Announcement PDF Annual Report RareX Limited 2024 RareX HQ Level 1, 338 Barker Rd Subiaco WA 6008 Australia P +61 8 6383 6593 info@rarex.com.au ASX: REE rarex.com.au Table of Contents Corporate Directory ..................................................................................................................................... 2 Review of Operations .................................................................................................................................. 3 Directors’ Report ....................................................................................................................................... 18 Auditor’s Independence Declaration ........................................................................................................ 33 Financial Statements ................................................................................................................................ 34 Consolidated entity disclosure statement …………………………………………………………………………………………………73 Director’s Declaration…………………………………………………………………………………………………………………………………….74 Auditor’s Report......................................................................................................................................... 75 Mineral Resource Statement .................................................................................................................... 78 Schedule of Mining Tenements ............................................................................................................... 80 ASX Additional Information ...................................................................................................................... 81 1 Corporate Directory DIRECTORS LAWYERS Mr Jeremy Robinson Non-Executive Chairman Hamilton Locke Central Park, Level 39 152-158 St Georges Terrace Perth, Western Australia 6000 Mr James Durrant Managing Director & CEO Mr Danny Goeman Non-Executive Director AUDITOR Mr Shaun Hardcastle Non-Executive Director SW Audit Level 18, 197 St Georges Terrace Perth, Western Australia 6000 COMPANY SECRETARY SHARE REGISTRY Ms Oonagh Malone Automic Registry Services Level 2, 267 St Georges Terrace Perth, Western Australia 6000 REGISTERED OFFICE & PRINCIPAL PLACE OF BUSINESS Telephone: 1300 288 664 Level 1, 338 Barker Road Subiaco, Western Australia 6008 Telephone: ASX CODES: REE, REEO (08) 6383 6593 Website: www.rarex.com.au 2 Review of Operations The Board of RareX Limited (RareX) is pleased to provide a review of operations across the Company’s asset portfolio for the 2024 financial year and to date. Managing Director’s Statement Dear Shareholders, I would like to take this opportunity, with the release of our annual report, to reflect on the year that's been, present our vision for the future, and thank shareholders past and present for their support - most particularly those that have supported the business through challenging macro and microeconomic conditions. During this year, rare earth prices, to which we are most heavily leveraged, have seen a significant drop from their US$150+ per kilogram NdPr highs of 2022 down to the current mid to high US$40/kg range. This impacts all projects and is well below incentive pricing. Most indications suggest a return to over US$100 per kilogram in the next few years. Recently, some indications of a recovery have emerged, but with ongoing uncertainty with respect to the sustainability of the recovery. Our primary engineering project, Cummins Range, remains well positioned as both a phosphate and a rare earth project, and we are now taking this opportunity to find low cost phosphate startup for this longer term rare earth project. We do this against a backdrop of steady progress at Cummins Range, including the de-risking of the supply chain to the port of Wyndham, defining the resource, advancing the offtake process and progressing our relationships with the native title groups. We have progressed our mining agreement with the heritage and environmental components and baselines now largely complete. This year we also reflected on the broad risks associated with single project orientated businesses and we have consequently started developing a pipeline of inorganic growth options. The first milestone of this was the acquisition of the Khaleesi Project in the East Yilgarn which has excellent indications of a rare earth - niobium mineralised system as well as showing a considerable opportunity for base and precious metals. The package of tenements at Khaleesi are being processed into their 'granted' status, including with one of the most expeditious heritage access agreements with the UUNAC, and we are planning a significant drilling program in the near future. The inorganic growth opportunity of the business does not stop with Khaleesi, and we have refined our search criteria. We are evaluating projects and have some specific targets into which we are putting significant effort. Part of our business development program sees us take a position in Saudi Arabia which we regard as geologically attractive and a real emerging mining jurisdiction with the strong geology augmented by a strong, financially backed, intent to establish a mining industry ecosystem similar to Australia. We are working with the public tender process and in parallel forming a position in country to work on projects that are not in the public space. 3 We have also begun working with advisors, Hunter and Co, on a particular target and also to bring in projects from further afield that are in a more advanced status than we might otherwise have access to. This year we also saw some changes in the leadership of the Company and I have been fortunate enough to have been entrusted by the Board to lead the company as Managing Director. My objective remains to be transparent with the direction of this business, even when times are challenging, and I have set up systems to facilitate strong interaction between shareholders and the Company. I am looking forward to RareX engineering an efficient startup for Cummins Range. I am also looking forward to our first high impact drilling program at Khaleesi which will go through the cover sequence and into the host rock where we see signs of mineralised carbonatites. I also look forward to what our business development activities can deliver for our shareholders in addition to the current portfolio. James Durrant Managing Director Figure 1: Jaru site visit to Cummins Range Rare Earths & Phosphate Project. 4 Cummins Range Rare Earths & Phosphate Project RareX’s flagship, 100%-owned Cummins Range Project is a nationally significant rare earths and phosphate project located in the Kimberley region of Western Australia, 135km southeast of the town of Halls Creek. Halls Creek is well provisioned for infrastructure with power, water and a sealed airstrip. The Cummins Range Project is serviced by the Great Northern Highway which connects to the Port of Wyndham. Enhanced scoping study At the start of the financial year RareX released an enhanced Scoping Study for Cummins Range. The study built upon learnings and recommendations from the September 2022 Scoping Study, metallurgical testwork and the 2023 updated Mineral Resource Estimate which positioned Cummins Range as Australia’s largest undeveloped rare earths project. The Project outlined in the Scoping Study is based on the Mineral Resource Estimate published to the ASX on1 May 2023. Stage 1: Low CAPEX (A$45M), direct shipping ore (DSO), direct application (DA), high-bioavailability, organic rock phosphate fertiliser for agricultural purposes. A production rate of up to 300 ktpa of 23% P2O 5 is forecast for a period of 3 years. Stage 2: Installation of a mid-sized beneficiation plant of A$304M to produce 550 ktpa phosphaterare earth mineral concentrate from the weathered resource for the phosphoric acid and rare-earth concentrate market. Stage 3: A$63M upgrade of the Stage 2 plant in year 13 to produce a concentrate from the unweathered, fresh, rock below c.130 m RL. Stage 3 should see further improvement and optionality in post beneficiation upgrades due to mineralogy factors. A mine closure cost of A$41M has been allocated at the end of Stage 3. The project concept outlined in the Scoping Study comprises a Stage 1 direct shipping ore (DSO) open pit mine and basic site infrastructure, including a crushing-screening plant and a road linking the mine site to the Tanami Road, 40km north of Billiluna. This will be followed by Stage 2, which comprises the installation of a flotation beneficiation facility at site to produce a rare earth and phosphate mineral concentrate, and the expansion of non-process infrastructure (NPI). This staged development approach has the benefits of initiating early cashflows, building confidence with the regulators on environmental management, furthering community relationships and social performance, providing greater mineral resource definition, allowing bulk samples for metallurgy and piloting, and establishing a functioning supply chain; all of which substantially de-risk Stage 2 which transitions the project into a rare-earth critical mineral mine. All project stage products are proposed to be trucked along mostly sealed roads to Wyndham Port, with the Tanami Road currently undergoing sealing. At Wyndham Port, which is powered by hydro electricity from the Ord River hydro power station, the Company proposes to install a simple covered stockpile storage area and to collaborate on using existing infrastructure and incumbent operators, including the current KMG iron ore loading jetty and transhipping operators familiar with the port. 5 Mineral Resource Update In January 2024, following a successful drill campaign, the Company was pleased to announce an updated Mineral Resource Estimate for the Cummins Range Project. The 2023 drill program was focused on gaining further understanding of the metallurgical domains and continuity of high-grade phosphate in the regolith. Drilling was also completed on the eastern edge of the Resource, where pit designs required definition. This drilling underpinned an updated Resource estimate totalling 524Mt at 0.31% TREO and 4.6% P2O5, including a higher-grade TREO Resource of 44Mt at 1.02% TREO and 5.8% P2O5 based on a 6,500ppm TREO cut. Cummins Range is a unique rare earths project due to its favourable phosphate mineralisation, which makes peer comparison analysis difficult. The Project’s exposure to the two major sectors of the green energy transition – rare earths for energy generation/use and phosphate for energy storage (by way of LFP batteries) – means the deposit underpins a rare project opportunity with reduced development and operational risk. Table 1. Cummins Range Mineral Resource Estimate, P2O5 ≥2.5% RARE DYKE Classification Tonnes (Mt) P2O5 (%) TREO + Y2O3 (ppm) HREO (ppm) Nd2O3 (ppm) Pr6O11 (ppm) Nb2O5 (ppm) Sc2O3 (ppm) ThU (ppm) Indicated 44.4 6.0 5560 280 880 260 990 90 80 Inferred 363.7 43.9 2960 160 480 140 570 70 40 Total 408.2 4.1 3240 180 520 160 610 70 40 PHOS DYKE Classification Tonnes (Mt) P2O5 (%) TREO + Y2O3 (ppm) HREO (ppm) Nd2O3 (ppm) Pr6O11 (ppm) Nb2O5 (ppm) Sc2O3 (ppm) ThU (ppm) Indicated 33.0 7.6 3430 290 670 170 500 80 100 Inferred 83.1 5.6 2390 200 460 120 450 60 60 Total 116.2 6.2 2690 230 520 140 460 70 70 COMBINED Classification Tonnes (Mt) P2O5 (%) TREO + Y2O3 (ppm) HREO (ppm) Nd2O3 (ppm) Pr6O11 (ppm) Nb2O5 (ppm) Sc2O3 (ppm) ThU (ppm) Indicated 77.4 6.7 4650 280 790 230 780 90 90 Inferred 446.9 4.2 2860 170 480 140 550 70 40 Total 524.3 4.6 3120 190 520 150 580 70 50 Notes: 1. Due to effects of rounding, the total may not represent the sum of all components 2. TREO (ppm) includes: Light Rare Earth Oxides (LREO): La 2O3, CeO2, Pr6O11, Nd2O3; and Heavy Rare Oxides (HREO): Sm2O3, Eu2O3, Gd2O3, Tb4O7, Dy2O3, Ho2O3, Er2O3, Tm2O3, Yb2O3, Lu2O3; + Y2O3 3. ThU comprises ThO2 + U3O8 (ppm) 4. Mineral Resource is reported from all blocks, classified as either Indicated or Inferred, where interpolated block grade is >2.5% P2O5 A phosphate cut-off was chosen for the MRE as it better represents the geology and economic potential of the deposit in that it captures the phosphate and almost all of the rare earths. Substantial quantities of phosphate, now classified by the Australian Federal Government as a Strategic Mineral, will be mined with the rare earth mineral and RareX intends to extract value from both the phosphate and rare earths. 6 During the 2023 field season, an improved geological model was created which defined several domains within the regolith that will allow accurate mining study work to be completed for the production of a rare earths phosphate concentrate (REPC), potentially preceded by monetised rock phosphate direct shipping ore (DSO). Metallurgical studies have shown lower-grade rare earths and phosphate are easily upgraded to a high-grade REPC. The rare earths can then be extracted from the REPC at a phosphoric acid production plant, potentially supplying the LFP (lithium ferro phosphate) battery supply chain. Using this product approach allows RareX to extract the most value from the two commodities within the large Cummins Range Resource. Full details of the updated Mineral Resource Estimate were provided in the Company’s ASX announcement dated 25 January 2024. Rare Earths Metallurgical Testwork Beneficiation testwork has returned promising results for the beneficiation of rare earths (RE) from the Cummins Range Project. RareX has initiated a beneficiation program at Baotou Mengrong Fine Materials (BTMR) in China to test RE beneficiation from both whole ore and the leach residue from the phosphoric acid production. BTMR is a highly experienced Chinese research institute and is a preeminent testing laboratory for rare earths beneficiation, particularly flotation. Following the positive dilute acid leach and RE flotation results at BTMR, the next important step of RareX’s metallurgical testwork program was to demonstrate good mineralogy of the leach residue to support the Company’s proposed product strategy. A Quantitative Evaluation of Materials by Scanning Electron Microscopy (QEMSCAN) analysis was performed at ALS Metallurgy in late 2023 to better understand the mineralogy of the leach residue and confirm favourable RE mineral distribution that will be used to support further RE beneficiation testwork. Results indicate that monazite is the main RE hosting mineral, accounting for approximately ~70% of the total rare earth elements. Bastnasite (10%) and crandallite (20%) host the remaining RE. The RE deportment is very well aligned to the mineralogy analysis on the head sample that was used for generating this leach residue, suggesting that the RE minerals remained intact during the dilute phosphoric acid leaching process. Monazite locking and liberation analysis showed minimal locking of monazite with other minerals post the dilute acid leach. Improved liberations were also observed, showing 64.4% ‘well liberated’ (at -53µm grind size) monazite (i.e., >90% monazite) and another 20.5% classified as ‘high grade middlings’ (60-90% monazite). It was also noted that this leach residue is generated from the same head sample that was tested at BTMR and achieved >20 times RE upgrade. This result is well aligned to RareX expectations and further supports the proposed product processing strategy at the offtaker’s facility. Bulk flotation of a 90kg sample was completed and generated ~18kg of dual mineral concentrate samples. A 10kg sample of the concentrate was leached with dilute phosphoric acid to generate product derivatives to better support off-take discussions. 7 Phosphate Bulk Flotation Testwork Following the positive 2022 sighter testwork results, a bulk flotation program was carried out to assess if similar, or better, flotation performance can be achieved at larger scale with the same simple flotation circuit. The bulk flotation using larger float cells is a good intermittent step to simulate pilot testing and to assess if similar flotation kinetics can be achieved. The test was performed on the same regolith composite that were tested in the sighter program and was undertaken at Auralia Metallurgy in Perth. Excellent results were achieved from the bulk flotation test producing a phosphate concentrate of 34.4% aligning to the sighter float performance. The bulk float P 2O5 recovery of 91.1% was also encouraging and was better that the sighter program. The flotation tests were not focused on concentrating rare earths and the TREO head grade is relatively low for this composite, however, the recovery trend of the rare earth showed high similarities, albeit slightly lower recoveries, to the phosphate for this composite in line with expectations. RareX sees the staged development of Cummins Range as a practical, fundable and lower risk approach which plays to the strengths of the deposit where parts of the shallow orebody are more enriched in phosphate relative to rare earths. Flotation is the obvious initial beneficiation method at scale due to favourable lab results and the use of the same facilities in the subsequent rare earths flotation, however this remains a relatively capital intense approach. Therefore, a more targeted, microbe assisted, leaching of the phosphate with Australian and US partners, already engaged, could enable much lower start-up costs and significantly reduced logistics costs for mine gate products going to market. Bench scale and comparative glasshouse trials indicate a clear economic benefit to farmers relying on large quantities of synthetic fertilisers. Specifically, initial tests of the bio-microbial phosphate product by our partners appear to compete very well in substitution of synthetic fertilisers in soils similar to those in the Ord River region, one of RareX’s natural initial customer bases. Completion of Baseline Environmental Surveys RareX, with support from its environmental consultants, including MBS Environmental and Rapallo Environmental, has completed the key environmental baseline work needed for meaningful engagement with the environmental permitting agencies. The reports received cover environmental aspects including: • • • • • • Flora Fauna Subterranean Fauna Ground and Surface Water Soils and Landforms Mine Rock Chemistry and Mineralogy The reports provide a description of the above environmental factors, associated risks in the context of a mining project being developed and proposed strategies to mitigate impacts to observed environmental receptors. No unusual or unexpected observations were made against initial desktop assessments and all observed risk factors have precedent mitigation strategies applied in the industry. 8 The project is located well away (>10km) from any reserves or other key receptors and is nestled amongst large regional landforms that extend well beyond the project area and as such provide plenty of continuous habitat for existing species to use during and after mining operations. Regional Exploration at Cummins Range Aerial magnetics and ground gravity surveys were completed over 100%-owned tenements E80/5092 and E80/5372 at Cummins Range in September 2023. Both surveys identified numerous targets, including a likely second ultramafic pipe in the northern portion of E80/5092. Results from the surveys indicate two large well-defined ultramafic bodies to the north of the existing Cummins Range deposit. The body immediately to the north of Cummins Range measures 4km long and up to 1km wide. Geophysics has defined internal structures and irregularities in the body, which may have been caused by intruding carbonatites similar to those within the Cummins Range pipe. A second pipe-like circular ultramafic body measuring 1km in diameter has been defined 6km to the north of the Cummins Range deposit. The magnetic and gravity responses over this intrusion also show irregular responses similar to those seen at the Cummins Range pipe. Figure 2:Total magnetics image on RareX tenements at Cummins Range. 9 Figure 3: Ground Gravity image on RareX tenements at Cummins Range. Offtake MOU RareX has signed an offtake MOU with Nitron Group (Nitron), a US headquartered global fertiliser trading and distribution company, for product from both initial stages of production from the Cummins Range Project. Cummins Range has the potential to monetise the mine’s pre-strip as a direct application, direct shipping rock phosphate fertiliser, before the production of a beneficiated rare earth and phosphate dual mineral concentrate. Following the distribution of product samples, Nitron formally expressed interest in pre-strip material which has the potential to provide a low-cost, low-risk start up platform for the main critical mineral rare earth and phosphate project at Cummins Range. Through the MOU, Nitron also confirmed interest in up to 250ktpa of phosphate mineral concentrate which RareX phosphate concentrate could produce from low-grade rare earths blocks within the Cummins Range orebody. Nitron is the world’s second largest distributor of fertilisers, with a dominant market position in Latin America, and growing positions in North America, Europe, Africa and – importantly for RareX – in SE Asia and New Zealand. Nitron traded more than $3 billion in revenue in 2021 and provides a wide range of logistical and financial services to its clients. Nitron trades over 8 million metrics tons per year of NPK fertiliser products throughout the globe. Supply Chain Infrastructure Agreements RareX has signed a term sheet with KMG Logistics Pty Ltd (KMG) to utilise the existing bulk loading facility (BLF) at Wyndham Port. KMG, the owner of the BLF, has agreed to negotiate a long-form bulk 10 loading facility agreement under which RareX would have access to at least 600ktpa of capacity at the BLF for an initial 5-year term (subject to extension). The term sheet also grants RareX a binding first right of refusal in the event of any proposed asset sale by KMG during this period. The BLF has historically been used for loading transhipment barges which subsequently load an anchored oceangoing vessel (OGV) approximately 500m from the BLF in deeper water in the centre of the channel. Recent work by KMG has determined that Supramax OGVs (48,000 to 60,000 DWT) will be able to load directly at the BLF. RareX is now using the operational learnings and practises of KMG to define a complementary and efficient loading process which has no detrimental impact on KMG’s operations. RareX signed a call option deed with the owner of Lot 715, Barytes Road, Wyndham Port for 4 hectares of land suitable for the storage and transfer of product from all stages of the Cummins Range Project. The call option deed includes the agreed form of the contract of sale that the parties will enter into should RareX elect to exercise its option to purchase the land. Under the call option deed, RareX has the right to enter the property during the option period to conduct investigations pertaining to the civil construction necessary for the design and installation of bulk handling and storage infrastructure. RareX has partnered with Newhaul Pty Ltd for the purposes of providing product haulage and logistical support for the Cummins Range Project. Newhaul is a logistics specialist with extensive experience in providing haulage capability for resource projects. They bring exceptional indigenous engagement, operational discipline, and data-driven haulage management experience to the project. Additionally, they have a clear roadmap for the decarbonisation of their haulage fleet. The terms bind Newhaul to immediately establish a special purpose vehicle (JV Co) to provide haulage services to the Project and to provide an option for Cummins Range Company to enter into the JV by acquiring 50% of the shares in JV Co for $1 plus the value of the tangible assets of the JV Co minus the liabilities (Option). The Option is exercisable subject to Cummins Range Company having entered into a haulage agreement with JV Co and at least 500,000 tonnes of product from the Project having been hauled by JV Co under the haulage agreement in any consecutive 12-month period. The Option expires in 2030. The joint venture agreement outlines the corporate governance and operational management details of the joint venture, once entered into by Cummins Range Company. KHALEESI NIOBIUM PROJECT In May 2024, RareX acquired the Khaleesi Niobium Project – a district-scale niobium-rare earth project in the East Yilgarn, 290km east-northeast of Kalgoorlie in Western Australia. The acquisition supports RareX’s goal of becoming a leading critical metals company with the future development of its 100%owned Cummins Range, carbonatite-hosted, Rare Earths and Phosphate Project and a strong focus on continuing to discover major new carbonatite-hosted mineral deposits utilising internally-fostered expertise. The project acquisition comprised six tenements acquired unconditionally (one granted, five pending), totalling 966km2, with RareX subsequently acquiring an additional 336km2 of potential alkaline complexes to expand its landholding in this highly prospective region. 11 Figure 4: Khaleesi Project location map showing significant Eastern Yilgarn Paleoproterozoic Alkaline Magmatism. The northernmost tenement at Khaleesi Project E39/2504, is RareX’s recent 336km2 land acquisition. The Khaleesi Project sits on the Northern Foreland unit of the Albany Fraser Belt and is a portion of the Yilgarn Craton that was intruded by Paleoproterozoic magmatic rocks and reworked during the Mesoproterozoic Albany–Fraser Orogeny. The tenements also contain the eastern boundary of the Canning Basin with the Mulga Rocks East uranium and rare earths deposits abutting the tenement boundary. The eastern margin of the Yilgarn Craton hosts significant alkaline intrusions particularly along strike in the Queen Victoria Spring nature reserve 5km to the south. The nature reserve hosts the largest carbonatite pipe in Australia, the 10km diameter Cundeelee carbonatite. Also within the nature reserve is the strongly rare earth mineralised Ponton Dyke with intersections up to 28m at 10% TREO, including 6m at 20.57% TREO. Although un-mineable due to the nature reserve, these deposits show the highly metaliferous nature and prospectivity of the alkaline intrusions of this area. The Tropicana Gold Mine (AngloGold Ashanti 70%, Regis Resources 30%) is located 100km to the northeast and sits along the same structural trend. Historically, Anglo Gold Ashanti, Fortescue and IGO have explored the Khaleesi Project with a narrow focus on gold-nickel-copper, and crucially completed a number of multi-element 4- Acid digest assays, including for elements niobium, yttrium and europium. These assays have confirmed large areas (many square kilometres) of elevated niobium in saprock and fresh rock up to 30 times the background values of 20ppm and over multiple 12 locations. This suggests tremendous opportunities to discover significant niobium and rare earths mineralisation across the holding. Following completion of the acquisition, RareX commenced a review and interpretation of extensive, detailed historical geophysical data from the Khaleesi Project, which delivered exciting target areas including multiple gravity anomalies. Compilation of AngloGold Ashanti and IGO magnetics and gravity data has been completed and several areas have been identified for targeted exploration. The entirety of the Khaleesi Alkaline Intrusion Complex (KAIC) has had aerial magnetics flown at 100m spacing, with the southern twothirds of the KAIC also having ground gravity at 400m x 400m spacing. These two detailed surveys provide incredible detail over the KAIC before RareX has even put feet on the ground – and is the result of several millions of dollars of Tier-1 exploration company groundwork. The gravity data has provided additional support for the circular geometry of the complex, with the bulk of the central area of the KAIC being a gravity low and the edges of the KAIC increasing in density. These anomalies range in size from 1km to 4km and are positioned in a variety of geological settings across the complex, including anomalies on the edges of sub-intrusions, on outer ring structures and proximal to large faults and shear zones. Some of the gravity highs are coincident magnetic highs, however a majority of the gravity highs are in magnetic low areas similar to WA1 Resources’ worldclass Luni niobium deposit in the West Arunta region. Figure 5: Total magnetic image of Khaleesi Alkaline Intrusive Complex. Colouring is rainbow style, white and red areas are gravity highs and purple areas are gravity lows. Aerial Magnetic survey over the entire project is at a 100m line spacing. Initial exploration targets are shown in pink dashed circles. 13 Figure 6: Gravity image of Khaleesi Alkaline Intrusive Complex. Colouring is rainbow style. White and red areas are gravity highs and purple areas are gravity lows. Areas shown in high definition are 400m x 400m ground gravity grid. The blurred areas are 500m (EW) x 2000m (NS) or 2.5km x 2.5km grid. Initial exploration targets are shown in pink dashed circles. RareX is compiling data from over 65,000m of historical gold-focused air core drilling on the tenement package Most of these drilled metres were only assayed for gold-related elements. RareX has located and acquired approximately 10,000m of the drill chips and pulps from the project area which are being assessed and sent for re-assay for target elements. The remaining drill chips and pulps have been located and acquisition is underway. On completion, the drill database, geological and geochemical data will be added to the geophysical surveys and