Hastings signs deal to enhance project economics

Shares in Hastings Technology Metals closed at 72 cents per share on Friday, up 13 per cent, after the rare earths developer announced it had signed a binding term sheet with China-based Baotou Sky Rock Rare Earth New Material, which included integrated tolling and offtake agreements. 

Under the integrated agreement, Hastings will provide rare earth concentrate from its flagship Yangibana project, located 250 kilometres north-east of Carnarvon, to China, where it will be toll-treated by Baotou Sky Rock. 

Baotou Sky Rock will oversee this process, which involves the concentrate eventually being separated into rare earth oxides. The final product will be sold at a benchmark indices price per each individual oxide. 

Hastings has agreed to provide a minimum of 10,000 tonnes of rare earth concentrate per annum to Baotou Sky Rock for seven years, with an option to extend for an additional five years.

Both parties are no strangers to each other, having signed a similar offtake deal in 2018, which involved the sale of mixed rare earth carbonite. 

Hastings said it believes the new offtake agreement will aid project economics and stage one construction at Yangibana, which is 31 per cent complete, according to its recently released December 2023 quarterly report.

“In line with our strategy to maximise value from the Yangibana project, we have continued to evaluate ways to both de-risk and optimise Stage one of the Yangibana project,” Hastings chief executive officer Paul Brown said.

‘We have identified the opportunity to utilise excess downstream rare earth processing capacity available in China by partnering with privately-owned rare earth processing and magnet manufacturers which are seeking to secure a long-term and steady supply of concentrate feedstock.

“The integrated arrangement under the binding term sheet with Baotou Sky Rock will facilitate Hastings extracting greater value from our concentrate under a multi-stage toll treatment arrangement and combined with our optimised mine plan delivers a more attractive project.

“The ability to secure this innovative tolling and offtake arrangement demonstrates the strong demand for the Yangibana project’s rich concentrates and gives us confidence in the outlook.”

Friday's announcement comes after Hastings told the market on January 30 it had entered into a study partnership with the Estonian government on whether a hydrometallurgical plant could be built to process ore from Yangibana. 

This concept is identical to Neo Performance Materials - a company Hastings holds a 21 per cent stake in - which has a rare earth separation facility in the Estonian town of Sillamae, and plans to build a magnet manufacturing plant close to Estonia's border with Russia.

In June last year, Hastings also signed a non-binding offtake agreement with Neo to provide 25,000t of concentrate from Yangibana.

Aside from the integrated tolling and offtake agreement with Baotou Sky Rock likely to improve cash streams, Hastings said it also provided them an opportunity to review other stage one aspects of the project. 

"Hastings has been reviewing opportunities to optimise Stage one of the Yangibana Project to further de-risk the project and enhance economic returns," the company said.

"This included a review of the mine plan which has been optimised for the first five years by bringing forward the mining of lower strip ratio zones while maintaining the grade to the beneficiation plant, resulting in higher free cashflow in the early years of operations and a reduction in the capital payback period.

"Hastings have reviewed the capital costs and remains confident about the robustness of the estimate completed in the May 2023 staged development study for Stage 1 of the project.

"As a result of the need to install a concentrate dryer to meet product moisture content specifications under the integrated arrangement, and additional holding costs due to changes in the funding and production schedule, an additional $33 million has been added to the capital cost estimate now totalling $503 million.

The remaining capital cost is estimated at $361 million, with $142 million already invested in early works as of December 31 2023." 

Last May, Hastings confirmed project costs at Yangibana had blown out by approximately 44 per cent, hitting $948 million, due to multiple factors, including industry cost inflation.