Further to the update on 29 June 2021 regarding the temporary suspension of trial mining operations from the Gakara Project in Burundi, Rainbow continues to engage with the Government of Burundi (the “Government”) to allow operations and exports to re-start.
During this Government-mandated suspension, operating costs in Burundi have been minimised, with the vast majority of staff placed on suspension, such that the ongoing situation is not having a significant impact on the Company’s cash flow forecasts.
Due to the visits of George Bennett, CEO, to Burundi in April, June, and July 2021, the Company understands that the primary concerns of the Government relate to the pricing of the rare earth mineral concentrate sold by Rainbow Mining Burundi SM, the local operating entity. Rainbow notes that this was addressed comprehensively in an independent report, dated 26 July 2019, that was commissioned by the World Bank at the request of the Government and compiled by SRK Consulting . This report, accepted by the Government in 2020 , concluded that:
· The price paid by ThyssenKrupp, the multinational industrial group, for the Gakara rare earth mineral concentrate, which is established on the basis of internationally recognised pricing, is commercial and forms a reliable foundation for the computation of royalties payable to the Government.
· The export grades of each shipment are independently verified as accurate by two internationally recognised laboratories (ALS Laboratories in Canada and Baotou Research Institute of Rare Earths in China) and have been correctly reported to the Government for each shipment from Gakara to date.
· That Rainbow is a “model company for new market entrants”.
Rainbow notes that the ongoing suspension contravenes Burundi law and has been imposed without due and proper process. For example, the Government has never provided credible, data-based alternative prices for the concentrate exported or any alternative credible third-party analysis of grades from the samples they hold for each batch exported to date.
The Company has asked the Government to lift the suspension as soon as possible to allow trial mining to resume, local staff to return to work and exports to restart thereby generating significant employment, revenue, royalties and taxes for Burundi.
George Bennett, CEO, said: “Whilst the situation facing Rainbow in Burundi is disappointing, it has allowed our team to focus on the substantially larger opportunity presented for near term development of Phalaborwa, which we see as the immediate catalyst of Rainbow’s business model and the asset that will enable the Company to become a significant producer of rare earths to drive the green revolution. With the opportunity to fast track the project’s development, I expect Phalaborwa to be a sizable, commercial scale producer of separated rare earth oxides, substantially surpassing the trial mining activities at Gakara.
Rainbow remains committed to the positive contributions we are able to make as a Company within our countries of operation and communities through the payment of taxes and royalties, the provision of employment, local investment and the support of local supply chains.”
Market Abuse Regulation (“MAR”) Disclosure
This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 (“MAR”), and is disclosed in accordance with the Company’s obligations under Article 17 of MAR.
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