Ecora Resources: Acquisition of Royalty over Phalaborwa Rare Earths Project

Ecora (LSE:ECOR)(TSX:ECOR) announced that it has entered into an agreement to acquire a 0.85% Gross Revenue Royalty (“GRR”) over the Phalaborwa Rare Earths Project (“Phalaborwa” or the “Project”) located in South Africa for a total cash consideration of US$8.5 million.

In connection with the royalty acquisition and in addition to the cash consideration, Ecora has subscribed for 10,442,427 new ordinary shares in Rainbow Rare Earths Ltd (“Rainbow”), the majority owner of the Phalaborwa project, for US$1.5 million in cash. Rainbow is listed on the London Stock Exchange (LSE: RBW).

The investment represents Ecora’s first rare earth exposure, and is in-line with the Group’s stated strategy of further diversifying and growing its portfolio of future facing commodity royalties over high quality operations and projects.

We are delighted 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 Rainbow with a non-dilutive means of securing the funding to move the project forward towards the completion of a DFS and subsequently a final investment decision. It also 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.Marc Bishop Lafleche, CEO, Ecora Resources PLC


  • Amongst the highest quality rare earth projects globally with a 16-year estimated mine life1 – expected to generate strong cashflows throughout the commodity price cycle
  • Located on brownfield site treating phosphogypsum stacks generated as a by-product of historical fertilizer production
    • No primary mining, crushing or grinding costs
    • Operation to fully rehabilitate site
  • Phalaborwa project product mix heavily weighted to permanent magnet end-markets which account for over 90% of global rare earth consumption by value4 and underpinned by strong long-term demand growth fundamentals
    • Life of mine average annual production1: 1,750t of neodymium/praseodymium (NdPr) oxide, 60t of dysprosium (Dy) oxide and 20t of terbium (Tb) oxide
  • Attractive cyclical entry point for rare earths with spot prices for Phalaborwa’s commodity basket trading near three-year market lows of $64/kg versus a three-year high of $221/kg (and a three-year average of $121/kg)
  • Proceeds to primarily fund the completion of a Definitive Feasibility Study (“DFS”) targeted for release in 2025
    • Pilot plant operations underway to test the flowsheet at DFS level and produce product samples
  • Rainbow targeting first Phalaborwa production in 2027, with protections for Ecora in the event of delays
    • Ecora royalty entitlement of 0.85% at transaction close
    • Royalty rate increases to 0.95% if commercial production does not occur prior to 1 October 2027
    • Royalty rate increases to 1.1% if commercial production does not occur prior to 1 July 2028
  • High quality management team with rare earths experience, combined with prior project development and operation experience at large mining companies
  • High quality shareholder base including backing from the U. S. International Development Finance Corporation (DFC) which has the option to invest US$50 million into the Project via TechMet
  • Transaction to be funded through a combination of cash on hand and the Group’s revolving credit facility

The Phalaborwa Project1

Phalaborwa is located in the Limpopo region of South Africa and is 85% owned by Rainbow, who have the right to acquire 100% ownership of the Project. It has a total JORC compliant MRE2 of 30.4Mt at 0.44% TREO contained within phosphogypsum in two unconsolidated stacks derived from historic phosphate hard rock mining. High value neodymium and praseodymium (NdPr) oxide, critical elements used in permanent magnets, represent c. 75% of the magnet rare earth basket by value, with economic dysprosium (Dy) and terbium (Tb) oxide credits enhancing the overall value of the rare earth basket.

Phalaborwa’s Preliminary Economic Assessment (“PEA”), published in October 2022, establishes a post-tax base case NPV10% of US$627 million, an IRR of 40%, an average EBITDA operating margin of 75% and a payback period of only two years. Capital costs of the project were estimated at c. US$296 million. The PEA was based on processing 2.2 million tonnes per annum of phosphogypsum over a 14-year project life (subsequently extended to 16-years3 to deliver 26,208 tonnes of separated magnet rare earth oxides at an average cost of US$33.86/kg.

A process flowsheet to extract rare earth elements efficiently from the phosphogypsum stacks has been developed in collaboration with K-Technologies, Inc., USA (“K-Tech”), following extensive test work carried out at ANSTO Minerals, Australia, and at K-Tech’s facilities in Florida, U.S.A.

Rare earths overview and market dynamics4

Rare earth elements (REEs) are a group of 17 elements which mostly occur naturally but rarely in concentrated forms that are commercial to extract. Due to their similar chemical properties, they can be challenging to split into individual elements with current producers often using harsh solvents to aid separation. China produced over 90% of refined rare earth products in 2023, with 66% of feedstock sourced from domestic production.

Rare earth magnets, or permanent magnets is the largest demand sector accounting for 90% of total market value in 2023. Neodymium (Nd) and praseodynium (Pr), the main rare earth elements at Phalaborwa, are a core component in NdFeB magnets, whilst small additions of dysprosium (Dy) and terbium (Tb) can further enhance magnet performance by improving temperature resistance.

Permanent magnets are used in wind turbines, electric vehicle motors and many consumer electronics. A key growth area is their use in electric vehicles where they can significantly improve performance with minimal additional cost. The added efficiency of using permanent magnets allows EV manufacturers to reduce the size and cost of their battery packs whilst maintaining performance.

The REE market is positioned to experience significant growth over the coming decade, with the industry valued at US$7.4 billion in 2023 forecast to grow to c. $10 billion by 2030.

Transaction structure and financing

Ecora will fund the US$8.5 million royalty consideration and US$1.5 million equity investment through a combination of cash on hand and the Group’s revolving credit facility.

As of transaction close, Ecora will be entitled to a 0.85% GRR over the Phalaborwa project. The royalty rate steps up by 0.1% to 0.95% if commercial production does not occur prior to 1 October 2027. If commercial production does not occur prior to 1 July 2028, then the royalty rate steps up by a further 0.15% to 1.10%.

Transaction Completion

Payment of the US$8.5 million royalty consideration is conditional upon:

  • receipt of exchange control authorisation from the South African Reserve Bank Financial Surveillance Department (customary for transactions of this nature), expected within 6 to 8 weeks of submitting the application; and
  • execution and delivery of certain security documents to Ecora.

Ecora 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) for consideration of US$1.5 million. The subscription is conditional upon the new ordinary shares being admitted to the standard listing segment of the Official List of the Financial Conduct Authority and being admitted to trading on the main market for listed securities of the London Stock Exchange plc on or around 5 July 2024.


2JORC Compliant MRE published by Rainbow Rare Earths Limited on 20 March 2023 in a regulatory news release

3As per regulatory news release issued by Rainbow Rare Earths Limited on 26 February 2024

4Source: Project Blue Report, May 2024

Duane Hope is a Partner at Capital 10X, he brings over 15 years of communications and research experience to the firm. His research and writing have appeared in publications for North American, European and Asian audiences.


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