The pair plan to extract rare earth elements from two gypsum stacks at the former hard rock phosphate mine.
The stacks had an estimated in situ grade of 0.6% total rare earth oxides (TREO) based on initial sampling, Rainbow said, indicating about 210,000 tonnes of contained TREOs.
Neodymium and praseodymium (together NdPr) were expected to constitute about 30% of the TREO basket.
Under the deal, Rainbow would pay US$750,000 in cash and shares in three equal tranches over 12 months to Bosveld, and hold 70% of the project on completing a prefeasibility study.
South African company Bosveld had acquired the Sasol phosphoric acid plant in 2012, where a hard rock foskorite and pyroxenite deposit was mined for about 50 years and resulted in 35 million tonnes of gypsum being deposited in two stacks.
Sasol had developed a process flowsheet to extract the REE from the gypsum, with a pilot plant operation producing about 3t of mixed rare earth carbonate with about 80% recoveries.
The project was fully permitted, Rainbow said.
It said reprocessing the stack carried significant environmental benefits, in that it would redeposit clean gypsum which had the potential for further use in the building and fertiliser industries.
"The considerable amounts of historical test work carried out to date, together with positive initial assays and successful pilot plant operations, indicate that this opportunity, in conjunction with the company's high-grade Gakara project, will enable Rainbow to become a very significant producer of NdPr, to power the green revolution," CEO George Bennett said.
Rainbow is trial mining at its Gakara project in Burundi.
The joint venture positioned Rainbow as the only REE producer with both country and project diversification, Bennett said.
China's domination of the REE market, including the country's new export control law, has put the need for diversity of supply in the spotlight.
Rainbow shares (LSE: RBW) rose 25.5% to a one-year closing high yesteday of 6.3p, valuing it at £26.6 million (US$34.6 million).