Announcement PDF Environmental, Social & Governance Framework and Maiden Sustainability and ­Self-Assessment Report 2022 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 2 Introduction Message from the Managing Director 3 Framework RareX Key Stakeholders 8 Overview RareX at a Glance 5 10 WEF World Economic Forum Framework (WEF) 6 Materiality RareX Materiality Matrix Approach RareX ESG Framework 11 Development Stage 1, Stage 2, Stage 3 12 Maiden Sustainability and Self-Assessment Report 2022 18 Message from the Managing Director “RareX is pleased to provide its maiden Sustainability Report following the release of our ESG Framework in 2021. Last year marked an important year for the Company as we materially progressed the Cummins Range Rare Earths Project by expanding the resource and announcing our plans to develop the Project. The development plans have been guided by our ESG Framework which looks to add as much value to our products as locally as we can, whilst developing relationships and partnerships with local business and stakeholders along the way. I’m very pleased to share our progress towards our commitments and, whilst we have not met them all, we are well on our way to finding our feet and integrating ESG into our DNA.” Jeremy Robinson Managing Director RareX Limited 3 Introduction RareX is pleased to present its maiden Sustainability Report alongside an updated ESG Framework. The look and the feel of the Framework has been revised to meet our new brand design, whilst retaining the original content to which we remain committed. The new look and feel reflects our transition away from exploration and towards development and is being updated across our business. The ESG Framework helps us embed responsible environmental and community management and good governance into our DNA from the very beginning. The maiden Sustainability Report presents our self-assessment on performance to the commitments we have made and aims to give readers full transparency on how we go about our business and develop our Project. Whilst simple and basic, the aspects we are reporting against are meaningful to us and meaningful to our stakeholders and will lay a public record of our commitment and focus, as we develop our Project, from which we can evolve and improve. Aspects of the Project have already been driven by our Framework and our commitments. We are actively working to secure hydroelectricity for the Project which opens up the potential for electrified processing plants and supply chains, and ultimately a low carbon product. The potential placement of byproducts into the local agricultural sector, as described in our MOU with OrdCo, brings broader regional benefits to people and planet and the refinement of our corporate governance structures improves our focus on matters of socio-environmental stewardship. Some areas we’ve done well on, and some areas require further focus and refining, but we hope you value the transparency and find this a small, but important, part of building our business right from the beginning. 4 Introduction RareX Limited at a Glance RareX Limited (ASX:REE) is an ASX-listed specialist company focused on developing rare earths deposits, including the flag-ship Cummins Range Rare Earths NdPr and Phosphate Project located in the East Kimberley region of Western Australia. Cummins Range is high in Neodymium-Praseodymium (NdPr), two critical rare earth minerals integral to the manufacturing of rare earth permanent magnets used in electric vehicles and wind turbines. We recently published our RareX Cummins Range Scoping Study, which contained promising results, and are now in the process of executing our Pre-Feasibility Study aiming to become one of the top 3 rare earth projects in Australia. Learn more about our Project and our Company by clicking on this link: Company Presentation Cummins Range Western Australia 5 Overview Adopting the World Economic Forum Framework The World Economic Forum (WEF) Framework was developed with the International Business Council (IBC) to report on environmental, social and governance (ESG) metrics and recommended disclosures as part of corporate annual reporting. Principles of Governance 1 2 6 Governing purpose Setting purpose Quality of governing body Governance body composition 3 Stakeholder engagement Material issues impacting stakeholders 4 5 Ethical behaviour Anti-corruption Protected ethics advice and ­reporting mechanisms 6 Risk and opportunity oversight Integrating risk and opportunity into business process WEF The ESG metrics are designed to be transparent, ­ ddressing the concerns and issues that would be a ­relevant to its stakeholders. The WEF framework has been chosen by RareX to guide its approach to ESG, which is outlined below. Planet 7 8 9 Climate change Greenhouse gas (GHG) emissions TCFD implementation Nature loss Land use and ecological sensitivity Freshwater availability 10 Water consumption and withdrawal in water stressed areas People Prosperity Dignity and equality 11 Diversity and inclusion 12 Pay equality 13 Wage level 14 Risk for incidents of child, forced or compulsory labour Employment & wealth generation 17 Absolute number and rate of employment 18 Economic contribution 19 Financial investment contribution Health and wellbeing 15 Health and safety Skills for the future 16 Training provided 7 WEF Innovation of better products & services 20 Total R&D expenses Community and social vitality 21 Total tax paid RareX Key Stakeholders RareX’s key stakeholders are listed below. This informs our material ESG topics and our approach to reporting on ESG metrics. The closest township to the Cummins Range Project, where we plan to commence mining, is Halls Creek. The Shire of Halls Creek and the local community more broadly, including pastoralists, community groups and not-forprofit organisations are relevant stakeholders in the area. Employees, Suppliers and Contractors Halls Creek / Port Wyndham / Kununurra Communities Regulators Investors Downstream Communities and Environments KLC and Traditional Land Owners Investors are increasingly concerned with risk management across a range of ESG topics. There are n ­ umerous RareX ­investors ranging from banks to individuals. 8 The WA Department of Mines, ­Industry Regulation and Safety (DMIRS) and other g ­ overnment departments require particular certifications and approvals for exploration and mining ­activities. Other state g ­ overnment departmental ­requirements may also apply. Our employees, our contractors and suppliers are important to us. We will support them as a family and be rigorous in Occupational Health and Safety (OH&S) from now through to mining. Not following proper procedure can lead to us hurting our people, legal risks and fines. Framework The future refining of rare earth minerals will involve activities, including refining, downstream of our mining operation, and potentially abroad. We will operate with careful downstream management with active consideration to the health and wellbeing of communities and the protection of local environments. The Kimberley Land Council (KLC) and traditional owners ­including the Jaru Community, ­Tjurabalan Native Title Land ­Aboriginal Corporation, and ­Bilaluna Community, have interests. This includes protecting and preserving culture, heritage and environmental values and we recognise the importance and value of their involvement. “We continue to be passionate about leaving a legacy of positive social impact in all areas of our business, particularly on the custodians of the land and the nearby communities of where we operate. Whilst limited in what we can achieve at this early stage, we have successfully employed Kevin Long, a Jaru traditional owner, who’s been an integral part of the team for the drilling season. The geology team have also been monitoring fuel, water and waste among other important aspects. It’s good to get this implemented at the start so it becomes part of our DNA.” Guy Moulang Exploration Manager 9 Framework RareX Materiality Matrix Importance to stakeholders Stakeholder engagement high Legend Climate change Dignity and equality Nature loss Ethical behaviour Quality of governing body Employment and wealth generation Health and wellbeing (safety) Community and social vitality Skills for the future Governing purpose Freshwater availability Risk and ­opportunity oversight People Dignity and equality Health and wellbeing Skills for the future low Innovation of better products and services Impact to RareX low high We have identified which ESG topics have the largest potential impact on ­RareX and are most important to our stakeholders. Our focus is highlighted in the top half of the matrix (as of: 2021). 10 Materiality Prosperity Employment and wealth generation Innovation of better products and services Community and social vitality Planet Climate change Nature loss Freshwater availability Principles of g ­ overnance Governing purpose Quality of governing body Stakeholder engagement Ethical behaviour Risk and opportunity oversight RareX ESG Framework Stakeholders and Stages Employees, Suppliers and Contractors Halls Creek / Port Wyndham / Kununurra Communities 1 2 3 Exploration and Project Definition Mine Development Mine Operation Regulators Principles of Governance / Planet / People & Prosperity Investors Level of granularity of data will increase Downstream Communities and Environments RareX Approach Planet We are committed to the responsible management of the environment in which we operate. We recognise the need to mitigate carbon emissions and we support Australia’s commitments under the Paris Agreement. We also recognise the need to reduce impacts to environmental receptors including ecological and water resources. We are developing policies to help us manage these commitments and we plan to continuously improve and evolve our approach to ensure that our transition from exploration to mining operations is in line with our ESG Framework. 11 Approach KLC and Traditional Land Owners People & Prosperity We are passionate about leaving a legacy of positive social impact in all areas of our business, particularly on the custodians of the land and the nearby communities of where we operate. RareX values engagement with local communities and continues to support community investment though the Kimberley Sustainable Development Trust. We see exciting opportunities to provide employment and skills development in the fast growing rare earth minerals industry, which is a critical component of low carbon economy infrastructure such as wind turbines and electric vehicles. Governance We are rigorous in our corporate governance and RareX values exceptional business ethics. We will commence reporting on ESG performance for the 2021-22 financial year. Our ESG Framework includes managing risks and opportunities consistent with leading standards such as the Taskforce for Climate Related Financial Disclosures, and working with stakeholders through our value chain, on and off-shore, to promote and demand activities that are in line with our ESG Framework. Stage 1 Exploration and Project Definition Three stages have been identified for implementing the ESG Framework. We are currently focussed on Stage 1. Stages 2 and 3 will be refined as we enter these subsequent phases of our Project. Principles of Governance Adopt an ESG Framework and publish it on the Company website. Prepare an ESG report for FY2021– 22. Maintain a register of key stakeholders including contact names of the KLC, Jaru station holder and pastoralists, and planned / required liaisons. Allocate resources to implement ESG activities. Integrate reviews of downstream, value chain risks, on and off-shore, including considerations of modern slavery, jurisdictional ethics and climate action. Conduct an annual review of policies for suitability and consistency with the ESG Framework, including anticorruption, whistleblowing, health and safety. Develop consistency of ESG reporting to the Taskforce for Climate Related Disclosures recommendations. Drill pad tracks at Cummins Range Rare Earth Project in the Kimberley region of Western Australia. 12 Development Include an ESG remit into the Charter of the Audit and Risk Committee. Planet Develop an emissions footprint based on current exploration activities. Develop current footprints for water and energy consumption and GHG emissions during exploration, including through working with contractors. Identify the potential economic and environmental contributions that RareX could make by channelling its products to low carbon products e.g. for electric vehicles and wind turbines. Engage with government on relevant initiatives such as stakeholder input to the WA net zero emissions strategy and potential financial support through the likes of ARENA for low carbon infrastructure. Integrate options for cleaner energy and waste management for mining and refining into our project definition studies. 13 Development People & Prosperity Measure and report on key health and safety data: including near misses, Lost Time Injury Frequency Rate (LTIFR), Total Recordable Injury Frequency Rate (TRIFR) and identified hazards for staff and contractors. Begin to develop a safety program which identifies safety risks and develops controls and systems to manage them, including for contractors. Develop recruitment strategy for jobs in the Kimberleys and amongst Indigenous communities. Report on economic contributions to the community as well as numbers of employed staff/contractors and salary expense. Report on any financial assistance received from the government. Begin reporting on annual training activities, budget and oversight/ engagement from Directors. 1 Stage 2 Mine Development Pillars What we plan to do Principles of Governance Planet People & Prosperity Risk management: review alignment of RareX policies to the ASX Corporate Governance Principles & Recommendations, and the TCFD. Identify best practice examples of ESG and energy efficiency / renewable energy integration, to inform the design of RareX’s mine site. Refine health and safety policies and procedures for mining operations: identify key safety risks and controls to manage them, including for contractors. Develop a training plan for Directors and staff including around climate risks, health and safety, etc. Refine reduction targets develop and report on energy efficiency and GHG reduction targets for mine construction and operation, e.g. 10% recycled water supply and waste minimisation / reuse goals over a base case. Diverse employment: set and develop targets such as for percentage female employment and percentage Indigenous employment by 2025. Modern slavery assessment: assess likelihood of suppliers going over the $100M threshold for modern slavery reporting. Compliance requirement: confirm alignment with UN No. 2192 Transporting Dangerous Goods List and other relevant compliances. Establish a Sustainability Committee and provide updates on ESG issues and activities. Permits: prepare material required for permits and consents. For example, the Environmental Management Plan for approval by the WA Environment Protection Authority (EPA), including Biodiversity, Water Resources, Land and Soils, Rehabilitation and Mine Closure. Show consideration to alter native energy supply options, where required by the EPA. Clean refining: consider options for clean refining of RareX products, including local planned refineries. Obtain certifications and management systems: consider key systems such as OHSAS 18001 (Occupational Health and Safety Management Systems), ISO 14001 (Environmental Management Systems) and ISO 9001 (Quality Management Systems) standards. Local community investment plan: develop a community investment plan, to support and contribute to the local community. This could form part of RareX’s communication strategy for the development and launch of the mine site. Local employment: set metrics for local employment i.e. the percentage of employees from the local community. Trainings: establish a training policy and percentage of staff training participation. 14 Development 2 Stage 3 Mine Operation Pillars Principles of Governance Planet What we plan to do Training of the Board and Management on an annual or bi annual basis, ­covering ESG topics including whistleblowing. Execution of ESG Framework and ­reduction targets. Continue execution of health and safety program. Consider requirements for National Greenhouse and Energy Reporting (NGER) reporting: begin NGER reporting if 25 kt or more of greenhouse ­gases, production of 100 TJ or more of energy, or consumption of 100 TJ or more of energy. Annual ESG reporting on social / people metrics including diversity, inclusion, health & safety, community contributions. ESG Rating and Environmental Management Plan: obtain an ESG Rating such as with MSCI or CDP and development RareX EMP. Local community investment strategy: update the community investment plan for support and contribution to the local community. Scope 3 emissions: measure and ­disclose scope 3 emissions in line with the Greenhouse Gas Protocol. Updates on staff training: report on the investment made and on the number of unfilled skilled positions and on the percentage of unfilled skilled positions for which the Company hires unskilled candidates and trains them. Review compliance with Modern Slavery requirements. Review compliance with UN No. 2912 Transporting Dangerous Goods List and other identified compliances. Periodic meetings of the Sustainability Committee (e.g. quarterly). Annual ESG reporting. People & Prosperity Training programs: updates on annual staff safety training programs. Updates on new hires and turnover: report on the total number and rate of new employee hires and turnover during the reporting period, by age group, gender, other indicators of diversity and region. Updates on Research and Development: reporting on total R&D expenses. Updates on products usage: report on percentage of its products which will be used for what purposes by partners and customers. 15 Development 3 “Our vision to integrate ESG from the beginning is off to a good start. We’ve comprehensively mapped out our stakeholders, we’ve visited a majority of them to share our project plans and to hear the priorities from the community and individuals. We’ve formed a Socio-Environmental steering committee which aligns the community engagement, environmental and ESG strategies. Through this we are beginning to integrate local support into our socio-environmental investigations and we’ve also begun monitoring what matters to form our baselines. As we enter the PFS, this will all be augmented for proper ESG integration.” Closeup of yellow flowers and flower buds of an Eucalyptus woodwardii tree in the Kimberley region of Western Australia. 16 Development Cummins Range core processing facility, drill core to be geologically logged. James Durrant General Manager Projects 17 Development Maiden Sustainability and Self-Assessment Report 2022 18 Legend on track and comfortable with ­performance partially met commitment but needs focus to improve commitment missed and needs targeted effort Governance 1 on track Adopt an ESG Framework and publish it on the Company website. ESG dedicated page on Company website and Framework disclosed. 2 RareX worked with a leading global advisory firm to establish the basis of our ESG Framework which we published to the ASX and on our website in September 2021. RareX has adopted the World Economic Framework Model of Governance, Planet, People and Prosperity to display our ESG metrics and focus. on track Prepare an ESG Report for FY2021–22. Welcome to the maiden Sustainability and Self-Assessment Report from RareX. We hope this document is meaningful and highlights a good basis from which we will grow. ESG Report published. 3 on track Maintain a register of key stakeholders. Stakeholder register completed. 4 partially met commitment Allocate resources to implement the ESG activities. Appointment of advisors in socio-­ environmental matters and the initiation of ESG committee. 19 RareX partnered with WSP Golder to create a detailed stakeholder engagement map and digital register which records stakeholders and relevant communications. Two community roadshows were completed as part of developing a comprehensive list of project stakeholders. Governance RareX has worked with a leading global ESG advisory firm as well as appointed MBS Environmental and WSP Golder as part of our socioenvironmental and ESG team. A dedicated ESG board committee has been scoped out and its charter is approved. This committee is expected to initiate in Q1 2023. Additionally, a socio-environmental and ESG steering committee has been formed at the executive level which will report to the board committee. The steering committee commenced in September 2022 and is underpinned by a stakeholder engagement strategy (WSP Golder) and an environmental management and approvals strategy (MBS Environmental). The steering committee meets fortnightly and maintains a rolling 6-month socio-environmental and ESG road map. 5 commitment missed Integrate reviews of downstream value chain risks on and offshore, including considerations of modern slavery, jurisdictional ethics and climate action. Specifically focussed risk review ­incomplete. 6 Whilst RareX has completed several operational and project risk reviews during the reporting period, the focus has not been on offshore matters nor climate action, but more on the safety and wellbeing of our employees and the scoping-level economic assessment of the proposed project development. As the Project advances and offtake partners and offshore and onshore suppliers become more defined, value chain risk assessments, including modern slavery, will be incorporated into counterparty evaluation and contracts. RareX will also begin evaluating its carbon footprint as soon as the Project is sufficiently defined. on track Conduct an annual review of policies for consistency with ESG Framework. Policy review completed. RareX has worked with a leading global ESG advisory firm to conduct a thorough review and gap analysis of our policy suite. resulted in an updated Diversity Policy and the preparation of 3 new policies: Community and Social Vitality Policy Environmental Policy Greenhouse Gas Emissions Policy These are going through the formal adoption process and will be implemented and published once complete. 7 on track Develop consistency of ESG reporting to the Taskforce for Climate Related Financial Disclosures (TCFD) recommendations. The TCFD has developed a reporting framework based on a set of consistent disclosure recommendations for use by companies as a means of providing transparency about their climate-related risk exposures to investors, lenders, and insurance underwriters. This report remains consistent to that framework. Reporting in the manner described in the ESG Framework and the annual ESG Report is, and will continue to be, consistent with the TCFD. 8 partially met commitment Include an ESG remit into the Charter of the Audit and Risk Committee. The Board’s A&R Committee Charter has not been updated to include an ESG remit, however an ESG board committee is being implemented. 20 Governance Although the Audit and Risk committee Charter has not been updated to include the ESG remit, a specific ESG committee is being implemented. This follows a review by a global leading advisory firm on the Company’s ESG Framework. The new ESG committee charter has been put to the Board for approval. The primary objective of the committee is to assist the Board in fulfilling its oversight of the Company’s ESG material issues. 9 on track Maintain a record of stakeholder / community engagements. Register of stakeholder engagements implemented. 10 on track Report on number of governance breaches such as Land Clearances Breaches (m²). No breaches occurred. Top left: Orientated drill core from Cummins Range. Top right: Cummins Range drill core to be geologically logged. Cummins Range exploration office 21 RareX maintains minutes of all stakeholder meetings and continuously ­updates a stakeholder engagement register. Currently, we are investigating the move to a more sophisticated database tool to manage this area. Governance For the FY 2022, RareX has had no land clearance, environmental or other governance breaches to report. Planet 1 on track Develop an emissions footprint based on current ­exploration a ­ ctivities. Energy and greenhouse gas ­footprints disclosed. 2 Cummins Range is a remote exploration site relying on diesel generation. Access to the site is by light vehicle from Halls Creek. Our Scope 1 diesel use for the year and the equivalent energy expended and carbon footprint from this use is outlined in the table below. Equipment Diesel use (kl) Energy (MJ) GHG (tCO₂-e) Drill Rigs 96.25 3.72 0.26 Generators 28.79 1.11 0.08 Light vehicles 4.34 0.17 0.01 Total 129.39 4.99 0.35 on track Develop footprints for water consumption and waste generation. Water and waste footprints have been established. Water is abstracted from water bores on site for un-potable use including drilling and domestic uses. Non contaminated wastewater discharged from camp activities is left to settle in a sump before seeping away. A portion of the drill water is recycled, and excess water seeps back into the ground via a sump. All potable water is imported to site. No contaminated water discharge events occurred during the financial year. Use (source) Volume (kl) Comments (Bore abstraction) 1750 All water is non-potable Contaminated water 0 No water is contaminated and unable to be safely discharged into the environment Recycled water 1750 All of the drill rig water is recycled (less any lost through evaporation) and eventually ends up seeping back into the ground via the sumps or drill holes Our team re-use and minimise waste as much as possible as there is no recycling facility in the area. All rubbish is taken off site to the Halls Creek refuse tip. Metal cans and plastic bottles are separated but these only represent a small portion of our waste. Use (source) Volume (kg) Comments (Total waste generated) 1897.5 22 Planet Waste recycled 0 No recycling facility in Northern Western Australia Waste landfill 1897.5 Hall Creek refuse tip 3 partially met commitment Identify the potential economic and environmental contributions that RareX could make by channelling its products to low carbon products. Potential sectors identified; contributions not fully established. 4 The Scoping Study has identified the Project has the potential to provide magnet metals and phosphate fertilisers from a hydroelectric energy grid. Clearly, these contributions are material in electrifying the planet, reducing emissions and, with the fertilisers, contributing to improved crop yields. The hydroelectric power source positions RareX as a potential producer of the lowest carbon footprint products in the sector . Detailed analysis will be needed to investigate our Scope 1, 2 and 3 footprint and how we sit relative to our peers. partially met commitment Engage with government on relevant initiatives, such as stakeholder input to the WA net zero emissions strategy and potential financial support through the likes of ARENA for low carbon infrastructure. RareX is working with partners to align the Project to government initiatives including CMAI and ARENA. As we increase our involvement with these initiatives, particularly now the Scoping Study is complete, we will share our involvement more. Engagement on initiatives beginning. 5 on track Integrate options for cleaner energy and waste management for mining and refining into our project definition studies. Hydro power identified. 6 The Scoping Study has identified a significant opportunity to connect with hydroelectric power. Work is ongoing with Horizon Power and Pacific Hydro for power supply. The Scoping Study also shows the ability to monetise waste streams as by-products including phosphate concentrates and even potentially gypsum. This would significantly reduce the waste footprint of the Project by maximising resource utilisation. Future studies will investigate the electrification of the supply chain. on track Measure land clearance activities. Clearance activities recorded. Land inspected for clearance Land cleared (m²) Land rehabilitated (m²) Comments Drill pads and access 16092 14700 All rehabilitation was to DMIRS standards Other 0 0 No other land clearing was performed in FYE22 58 drill pads with access tracks were cleared for drill purposes during the reporting period. These were all cleared with prior inspection for matters of cultural heritage by Jaru Elder, Kenny Boomer. Most of the drill pads will be rehabilitated within 12 months. A portion of the pads will not be rehabilitated as they may be repurposed for further drilling as the deposit requires testing at depth. Most rehabilitation this year was for the previous year’s activities. 23 Planet People & Prosperity 1 on track Measure and report on key health and safety data. Safety incidents, injuries and lost time records are kept. No injuries or lost time were sustained in the reporting period. RareX confirms there were no injuries sustained resulting in lost time or a reportable event. Over the reporting period we recorded 9,180 man hours on site. Safety incidents: a spinifex fire encroached