# Rainbow Rare Earths Ltd Q&A with CEO Martin Eales (LON:RBW)

- Link: https://www.directorstalkinterviews.com/rainbow-rare-earths-ltd-qa-ceo-martin-eales-lonrbw/412737663
- Published: 2017-10-06T10:45:48+01:00
- Author: Amilia Stone

**Rainbow Rare Earths Ltd** (LON:RBW) Chief Executive Officer Martin Eales caught
up with DirectorsTalk for an exclusive interview to discuss their final results,
what has happened since the 30th June, first sales in Q4, the interest in rare earths
and the potential of the company

 

**Q1: An RNS announced this morning, can you remind listeners what the company announced?**

**A1**: So, what’s gone out today is our annual report to the end of June this year
detailing all the financial results for the 12 months period to the end of June.
The numbers are, I guess, slightly academic in that, as we have stressed to the 
market, our first sales are due to come up in Q4 this year so the accounts to the
end of June really just detail expenditure to that point but the really exciting
news is still to come.

 

**Q2: Were you pleased with the numbers?**

**A2**: Yes, the numbers themselves aren’t what’s exciting, I think what’s really
exciting is the progress we’ve made on the ground in such a short space of time 
in Burundi since IPO at the start of this year. For any junior mining company to
raise money on the markets and to get into production sales within the year is fairly
unique.

 

**Q3: As you mentioned, these are only to the 30th June this year so what has happened
since then?**

**A3**: It’s a continuation of the development plan that we’ve set out in our presentations
and our strategy. We are working hard on the first mining area within our licence
which is the Gasagwe pit and as at the end of June we’d employed the labour force,
we’d done the work on the access road and we started pre-stripping. That has continued
at pace and we were pleased to announce just a couple of weeks ago that actual extraction
of the high-grade rare earth veins had started and we are now stockpiling ore ready
for the commissioning of the processing plant in the next month or two.

 

**Q4: There’s a lot of talk about first sales in Q4 of 2017, is this still on?**

**A4**: Yes, very much so. We have stressed that target since the IPO and we’ve 
been incredibly focussed on delivering that and making sure the company is in a 
position to export and sell those first tonnes of mineral concentrate. There are
a lot of moving parts behind getting to that point so we’ve always made sure we’ve
given ourselves a bit of wiggle room there and saying Q4 but we’re highly confident
we’re going to meet that target.

 

**Q5: You talk about production guidance of between 2,250 to 3,000 tonnes of concentrate,
can you explain what that actually means?**

**A5**: That’s the product we’re selling, it’s a high-grade mineral concentrate 
and that’s the vein material we’re taking from the pit and we’re putting through
our processing plant to concentrate further so effectively shake off or extract 
some of the waste material that might come from the run of mine feedstock. We’re
selling a very simple high-grade concentrate product which we’ll export from Mombasa,
most likely we’re likely to truck our concentrate to the port and from Mombasa it
will go to the customers around the world.

 

**Q6: How would you describe Rainbow Rare Earths to somebody who has never heard
of you before?**

**A6**: There’s a number of ways you could describe Rainbow, we are both a junior
mining company but we’re also heavily plugged in to technology. For those that don’t
know, in the main, the biggest value driver for rare earth is its use in very powerful
magnets and those magnets are increasingly applied to green technologies such as
wind turbines and electric vehicles. Over the course of this year, everyone will
have seen a lot of publicity about the move the move to electric vehicles, both 
because of consumer demand and government mandates. Increasingly, we are now seeing
countries’ setting targets for the switch to electric vehicles and the simple fact
is that every electric vehicle consumes more rare earth materials than a traditional
vehicle, mainly in the magnets used in the electric motor.

 

**Q7: Why should people be interested in rare earths?**

**A7**: The supply is very very limited, for those that don’t know, China probably
mines 85%-90% of the world’s rare earths but also consumes a great deal because 
it has a downstream processing. For various reasons, western consumers are perhaps
concerned about security of supply if China is dominating the market, there is only
one other operational rare earth mine outside of China, that’s in Australia at the
moment so we’ll be the second one.

So, from a security of supply point of view, access to our material could be incredibly
important to western consumers down the line but also, as we’ve seen from the recent
increases in prices, near-term supply is short. There are no other new mines coming
on stream at the moment, there are development projects out there but typically 
those projects need hundreds of millions of dollars of capex in financing to get
off the ground. It’s not quite certain that the prices are yet high enough despite
the recent strengthening of prices to justify financing those other projects so 
supply is getting tighter and we’re feeding into that in the short-term.

 

**Q8: What’s the real potential of Rainbow Rare Earths, why should people buy the
shares now?**

**A8**: As listeners may know, that our IPO price was 10p and we’ve gone up nicely
from there since the IPO but I don’t think the market has yet really caught wind
of the fact that our commodity price has strengthened so significantly this year,
it hasn’t really fed into the story. People perhaps want to see us deliver on those
first sales but the beauty is that our overheads are relatively fixed so that increase
in commodity price is going straight to our bottom line. As we ramp up production,
we’re going to see those relatively fixed overheads benefit from the economies of
scale, as it were, and the more tonnes we put through the more profitable we become
and we have capacity in our plant to more than double production with no significant
further investment.

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