Business & Investment

MIDAS SHARE TIPS: Rare metal for earphones?Try Rainbow

In 1992, Chinese Communist Party veteran Deng Xiaoping said: There are rare earths in China. ”

At that time, few people were concerned. Today, many do so, including governments and businesses around the world.

Rare earth metals are found in a variety of products, from earphones to air conditioners, and they are in increasing demand as the world becomes cleaner and greener.

Powerplay: Chinese mining company Rainbow Rare Earths is a leading producer of neodymium and is used in millions of earphones, air conditioners and other products.

China accounts for more than 75% of the world’s rare earth production and 95% of refining and processing.

Not surprisingly, Western countries are keen to reduce their dependence on China, but alternative producers and processors are on the ground.

Rainbow rare earths are an exception to the rules. The company is becoming one of the largest producers of two major rare earth metals, praseodymium and neodymium, outside of China.

They formed the basis of a compound called NdPr oxide, which tripled in price from $ 40,000 per ton to $ 115,000 per ton (£ 86,000) in less than two years.

Some predictors suggest that the surge will continue as both rare earth metals are important components of wind turbines and electric vehicles.

Rainbow has two rare earth projects, Burundi and South Africa. Today, the Burundi mine is hibernating and the South African site is under development.

Still, Rainbow’s share price has risen by more than 30% over the past year to 13p, and analysts expect it to triple in the next few years.

Investor excitement is focused on the South African project in Phalaborwa, right next to Kruger National Park.

The site, which has been the home of phosphate mines for decades, has produced two stacks of gypsum residue, each over 1,000 feet long and 200 feet high.

Rainbow has two rare earth projects, one next to South Africa's Kruger National Park

Rainbow has two rare earth projects, one next to South Africa’s Kruger National Park

They contain trace amounts of praseodymium and neodymium, along with other precious rare earth elements.

Normally, these elements are extracted from the ore. In the case of Phalaborwa, they are extracted from the gypsum stack. This is much cheaper than traditional mining and, importantly, does not provide the untreated metal mass that needs to be separated in China.

Costs are relatively modest as they are not subject to South African mining regulations because there is no need for expensive underground drilling and the project is considered a chemical treatment operation rather than a mine.

Rainbow also has the benefit of green as it cleans up the gypsum as part of the rare earth extraction process and creates materials that can be easily sold to construction companies.

The site is up and running by 2024 and is expected to generate up to $ 250 million in annual revenue, with an underlying revenue of at least $ 100 million.

The Burundi project could resume even when Phalaborwa is moving towards production.

Historically, the Burundian government was entitled to 10% of local mining projects, but stopped all mining activities this summer because it was keen to ensure more favorable conditions.

A compromise is expected next year, with politicians likely demanding nearly 15% of the Burundi mine.

Even at that level, the site has a lot of potential as it is rich in praseodymium and neodymium and is waiting for about 450 tonnes of ore to be processed. This move alone will generate about $ 1.5 million in cash.

African mining projects have been confirmed to have a proven track record in the stock market.

However, Rainbow is run by George Bennett, who turned from an investment banker to a mining expert, with nearly 20 years of successful projects in his name and the experienced team behind him. ..

Midas Verdict: A mining company that doesn’t make money, tackles political issues, and is unlikely to make meaningful profits for years may seem like a ridiculous investment.

However, Rainbow Rare Earths are in the right place and at the right time. Demand for rare earths is rising, Rainbow helps reduce the world’s dependence on China, and Bennett knows his game. At 13p, the share is worth the punt.

Suppliers: Major markets Ticker: RBW contact: rainbowrareearths.com or 0027 82 652 8526

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MIDAS SHARE TIPS: Rare metal for earphones?Try Rainbow

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