very strong IP at the back end and the front end using Rainbow's very strong technical team and the K-tech team, we've now developed a front end, which we're busy patenting. And that patent is in the process of being finalized and launched. And we believe that gives us a very strong position in the market. Of course, over time, somebody could replicate it, but it will take years and years and years to get there. And so like anything, if you're the first mover, you've always got a big advantage. You know Nokia didn't make the first mobile phones in the world, but they are also mobile phone manufacturers in the world now. But they were the first mover in the mass market and for many years, they dominated the mass market. And then they made mistakes you all know about it. So what I'm saying is having first move advantage in this area of IP and to look at this opportunity gives us, I think, a unique position in the marketplace.

And last question, what are the major corporate objectives for Rainbow to achieve in 2023?

I've gone through that, to be honest with you. There we go. We've got a resource updates. Our pilot plant will be built and up and running by the end of the next quarter. We already started the EIA permitting process, that's already started in conjunction with the start of our bankable feasibility study, and that will be delivering by the end of this year. So I think those are our key targets for 2023, which will be very significant.

George, Tara, perhaps if I just jump back in there. Thank you very much indeed for being so generous of your time there and addressing all of those questions that came in from investors this morning. And of course, if there are any further questions that do come through, we'll make these available to you immediately after the presentation has ended for you to review to then add any additional responses, of course, where it's appropriate to do so, and we'll publish those out on the Investor Meet Company platform. George, perhaps before redirecting those on the call to provide you their feedback, which I know is particularly important to yourself and the company. If I could please just ask you for a few closing comments, that would be great.

Yes. I think just for the audience, this will be on our website, this presentation. There's a whole bunch of the appendices with a lot more information on the Board, which is a very experienced board as well apart from the technical management team. We've got a very strong and experienced Board and you can, at your leisure go through those appendices. And -- but just to finish off, as I said, people invest in companies to make money. And I believe the reason why one should be looking at Rainbow is that there's a massive value gap between our market cap and our MPV and the fact that we've got such strong metrics in terms of financial metrics on any project of this nature. As I said, Rainbow is, we believe, going to be the lowest cost producer in the world of separated rare earths oxides even below the Chinese that came out of my conference in Las Vegas last year. And as I said, we've got exceptionally strong metrics. And I believe that we've got a team to close that value gap. So I want to leave the audience with those thoughts.

George, that's great. And thank you once again for updating investors this morning. Could I please ask investors not to close this session as you will now be automatically redirected for the opportunity to provide your feedback in order that the management team can better understand your views and expectations. It's going to take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of Rainbow Rare Earths Limited, we would like to thank you for attending today's presentation. That now concludes today's session. So good morning to you all.

Thank you to the audience.