Royalty Agreement with Ecora & US$10m raise

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Rainbow Rare Earths Limited

("Rainbow" or "the Company")

LSE: RBW

Royalty Agreement and associated share placing signed with Ecora Resources PLC raising a total of US$10 million

• Agreement endorses Phalaborwa as a stand-out rare earths opportunity, expected to be one of the highest margin rare earth projects in development globally
• Funds raised will allow for completion of the Definitive Feasibility Study ("DFS") and will cover the Company's financing requirements up to June 2025
• Funding agreement is largely non-dilutive to Rainbow shareholders compared with conventional equity funding
• This royalty is the only revenue royalty payable for Phalaborwa due to the unique nature of the project, which does not attract royalties typically payable for hard rock mining projects

NEWS RELEASE

Rainbow is pleased to announce that it has entered into a binding agreement with Ecora Resources PLC ("Ecora") whereby Ecora will purchase a 0.85% Gross Revenue Royalty (the "Royalty") on future rare earths production from the Company's flagship Phalaborwa project in South Africa, plus any other saleable products, for a cash consideration of US$8.5 million.

Rainbow has also agreed to issue 10,442,427 new ordinary shares in the Company of no par value each ("Ordinary Shares") at a price of 11.3652p (based on a 20 day volume weighted average price) to Ecora to raise an additional US$1.5 million via an equity subscription.

The Royalty financing and share subscription agreements therefore provide Rainbow with a total of US$10 million, being substantial funding on terms that are considerably less dilutionary than conventional equity funding.

The funds will be used to:

• deliver the completion of the DFS on the Phalaborwa project in H1 2025; and
• cover all other Company financing requirements up to June 2025.

George Bennett, CEO of Rainbow, commented: "We are delighted to have concluded this royalty agreement with Ecora which allows us to take the Phalaborwa project all the way through to a completed DFS, without causing any significant dilution to shareholders. This investment confirms Phalaborwa's status as a strategic and near-term source of all four of the magnet rare earths separated oxides so critical to the green energy transition. It is also a validation of the robust economics of the project, with its comparatively low capital and operating costs giving it resilience against rare earth pricing fluctuations. The Ecora DD process encompassed detailed reviews of all aspects of the project covering technical, environmental and legal. We look forward to working with Ecora as strong project partners going forward."

Marc Bishop Lafleche, CEO of Ecora, commented: "We are excited to announce our partnership with the Rainbow Rare Earths team on the Phalaborwa project. This project stands out as one of the lowest-cost prospective producers of rare earths outside of China. Notably, production will be principally weighted to rare earth elements essential in the production of permanent magnets, key components in renewable wind power turbines and electric vehicle motors. The transaction provides Ecora with a counter-cyclical entry point to further diversify our commodity exposure to include rare earth elements, whose end markets are forecast to see sustained demand growth over the coming decades."

Key Royalty Terms

US$8.5 million in cash in exchange for:

• Ecora royalty entitlement of 0.85% at transaction close
• Royalty rate increases to 0.95% if production does not occur prior to 1 October 2027
• Royalty rate increases to 1.1% if production does not occur prior to 1 July 2028

Update on Phalaborwa project development

Rainbow is currently carrying out a DFS at Phalaborwa, which is on track to be completed in H1 2025.

A key component of the DFS is the operation of a pilot plant to confirm and optimise the operating parameters for the unique flowsheet developed to deliver separated rare earth oxides from the Phalaborwa phosphogypsum. Rainbow announced an update with regards to the pilot plant operations in both South Africa and the USA on 19 June 2024, with the results to date supporting the Company's expectation that Phalaborwa will be a low-cost producer of separated rare earth oxides in comparison to the global peer group.

As previously announced, Rainbow plans to release an interim report in H2 2024 to update the economics of the Phalaborwa project reflecting the optimisations delivered from the pilot test work campaigns, footprinted against the Preliminary Economic Assessment, and to allow for commencement of project financing.

Following completion of the DFS, a Final Investment Decision will be made by the Board prior to construction and the expected commencement of operations in H1 2027.

Transaction Completion

Payment of the US$8.5 million royalty consideration by Ecora is conditional upon execution and delivery of certain security documents to Ecora and receipt of customary exchange control authorisation from the South African Reserve Bank Financial Surveillance Department for those security documents, which is expected within six to eight weeks of submitting the application.

In addition, Ecora has subscribed for 10,442,427 Ordinary Shares at a price of 11.3652 pence per share (calculated at the 20-day volume weighted average price as at 28 June 2024) for a consideration of US$1.5 million. An application will be made for the 10,442,427 Ordinary Shares to be issued pursuant to the subscription to be admitted to the Official List (by way of a Standard Listing) and to trading on the London Stock Exchange Plc's Main Market for listed securities ("Admission"). It is expected that Admission will become effective and that dealing in the Ordinary Shares will commence on or around 5 July 2024. The new Ordinary Shares will rank pari passu with the existing Ordinary Shares. Following Admission, the Company will have 640,759,083 Ordinary Shares in issue. This figure may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the Company under the FCA's Disclosure, Guidance and Transparency Rules.