Rainbow Rare Earths Ltd on Wednesday said it has signed a deal to give investor TechMet Ltd an option to invest $50 million in its Phalaborwa project in South Africa.

Rainbow Rare Earths shares rose 12% to 15.20 pence each on Wednesday morning in London.

The South Africa and east Africa-focused rare earth oxide producer said the investment will give TechMet between a 15% and 33% stake in the project, which it said gives the project an equity valuation of between $151.5 million and $333.3 million.

TechMet is a technology metals investment company based in Dublin, it has a 12% stake in Rainbow Rare Earths.

The firm said it sees the option as a ‘significant validation of the robust economics of Phalaborwa’, noting that the option will de-risk the funding requirements of the development.

Rainbow Rare Earths added that the option deal follows ‘extensive’ due diligence from TechMet, which it says confirms the potential of the project.

Rainbow Chief Executive George Bennett commented: ‘e are delighted with the confidence shown by our long-term strategic investor, TechMet, following their due diligence on Phalaborwa. We believe that the TechMet Option is a significant de-risking for the financing requirements. This validates the company’s focus on the development of rare earths from secondary sources, as well as supporting the company’s belief that Phalaborwa is a strong and unique project.

‘We expect Phalaborwa to continue to attract funding, especially from US-sources of capital, due to the focus on the critical role of these rare earth metals in the technology-driven industrial and clean energy age.’

Meanwhile, TechMet Chief Executive Brian Menell said: ‘Phalaborwa has the potential to become one of the most environmentally friendly and lowest-cost rare earth projects anywhere in the world.’

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