Rainbow Rare Earths has inked an agreement with Bosveld Phosphates that would give it full ownership of the Phalaborwa rare earths project in South Africa.

The deal will see the rare earths producer receive an immediate 85% interest in the unincorporated joint venture (JV) that has the rights to Phalaborwa through the payment of US$5 million ($6.6 million) cash. 

Bosveld will keep the remaining 15%, but Rainbow has the option to acquire it in return for US$7-million of equity in the company, at any time from Oct. 31 to Dec. 31. Rainbow shares issued pursuant to the call option will be subject to a 24-month lock-up. 

The original set-up called for a co-development of the asset, with Rainbow having the right to a 70% interest in Phalaborwa after completing a pre-feasibility study on the project. 

Once the study is published the unincorporated JV will be transferred into an incorporated JV company and, at Rainbow’s election, Bosveld will transfer all assets required for the project into that company. 

“We have always wanted to consolidate our interest in the Phalaborwa project, given the exceptional economics highlighted by our preliminary economic assessment that confirmed an NPV10 of $627 million based on spot rare earth prices at the time of publication,” Rainbow Rare Earths chief executive, George Bennett, said in the statement.

Phalaborwa contains about 35 million tonnes of gypsum resulting from historic phosphate hard rock mining, containing rare earth elements (REEs) with an estimated average in situ grade of 0.6% total rare earth oxides (TREOs), the companies said.

Output will be shipped to the pilot plant’s back end, which is being constructed in Florida, to produce high-purity separated magnet rare earth oxides.